424B3: Prospectus filed pursuant to Rule 424(b)(3)
Published on May 17, 2007
Filed
Pursuant to Rule 424(b)(3)
Registration
No.
333-137208
PROSPECTUS
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
6,135,579
Shares of Common Stock, $0.0001 Par Value
This
prospectus relates to the offer of up to 6,135,579 shares of the common stock
of
Lixte Biotechnology Holdings, Inc. (f/k/a SRKP 7, Inc.) by certain selling
stockholders. Until the shares are listed on the OTC Bulletin Board, the shares
may only be sold at a fixed price of $0.33. Thereafter, the shares may be
sold at fixed prices, or prevailing market prices or privately negotiated
prices.
There
is
not currently, and there has never been, any market for any of our securities.
Our securities are not eligible for trading on any national securities exchange,
the Nasdaq or other over-the-counter markets, including the OTC Bulletin
Board.
INVESTMENT
IN THE
COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A HIGH DEGREE OF RISK. YOU
MAY
LOSE YOUR ENTIRE INVESTMENT. CONSIDER CAREFULLY THE “RISK FACTORS” BEGINNING ON
PAGE 5 OF THIS PROSPECTUS BEFORE INVESTING.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
accurate or complete. It is illegal for anyone to tell you otherwise.
The
date
of this prospectus is May 14, 2007.
You
should rely only on the information contained in this prospectus. We have not,
and the selling stockholders have not, authorized anyone to provide you with
additional or different information. If anyone provides you with different
information, you should not rely on it. We are not, and the selling stockholders
are not, making an offer to sell these securities in any jurisdiction where
the
offer or sale is not permitted. You should assume that the information contained
in this prospectus is accurate only as of the date on the front cover of this
prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date.
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F-1
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This
summary does not contain all of the information that you should consider before
investing in our common stock. You should read the entire prospectus carefully,
including the more detailed information regarding our company, the risks of
purchasing our common stock discussed under “risk factors,” and our financial
statements and the accompanying notes.
Company
Overview
We
were
organized as a blank check company formed for the purpose of effecting a
business combination with an operating business. On June 30, 2006, pursuant
to a
Share Exchange Agreement dated as of June 8, 2006 among us, Dr. John S. Kovach
and Lixte Biotechnology, Inc., we issued 19,021,786 shares of our common stock
to Dr. Kovach in exchange for all of the issued and outstanding shares of Lixte
Biotechnology, Inc. As a result of this transaction, Lixte is now our wholly
owned subsidiary, though from an historical perspective it was deemed to have
been the acquirer in the reverse merger and the survivor of the reorganization.
On December 7, 2006, we changed our name from SRKP 7, Inc. to Lixte
Biotechnology Holdings, Inc. Throughout this prospectus, when we refer to Lixte,
we are referring to Lixte Biotechnology, Inc., our operating
subsidiary.
Lixte
was
created to capitalize on opportunities for the company to develop low cost,
specific, and sensitive tests for the early detection of cancers to better
estimate prognosis, to monitor treatment response, and to reveal targets for
development of more effective treatments.
Lixte
is
concentrating on discovering biomarkers for common cancers for which better
diagnostic and therapeutic measures are needed. For each of these diseases
a
biomarker that would enable identification of the presence of cancer at a stage
curable by surgery could possibly save thousands of lives annually. In addition,
biomarkers specific to these diseases may also provide clues as to processes
(biological pathways) that characterize specific cancer types and that may
be
vulnerable to drug treatment targeted to the activity of the
biomarker.
Lixte’s
initial focus is on developing new treatments for the most common and most
aggressive type of primary brain cancer, gliobastoma multiforme (which we refer
to as GBM). Lixte entered into a Cooperative Research and Development Agreement
(which we refer to as the CRADA) with the National Institute of Neurological
Diseases and Stroke (which we refer to as NINDS) of the National Institutes
of
Health (which we refer to as NIH) to identify and evaluate drugs that target
a
specific biochemical pathway for GBM cell differentiation. The CRADA also covers
research to determine whether expression of a component of this pathway
correlates with prognosis in glioma patients.
The
lead
scientist at NINDS collaborating with Lixte under the CRADA is
Dr. Zhengping Zhuang. Dr. Zhuang is internationally recognized for his
research in molecular pathology. Dr. Zhuang has four issued and two pending
patents related to molecular pathology of human cancers. He has recently
discovered a biomarker of relevance to the growth of GBMs that Lixte believes
can be used as a tool for identifying drugs that affect the growth of GBM cells.
Under the CRADA, Lixte will support two persons at NIH to work under the
direction of Dr. Zhuang. The goal is to identify drugs that inhibit GBM
cell growth and to determine if the identified biomarker may be useful for
estimation of prognosis. Lixte’s annual contribution to the collaborative
research done by Lixte and NIH is $200,000 for each of two years for two
research assistants expected to be at the post-doctoral level and supplies.
On
February 6, 2006, we filed a provisional patent application naming as
co-inventors Dr. Zhuang and several other NIH investigators, and
Dr. Kovach covering certain methods and classes of molecules that are
expected to be the foundation of product development and commercialization
efforts with respect to human brain tumors. On February 6, 2007, we filed
on behalf of the NIH co-inventors and Dr. Kovach a PCT international patent
including all countries participating in the Patent Cooperation Treaty (except
the USA) and an identical non-provisional patent in the USA. These two patent
applications contain all claims in the provisional patent of February 6,
2006 plus additional claims.
Both
February 6, 2007 patent filings fall under the CRADA agreement with NINDS,
NIH. Patents resulting from these applications are jointly owned by Lixte
Biotechnology, Inc. and the U.S. Government. All NIH co-inventors are required
to assign their rights to NIH. As specified in the CRADA agreement between
us
and NINDS, NIH, we are entitled to obtain an exclusive license from NIH to
all
claims in these patents. We
have
received a draft of the proposed exclusive patent license agreement with
NIH.Under
the
proposed agreement, we will pay a non-creditable, nonrefundable upfront fee
of
$150,000 within thirty days from the effective date of the agreement, a royalty
of 6% on net sales with a minimum annual royalty of $30,000 and royalties
upon
achieving the following benchmarks: (a) $50,000
upon starting Phase I Clinical Trials; (b) $100,000
upon starting Phase II Clinical Trials; (c) $200,000
upon starting Phase III Clinical Trials; (d) $300,000
upon filing an IND submission; and (e) $500,000
upon the first commercial sale. Additionally,
we are required to pay royalties of 15% of the consideration received for
the granting of sublicensing rights.We
intend
to negotiate these economic terms in order to attempt to obtain economic
terms
more advantageous to us. We believe that the other terms of the proposed
agreement are customary for agreements of this type.
Also
on
February 6, 2007, we filed a new US provisional application in our sole
name. This filing does not fall under the CRADA agreement. We have the sole
right to any patent issued pursuant to this application. This application
identifies a method of synthesis and documents activity against glioblastoma
multiforme cell lines in vitro of a proprietary lead compound synthesized
by the
company. This provisional patent application also describes a series of homologs
of this lead compound.
Lixte’s
products will derive directly from its intellectual property consisting of
its
Provisional Patent Application and other patents it anticipates will arise
out
of its research activities. Those patents are expected to cover biomarkers
uniquely associated with specific types of cancer, patents on methods to
identify drugs that inhibit growth of specific tumor types and combinations
of
drugs and potential therapeutic agents for the treatment of specific cancers.
We
face
several potential challenges in our drive for commercial success, including
raising sufficient capital to fund our business plan, achieving commercially
applicable results of our research program, continued access to tissue and
blood
samples from cancer patients, competition from established, well funded
companies with competitive technologies, and future competition from companies
that are developing competitive technologies, some of whom are larger companies
with greater capital resources than us.
Private
Placement
We
have
filed this registration statement because we sold in private placements on
June 30, 2006 and July 27, 2006, an aggregate of 3,555,220 shares of common
stock to accredited investors at a per share price of $0.333, resulting in
aggregate gross proceeds of $1,183,889. We paid to WestPark Capital, Inc. as
placement agent, a commission of 10% and a nonaccountable fee of 4% on the
gross
proceeds of the private placement and issued two five year warrants to purchase
common stock for a total of 12% of the number of shares sold in the private
placement exercisable at $0.333 per share.
We
have
also agreed to include the shares of common stock owned by certain of our
original stockholders in the registration statement.
The
Offering
Securities
Offered by certain of our original stockholders
|
Up
to 2,580,359 shares of our common stock.
|
Securities
Offered by investors in the private placement
|
Up
to 3,555,220 shares of our common stock that are currently
outstanding.
|
Use
of Proceeds
|
We
will not receive any proceeds from the sale of shares by the selling
stockholders in this offering.
|
Risk
Factors
|
An
investment in our common stock involves a high degree of risk and
could
result in a loss of your entire
investment.
|
Executive
Offices
Our
executive offices are located at 248 Route 25A, No. 2, East Setauket, New
York 11733. Our telephone number is (631) 942-7959.
Summary
Historical Financial Information
The
financial statements presented reflect the condensed and consolidated financial
results of our company and our subsidiary, Lixte Biotechnology, Inc. Our equity
survives the reorganization. All costs associated with the reverse merger were
expensed as incurred. Information with respect to shares is based on a stock
dividend of 11% to stockholders of record on May 18, 2006.
You
should read the following selected financial data presented below together
with
“Management’s Discussion and Analysis of Financial Condition or
Plan of Operation” and our financial statements and related notes included
in this prospectus.
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
(FORMERLY
SRKP 7, INC.)
AND
SUBSIDIARY
(a
development stage company)
CONSOLIDATED
BALANCE SHEET (Restated)
December
31, 2006
|
|
|||
|
|
|||
|
||||
ASSETS
|
|
|||
Current
assets:
|
|
|||
Cash
and cash equivalents
|
$
|
679,640
|
||
Advances
on research and development contract services
|
50,000
|
|||
Prepaid
insurance
|
20,365
|
|||
Total
current assets
|
750,005
|
|||
Office
equipment,
net of accumulated depreciation of $575
|
1,062
|
|||
Total
assets
|
$
|
751,067
|
||
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||
Current
liabilities:
|
||||
Accounts
payable and accrued expenses
|
$
|
31,786
|
||
Estimated
liquidated damages payable under registration rights
agreement
|
74,000
|
|||
Due
to stockholder
|
92,717
|
|||
Total
current liabilities
|
198,503
|
|||
|
||||
Commitments
and contingencies
|
||||
|
||||
Stockholders’
equity:
|
||||
Preferred
stock, $0.0001 par value;
authorized
- 10,000,000 shares; issued - none
|
—
|
|||
Common
stock, $0.0001 par value;
authorized
- 100,000,000 shares; issued and outstanding - 26,582,183 shares
|
2,658
|
|||
Additional
paid-in capital
|
1,128,114
|
|||
Deficit
accumulated during the development stage
|
(578,208
|
)
|
||
Total
stockholders’ equity
|
552,564
|
|||
Total
liabilities and stockholders’ equity
|
$
|
751,067
|
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
(FORMERLY
SRKP 7, INC.)
AND
SUBSIDIARY
(a
development stage company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
Year
Ended
December 31,
2006
(Restated)
|
Period from
August 9,
2005
(Inception)
to
December 31,
2005
|
Period from
August 9,
2005
(Inception)
to
December 31,
2006
(Cumulative)
(Restated)
|
||||||||
Revenues
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
|
|
|||||||||
Costs
and expenses:
|
||||||||||
General
and administrative, including $97,400
of stock-based compensation to director during the year ended
December
31, 2006 and the period from August 9, 2005 inception) to December
31,
2006 (cumulative)
|
299,420
|
16,011
|
315,431
|
|||||||
Depreciation
|
462
|
113
|
575
|
|||||||
Research
and development costs
|
150,100
|
—
|
150,100
|
|||||||
Reverse
merger costs
|
50,000
|
—
|
50,000
|
|||||||
Total
costs and expenses
|
499,982
|
16,124
|
516,106
|
|||||||
(499,982
|
)
|
(16,124
|
)
|
(516,106
|
)
|
|||||
Interest
income
|
11,898
|
—
|
11,898
|
|||||||
Estimated
liquidated damages under registration rights
agreement
|
(74,000
|
)
|
(74,000
|
)
|
||||||
Net
loss
|
$
|
(562,084
|
)
|
$
|
(16,124
|
)
|
$
|
(578,208
|
)
|
|
Net
loss per common share - basic
and diluted
|
$
|
(0.02
|
)
|
$
|
(0.00
|
)
|
||||
Weighted
average number of common shares
outstanding - basic
and diluted
|
22,750,033
|
19,021,786
|
-4-
Please
consider the following risk factors together with the other information
presented in this prospectus, including the financial statements and the notes
thereto, before investing in our common stock. The trading price of common
stock
could decline due to any of the following risks, and you might lose all or
part
of your investment.
Any
investment in our common stock involves a high degree of risk. The following
risk factors relating to us should be carefully considered.
RISKS
RELATED TO BUSINESS
We
are engaged in early stage research and as such may not be successful in our
efforts to develop a portfolio of commercially viable
products.
A
key
element of our strategy is to discover, develop and commercialize a portfolio
of
new drugs and diagnostic tests. We are seeking to do so through our internal
research programs. A significant portion of the research that we are conducting
involves new and unproven technologies. Research programs to identify new
disease targets and product candidates require substantial technical, financial
and human resources whether or not any candidates or technologies are ultimately
identified. Our research programs may initially show promise in identifying
potential product candidates, yet fail to yield product candidates for clinical
development for any of the following reasons:
·
|
the
research methodology used may not be successful in identifying potential
product candidates;
|
·
|
product
candidates for diagnostic tests may on further study be shown to
not
obtain an acceptable level of accuracy;
or
|
·
|
product
candidates for drugs may on further study be shown to have harmful
side
effects or other characteristics that indicate they are unlikely
to be
effective drugs.
|
Although
we have identified one potential product candidate in the area of brain tumors,
the work needed to demonstrate its commercial viability is at a very early
stage. The follow-up research needed to demonstrate the viability of the product
is costly and time-consuming and may reveal that the product does not function
as expected or that it is otherwise not commercially viable.
If
we are
unable to discover suitable potential product candidates, develop additional
delivery technologies through internal research programs or in-license suitable
products or delivery technologies on acceptable business terms, our business
prospects will suffer.
We
do not expect to obtain any revenues for several years and there is no assurance
that we will ever generate revenue or be profitable. If we do not generate
revenues and achieve profitability, we will be forced to cease or substantially
curtail our operations and you may lose your entire investment.
Because
we are currently engaged in research at a very early stage, significant time
may
be required to develop any product or intellectual property capable of
generating revenues. As such, our business is unlikely to generate any revenue
in the next several years and may never do so. Even if we are able to generate
revenues in the future through licensing our technologies or through product
sales, there is no assurance that our revenues will exceed our expenses. Should
we fail to achieve profitability, you may lose your entire investment.
We
will
need to raise additional funds in the future and these funds may not be
available on acceptable terms or at all.
The
funds
we raised in the private placement will not be sufficient to fully develop
and
commercialize any products that may arise from our research. We will also need
to raise additional funds in order to satisfy our future liquidity requirements.
Most immediately, in addition to the $969,372 from the Private Placement, we
expect to require up to $2.3 million in the near term to enable us to
obtain a wet lab to further advance our research projects. Additionally, the
amount and timing of future cash requirements will depend on market acceptance
of our products, if any, and the resources we devote to developing and
supporting our products. We will need to fund these cash requirements from
either one or a combination of additional financings, mergers or acquisitions,
or via the sale or license of certain of our assets. Current
market conditions present uncertainty as to
our
ability to secure additional funds, as well as our ability
to reach
profitability. There can be no assurances that
we
will be able to secure additional financing, or obtain favorable terms on such
financing if it is available,
or as to
our ability to achieve positive cash flow from operations. Continued negative
cash flows and lack of liquidity
create significant uncertainty about our ability to fully implement our
operating plan and we may have
to
reduce the scope of our planned operations. If cash and cash equivalents are
insufficient to satisfy our liquidity requirements, we would be required to
scale back or discontinue our product development program, or obtain funds
if
available through strategic alliances that may require us to relinquish rights
to certain of our technologies or discontinue our operations.
Our
auditors have included a going concern assumption in
their
opinion.
Our
auditors opinion regarding our financial
statements include concerns about our ability
to continue as a going concern in view of the fact that we are in the
development stage and
have
not commenced operations. All
activity through December 31, 2006 related to our formation, capital
raising
efforts and initial research and development activities. As such, we
have yet to
generate any cash flows from operations, and are essentially dependent
on debt
and equity funding from both related and unrelated parties to finance
our
operations. Prior to June 30 2006, cash requirements for Lixte, our
operating
subsidiary, were funded by advances from Dr. John Kovach, Lixte’s
founder, our current Chief Executive Officer. On June 30, 2006, we
completed an initial closing of a private placement, selling 1,973,869
shares of
common stock at a price of $0.333 per share and receiving net proceeds
of
$522,939. On July 27, 2006, we completed a second closing of a private
placement, selling 1,581,351 shares of common stock at a price of $0.333
per
share and receiving net proceeds of
$446,433.
Because
we are currently engaged in research at a very early stage, it will likely
take
a significant amount of time to develop any product or intellectual property
capable of generating revenues. As such, our business is unlikely to generate
any revenue in the next several years and may never do so. Even if we are
able
to generate revenues in the future through licensing our technologies or
through
product sales, there can be no assurance that such revenues will exceed
our
expenses.
Based
on
the proceeds received from the private placement, we may not have sufficient
resources to completely fund our planned operations for the next twelve
months.
We do not have sufficient resources to fully develop and commercialize
any
products that may arise from our research. Accordingly, we will need to
raise
additional funds in order to satisfy our future working capital requirements.
In
the short-term, in addition to the net proceeds from the private placement,
we
estimate that it will approximately require additional funding of approximately
$2,300,000. Additionally, the amount and timing of future cash requirements
will
depend on market acceptance of our products, if any, and the resources
that we
devote to developing and supporting our products. We will need to fund
these
cash requirements from either one or a combination of additional financings,
mergers or acquisitions, or via the sale or license of certain of our assets.
Current
market conditions present uncertainty as to our ability to secure additional
funds, as well as our ability to reach profitability. There can be no assurances
that we will be able to secure additional financing, or obtain favorable
terms
on such financing if it is available, or as to our ability to reach
profitability. There can be no assurances that we will be able to secure
additional financing, or obtain favorable terms on such financing if it
is
available, or as to our ability to achieve positive cash flow from operations.
Continued negative cash flows and lack of liquidity create significant
uncertainty about our ability to fully implement our operating plan and
we may
have to reduce the scope of our planned operations. If cash and cash equivalents
are insufficient to satisfy our liquidity requirements, we would be required
to
scale back or discontinue our product development program, or obtain funds
if
available through strategic alliances that may require us to relinquish
rights
to certain of our technologies or discontinue our operations.
If
we are unable to secure licenses to technologies or materials vital to
our
business, or if the rights to technologies that we have licensed terminate,
our
commercialization efforts could be delayed or
fail.
On
February 6, 2006, we filed a provisional patent application naming as
co-inventors Dr. Zhuang and several other NIH investigators, and
Dr. Kovach covering certain methods and classes of molecules that are
expected to be the foundation of product development and commercialization
efforts with respect to human brain tumors. On February 6, 2007, we filed
on behalf of the NIH co-inventors and Dr. Kovach a PCT international patent
including all countries participating in the Patent Cooperation Treaty (except
the USA) and an identical non-provisional patent in the USA. These two patent
applications contain all claims in the provisional patent of February 6,
2006 plus additional claims.
Both
February 6, 2007 patent filings fall under the CRADA agreement with NINDS,
NIH. Patents resulting from these applications are jointly owned by Lixte
Biotechnology, Inc. and the U.S. Government. All NIH co-inventors are required
to assign their rights to NIH. As specified in the CRADA agreement between
us
and NINDS, NIH, we are entitled to obtain an exclusive license from NIH to
all
claims in these patents. We
have
received a draft of the proposed exclusive patent license agreement with
NIH.Under
the
proposed agreement, we will pay a non-creditable, nonrefundable upfront fee
of
$150,000 within thirty days from the effective date of the agreement, a royalty
of 6% on net sales with a minimum annual royalty of $30,000 and royalties
upon
achieving the following benchmarks: (a) $50,000
upon starting Phase I Clinical Trials; (b) $100,000
upon starting Phase II Clinical Trials; (c) $200,000
upon starting Phase III Clinical Trials; (d) $300,000
upon filing an IND submission; and (e) $500,000
upon the first commercial sale. Additionally,
we are required to pay royalties of 15% of the consideration received for
the
granting of sublicensing rights. We
intend
to negotiate these economic terms in order to attempt to obtain economic
terms
more advantageous to us. We believe that the other terms of the proposed
agreement are customary for agreements of this type.
Also
on
February 6, 2007, we filed a new US provisional application in our sole
name. This application identifies a method of synthesis and documents activity
against glioblastoma multiforme cell lines in vitro of a proprietary lead
compound synthesized by the company. This provisional patent application
also
describes a series of homologs of this lead compound. This filing does not
fall
under the CRADA agreement. We have the sole right to any patent issued pursuant
to this application.
If
we were to materially breach our present collaboration agreement or any future
license or collaboration agreements, we could lose our ability to commercialize
the related technologies, and our business could be materially and adversely
affected.
We
are
party to a research collaboration agreement and intend to enter into
intellectual property licenses and agreements, all of which will be integral
to
our business. These licenses and agreements impose various research,
development, commercialization, sublicensing, royalty, indemnification,
insurance and other
obligations
on us. If we or our collaborators fail to perform under these agreements or
otherwise breach obligations imposed by them, we could lose intellectual
property rights that are important to our business.
We
may not be successful in establishing additional strategic collaborations,
which
could adversely affect our ability to develop and commercialize
products.
In
the
future, we may seek opportunities to establish new collaborations, joint
ventures and strategic collaborations for the development and commercialization
of products we discover. We face significant competition in seeking appropriate
collaborators and the negotiation process is time-consuming and complex. We
may
not be successful in our efforts to establish additional strategic
collaborations or other alternative arrangements. Even if we are successful
in
our efforts to establish a collaboration or agreement, the terms that we
establish may not be favorable to us. Finally, such strategic alliances or
other
arrangements may not result in successful products and associated
revenue.
The
life sciences industry is highly competitive and subject to rapid technological
change.
The
life
sciences industry is highly competitive and subject to rapid and profound
technological change. Our present and potential competitors include major
pharmaceutical companies, as well as specialized biotechnology and life sciences
firms in the United States and in other countries. Most of these companies
have
considerably greater financial, technical and marketing resources than we do.
Additional mergers and acquisitions in the pharmaceutical and biotechnology
industries may result in even more resources being concentrated in our
competitors. Our existing or prospective competitors may develop processes
or
products that are more effective than ours or be more effective at implementing
their technologies to develop commercial products faster. Our competitors may
succeed in obtaining patent protection and/or receiving regulatory approval
for
commercializing products before us. Developments by our competitors may render
our product candidates obsolete or non-competitive.
We
also
experience competition from universities and other research institutions, and
we
are likely to compete with others in acquiring technology from those sources.
There can be no assurance that others will not develop technologies with
significant advantages over those that we are seeking to develop. Any such
development could harm our business.
We
may be unable to compete successfully with our
competitors.
We
face
competition from other companies seeking to identify and commercialize cancer
biomarkers. We also compete with universities and other research institutions
engaged in research in these areas. Many of our competitors have greater
technical and financial resources than we do.
Our
ability to compete successfully is based on numerous factors,
including:
·
|
the
cost-effectiveness of any product we ultimately commercialize relative
to
competing products;
|
·
|
the
ease of use and ready availability of any product we bring to
market;
|
·
|
the
accuracy of a diagnostic test designed by us in detecting cancers,
including overcoming the propensity for “false positive” results;
and
|
·
|
the
relative speed with which we are able to bring any product resulting
from
our research to market in our target
markets.
|
If
we are
unable to distinguish our products from competing products, or if competing
products reach the market first, we may be unable to compete successfully with
current or future competitors. This would cause our revenues to decline and
affect our ability to achieve profitability.
We
depend on certain key scientific personnel for our success who do not work
full
time for us. The loss of any such personnel could adversely affect our business,
financial condition and results of operations.
Our
success depends on the continued availability and contributions of our Chief
Executive Officer and founder, Dr. John S. Kovach, as well as the
continued availability and contributions of Dr. Zhengping Zhuang and other
collaborators at the NIH. In particular, Dr. Kovach is 70 years old,
and, because of his arrangement with the State University of New York, does
not
devote his full time to us although Dr. Kovach generally devotes a minimum
of
twenty hours a week to our business. The loss of services of any of these
persons could delay or reduce our product development and commercialization
efforts. Furthermore, recruiting and retaining qualified scientific personnel
to
perform future research and development work will be critical to our success.
The loss of members of our scientific personnel, or our inability to attract
or
retain other qualified personnel or advisors, could significant weaken our
management, harm our ability to compete effectively and harm our
business.
Our
key
personnel are involved in
other
business activities and
may
face a conflict in selecting between their other business interests
and our business.
Dr.
John
Kovach, our Chief Executive Officer, also is Chair of the Department of
Preventive
Medicine at Stony Brook University. Dr. Zhengping Zhuang, a consultant to
us, is
employed
at the NIH. They may also become involved in the future with other business
opportunities, which may become available. Accordingly, our key personnel
may
face a conflict in selecting between us and their other business interests.
We
have not formulated a policy for the
resolution of such conflicts.
We
expect to rely heavily on third parties for the conduct of clinical trials
of
our product candidates. If these clinical trials are not successful, or if
we or
our collaborators are not able to obtain the necessary regulatory approvals,
we
will not be able to commercialize our product
candidates.
In
order
to obtain regulatory approval for the commercial sale of our product candidates,
we and our collaborators will be required to complete extensive preclinical
studies as well as clinical trials in humans to demonstrate to the FDA and
foreign regulatory authorities that our product candidates are safe and
effective.
Dr. Kovach
is experienced in the design and conduct of early clinical cancer trials, having
been the lead investigator for a National Cancer Institute Phase I contract
for
ten years at the Mayo Clinic, Rochester, MN. Lixte, however, has no experience
in conducting clinical trials and expects to rely heavily on collaborative
partners and contract research organizations for their performance and
management of clinical trials of our product candidates.
Clinical
development, including preclinical testing, is a long, expensive and uncertain
process. Prior
to
conducting preclinical studies and clinical trials in humans, we anticipate
that
the following
steps will be taken: Identification of lead compounds in
vitro studies,
followed by documentation
of activity in an animal model of a particular disease entity, and determination
of toxicity
of the new therapy(s) in an animal system usually consisting of the mouse and
often the dog.
For
new diagnostic tests, pre-clinical studies involve demonstration of recognition
of specific
endpoints associated with the presence or progression of disease in a manner
that suggest
relevance to clinical diagnosis and/or assessment of prognosis. It is expected
that for us to
carry
its new treatments to clinical trials-an agreement will be negotiated with
(1)
NIH to conduct
the trial as part of a new CRADA or (2) a pharmaceutical company, most probably
in conjunction with NIH as co-inventor of the new therapies.Accordingly,
preclinical testing and clinical trials, if any, of our product candidates
under
development may not be successful. We and our collaborators could experience
delays in preclinical or clinical trials of any of our product candidates,
obtain unfavorable results in a development program, or fail to obtain
regulatory approval for the commercialization of a product. Preclinical studies
or clinical trials may produce negative, inconsistent or inconclusive results,
and we or our collaborators may decide, or regulators may require us, to conduct
additional preclinical studies or clinical trials. The results from early
clinical trials may not be statistically significant or predictive of results
that will be obtained from expanded, advanced clinical trials.
Furthermore,
the timing and completion of clinical trials, if any, of our product candidates
depend on, among other factors, the number of patients we will be required
to
enroll in the clinical trials and the rate at which those patients are enrolled.
Any increase in the required number of patients, decrease in recruitment rates
or difficulties retaining study participants may result in increased costs,
program delays or both.
Also,
our
products under development may not be effective in treating any of our targeted
disorders or may prove to have undesirable or unintended side effects,
toxicities or other characteristics that may prevent or limit their commercial
use. Institutional review boards or regulators, including the FDA, may hold,
suspend or terminate our clinical research or the clinical trials of our product
candidates for various reasons, including non-compliance with regulatory
requirements or if, in their opinion, the participating subjects are being
exposed to unacceptable health risks. Additionally, the failure of third parties
conducting or overseeing the operation of the clinical trials to perform their
contractual or regulatory obligations in a timely fashion could delay the
clinical trials. Failure of clinical trials can occur at any stage of testing.
Any of these events would adversely affect our ability to market a product
candidate.
The
development process necessary to obtain regulatory approval is lengthy, complex
and expensive. If we and our collaborative partners do not obtain necessary
regulatory approvals, then our business will be unsuccessful and the market
price of our common stock will substantially decline.
To
the
extent that we, or our collaborative partners, are able to successfully advance
a product candidate through the clinic, we, or such partner, will be required
to
obtain regulatory approval prior to marketing and selling such
product.
The
process of obtaining FDA and other required regulatory approvals is expensive.
The time required for FDA and other approvals is uncertain and typically takes
a
number of years, depending on the complexity and novelty of the
product.
Any
regulatory approval to market a product may be subject to limitations on the
indicated uses for which we, or our collaborative partners, may market the
product. These limitations may restrict the size of the market for the product
and affect reimbursement by third-party payors. In addition, regulatory agencies
may not grant approvals on a timely basis or may revoke or significantly modify
previously granted approvals.
We,
or
our collaborative partners, also are subject to numerous foreign regulatory
requirements governing the manufacturing and marketing of our potential future
products outside of the United States. The approval procedure varies among
countries, additional testing may be required in some jurisdictions, and the
time required to obtain foreign approvals often differs from that required
to
obtain FDA approvals. Moreover, approval by the FDA does not ensure approval
by
regulatory authorities in other countries, and vice versa.
As
a
result of these factors, we or our collaborators may not successfully begin
or
complete clinical trials in the time periods estimated, if at all. Moreover,
if
we or our collaborators incur costs and delays in development programs or fail
to successfully develop and commercialize products based upon our technologies,
we may not become profitable and our stock price could decline.
Even
if our products are approved by regulatory authorities, if we fail to comply
with ongoing regulatory requirements, or if we experience unanticipated problems
with our products, these products could be subject to restrictions or withdrawal
from the market.
Any
product for which we obtain marketing approval, along with the manufacturing
processes, post-approval clinical data and promotional activities for such
product, will be subject to continual review and periodic inspections by the
FDA
and other regulatory bodies. Even if regulatory approval of a product is
granted, the approval may be subject to limitations on the indicated uses for
which the product may be marketed or contain requirements for costly
post-marketing testing and surveillance to monitor the safety or efficacy of
the
product. Later discovery of previously unknown problems with our products,
including unanticipated adverse events or adverse events of unanticipated
severity or frequency, manufacturer or manufacturing processes, or failure
to
comply with regulatory requirements, may result in restrictions on such products
or manufacturing processes, withdrawal of the products from the market,
voluntary or mandatory recall, fines, suspension of regulatory approvals,
product seizures, injunctions or the imposition of civil or criminal
penalties.
Failure
to obtain regulatory approval in foreign jurisdictions will prevent us from
marketing our products abroad.
We
intend
to market our products in international markets. In order to market our products
in the European Union and many other foreign jurisdictions, we must obtain
separate regulatory approvals. The approval procedure varies among countries
and
can involve additional testing, and the time required to obtain approval may
differ from that required to obtain FDA approval. The foreign regulatory
approval process may include all of the risks associated with obtaining FDA
approval. We may not obtain foreign regulatory approvals on a timely basis,
if
at all. Approval by the FDA does not ensure approval by regulatory authorities
in other countries, and approval by one foreign regulatory authority does not
ensure approval by regulatory authorities in other foreign countries or by
the
FDA. We may not be able to file for regulatory approvals and may not receive
necessary approvals to commercialize our products in any market.
We
are subject to uncertainty relating to health care reform measures and
reimbursement policies which, if not favorable to our product candidates, could
hinder or prevent our product candidates’ commercial
success.
The
continuing efforts of the government, insurance companies, managed care
organizations and other payors of health care costs to contain or reduce costs
of health care may adversely affect:
·
|
our
ability to generate revenues and achieve
profitability;
|
·
|
the
future revenues and profitability of our potential customers, suppliers
and collaborators; and
|
·
|
the
availability of capital.
|
In
certain foreign markets, the pricing of prescription pharmaceuticals is subject
to government control. In the United States, given recent federal and state
government initiatives directed at lowering the total cost of health care,
the
U.S. Congress and state legislatures will likely continue to focus on health
care reform, the cost of prescription pharmaceuticals and on the reform of
the
Medicare and Medicaid systems. For example, legislation was enacted on
December 8, 2003, which provides a new Medicare prescription drug benefit
beginning in 2006 and mandates other reforms. While we cannot predict the full
effects of the implementation of this new legislation or whether any legislative
or regulatory proposals affecting our business will be adopted, the
implementation of this legislation or announcement or adoption of these
proposals could have a material and adverse effect on our business, financial
condition and results of operations.
Our
ability to commercialize our product candidates successfully will depend in
part
on the extent to which governmental authorities, private health insurers and
other organizations establish appropriate reimbursement levels for the cost
of
our products and related treatments. Third-party payors are increasingly
challenging the prices charged for medical products and services. Also, the
trend toward managed health care in the United States, which could significantly
influence the purchase of health care services and products, as well as
legislative proposals to reform health care or reduce government insurance
programs, may result in lower prices for our product candidates or exclusion
of
our product candidates from reimbursement programs. The cost containment
measures that health care payors and providers are instituting and the effect
of
any health care reform could materially and adversely affect our results of
operations.
If
physicians and patients do not accept the products that we may develop, our
ability to generate product revenue in the future will be adversely
affected.
The
product candidates that we may develop may not gain market acceptance among
physicians, healthcare payors, patients and the medical community. This will
adversely affect our ability to generate revenue. Market acceptance of and
demand for any product that we may develop will depend on many factors,
including:
·
|
our
ability to provide acceptable evidence of safety and
efficacy;
|
·
|
convenience
and ease of administration;
|
·
|
prevalence
and severity of adverse side
effects;
|
·
|
availability
of alternative treatments or diagnostic
tests;
|
·
|
cost
effectiveness;
|
·
|
effectiveness
of our marketing strategy and the pricing of any product that we
may
develop;
|
·
|
publicity
concerning our products or competitive products;
and
|
·
|
our
ability to obtain third-party coverage or
reimbursement.
|
We
face the risk of product liability claims and may not be able to obtain
insurance.
Our
business exposes us to the risk of product liability claims that is inherent
in
the testing, manufacturing, and marketing of drugs and related devices. Although
we will obtain product liability and clinical trial liability insurance when
appropriate, this insurance is subject to deductibles and coverage limitations.
We may not be able to obtain or maintain adequate protection against potential
liabilities. In addition, if any of our product candidates are approved for
marketing, we may seek additional insurance coverage. If we are unable to obtain
insurance at acceptable cost or on acceptable terms with adequate coverage
or
otherwise protect against potential product liability claims, we will be exposed
to significant liabilities, which may harm our business. These liabilities
could
prevent or interfere with our product commercialization efforts. Defending
a
suit, regardless of merit, could be costly, could divert management attention
and might result in adverse publicity or reduced acceptance of our products
in
the market.
We
cannot be certain we will be able to obtain patent protection to protect our
product candidates and technology.
We
cannot
be certain that any patent or patents will be issued based on the pending
provisional patent application we recently filed. If a third party has also
filed a patent application relating to an invention claimed by us or our
licensors, we may be required to participate in an interference proceeding
declared by the U.S. Patent and Trademark Office to determine priority of
invention, which could result in substantial uncertainties and cost for us,
even
if the eventual outcome is favorable to us. The degree of future protection
for
our proprietary rights is uncertain. For example:
·
|
we
or our licensors might not have been the first to make the inventions
covered by our pending or future patent
applications;
|
·
|
we
or our licensors might not have been the first to file patent applications
for these inventions;
|
·
|
others
may independently develop similar or alternative technologies or
duplicate
any of our technologies;
|
·
|
it
is possible that our patent applications will not result in an issued
patent or patents, or that the scope of protection granted by any
patents
arising from our patent applications will be significantly narrower
than
expected;
|
·
|
any
patents under which we hold ultimate rights may not provide us with
a
basis for commercially-viable products, may not provide us with any
competitive advantages or may be challenged by third parties as not
infringed, invalid, or unenforceable under United States or foreign
laws;
|
·
|
any
patent issued to us in the future or under which we hold rights may
not be
valid or enforceable; or
|
·
|
we
may develop additional proprietary technologies that are not patentable
and which may not be adequately protected through trade secrets;
for
example if a competitor independently develops duplicative, similar,
or
alternative technologies.
|
If
we are not able to protect and control our unpatented trade secrets, know-how
and other technological innovation, we may suffer competitive
harm.
We
also
rely on proprietary trade secrets and unpatented know-how to protect our
research and development activities, particularly when we do not believe that
patent protection is appropriate or available. However, trade secrets are
difficult to protect. We will attempt to protect our trade secrets and
unpatented know-how by requiring our employees, consultants and advisors to
execute a confidentiality and non-use agreement. We cannot guarantee that these
agreements will provide meaningful protection, that these agreements will not
be
breached, that we will have an adequate remedy for any such breach, or that
our
trade secrets will not otherwise become known or independently developed by
a
third party. Our trade secrets, and those of our present or future collaborators
that we utilize by agreement, may become known or may be independently
discovered by others, which could adversely affect the competitive position
of
our product candidates.
We
may incur substantial costs enforcing our patents, defending against third-party
patents, invalidating third-party patents or licensing third-party intellectual
property, as a result of litigation or other proceedings relating to patent
and
other intellectual property rights.
We
may
not have rights under some patents or patent applications that may cover
technologies that we use in our research, drug targets that we select, or
product candidates that we seek to develop and commercialize. Third parties
may
own or control these patents and patent applications in the United States and
abroad. These third parties could bring claims against us or our collaborators
that would cause us to incur substantial expenses and, if successful against
us,
could cause us to pay substantial damages. Further, if a patent infringement
suit were brought against us or our collaborators, we or they could be forced
to
stop or delay research, development, manufacturing or sales of the product
or
product candidate that is the subject of the suit. We or our collaborators
therefore may choose to seek, or be required to seek, a license from the
third-party and would most likely be required to pay license fees or royalties
or both. These licenses may not be available on acceptable terms, or at all.
Even if we or our collaborators were able to obtain a license, the rights may
be
nonexclusive, which would give our competitors access to the same intellectual
property. Ultimately, we could be prevented from commercializing a product,
or
forced to cease some aspect of our business operations, as a result of patent
infringement claims, which could harm our business.
There
has
been substantial litigation and other proceedings regarding patent and other
intellectual property rights in the pharmaceutical and biotechnology industries.
Although we are not currently a party to
any
patent litigation or any other adversarial proceeding, including any
interference proceeding declared before the United States Patent and Trademark
Office, regarding intellectual property rights with respect to our products
and
technology, we may become so in the future. We are not currently aware of any
actual or potential third party infringement claim involving our products.
The
cost to us of any patent litigation or other proceeding, even if resolved in
our
favor, could be substantial. The outcome of patent litigation is subject to
uncertainties that cannot be adequately quantified in advance, including the
demeanor and credibility of witnesses and the identity of the adverse party,
especially in biotechnology related patent cases that may turn on the testimony
of experts as to technical facts upon which experts may reasonably disagree.
Some of our competitors may be able to sustain the costs of such litigation
or
proceedings more effectively than we can because of their substantially greater
financial resources. If a patent or other proceeding is resolved against us,
we
may be enjoined from researching, developing, manufacturing or commercializing
our products without a license from the other party and we may be held liable
for significant damages. We may not be able to obtain any required license
on
commercially acceptable terms or at all.
Uncertainties
resulting from the initiation and continuation of patent litigation or other
proceedings could harm our ability to compete in the marketplace. Patent
litigation and other proceedings may also absorb significant management
time.
If
our products were derived from tissue or other samples from a patient without
the patient’s consent, we could be forced to pay royalties or cease selling our
products.
An
essential component of our business is our ability to obtain well-characterized
tissue and other samples from patients. To that end, on January 5, 2007,
we
entered into an agreement with the Institute of Pathology at the University
of
Regensburg in Germany to collect samples of colon, kidney, bladder, stomach,
breast, prostate, and ovarian cancers for biomarker discovery programs focused
on these cancers. Although we believe that all necessary consents will be
obtained from any patient who donates samples for our research purposes, there
is a risk that, without our knowledge and through inadvertence
or neglect, proper consents will not be obtained from all patients.
The responsibility for obtaining the consents is vested in the physicians at
the
University. If a patient does not give a proper consent and we develop a product
using a sample obtained from him or her, we could be forced to pay royalties
or
to cease selling that product.
If
we are unable to protect our intellectual property rights, our competitors
may
develop and market products with similar features that may reduce demand for
our
potential products.
The
following factors are important to our success:
·
|
receiving
patent protection for our product
candidates;
|
·
|
preventing
others from infringing our intellectual property rights;
and
|
·
|
maintaining
our patent rights and trade
secrets.
|
We
will
be able to protect our intellectual property rights in patents and trade secrets
from unauthorized use by third parties only to the extent that such intellectual
property rights are covered by valid and enforceable patents or are effectively
maintained as trade secrets.
To
date,
we have sought to protect our proprietary position by filing for a Patent
Cooperation Treaty patent and a non-provisional patent in the U.S. related
to
inventions that form the basis of our research arrangements with the NIH and
potential pipeline of future products. We also filed a new provisional
application in the U.S. in February 2007 relating to a lead compound that has
activity against glioblastoma multiform cell lines in vitro. We
anticipate that we will apply for further patents based on our ongoing research.
Because issues of patentability involve complex legal and factual questions,
the
issuance, scope and enforceability of patents cannot be predicted with
certainty. Patents, if issued, may be challenged, invalidated or circumvented.
U.S. patents and patent applications may also be subject to interference
proceedings, and U.S. patents may be subject to reexamination proceedings in
the
U.S. Patent and Trademark Office and
foreign
patents may be subject to opposition or comparable proceedings in corresponding
foreign patent offices, which proceedings could result in either loss of the
patent or denial of the patent application or loss or reduction in the scope
of
one or more of the claims of the patent or patent application. In addition,
such
interference, reexamination and opposition proceedings may be costly. Thus,
any
patents that we own or license from others may not provide any protection
against competitors. Furthermore, an adverse decision in an interference
proceeding can result in a third-party receiving the patent rights sought by
us,
which in turn could affect our ability to market a potential product to which
that patent filing was directed. Our pending patent applications, those that
we
may file in the future, or those that we may license from third parties may
not
result in patents being issued. If issued, they may not provide us with
proprietary protection or competitive advantages against competitors with
similar technology. Furthermore, others may independently develop similar
technologies or duplicate any technology that we have developed. Many countries,
including certain countries in Europe, have compulsory licensing laws under
which a patent owner may be compelled to grant licenses to third parties. For
example, compulsory licenses may be required in cases where the patent owner
has
failed to “work” the invention in that country, or the third-party has patented
improvements. In addition, many countries limit the enforceability of patents
against government agencies or government contractors. In these countries,
the
patent owner may have limited remedies, which could materially diminish the
value of the patent. Moreover, the legal systems of certain countries,
particularly certain developing countries, do not favor the aggressive
enforcement of patent and other intellectual property protection, which makes
it
difficult to stop infringement.
In
addition, our ability to enforce our patent rights depends on our ability to
detect infringement. It is difficult to detect infringers who do not advertise
the compounds that are used in their products. Any litigation to enforce or
defend our patent rights, even if we prevail, could be costly and time-consuming
and would divert the attention of management and key personnel from business
operations.
We
will
also rely on trade secrets, know-how and technology, which are not protected
by
patents, to maintain our competitive position. We will seek to protect this
information by entering into confidentiality agreements with parties that have
access to it, such as strategic partners, collaborators, employees and
consultants. Any of these parties may breach these agreements and disclose
our
confidential information or our competitors might learn of the information
in
some other way. If any trade secret, know-how or other technology not protected
by a patent were disclosed to, or independently developed by, a competitor,
our
business, financial condition and results of operations could be materially
adversely affected.
If
our third-party manufacturers’ facilities do not follow current good
manufacturing practices, our product development and commercialization efforts
may be harmed.
There
are
a limited number of manufacturers that operate under the FDA’s and European
Union’s good manufacturing practices regulations and are capable of
manufacturing products. Third-party manufacturers may encounter difficulties
in
achieving quality control and quality assurance and may experience shortages
of
qualified personnel. A failure of third-party manufacturers to follow current
good manufacturing practices or other regulatory requirements and to document
their adherence to such practices may lead to significant delays in the
availability of products for commercial use or clinical study, the termination
of, or hold on, a clinical study, or may delay or prevent filing or approval
of
marketing applications for our products. In addition we could be subject to
sanctions being imposed on us, including fines, injunctions and civil penalties.
Changing manufacturers may require additional clinical trials and the
revalidation of the manufacturing process and procedures in accordance with
FDA
mandated current good manufacturing practices and will require FDA approval.
This revalidation may be costly and time consuming. If we are unable to arrange
for third-party manufacturing of our products, or to do so on commercially
reasonable terms, we may not be able to complete development or marketing of
our
products.
If
we
fail to obtain an adequate level of reimbursement for our products by
third-party payors, there may be no commercially viable markets for our products
or the markets may be much smaller than expected.
The
availability and levels of reimbursement by governmental and other third-party
payors affect the market for our products. The efficacy, safety and
cost-effectiveness of our products as well as the efficacy, safety and
cost-effectiveness of any competing products will determine the availability
and
level of reimbursement. These third-party payors continually attempt to contain
or reduce the costs of healthcare by challenging the prices charged for
healthcare products and services. In certain countries, particularly the
countries of the European Union, the pricing of prescription pharmaceuticals
is
subject to governmental control. In these countries, pricing negotiations with
governmental authorities can take six to twelve months or longer after the
receipt of regulatory marketing approval for a product. To obtain reimbursement
or pricing approval in some countries, we may be required to conduct clinical
trials that compare the cost-effectiveness of our products to other available
therapies. If reimbursement for our products is unavailable, limited in scope
or
amount or if pricing is set at unsatisfactory levels, our revenues would be
reduced.
Another
development that may affect the pricing of drugs is regulatory action regarding
drug reimportation into the United States. The Medicare Prescription Drug,
Improvement and Modernization Act of 2003, which became law in December 2003,
requires the Secretary of the U.S. Department of Health and Human Services
to
promulgate regulations allowing drug reimportation from Canada into the United
States under certain circumstances. These provisions will become effective
only
if the Secretary certifies that such imports will pose no additional risk to
the
public’s health and safety and result in significant cost savings to consumers.
To date, the Secretary has made no such finding, but he could do so in the
future. Proponents of drug reimportation may also attempt to pass legislation
that would remove the requirement for the Secretary’s certification or allow
reimportation under circumstances beyond those anticipated under current law.
If
legislation is enacted, or regulations issued, allowing the reimportation of
drugs, it could decrease the reimbursement we would receive for any products
that we may commercialize, negatively affecting our anticipated revenues and
prospects for profitability.
RISKS
RELATED TO CAPITAL STRUCTURE
There
is no assurance of an established public trading market, which would adversely
affect the ability of our investors to sell their securities in the public
market.
Although
our common stock is registered under the Exchange Act, our common stock is
not
and has never been publicly traded. As such, a regular trading market for the
securities does not yet exist and may not exist or be sustained in the future.
We intend to seek a listing on the OTC Bulletin Board. No assurance can be
given
that such listing will be obtained or the timing of the listing. Even if such
listing is obtained, the NASD has enacted recent changes that limit quotations
on the OTC Bulletin Board to securities of issuers that are current in their
reports filed with the Securities and Exchange Commission. The effect on the
OTC
Bulletin Board of these rule changes and other proposed changes cannot be
determined at this time. The OTC Bulletin Board is an inter-dealer,
over-the-counter market that provides significantly less liquidity than the
NASD’s automated quotation system (the “NASDAQ Stock Market”). Quotes for stocks
included on the OTC Bulletin Board are not listed in the financial sections
of
newspapers as are those for the NASDAQ Stock Market. Therefore, prices for
securities traded solely on the OTC Bulletin Board may be difficult to obtain
and holders of common stock may be unable to resell their securities at or
near
their original offering price or at any price. Market prices for our common
stock will be influenced by a number of factors, including:
·
|
the
issuance of new equity securities pursuant to a future offering or
acquisition;
|
·
|
competitive
developments, including announcements by competitors of new products
or
services or significant contracts, acquisitions, strategic partnerships,
joint ventures or capital
commitments;
|
·
|
variations
in quarterly operating results;
|
·
|
changes
in financial estimates by securities
analysts;
|
·
|
the
depth and liquidity of the market for our common
stock;
|
·
|
investor
perceptions of our company and the medical device industry generally;
and
|
·
|
general
economic and other national
conditions.
|
Shares
eligible for future sale may adversely affect the market price of our common
stock, as the future sale of a substantial amount of outstanding stock in the
public marketplace could reduce the price of our common
stock.
Dr.
John
Kovach, our current Chief Executive Officer, was the former stockholder of
Lixte, our operating subsidiary, and received shares of our stock in the Reverse
Merger. He will be eligible to sell all or some of his shares of common stock
by
means of ordinary brokerage transactions in the open market pursuant to
Rule 144 promulgated under the Securities Act (“Rule 144”), commencing
one year after the Reverse Merger, subject to certain limitations. In general,
pursuant to Rule 144, a stockholder (or stockholders whose shares are
aggregated) who has satisfied a one-year holding period may, under certain
circumstances, sell within any three-month period a number of securities which
does not exceed the greater of 1% of the then outstanding shares of common
stock
or the average weekly trading volume of the class during the four calendar
weeks
prior to such sale if the shares are listed on a national exchange or on NASDAQ.
Rule 144 also permits, under certain circumstances, the sale of securities,
without any limitations, by a non-affiliate that has satisfied a two-year
holding period. Additionally, this prospectus covers the resale of shares issued
in the private placement and the shares owed by certain of our stockholders
immediately prior to the Reverse Merger. Any substantial sale of common stock
pursuant to this prospectus or Rule 144 may have an adverse effect on the
market price of our common stock by creating an excessive supply.
Our
common stock is considered a “penny stock” and may be difficult to
sell.
Our
common stock is considered to be a “penny stock” since it meets one or more of
the definitions in Rules 15g-2 through 15g-6 promulgated under
Section 15(g) of the Exchange Act. These include but are not limited to the
following: (i) the stock trades at a price less than $5.00 per share;
(ii) it is NOT traded on a “recognized” national exchange; (iii) it is
NOT quoted on the NASDAQ Stock Market, or even if so, has a price less than
$5.00 per share; or (iv) it is issued by a company with net tangible assets
less than $2.0 million, if in business more than a continuous three years,
or with average revenues of less than $6.0 million for the past three
years. The principal result or effect of being designated a “penny stock” is
that securities broker-dealers cannot recommend the stock but must trade in
it
on an unsolicited basis.
Additionally,
Section 15(g) of the Exchange Act and Rule 15g-2 promulgated
thereunder by the SEC require broker-dealers dealing in penny stocks to provide
potential investors with a document disclosing the risks of penny stocks and
to
obtain a manually signed and dated written receipt of the document before
effecting any transaction in a penny stock for the investor’s
account.
Potential
investors in our common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be “penny stock.”
Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the
account of any investor for transactions in such stocks before selling any
penny
stock to that investor. This procedure requires the broker-dealer to
(i) obtain from the investor information concerning his or her financial
situation, investment experience and investment objectives;
(ii) reasonably
determine,
based on that information, that transactions in penny stocks are suitable for
the investor and that the investor has sufficient knowledge and experience
as to
be reasonably capable of evaluating the risks of penny stock transactions;
(iii) provide the investor with a written statement setting forth the basis
on which the broker-dealer made the determination in (ii) above; and
(iv) receive a signed and dated copy of such statement from the investor,
confirming that it accurately reflects the investor’s financial situation,
investment experience and investment objectives. Compliance with these
requirements may make it more difficult for holders of our common stock to
resell their shares to third parties or to otherwise dispose of them in the
market or otherwise.
Our
principal stockholder has significant influence over our
company.
As
a
result of the Reverse Merger, Dr. John Kovach, our principal stockholder and
our
Chief Executive Officer, beneficially owns approximately 64% of our outstanding
voting stock after giving effect to the private placement. As a result, Dr.
Kovach possesses significant influence, giving him the ability, among other
things, to elect all of the members of the Board of Directors and to approve
significant corporate transactions. Such stock ownership and control may also
have the effect of delaying or preventing a future change in control, impeding
a
merger, consolidation, takeover or other business combination or discourage
a
potential acquirer from making a tender offer or otherwise attempting to obtain
control of us.
Standards
for compliance with Section 404 of the Sarbanes-Oxley Act of 2002 are
uncertain, and if we fail to comply in a timely manner, our business could
be
harmed and our stock price could decline.
Rules
adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of
2002 require annual assessment of our internal control over financial reporting,
and attestation of our assessment by our independent registered public
accountants. On September 22, 2005, the SEC extended the compliance dates
for non-accelerated filers, as defined by the SEC, by one year. Accordingly,
we
believe that this requirement will first apply to our annual report for fiscal
2007. The SEC has recently proposed new rules on compliance with Section 404.
In
any event, the standards that must be met for management to assess the internal
control over financial reporting as effective are new and complex, and require
significant documentation, testing and possible remediation to meet the detailed
standards. We may encounter problems or delays in completing activities
necessary to make an assessment of our internal control over financial
reporting. In addition, the attestation process by our independent registered
public accountants is new and we may encounter problems or delays in completing
the implementation of any requested improvements and receiving an attestation
of
our assessment by our independent registered public accountants. If we cannot
assess our internal control over financial reporting as effective, or our
independent registered public accountants are unable to provide an unqualified
attestation report on such assessment, investor confidence and share value
may
be negatively impacted.
We
do not foresee paying cash dividends in the foreseeable
future.
We
have
not paid cash dividends on our stock and do not plan to pay cash dividends
on
our common stock in the foreseeable future.
This
Prospectus contains certain forward-looking statements. For example,
statements regarding our financial position, business strategy and other plans
and objectives for future operations, and assumptions and predictions about
future product demand, supply, manufacturing, costs, marketing and pricing
factors are all forward-looking statements. These statements are generally
accompanied by words such as “intend,” “anticipate,” “believe,” “estimate,”
“potential(ly),” “continue,” “forecast,” “predict,” “plan,” “may,” “will,”
“could,” “would,” “should,” “expect” or the negative of such terms or other
comparable terminology. We believe that the assumptions and expectations
reflected in such forward-looking statements are reasonable, based on
information available to us on the date hereof, but we cannot assure you that
these assumptions and expectations will prove to have been correct or that
we
will take any action that we may presently be planning. However, these
forward-looking statements are inherently subject to known and unknown risks
and
uncertainties. Actual results or experience may differ materially from those
expected or anticipated in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to,
regulatory policies, competition from other similar businesses, and market
and
general policies, competition from other similar businesses, and market and
general economic factors. This discussion should be read in conjunction with
the consolidated financial statements and notes thereto included in this
prospectus.
If
one or
more of these or other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, actual results may vary materially from
what
we project. Any forward-looking statement you read in this prospectus reflects
our current views with respect to future events and is subject to these and
other risks, uncertainties and assumptions relating to our operations, results
of operations, growth strategy, and liquidity. All subsequent forward-looking
statements attributable to us or individuals acting on our behalf are expressly
qualified in their entirety by this paragraph. You should specifically consider
the factors identified in this prospectus, which would cause actual results
to
differ before making an investment decision. We are under no duty to update
any
of these forward-looking statements after the date of this prospectus or to
conform these statements to actual results.
The
following technical terms are used in this Prospectus:
Assay
An
assay
is a
method to determine the presence, absence, or the amount of a particular
substance in a sample. Assays
of body
fluids such as blood and urine can be used to detect specific products
(biomarkers)
that
indicate the presence of a specific type of cancer.
Biomarker
A
biomarker
is a
component of a cell that is uniquely or strongly associated with a particular
feature of that cell. The detection of the biomarker in body fluid by an
assay
indicates that a particular cell is very likely to be present in the body.
In
this memorandum, “biomarkers”
refer
primarily to proteins
that are
uniquely produced by specific types of cancer cells or that are produced in
excess by the cancer cells compared to non—cancer cells of the same tissue or
organ.
Cancer
A
disease
characterized by loss or enhancement of one or more mechanisms that regulate
the
growth of cells of a specific tissue. Loss of these control mechanisms or gain
of abnormal mechanisms in a single cell that put cell
growth
into
overdrive allows that cell to grow, invade local tissue, and to spread to other
regions of the body. This spreading of altered cells to distant sites is the
process called metastasis.
Cell
Growth
Cell
growth
is the
ability of an individual cell to reproduce by dividing into two cells. During
normal development and subsequently during the life of the adult, this process
is highly controlled. Loss of this control is the distinguishing feature of
cancer cells. Although all cancer cells gain the capacity for uncontrolled
growth, in most instances they retain many of the highly specialized features
(and associated specific molecular components) that were characteristic of
the
normal tissue before loss of growth control. For example, breast cancer cells
and brain cancer cells have lost control of growth and may be unrecognizable
by
their appearance under the microscope but
identifiable by the presence of biomarkers specific to breast or brain
cells.
CRADA
A
CRADA
(Cooperative Research and Development Agreement) is a formal contractual
mechanism by which a variety of federal government agencies may agree to work
collaboratively with a non-governmental entity to study and advance a particular
idea, observation, or process under a defined plan of work.
Gene
A
gene
is a
unit of information that specifies the structure of one or more gene
products.
Collectively, genes determine the precise composition of all molecules needed
for maintenance of the functions of life: reproduction, development,
organization, growth and metabolism. Genes
are
often referred to as units of heredity because they pass on the information
necessary for all characteristics of an individual. For mammals like ourselves,
one set of genes is received from each parent.
Gene
Products
The
products of genes are the thousands of different chemical structures, called
molecules, needed for development of all cells. Most gene products are proteins.
Most proteins are enzymes, molecules that can carry out work such as digesting
and utilizing food for energy, signaling the cell to produce other gene products
in response to changing conditions in the body, and controlling cell
growth.
When
proteins controlling cell
growth
are
altered, as occurs in all cancers, they become prime candidates for biomarkers
that
reveal the presence of cancer.
Glioblastoma
Multiforme (GBM)
GBM
is the
most common and most aggressive type of primary human brain cancer. The name
derives from the fact that the brain cell that loses growth control and becomes
a brain cancer cell is a glial cell (glioblastoma); as the altered glial cells
grow without restraint, they take on many different shapes (multiforme). Recent
studies suggest, however, that GBMs may arise from primitive brain stem cells
rather than from glial cells. GBM
is the
initial target of Lixte Biotechnology, Inc.
Metastasis
Metastasis
is the
process by which cancers acquire the ability to spread to other parts of the
body by entry and dissemination through the blood and/or lymph systems. The
devastating aspect of metastasis is the ability of the cancer cells to grow
in a
new environment (new tissue) Examples are the metastasis of breast cancer cells
to the brain and liver and prostate cancer cells to bone.
Cure
of
cancers is much more difficult to achieve after metastasis
has
occurred. A major goal of our biomarker research is to develop assays
for
detection of cancers before they have invaded extensively or metastasized,
allowing complete removal by surgery.
Mutation
A
mutation
is a
change in one or more building blocks of a gene. Some changes can be tolerated
without altering the integrity (function) of the product of the gene but other
changes can result in cancer.
For
the
purposes of the cancer projects described in this memorandum, it is important
to
distinguish between inherited mutations (inborn mutations) and acquired
(environmentally caused) mutations.
Some
inborn mutations predispose an individual to development of one or more kinds
of
cancer. Because these mutations are inherited, they are present in every cell
in
the body. Such mutations are responsible for the higher frequency of certain
cancers in particular families and ethnic groups. Examples are the breast cancer
predisposing genes known as BRCA I and BRCA II.
Research
on biomarkers,
however, is directed at finding the gene products (proteins) of acquired
mutations. Acquired mutations that change a single cell to a cancer cell are
present ONLY in that cell and cells arising from its uncontrolled cell
growth.
If the
products of the altered genes in these cancer cells are detectable in the body,
they may reveal the presence of the cancer at a stage when it is curable by
surgery.
Prognosis
Prognosis
refers
to the likely course of a disease at specific stage of development. For example,
a breast or prostate cancer that is not confined to the tissue of origin, e.g.
is also present in a lymph node when first detected, has a greater likelihood
of
recurrence, a worse prognosis, than if it were confined to the tissue of
origin.
Thus,
the
presence of lymph node metastases is an indicator of poor
prognosis.
It
is
hoped that specific biomarkers
for
cancers will be found that have prognostic value. With assays for such markers,
patients with poor prognoses could consider more aggressive treatments before
obvious spread of disease and patients with good prognoses could be spared
unnecessary treatment.
Proteins
Proteins
are
molecules that have many functions important to the nature and behavior of
the
cell. Many proteins are enzymes that regulate and integrate a myriad of
biochemical processes essential to life.
Certain
enzymes are critical to an integrated system of cellular signaling that
regulates cell behavior in response to a constantly changing environment and
maintains the specialized nature of different types of cells. It is likely
that
some biomarkers
of
cancers have perverted signaling functions that perpetuate the abnormal behavior
of the cancer.
Thus,
discovery of biomarkers of known function that are unique or overly abundant
in
specific types of cancers may provide clues as to the biochemical
vulnerabilities of these cancers, weaknesses that can be attacked selectively
by
specific classes of drugs.
We
will
not receive any proceeds from the resale of any of the shares offered by this
prospectus by the selling stockholders.
Since
our
shares are not listed or quoted on any exchange or quotation system, the
offering price of the shares of common stock was arbitrarily determined. The
offering price of the common stock registered hereunder was determined by the
price shares sold to our stockholders in our recent private placements completed
on June 30, 2006 and July 27, 2006. The offering price of the shares of common
stock that is being registered hereunder was negotiated by us, the respective
investors and placement agent under the offerings.
This
offering price does not necessarily bear any relationship to our book value,
assets, financial condition or any other established criteria of value. Although
our common stock is not listed on a public exchange, we intend to seek a listing
on the Over-the-Counter Bulletin Board (OTCBB) as soon as practicable following
the effective date of the registration statement that contains this prospectus.
However, there is no assurance that our common stock, once it becomes listed
on
a public exchange, will trade at market prices in excess of the initial public
offering price as prices for the common stock in any public market which may
develop will be determined in the marketplace, and may be influenced by many
factors, including the depth and liquidity of the market for the common stock,
investor perception of us and general economic and market conditions.
There
is
no trading of our capital stock on any publicly traded market. Even if such
stock becomes publicly tradable, the price of our common stock will likely
fluctuate in the future. The stock market in general has experienced extreme
stock price fluctuations in the past few years. In some cases, these
fluctuations have been unrelated to the operating performance of the affected
companies. Many companies have experienced dramatic volatility in the market
prices of their common stock. We believe that a number of factors, both within
and outside our control, could cause the price of our common stock to fluctuate,
perhaps substantially. Factors such as the following could have a significant
adverse impact on the market price of our common stock:
· |
Our
ability to obtain additional financing and, if available, the terms
and
conditions of the financing;
|
·
|
Our
financial position and results of
operations;
|
·
|
Concern
as to, or other evidence of, the safety or efficacy of any future
proposed
products and services or our competitors’ products and
services;
|
·
|
Announcements
of technological innovations or new products or services by us or
our
competitors;
|
·
|
U.S.
and foreign governmental regulatory
actions;
|
·
|
The
development of litigation against
us;
|
·
|
Period-to-period
fluctuations in our operating
results;
|
·
|
Changes
in estimates of our performance by any securities
analysts;
|
·
|
Possible
regulatory requirements on our
business;
|
·
|
The
issuance of new equity securities pursuant to a future
offering;
|
·
|
Changes
in interest rates;
|
·
|
Competitive
developments, including announcements by competitors of new products
or
services or significant contracts, acquisitions, strategic partnerships,
joint ventures or capital
commitments;
|
·
|
Variations
in quarterly operating results;
|
·
|
Change
in financial estimates by securities
analysts;
|
·
|
The
depth and liquidity of the market for our common
stock;
|
·
|
Investor
perceptions of us; and
|
·
|
General
economic and other national
conditions.
|
Holders
As
of December 31, 2006, we currently have 26,582,183 shares of our common
stock outstanding. As of December 31, 2006, our shares of common stock are
held by approximately 66 stockholders
of record. This does not include an indeterminate number of beneficial
owners of securities whose shares are held in the names of various dealers
and
clearing agencies.
Our
dividend policy will be determined by our Board of Directors and will depend
upon a number of factors, including our financial condition and performance,
our
cash needs and expansion plans, income tax consequences, and the restrictions
that applicable laws and our credit arrangements then impose.
OR
PLAN OF OPERATION
Recent
Events
On
June
30, 2006, Lixte Biotechnology, Inc., a privately-held Delaware corporation,
completed a reverse merger transaction with our company, a public “shell”
company, whereby Lixte became our wholly-owned subsidiary. For financial
reporting purposes, Lixte was considered the accounting acquirer in the merger
and the merger was accounted for as a reverse merger. Accordingly, the
historical financial statements presented herein are those of Lixte and do
not
include our historical financial results. All costs associated with the reverse
merger transaction were expensed as incurred. On December 7, 2006, we
changed our name to Lixte Biotechnology Holdings, Inc. Lixte Biotechnology
Holdings, Inc. is a holding company for Lixte Biotechnology, Inc., the company
acquired in the reverse merger and our operating company. When we refer to
"Lixte," we are referring to Lixte Biotechnology, Inc., our operating
subsidiary.
Overview
Lixte
Biotechnology, Inc. was incorporated in Delaware on August 9, 2005 to capitalize
on opportunities to develop low cost, specific and sensitive tests for the
early
detection of cancers to better estimate prognosis, to monitor treatment
response, and to reveal targets for development of more effective treatments.
As
a
result of the reverse merger, we are now concentrating on discovering biomarkers
for common cancers for which better diagnostic and therapeutic measures are
needed. For each of these diseases, a biomarker that would enable identification
of the presence of cancer at a stage curable by surgery could possibly save
thousands of lives annually. In addition, biomarkers specific to these diseases
may also provide clues as to processes (biological pathways) that characterize
specific cancer types and that may be vulnerable to drug treatment targeted
to
the activity of the biomarker.
Critical
Accounting Policies and Estimates
We
prepared the consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements requires the use of estimates and assumptions
that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period.
Management periodically evaluates the estimates and judgments made. Management
bases its estimates and judgments on historical experience and on various
factors that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates as a result of different assumptions
or
conditions.
The
following critical accounting policies affect the more significant judgments
and
estimates used in the preparation of our consolidated financial statements.
Research
and Development
Research
and development costs are expensed as incurred. Amounts due on research and
development contracts with third parties are recorded as a liability, with
the
related amount of such contracts recorded as advances on research and
development contract services on the Company’s balance sheet. Such advances on
research and development contract services are expensed over their life on
the
straight-line basis, unless the achievement of milestones, the completion
of
contracted work, or other information indicates that a different expensing
schedule is more appropriate.
Stock-Based
Compensation
In
December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123R, “Share-Based Payment” (“SFAS 123R”).
SFAS 123R requires all share-based payments, including grants of employee stock
options to employees, to be recognized in the financial statements based on
their grant date fair values. Effective
January 1, 2006, SFAS No. 123R requires that the Company measure the cost of
employee services received in exchange for equity awards based on the grant
date
fair value of the awards, with the cost to be recognized as compensation expense
in the Company’s financial statements over the vesting period of the
awards.
Income
Taxes
We
account for income taxes under Statement of Financial Accounting Standards
No.
109, “Accounting for Income Taxes”, which requires the recognition of deferred
tax assets and liabilities for the expected impact of differences between the
financial statements and the tax basis of assets and liabilities.
For
federal income tax purposes, substantially all expenses must be deferred until
we commence business operations and then they may be written off over a 60-month
period. These expenses will not be deducted for tax purposes and will represent
a deferred tax asset. We will provide a valuation allowance for the full amount
of the deferred tax asset since there is no assurance of future taxable income.
Tax deductible losses can be carried forward for 20 years until
utilized.
Plan
of Operation
Our
initial focus is on developing new treatments for the most common and most
aggressive type of primary brain cancer, glioblastoma multiforme (“GBM”). We
entered into a Cooperative Research and Development Agreement with the
National
Institute of Neurological Diseases and Stroke of the National Institutes
of
Health to identify and evaluate drugs that target a specific biochemical
pathway for GBM cell differentiation. The CRADA also covers research to
determine whether expression of a component of this pathway correlates
with
prognosis in glioma patients.
The
lead
scientist at NINDS collaborating with us under the CRADA is Dr. Zhengping
Zhuang. Dr. Zhuang is internationally recognized for his research in molecular
pathology. Dr. Zhuang has four issued and two pending patents related to
molecular pathology of human cancers. Dr. Zhuang recently discovered a
biomarker
of relevance to the growth of GBMs that we believe can be used as a tool
for
identifying drugs that affect the growth of GBM cells. Under the CRADA,
we will
support two persons at NIH to work under the direction of Dr. Zhuang. The
goal
is to identify drugs that inhibit GBM cell growth and to determine if the
identified biomarker may be useful for estimation of prognosis. Our contribution
to the collaborative research done by us and NIH is $200,000 annually for
two
years to fund two research assistants expected to be at the post-doctoral
level,
as well as supplies and travel expenses.
On
February 6, 2006, we filed a provisional patent application naming as
co-inventors Dr. Zhuang and several other NIH investigators, and
Dr. Kovach covering certain methods and classes of molecules that are
expected to be the foundation of product development and commercialization
efforts with respect to human brain tumors. On February 6, 2007, we filed
on behalf of NIH co-inventors and Dr. Kovach a PCT international patent
including all countries participating in the Patent Cooperation Treaty
(except
the USA) and an identical non-provisional patent in the USA. These two
patent
applications contain all claims in the provisional patent of February 6,
2006 plus additional claims. We
have
received a draft of the proposed exclusive patent license agreement with
NIH.
Under the proposed agreement, we will pay a non-creditable, nonrefundable
upfront fee of $150,000 within thirty days from the effective date of
the
agreement, a royalty of 6% on net sales with a minimum annual royalty
of $30,000
and royalties upon achieving the following benchmarks: (a) $50,000 upon
starting
Phase I Clinical Trials; (b) $100,000 upon starting Phase II Clinical
Trials;
(c) $200,000 upon starting Phase III Clinical Trials; (d) $300,000 upon
filing
an IND submission; and (e) $500,000 upon the first commercial sale.
Additionally,
we are required to pay royalties of 15% of the consideration received
for the
guaranty of sublicensing rights. We intend to negotiate these economic
terms in
order to attempt to obtain economic terms more advantageous to us. We
believe
that the other terms of the proposed agreement are customary for agreements
of
this type.
Both
February 6, 2007 patent filings fall under the CRADA agreement with NINDS,
NIH. Patents resulting from these applications are jointly owned by Lixte
Biotechnology, Inc. and the U.S. Government. All NIH co-inventors are
required
to assign their rights to NIH. As specified in the CRADA agreement between
us
and NINDS, NIH, we are entitled to obtain an exclusive license from NIH
to all
claims in these patents. We
have
received a draft of the proposed exclusive patent license agreement with
NIH.
Under the proposed agreement, we will pay a non-creditable, nonrefundable
upfront fee of $150,000 within thirty days from the effective date of
the
agreement, a royalty of 6% on net sales with a minimum annual royalty
of $30,000
and royalties upon achieving the following benchmarks: (a) $50,000 upon
starting
Phase I Clinical Trials; (b) $100,000 upon starting Phase II Clinical
Trials;
(c) $200,000 upon starting Phase III Clinical Trials; (d) $300,000 upon
filing
an IND submission; and (e) $500,000 upon the first commercial
sale.Additionally,
we are required to pay royalties of 15% of the consideration received
for the
guaranty of sublicensing rights. We intend to negotiate these economic
terms in
order to attempt to obtain economic terms more advantageous to us. We
believe
that the other terms of the proposed agreement are customary for agreements
of
this type.
We
expect
that the products will derive directly from our intellectual property,
which
will consist of patents that we anticipate will arise out of our research
activities. These patents are expected to cover biomarkers uniquely associated
with the specific types of cancer, patents on methods to identify drugs
that
inhibit growth of specific tumor types, and combinations of drugs and potential
drugs and potential therapeutic agents for the treatment of specific cancers.
We
face
several potential challenges in our efforts to achieve commercial success,
including raising sufficient capital to fund our business plan, achieving
commercially applicable results of our research program, continued access
to
tissue and blood samples from cancer patients, competition from more
established, well-funded companies with competitive technologies, and future
competition from companies that are developing competitive technologies,
some of
whom are larger companies with greater capital resources than us.
-26-
There
is
substantial uncertainty as to our ability to fund our operations and continue
as
a going concern (see “Liquidity and Capital Resources - December 31, 2006 -
Going Concern” below).
We
have
two major goals to achieve over the next 12 months. The prime objective,
in
collaboration with the National Institute of Neurological Diseases and Stroke
(NINDS) under CRADA # 02165, is to extend the characterization of potentially
more effective drugs and drug combinations (identified by us and jointly
with
NINDS) for the treatment of the incurable human brain tumor, glioblastoma
multiforme (GBM). The second goal is to obtain well characterized samples
of
common human cancers other than GBM under conditions needed to identify new
biomarkers for the earlier detection and identification of biochemical pathways
as potential targets for new treatments.
Goal
I: Development of more effective regimens for the treatment of
GBM
Over
the
next 12 months, we will continue to develop preclinical data supporting the
potential effectiveness of several drugs for the treatment of GBM when used
alone or in combination. The drugs that have been identified as active in
vitro
have never been used for the treatment of GBM in humans. Some of these compounds
were included in claims of a provisional patent filed jointly by the company
and
NINDS in February, 2006. Over the past 6 months, the activity of these drugs
has
been documented and several new lead compounds were identified. This work
was
done under the CRADA. The combinations of several pairs of lead drugs appear
to
have some specificity for GBM in that at equimolar doses these drugs are
more
active against GBMs than against other human cancer cell types tested. Some
of
the drug combinations are synergistic in their ability to inhibit the growth
of
GBMs, e.g. the combination of two drugs inhibits GBMs to a greater extent
than
would be expected from the sum of their inhibitory effects when used alone.
For
several of the lead compounds, toxicity in mice was determined previously
by
others and for two lead compounds, doses that are tolerable in man and the
specific toxicities induced by those doses are known. None of the lead
compounds, however, have been evaluated as potential treatments for GBM.
Over
the
next 6-12 months, we will evaluate two or more lead compounds alone and
in
combination for activity against human GBMs in an animal (mouse) model.
These
evaluations will be done at NIH under protocols developed by NINDS and
us. The
protocols will be approved by NIH committees responsible for approving
the
conduct of animal research at NIH and will be carried out by NIH personnel
as a
joint activity under the CRADA. The CRADA agreement specifies evaluation
of drug
regimens in animal models as one of the activities to be pursued by the
company
and NINDS. It is anticipated that the animal studies will include 3 regimens
identified under the CRADA that have never been investigated as treatment
for
human GBMs. We expect these animal studies to be completed in September,
2007.
As
the
effectiveness of lead regimens against GBMs in the animal model is determined,
a
decision will be made as to which regimens are most promising for development
for human studies. This decision will be made jointly by the company with
the
advice of its scientific advisory board and its CRADA partner, NINDS. At
this
point, NINDS and the company will consider whether development of specific
regimens for evaluation in humans should proceed via an extension of the
existing CRADA, under a new CRADA with NINDS, or possibly with another
institute
at NIH and/or with a partner in the pharmaceutical industry interested
in and
capable of taking the drug though the IND process and conducting clinical
evaluations.
We
expect
to participate in clinical trials of new therapies only in partnership
with an
organization experienced in such undertakings. The partnering organization
may
be either a clinical branch of NIH or a pharmaceutical company with expertise
in
the conduct of clinical trials. Our present position is to take one or
more of
our new therapies for the treatment of glioblastoma multiforme through
pre-clinical evaluation as part of our CRADA agreement with NINDS, NIH.
After
completing pre-clinical evaluation, we will consider partnering with NIH
to
conduct a phase I trial or jointly with NIH seek a third party, most
probably a large pharmaceutical company to carry the new therapies into
phase I trials.
After
completion of phase I trials, we, potentially in partnership with NIH or on
our own, would collaborate with the third party to carry new therapies
found to
be safe for administration to humans in the phase I trials into
phase II trials.
Phase II
trials test the safety and effectiveness, as well as the best estimate
of the
proper dose of the new therapies in a group of patients with the same type
of
cancer at the same stage. For our initial studies the focus will be brain
tumors. The duration of phase II trials may run from 6 to 24 months. New
regimens showing beneficial activity in phase II trials may then be
considered for evaluation in phase III trials. Phase III trials for
the evaluation of new cancer treatments are comparative trials in which
the
therapeutic benefit of a new regimen is compared to the therapeutic benefit
of
the best standard regimen in a randomized study.
Whether
we will participate or be in a position to participate in any clinical
trials
will depend upon partnerships and specific licensing agreements. In all
cases of
clinical trial participation, however, we will be subject to FDA regulation.
These regulations are specific and form the basis for assessing the potential
clinical benefit of new therapeutic regimens while safeguarding the health
of
patients participating in investigational studies. Even after a drug receives
approval from the FDA for sale as a new treatment for a specific disease
indication, the sponsors of the drug are subject to reporting potentially
adverse effects of a new regimen to the FDA.
-27-
Goal
II: Collection of Human Tumor Samples
Over
the
next 12 months, samples of human tumors and associated blood and urine samples
will be collected by the University of Regensburg under our January 5, 2007
agreement with the Free State of Bavaria, Germany. Technology comparable
to that
used to detect the biomarker for GBM will be applied to these tumors to identify
new biomarkers for cancers of the breast, colon, stomach, kidney, bladder,
prostate, and ovary. The present CRADA with NINDS is limited to the study
of
GBM.
Plans
Beyond the Next 12 Months
In
early
2008, we expect to be in a position to begin analyses of tumor types other
than
GBM. The Company plans to establish a laboratory to proceed with biomarker
discovery independent of NIH. To do this we will need approximately $2.3
million
to establish and operate the laboratory for 2 years i.e., to January 2010.
The
creation and operation of the laboratory for two years until December 2009
will
cost about $1.7 million. During this period, patent, auditing and office
management expenses are estimated at $500,000. Thus, the company will need
to
raise about $2.3 million at the end of 2007 and the beginning of 2008 to
take
the next step to biomarker discovery in cancers other than GBM. Funds are
expected to come from either payments as part of licensing rights to
compounds for the treatment of GBMs or though the sale
of stock.
The
laboratory (rented space) is expected to be located in a biotechnology
incubator of the State of Maryland in close proximity to NIH or comparable
incubator near an academic biomedical research center. This incubator offers
low-cost, high-quality space and shared resources necessary for a molecular
biology research. Because of proximity to NIH or other academic biomedical
research center, we will have access to many highly trained scientists and
technical personnel to staff the laboratory.
Projected
major expenses for the wet laboratory are:
Year
1:
|
|
$
48,000
|
for
rental of 800 sq, ft. wet lab in MD incubator ($4000/month plus
utilities/phone/internet)
|
$300,000
|
for
staff salaries plus fringe (1 scientist & 2
technicians)
|
$100,000
|
for
disposable equipment and reagents (~33K/lab person)
|
$300,000
|
for
equipment (one time expense)
|
$100,000
|
for
outsourced technical services (LC/MS/MS, immunoassay
development)
|
Total
Year 1:
|
$848,000
|
Year
2:
|
|
$
50,400
|
for
rental of wet lab
|
$315,000
|
for
staff salaries
|
$105,000
|
for
supplies
|
$300,000
|
for
outsource technology services (LC/MS/MS, immunoassay
development)
|
Total
Year 2:
|
$770,400
|
Total
costs for Laboratory Start Up and 2 Years of Operation = $1,618,400
\
-28-
Results
of Operations - Year Ended December 31, 2006
Comparative
financial statements for the period ended December 31, 2005 reflect the
results
of operations of Lixte, our operating subsidiary, for the period August
9, 2005
(inception) to December 31, 2005 as Lixte, the accounting acquirer in the
reverse merger transaction, was not formed until August 9, 2005. As such,
the
operations of the Company during this period were nominal.
We
are a
development stage company and have not yet commenced revenue-generating
operations.
General
and Administrative. For the year ended December 31, 2006, general and
administrative expenses were $299,420, which included $97,400 for the vested
portion of the fair value of stock options issued to a director and certain
members of the Company’s Scientific Advisory Committee on June 30, 2006.
Significant components of general and administrative expenses to date consist
of
board compensation and legal and accounting fees.
Depreciation.
For the year ended December 31, 2006, depreciation expense was
$462.
Research
and Development Costs. Effective March 22, 2006, Lixte entered into a
Cooperative Research and Development Agreement (the “CRADA”) with the U.S.
Department of Health and Human Services, as represented by National Institute
of
Neurological Disorders and Stroke (“NINDS”) of the National Institutes of
Health. The CRADA is for a term of two years from the effective date and
may be
unilaterally terminated by either party by providing written notice within
sixty
days. Pursuant to the CRADA, Lixte agreed to provide total payments of
$400,000
over the term of the CRADA.
The
current amount due pursuant to the CRADA was recorded as a liability (and
was
subsequently reduced by any applicable payments), with the related amount
of
such contract recorded as advances on research and development contract
services
on the Company’s balance sheet. Such advances on research and development
contract services are expensed over their life on the straight-line basis,
unless the achievement of milestones, the completion of contracted work,
or
other information indicates that a different expensing schedule is more
appropriate. For the year ended December 31, 2006, research and development
costs aggregating $150,100 were charged to operations.
Reverse
Merger Costs. On June 30, 2006, pursuant to a Share Exchange Agreement
dated as
of June 8, 2006 by and among us, Dr. John S. Kovach and Lixte, we issued
19,021,786 shares of our common stock in exchange for all of the issued
and
outstanding shares of Lixte, and Lixte became a wholly owned subsidiary
of SRKP.
In connection with this transaction, we paid WestPark Capital, Inc. a cash
fee
of $50,000, which was charged to operations during the year ended December
31,
2006.
Estimated
Liquidated Damages Under Registration Rights Agreement.
As part
of the Company’s private placement of its securities completed on July 27, 2006,
the Company entered into a registration rights agreement with the purchasers,
whereby the Company agreed to register the shares of common stock sold
in the
private placement. The agreement required the Company to file a registration
statement within 45 days of the closing of the private placement and
to have the
registration statement declared effective within 120 days of the closing
of the
private placement. Since the registration statement was not declared
effective
by the Securities and Exchange Commission within 120 days of the closing
of the
private placement, the Company is required to pay each investor prorated
liquidated damages equal to 1.0% of the amount raised. The liquidated
damages
are payable monthly in cash. On September 8, 2006, the Company filed
a
registration statement on Form SB-2 to register 3,555,220 shares of the
common
stock sold in the private placement.
In
accordance with EITF 00-19-2, on the date of the closing of the private
placement, the Company believed it would meet the deadlines under the
Agreement
with respect to filing a registration statement and having it declared
effective
by the SEC. As a result, the Company did not record any liabilities associated
with the registration rights agreement at June 30, 2006 or at September
30,
2006. At December 31, 2006, the Company has determined that the registration
statement covering the shares sold in the private placement would not
be
declared effective within the requisite timeframe; management currently
estimates that the registration statement will be declared effective
during May
2007. As a result, the Company has recorded six months liquidated damages
under
the registration rights agreement aggregating approximately $74,000 as
a charge
to operations and a current liability at December 31, 2006. The Company
will
continue to review the status of the registration statement and adjust
the
accrued liquidated damages under the registration rights agreement at
each
quarter end as appropriate.
Net
Loss.
For the year ended December 31, 2006, we incurred a net loss of
$562,084.
-29-
Liquidity
and Capital Resources - December 31, 2006
Going
Concern
At
December 31, 2006, we had not yet commenced any revenue-generating operations
and were therefore considered a “development stage company”. All activity
through December 31, 2006 related to our formation, capital raising efforts
and
initial research and development activities. As such, we have yet to generate
any cash flows from operations, and is essentially dependent on debt and
equity
funding from both related and unrelated parties to finance its operations.
Prior
to June 30 2006, Lixte’s cash requirements were funded by advances from Lixte’s
founder, Dr. John Kovach, our Chief Executive Officer. On June 30, 2006,
we
completed an initial closing of our private placement, selling 1,973,869
shares
of common stock at a price of $0.333 per share and receiving net proceeds
of
$522,939. On July 27, 2006, we completed a second closing of our private
placement, selling 1,581,351 shares of common stock at a price of $0.333
per
share and receiving net proceeds of $446,433.
Because
we are currently engaged in research at a very early stage, it will likely
take
a significant amount of time to develop any product or intellectual property
capable of generating revenues. As such, our business is unlikely to generate
any revenue in the next several years and may never do so. Even if the
Company
is able to generate revenues in the future through licensing its technologies
or
through product sales, there can be no assurance that such revenues will
exceed
its expenses.
Based
on
the proceeds received from the private placement, we may not have sufficient
resources to completely fund our planned operations for the next twelve
months. The
strain on our limited cash resources has been further exacerbated by the
accrual
of a registration penalty obligation under EITF 00-19-2 at December 31,
2006 of
$74,000 (reflecting the cash amount payable for the registration penalty
through
mid-May 2007, as described above at “Results of Operations—Year Ended December
31, 2006—Estimated Liquidated Damages Under Registration Right Agreement”). If
our registration statement has not been declared effective by mid-May 2007
(or
we do not maintain its effectiveness after it has been declared effective),
we
would be subject to a registration penalty at the rate of approximately
$12,000
per 30-day period thereafter, continuing through July 2008, for a total
potential maximum liability of approximately $300,000. Since we only have
cash
of $679,640 and working capital of $551,502 (net of the $74,000 registration
penalty obligation referred to above) at December 31, 2006, this short-term
cash
obligation and the uncertainty as to how long it may continue to accrue
could
have a material adverse impact on our ability to fund our business plan
and
conduct operations.
The
Company does not have sufficient resources to fully develop and commercialize
any products that may arise from its research. Accordingly, we will need
to
raise additional funds in order to satisfy its future working capital
requirements. In the short-term, in addition to the net proceeds from the
private placement, we estimate that it will require additional funding
of
approximately $2,300,000. Additionally, the amount and timing of future
cash
requirements will depend on market acceptance of our products, if any,
and the
resources that we devote to developing and supporting its products. We
will need
to fund these cash requirements from either one or a combination of additional
debt and/or equity financings, mergers or acquisitions, or via the sale
or
license of certain of its assets.
Current
market conditions present uncertainty as to our ability to secure additional
funds, as well as its ability to reach profitability. There can be no assurances
that we will be able to secure additional financing, or obtain favorable
terms
on such financing if it is available, or as to its ability to achieve positive
cash flow from operations. Continued negative cash flows and lack of liquidity
create significant uncertainty about our ability to fully implement its
operating plan and the Company may have to reduce the scope of its planned
operations. If cash and cash equivalents are insufficient to satisfy the
Company’s liquidity requirements, we would be required to scale back or
discontinue its product development program, or obtain funds if available
through strategic alliances that may require the Company to relinquish
rights to
certain of its technologies or discontinue its operations.
-30-
Operating
Activities. For the year ended December 31, 2006, operating activities
utilized
cash of $443,451.
The
Company had working capital of $551,502 at December 31, 2006, primarily
as a
result of the Company’s private placement closings on June 30, 2006 and July 27,
2006, which generated net proceeds of $522,939 and $446,433,
respectively.
Investing
Activities. For the year ended December 31, 2006, investing activities
utilized
net cash of $498 for the purchase of office equipment.
Financing
Activities. For the year ended December 31, 2006, financing activities
provided
net cash of $1,118,643, consisting of the gross proceeds from the sale of
common stock of $1,183,889, the cash acquired in the reverse merger transaction
of $62,500, and advances from stockholder of $86,771, reduced by the payment
of
private placement offering costs of $214,517.
Principal
Commitments
At
December 31, 2006, we did not have any material commitments for capital
expenditures. Our principal commitments at December 31, 2006 consisted
of the
estimated liquidated damages payable under the registration rights
agreement (see "Results of Operations—Year
Ended
December 31, 2006" above and to contractual obligations as summarized
below.
Effective
March 22, 2006, Lixte entered into a Cooperative Research and Development
Agreement (the “CRADA”) with the U.S. Department of Health and Human Services,
as represented by National Institute of Neurological Disorders and Stroke
(“NINDS”) of the National Institutes of Health. The CRADA is for a term of two
years from the effective date and may be unilaterally terminated by either
party
by providing written notice within sixty days. Pursuant to the CRADA, Lixte
agreed to provide total payments of $400,000 over the term of the CRADA,
of
which $200,000 had been paid at December 31, 2006 and $200,000 is scheduled
for payment in July 2007.
On
January 5, 2007, Lixte entered into a Services Agreement with The Free
State of
Bavaria (Germany) represented by the University of Regensburg (the “University”)
pursuant to which Lixte retained the University to provide to it certain
samples
of primary cancer tissue and related biological fluids to be obtained from
patients afflicted with specified types of cancer. The University will
also
provide certain information relating to such patients. Lixte will pay the
University 72,000 Euros (approximately $99,700) in two installments of
36,000
Euros (approximately $49,850). The first installment was paid on March
7, 2007, and the second installment will be paid within sixty days of
the earlier of (i) January 5, 2008 or (ii) the University’s fulfillment of
certain obligations relating to the delivery of materials.
On
February 5, 2007, we entered into an agreement (the “Agreement”) with
Chem-Master International, Inc. (“Chem-Master”) pursuant to which the Company
engaged Chem-Master to synthesize a compound designated as “LB-1”, and any other
compound synthesized by Chem-Master pursuant to the Company’s request, which
have potential use in treating a disease, including, without limitation,
cancers
such as glioblastomas. Pursuant to the Agreement, we agreed to reimburse
Chem-Master for the cost of materials, labor and expenses for other items
used
in synthesis process, and to grant to Chem-Master a five-year option to
purchase
100,000 shares of our common stock with an exercise price of $0.333 per
share.
Additionally, provided that the Agreement is not terminated by us without
cause
or by any party for cause prior to the second anniversary of the Agreement,
we
agreed to grant to Chem-Master a five-year option to purchase an additional
100,000 shares of the Company’s common stock at $0.333 per share.
-31-
Off-Balance
Sheet Arrangements
At
December 31, 2006, the Company did not have any transactions, obligations
or
relationships that could be considered off-balance sheet
arrangements.
Recent
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards No. 157, “Fair Value Measurements”
(“SFAS No. 157”), which establishes a formal framework for measuring fair value
under generally accepted accounting principles. SFAS No. 157 defines and
codifies the many definitions of fair value included among various other
authoritative literature, clarifies and, in some instances, expands on
the
guidance for implementing fair value measurements, and increases the level
of
disclosure required for fair value measurements. Although SFAS No. 157
applies
to and amends the provisions of existing FASB and AICPA pronouncements,
it does
not, of itself, require any new fair value measurements, nor does it establish
valuation standards. SFAS No. 157 applies to all other accounting pronouncements
requiring or permitting fair value measurements, except for: SFAS No. 123R,
share-based payment and related pronouncements, the practicability exceptions
to
fair value determinations allowed by various other authoritative pronouncements,
and AICPA Statements of Position 97-2 and 98-9 that deal with software
revenue
recognition. SFAS No. 157 is effective for financial statements issued
for
fiscal years beginning after November 15, 2007, and interim periods within
those
fiscal years. The Company is currently assessing the potential effect of
SFAS
No. 157 on its consolidated financial statements.
In
December 2006, the FASB issued FSP EITF 00-19-2, “Accounting for Registration
Payment Arrangements (“EITF 00-19-2”), which addresses an issuer’s accounting
for registration payment arrangements. EITF 00-19-2 specifies that the
contingent obligation to make future payments or otherwise transfer
consideration under a registration payment arrangement, whether issued
as a
separate agreement or included as a provision of a financial instrument
or other
agreement, should be separately recognized and measured in accordance
with FASB
No. 5, “Accounting for Contingencies”. The guidance in EITF 00-19-2 amends
FASB No. 133, “Accounting for Derivative Instruments and Hedging
Activities” and FASB No. 150, “Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity”, and FASB Interpretation
No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others”, to include scope
exceptions for registration payment arrangements. EITF 00-19-2 further
clarifies
that a financial instrument subject to a registration payment arrangement
should
be accounted for in accordance with other applicable generally accepted
accounting principles without regard to the contingent obligation to
transfer
consideration pursuant to the registration payment arrangement. EITF
00-19-2 is
effective immediately for registration payment arrangements and the financial
instruments subject to those arrangements that are entered into or modified
subsequent to the date of issuance of EITF 00-19-2. For registration
payment
arrangements and financial instruments subject to those arrangements
that were
entered into prior to the issuance of EITF 00-19-2, EITF 00-19-2 is effective
for financial statements issued for fiscal years beginning after December
15,
2006, and interim periods within those fiscal years. Early adoption of
EITF
00-19-2 for interim or annual periods for which financial statements
or interim
reports have not been issued is permitted. The Company has chosen to
early adopt
EITF 00-19-2 effective December 31, 2006, the effect of which is discussed
above
at “Results of Operations - Year Ended December 31, 2006 - Estimated Liquidated
Damages Under Registration Rights Agreement”.
In
February 2007, the FASB issued Statement of Financial Accounting Standards
No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(“SFAS No. 159”), which provides companies with an option to report selected
financial assets and liabilities at fair value. SFAS No. 159’s objective is to
reduce both complexity in accounting for financial instruments and the
volatility in earnings caused by measuring related assets and liabilities
differently. Generally accepted accounting principles have required different
measurement attributes for different assets and liabilities that can create
artificial volatility in earnings. SFAS No. 159 helps to mitigate this
type of
accounting-induced volatility by enabling companies to report related assets
and
liabilities at fair value, which would likely reduce the need for companies
to
comply with detailed rules for hedge accounting. SFAS No. 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose different measurement attributes for similar
types
of assets and liabilities. SFAS No. 159 requires companies to provide additional
information that will help investors and other users of financial statements
to
more easily understand the effect of the company’s choice to use fair value on
its earnings. SFAS No. 159 also requires companies to display the fair
value of
those assets and liabilities for which the company has chosen to use fair
value
on the face of the balance sheet. SFAS No. 159 does not eliminate disclosure
requirements included in other accounting standards, including requirements
for
disclosures about fair value measurements included in SFAS No. 157 and
SFAS No.
107. SFAS No. 159 is effective as of the beginning of a company’s first fiscal
year beginning after November 15, 2007. Early adoption is permitted as
of the
beginning of the previous fiscal year provided that the company makes that
choice in the first 120 days of that fiscal year and also elects to apply
the
provisions of SFAS No. 157. The Company is currently assessing the potential
effect of SFAS No. 159 on its consolidated financial statements.
Management
does not believe that any other recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect
on the
Company's financial statements.
Our
Company
Lixte
Biotechnology Holdings, Inc. (f/k/a SRKP 7, Inc.) was incorporated in the
State of Delaware on May 27, 2005. Immediately prior to the completion of the
Reverse Merger, we did not conduct any business operations and had minimal
assets and liabilities. Upon the Reverse Merger, there was a change of control
and Dr. John Kovach, our current Chief Executive Officer, acquired a controlling
interest as a result of the share exchange involving Lixte Biotechnology, Inc.
Our management immediatedly prior to the Reverse Merger also served as officers
and directors of SRKP 1, Inc., SRKP 2, Inc., SRKP 3, Inc., SRKP
5, Inc., SRKP 6, Inc., SRKP 8, Inc., SRKP 9, Inc., SRKP
10, Inc., SRKP 11, Inc., SRKP 12, Inc. and SRKP 14, Inc.,
all of which are or were “blank check”
companies.
Lixte
was
created to capitalize on opportunities for the company to develop specific,
and
sensitive tests for the early detection of cancers to better estimate prognosis,
to monitor treatment response, and to reveal targets for development of more
effective treatments.
Research
Objectives
In
the
first year of operation, we will concentrate on exploiting the biomarker pathway
associated with the growth of GBMs to identify drugs with potential selective
activity against this type of tumor. In the first year, we will also collect
the
clinical samples needed for the identification of biomarkers for ovarian
and
stomach
cancer. Subsequently, we will include cancers of the breast, prostate, colon,
bladder, and kidney. For each of these diseases, a biomarker that would enable
identification of the presence of cancer at a stage curable by surgery would
save thousands of lives annually. Biomarkers specific to these diseases may
also
provide clues as to processes (biological pathways) that may be important to
the
growth of the cancer and therefore be vulnerable to drug treatments targeted
to
the biomarker pathway.
We
will
seek to identify new treatments for the most common and most aggressive type
of
primary brain cancer, glioblastoma multiforme (“GBM”) under a Cooperative
Research and Development Agreement (“CRADA”) with the National Institute of
Neurological Diseases and Stroke (“NINDS”) of the National Institutes of Health
(“NIH”). A second goal of the CRADA is to determine whether expression of a
component of the biomarker pathway correlates with prognosis in glioma patients.
The
collaborating NIH laboratory is directed by Dr. Zhengping Zhuang, who is an
internationally recognized molecular pathologist. He has four issued and two
pending patents related to molecular pathology of human cancers. Dr. Zhuang
and
colleagues at NIH recently discovered a biomarker that we believe can be used
as
a tool for identifying drugs that affect the growth of GBM cells. Under the
CRADA, we will support studies in Dr. Zhuang’s laboratory with $200,000 annually
for two years for two research assistants expected to be at the post-doctoral
level and supplies. Dr. Zhuang will make the selection of the research
personnel.
Intellectual
Property
In
February 2006, a provisional patent application was filed covering certain
methods and classes of molecules that we expect to be the foundation of our
product development and commercialization efforts with respect to human brain
tumors that are subject to the CRADA. In February 2007 a PCT international
patent covering all countries participating in the Patent Cooperation Treaty
except the USA was filed containing all claims in the provisional patent plus
additional claims. A non-provisional patent application with the same claims
was
filed in the USA. The PCT application and the non-provisional application
include data supporting the original claims in the provisional patent and a
number of new claims, including evidence that several drugs mentioned in the
provisional patent may mimic the activity of the lead drugs named in the
provisional patent, and do, in fact, have anti-tumor activity against human
glioblastoma cell lines.
Both
February 2007 filings fall under the CRADA agreement with NINDS, NIH. As such,
we are entitled to obtain an exclusive license to such claims as specified
in
the standard NIH CRADA agreement. In addition, patents resulting from these
applications will be jointly owned by Lixte and the U.S. Government. The terms
of the license (including term and royalty) will be subject to negotiations
between us and NINDS, NIH in the future. We
have
received a draft of the proposed exclusive patent license agreement with
NIH.Under
the
proposed agreement, we will pay a non-creditable, nonrefundable upfront fee
of
$150,000 within thirty days from the effective date of the agreement, a
royalty
of 6% on net sales with a minimum annual royalty of $30,000 and
royalties upon achieving the following benchmarks: (a) $50,000
upon starting Phase I Clinical Trials; (b) $100,000
upon starting Phase II Clinical Trials; (c) $200,000
upon starting Phase III Clinical Trials; (d) $300,000
upon filing an IND submission; and (e) $500,000
upon the first commercial sale. Additionally,
we are required to pay royalties of 15% of the consideration received for the
granting of sublicensing rights. We
intend
to negotiate these economic terms in order to attempt to obtain economic terms
more advantageous to us. We believe that the other terms of the proposed
agreement are customary for agreements of this type.
In
February 2007, a new US provisional application was filed on behalf of Lixte
Biotechnology Holdings, Inc. under our sole name. This filing does not fall
under the CRADA agreement. We have the sole right to any patent issued under
this application. This provisional patent application identifies a lead compound
that has activity against glioblastoma multiform cell lines in vitro. This
provisional patent application also describes a series of homologs of the lead
compound.
Access
to Clinical Materials
To
detect
and to assess the clinical relevance of biomarkers, we need access to human
tissue, blood and perhaps other body fluids of patients with and without the
specific types of cancer under study. On January 5, 2007 we entered into a
two
year agreement with the Institute of Pathology at the University of Regensburg
in Germany to receive a supply of high quality, accurately annotated tissue
and
blood samples for cancers other than brain cancers. This arrangement
provides us with appropriate clinical samples for which permission has been
obtained to study any molecular feature of the tissue for commercial purposes.
This is an absolute requirement for success of a for-profit company in this
field. Pursuant to the Agreement, the University will provide us with certain
samples of primary cancer tissue and related biological fluids to be obtained
from patients affiliated with specified types of cancer. The University will
also provide certain information relating to such patients. The University
is to be paid 72,000 Euros (approximately $99,702) in two installments of 36,000
Euros. The first installment was paid on March 7, 2007, and the second
installment will be paid within 60 days of the earlier of (i) January 5,
2008 or (ii) the University's fulfillment of certain obligations relating to
the
delivery of materials.
Clinical
samples will be obtained from patients who have given their signed informed
consent
by persons identified by the University of Regensburg, Germany. These are
employees of
the
University who have approval by the University to seek such permission under
a
consent form
approved by the University. The scope of use has been narrowed to the study
of
human cancers
for the purposes of developing improved methods of diagnosis, estimation
of
prognosis, treatment
and understanding causation of human cancers.
The
collection, selection, histological characterization, and processing of tissue
samples and collection of blood samples will be managed by Arndt Hartmann,
M.D.,
a Professor in the Institute of Pathology at the University of Regensburg.
Dr.
Hartmann is an expert clinical and molecular pathologist and is
keenly
interested in the project. His research is focused on the molecular genetics
of
breast, bladder, prostate and kidney cancer. He was a research fellow for three
years in Dr. Kovach’s laboratory at the Mayo Clinic in Rochester before
completing his residency in pathology and joining the faculty at Regensburg
University. Dr. Hartmann is a member of the Scientific Advisory Committee
of Lixte.
To
date, the only cancers studied by us are those of brain cancers, and
all such studies have been done at the NIH under the CRADA. All brain cancer
cell lines and human tumor cells were provided by NIH.
Access
to Chemical Compounds
On
February 5, 2007 we entered into an agreement with Chem-Master International,
Inc. pursuant to which we engaged Chem-Master to synthesize the compound
designated LB-1 and any other compound synthesized by Chem-Master pursuant
to
our request, which has potential use in treating a disease, including, without
limitation, cancers such as glioblastomas. Pursuant to the Agreement, we agreed
to grant to Chem-Master a five-year option to purchase 100,000 shares of our
common stock with an exercise price of $0.33⅓ per share. Additionally, provided
that the Agreement is not terminated by us without cause or by any party
for cause prior to the second anniversary of the Agreement, we agreed to grant
to Chem-Master a five year option to purchase an additional 100,000 shares
of
the Company’s common stock at $0.333 share. We have agreed to reimburse
Chem-Master for the cost of materials, labor and expenses in providing the
synthesis.
The
Market
We
believe that a sensitive, specific, reasonably priced assay for the detection
of
any common human cancer at an early stage could save thousands of lives
annually, reduce health care costs, and generate significant income.
Brain
Cancer
The
most
malignant type of brain cancer, GBM, although less common than stomach, breast
and prostate cancers, is almost invariably fatal. Typically, survival after
surgery and radiation is only 12 to 18 months. A biomarker reflecting disease
progression and, most importantly, providing a method to develop more specific
and effective treatments of GBM would be an important discovery.
Stomach
Cancer
We
believe that stomach cancer (gastric cancer) is a target for biomarker
identification because of its high prevalence in certain of the world’s
population, particularly in Asia. Since gastric cancer is uncommon in the West,
development of new diagnostics and treatments is not a priority for many
pharmaceutical and diagnostic companies, providing a special opportunity for
us.
Current
screening for gastric cancer entails passing a tube into the stomach
(gastroscopy) and sampling of suspicious areas. The invasive nature and cost
of
gastroscopy with sedation limits systematic screening of large numbers of
individuals at risk. We believe that a blood test for the early detection of
stomach cancer could save many lives and significantly reduce health care costs
in countries with a high prevalence of the disease.
Ovarian
Cancer
Although
ovarian cancer is much less common than breast cancer, cancer of the ovary
is
responsible for the death of almost half as many women who die from breast
cancer. Less than 50% of women are cured of ovarian cancer because the disease
is almost always in an advanced stage before it produces symptoms. Yet, if
ovarian cancer is found early, the cure rate is 90% or better. A blood test
for
screening women at risk (all women who are 50 or older) is urgently needed.
Marketing
Plan
Once
a
biomarker has been identified, depending on the projected cost for evaluation,
we expect to either conduct the initial assessment using our resources or seek
partners in industry for clinical development. If we have the resources, we
prefer to generate evidence of clinical value on our own to maximize financial
value of the product.
If
we do
not have the resources needed to develop the clinical potential of a given
biomarker ourselves, we intend to try to find partners in large diagnostic
and/or pharmaceutical companies. These companies are increasingly dependent
upon
new biomarkers discovered by academic groups and small biotechnology companies
to maintain a pipeline of promising drugs and new diagnostic tools.
We
are
confident that the molecular approaches that led to the discovery of the
biomarker for GBMs (and the subject of the Provisional Patent Application)
could
lead to the discovery of equally promising new biomarkers for other cancers.
If
discovered and developed, the challenge will be to decide which products to
license early and which to carry into clinical evaluation without a
pharmaceutical company partner.
Research
and Development
Our
primary objective is to develop sensitive and specific assays for identification
of potential therapeutic targets and for the early detection for several common
cancers. Most cancers produce abnormal proteins or abnormal amounts of normal
proteins. How many of these potential biomarkers are present at detectable
concentrations in the blood is not known.
There
are
four steps in our biomarker detection and validation process:
1.
|
Tissue
Acquisition
|
The
acquisition of well-characterized cancer tissue and blood samples from cancer
patients and control individuals is the most critical step to success. We
believe that we should have access to the clinical samples needed for our
program from the Institute of Pathology at University of Regensburg in Germany.
We expect that the samples we will obtain will be or have been collected under
the regulatory requirements of the European Union and of the Office of
Protection of Research Subjects in the United States. Those regulations require
that each patient be fully informed about the process, the use of the samples,
and any attendant risks. Though there is a negligible medical risk related
to
the collection of the samples for Lixte’s purposes, the consent form points out
that the tissue is not needed for clinical purposes and that the research done
will not affect the patient’s care in any way.
The
consent specifies further that the samples will be used to develop diagnostic
tests and/or treatments for cancer that may have commercial value and that
the
participants will not be entitled to any of the financial benefits from the
product’s development. All samples are coded and the privacy of all participants
is assured because personal identifiers are never shared with us by the
University of Regensburg. Obtaining consent is the responsibility of the
collaborating institution, but all consent processes and forms will be jointly
approved by the collaborating institution and by us.
Under
the
CRADA agreement, any tissue that might be studied at NIH must meet the
requirements
of the Office of Protection of Research Subjects in the United States.
Before
any samples
collected by us would be used under the CRADA, the informed consent
process pertaining to the samples, including determination that
anonymization of the samples was carried out, would be reviewed with
NIH and deemed acceptable with respect to the requirements of NIH.
2.
|
Tissue
Processing
|
For
maximum efficiency in detecting biomarkers, cancer cells must be isolated from
a
complex matrix of normal cells and other structural elements of tissue in which
the cancer has arisen under conditions that do not alter potential biomarkers.
The procedures used minimize destruction and alteration of cell components.
Once
processed, preparations can be transported without compromising their integrity.
3.
|
Detection
and Identification of
Biomarkers
|
The
search for molecular elements with features unique to a specific cancer type
is
accomplished using highly reproducible physical techniques. These techniques
are
not proprietary but involve technologies used in sequences that are not obvious.
The most prominent biomarkers for each tumor type are identified by mass
spectrometric sequencing. We will select for patenting and clinical evaluation
biomarkers present at high frequency in all cancers of the same type.
4.
|
Development
of Assays for Biomarkers in the
Blood
|
Whether
to develop an assay for selected biomarkers is an important decision point.
Assay development is an expensive component of the discovery process but also
an
essential step in establishing commercial value. For each cancer type, we expect
to screen sera of affected and unaffected persons for the five most promising
biomarkers of known sequence for which patent protection seems achievable.
Maximum value of the product for diagnostics is achieved by demonstrating the
presence of specific biomarkers in the serum of patients harboring the cancer
of
interest and their absence in the sera of patients without the cancer.
Biomarkers
not useful for diagnostic assays may still have significant value as markers
of
prognosis and/or as drug targets. For example, although it is not yet clear
whether the new biomarker discovered by Dr. Zhuang will serve as a useful
diagnostic assay for GBMs, that biomarker is nevertheless valuable because
it
was demonstrated to provide a tool for identification of new drug combinations
active against GBMs in vitro.
Using
stringent criteria for biomarker selection, analysis of small numbers of a
given
type of cancer is sufficient for detection of relevant biomarkers. If potential
biomarkers for early diagnosis are discovered for several types of cancer,
such
as the one already identified for GBMs, we will prioritize their development
in
the following order: stomach, ovary, prostate, colon, bladder, and kidney.
If a
particularly compelling opportunity arises, we have the flexibility to quickly
direct resources to maximize chances of developing a clinically useful product.
Product
Overview
Our
products will derive directly from our intellectual property consisting of
our
Provisional Patent Application and other patents we anticipate will arise from
our research activities. Those patents are expected to cover biomarkers uniquely
associated with specific types of cancer that may provide the bases for assays
suitable for cancer detection and patents on methods to identify drugs that
inhibit growth of specific tumor types and combinations of drugs as potential
therapeutic agents for the treatment of specific cancers.
We
believe that there are four main markets for potential products that may be
developed by Lixte.
1. Improved
Cancer Treatments. Improved
chemotherapy regimens for cancers not curable by surgery or
radiation;
2. Diagnostic
Assays. Improved
assays of body fluids, primarily blood, for the diagnosis of cancers at stages
when cure is possible through surgery and/or radiotherapy;
3. Estimation
of Prognosis. Improved
methods for estimation of prognosis by molecular sub-classification of
histologically indistinguishable tumor subtypes; and
4. Assessment
of Therapeutic Effectiveness. Improved
methods to assess therapeutic effectiveness by monitoring with biomarker assays
persistence or reappearance of cancer during and after treatment and during
drug
development.
Each
market is discussed below.
1.
|
Improved
Cancer Treatments
|
We
will
seek to develop improved therapeutic regimens when biomarkers provide insight
into pathways vulnerable to chemical and/or immunological attack. Some tumor
biomarkers have specific (enzymatic) functions and are “drugable,” that is,
their function can be altered pharmacologically. For example, the identification
of the biomarker specific to regulation of GBMs has led to development of an
assay for screening compounds for anti-GBM activity.
2.
|
Diagnostic
Assays
|
We
intend
to work under the CRADA with NINDS to assess the clinical potential of the
new
biomarker for GBM. Using the approach developed by Dr. Zhuang to identify
markers for GBM and for other rare tumors, we also intend to initiate searches
for biomarkers in other common cancers for which there is no highly specific
and
sensitive blood test for early detection. The focus for the first two years,
in
addition to GBMs, will be ovarian and gastric cancer. For these diseases, a
reliable blood test for their detection at an
early
surgically curable stage would save many lives. If our resources increase as
anticipated, research will likely be extended to the identification of
biomarkers for stomach and ovarian cancer and subsequently to biomarkers for
breast, prostate, colon, bladder, and kidney cancers.
3.
|
Estimation
of Prognosis
|
There
is
a wide spectrum of aggressiveness and responsiveness to drug treatments for
many
cancers that are clinically indistinguishable with present methods of
classification. Judgment of the aggressiveness of most cancers is currently
based on their morphologic appearance under the microscope and, for some tumors,
on a few molecular features such as hormone receptors associated with breast
cancers. There are few biomarkers sufficiently reliable to predict the prognosis
of a given cancer patient so that treatment intensity can be adjusted with
confidence toward less or more toxic regimens.
4.
|
Assessment
of Therapeutic
Effectiveness
|
We
believe that specific and sensitive biomarkers for any human cancer are in
great
demand by pharmaceutical companies and by the National Cancer Institute as
aids
to drug development and to the development of targeted drug treatment. In
addition, we believe that biomarkers that reflect disease progression and
regression during initial clinical evaluation of new therapeutic agents could
greatly reduce the cost of new drug development. To assess the effectiveness
of
a specific treatment, it would be less expensive and more efficient to monitor
the appearance and disappearance of a biomarker in the blood than to monitor
the
course of disease by radiological imaging.
Product
Development
We
will
become subject to FDA regulations at such time as we pursue development of
clinical trials. Additionally, any product for which we obtain marketing
approval, along with the manufacturing processes, post-approval clinical data
and promotional activities for such product, will be subject to continual review
and periodic inspections by the FDA and other regulatory bodies. Even if
regulatory approval
of a
product is granted, the approval may be subject to limitations on the indicated
uses for which the product may be marketed or contain requirements for costly
post-marketing testing and surveillance to monitor the safety or efficacy of
the
product. Later discovery of previously unknown problems with our products,
including unanticipated adverse events or adverse events of unanticipated
severity or frequency, manufacturer or manufacturing processes, or failure
to
comply with regulatory requirements, may result in restrictions on such products
or manufacturing processes, withdrawal of the products from the market,
voluntary or mandatory recall, fines, suspension of regulatory approvals,
product seizures, injunctions or the imposition of civil or criminal
penalties.
Competition
The
life
sciences industry is highly competitive and subject to rapid and profound
technological change. We believe that several companies are investigating
biomarkers for every human cancer. These companies include firms seeking a
better understanding of molecular variability in human brain tumors with the
objective to be able to use such information to design better treatments. Our
present and potential competitors include major pharmaceutical companies, as
well as specialized biotechnology and life sciences firms in the United States
and in other countries. Most of these companies have considerably greater
financial, technical and marketing resources than we do. Additional mergers
and
acquisitions in the pharmaceutical and biotechnology industries may result
in
even more resources being concentrated in our competitors. Our existing or
prospective competitors may develop processes or products that are more
effective than ours or be more effective at implementing their technologies
to
develop commercial products faster. Our competitors may succeed in obtaining
patent protection and/or receiving regulatory approval for commercializing
products before us. Developments by our competitors may render our product
candidates obsolete or non-competitive.
We
also
experience competition from universities and other research institutions, and
we
are likely to compete with others in acquiring technology from those sources.
There can be no assurance that
others
will not
develop
technologies with significant advantages over those that we are seeking to
develop. Any such development could harm our business.
We
face
competition from other companies seeking to identify and commercialize cancer
biomarkers. We also compete with universities and other research institutions
engaged in research in these areas. Many of our competitors have greater
technical and financial resources than we do.
Our
ability to compete successfully is based on numerous factors,
including:
·
|
the
cost-effectiveness of any product we ultimately commercialize relative
to
competing products;
|
·
|
the
ease of use and ready availability of any product we bring to
market;
|
·
|
the
accuracy of a diagnostic test designed by us in detecting cancers,
including overcoming the propensity for “false positive” results;
and
|
·
|
the
relative speed with which we are able to bring any product resulting
from
our research to market in our target
markets.
|
If
we are
unable to distinguish our products from competing products, or if competing
products reach
the
market first, we may be unable to compete successfully with current or future
competitors. This would cause our revenues to decline and affect our ability
to
achieve profitability.
Employees
As
of
April 30, 2007, we had no full-time employees. Dr. Kovach is Chair of the
Department of Preventive Medicine at SUNY, in Stony Brook. He received approvals
from the School of Medicine of Stony Brook University and from the New York
State Ethics Commission to operate the company (or to serve as CEO of the
company) and to hold greater than 5% of our outstanding shares.
Our
investment commitments in the research efforts pursuant to the CRADA fund two
technical assistants who will work under the supervision of Dr. Zhuang on the
aims of the CRADA. Dr. Kovach will devote 0.2 person of his efforts per year
to
research planning and design and will monitor the research progress under the
CRADA. Dr. Kovach’s contributions will be made outside of his academic
responsibilities.
Properties
At
present, we conduct all laboratory activities at NIH under the CRADA agreement.
We will
also
collect and store samples of human tumors other than brain cancers under
a
service agreement
with the University of Regensburg, Germany. The company maintains a single
office in
a
designated area of Dr. Kovach's residence and receives mail at the post office
depot, 248 Route
25A, No. 2, East Setauket, New York 11733. No additional facilities are needed
until the company
develops its independent laboratory.
Government
Regulation
At
its
present stage of development, our business is not subject to any specific
government regulation
with respect to its ongoing research and plan service agreement. Our only
collaborator at present is National Institute of Neurological Diseases and
Stroke (NINDS), National Institutes of Health. This collaboration is defined
in
CRADA
2165 under which NINDS evaluates compounds for their ability to inhibit the
growth
of
brain tumor cells. The NINDS laboratory that is carrying out this activity
is a
research laboratory that operates in compliance with various federal and
state's
statutes and regulations including the OSHA. All activities of this laboratory
are monitored by the
compliance office of NINDS.
We
have
entered into a service agreement with Regensburg University, Germany
for access to “waste”
samples of
various human cancers and serum and urine from individuals with cancers.
The
collection, preparation, storage, and transfer of these materials are subject
to
the investigational review board of the University, which operates under
the
requirements of the Free State of Bavaria. The materials are anonymized by
the
personnel by the University so that the business has no way to link clinical
samples to any individuals. This process is in compliance with the requirements
of the CRADA and with FDA regulations concerning the study of clinical
material.
There
are
no other regulations affecting the pursuit of the goals
of the
business. In the future,
if and when we develop an independent laboratory,
that laboratory would be subject to the same regulations that apply to any
laboratory carrying out research
on biological samples. Should we develop
an independent laboratory, it will engage a compliance expert to formally
assess
the status of the laboratory with respect
to federal occupational and environmental regulations and also those regulations
of the state in which the laboratory is located as these regulations pertain
to
the operation of
the
laboratory.
In
the
future, we
anticipate that as part of the CRADA agreement with NINDS lead
compounds identified as active in vitro by the NINDS laboratory will be assessed
for activity in animal models (mouse/rat) of human brain tumors. Such activities
by NINDS and the business would be carried out in compliance with all applicable
Statutes, Executive Capital Orders, HHS regulations and all FDA, CDC, and
NIH
policies as specified
in Article 13, 13.1 and 13.2, of the PHS CRADA agreement.
Our
business will become subject to the regulations of the FDA when we
begin to pursue development of clinical trials. Clinical
trials are research studies to answer specific questions about new therapies
or
new ways of using known treatments. Clinical trials are use to determine
whether
new drugs or treatments are both safe and effective and the FDA has determined
that carefully conducted clinical trials are the fastest and safest way to
find
treatment that work in people.
The
ultimate objective of our CRADA is to identify, characterize, and bring to
clinical trial regimens for the treatment of human brain tumors (GBMs). We
estimate that we are at least one year from being in a position to begin
discussing development of a clinical trial. Such a clinical trial would most
likely be conducted by us in association with a pharmaceutical company in
association with NIH under the existing CRADA or under a new CRADA or with
a
pharmaceutical company without association with NIH. In either case, we would
be
primarily responsible for filing and obtaining approval from the FDA of an
Investigational New Drug Application (IND). In the event that we seek to
raise
sufficient capital to conduct a phase I clinical trial without a partner
in the
pharmaceutical industry in collaboration with NIH or independently, we would
become subject to FDA regulation as we sought to obtain an IND for clinical
evaluation of a therapeutic regimen with the long-range goal of receiving
FDA
approval of the drug for commercial use. Acquisition of an IND from the FDA
is
the process that triggers FDA review and oversight as federal law requires
that
a drug be the subject of an approved marketing application before it is
transported to clinical investigations, unless exempted. The IND is the means
through which we would obtain such exemption. During a new drug's early
preclinical development, our primary goal is to determine if the product
is
reasonably safe for initial use in humans, and if the compound exhibits
pharmacological activity that justifies commercial development. When a product
is identified as a viable candidate for further development, we would then
focus
on collecting the data and information necessary to establish that the product
will not expose humans to unreasonable risks when used in limited, early-stage
clinical studies. FDA's role in the development of a new drug begins when
we,
having screened the new molecule for pharmacological activity and acute toxicity
potential in animals, want to test its diagnostic or therapeutic potential
in
humans. At that point, the molecule changes in legal status under the Federal
Food, Drug, and Cosmetic Act and becomes a new drug subject to specific
requirements of the drug regulatory system. Once the IND is submitted, we
must
wait 30 calendar days before initiating any clinical trials. During this
time,
FDA has an opportunity to review the IND for safety to assure that research
subjects will not be subjected to unreasonable risk.
The
first
phase of clinical trials, Phase I trials, are the initial studies to determine
the metabolism and pharmacologic action of drugs in humans, the side effects
associated with increasing doses, and to gain early evidence of effectiveness.
If we were to conduct clinical trials on our own, it is likely that only
a Phase
I type trial would be done. In such a trial a new investigational drug or
combination of drugs is first introduced into humans. For the evaluation
of
anticancer drugs, patients entering such trials are those for whom no means
of
therapy is known to be associated with benefit. Such studies are closely
monitored and require approval from the FDA including a proposal for the
conduct
of the clinical trial.
The
FDA
also requires that an independent review body consider the benefits and risks
of
a clinical trial and grant approval for the proposed study including selecting
of initial doses, plans for escalation of dose, plans for modification of
dose
if toxicity is encountered, plans for monitoring the well being of individuals
participating in the study and for defining and measuring to the extent possible
any untoward effects related to drug administration. Serious adverse effects
such as life-threatening toxicities and death are immediately reportable
to the
review body and to the FDA. To minimize risk when studying a new drug, the
initial dose is well below that expected on the basis of animal studies to
cause
any toxicity. No more than three patients are entered at a given dose and
in
general dose is not escalated within patients. Once safety is established
by the
absence of toxicity or low toxicity in a group of three patients, a planned
higher dose is then evaluated in a subsequent group of three individuals
and so
on until dose limiting toxicity is encountered. The dose level producing
definite but acceptable toxicity is then selected as the dose level to be
evaluated in Phase II trials. Thus, the goal of Phase I studies is to determine
the appropriate dose level for evaluation of drug efficacy in patients with
the
same type of tumor at comparable stages of progression for whom no beneficial
treatment is established. The
duration of a Phase I trial is generally from 4 to 9 months.
We
expect
to participate in clinical trials of new therapies only in partnership with
an organization experienced in such undertakings. The partnering organization
may be either a clinical branch of NIH or a pharmaceutical company with
expertise in the conduct of clinical trials. Our present position is to
take one
or more of our new therapies for the treatment of glioblastoma multiforme
through pre-clinical evaluation as part of our CRADA agreement with NINDS,
NIH.
After completing pre-clinical evaluation, we will consider partnering with
NIH to conduct a phase I trial or jointly with NIH seek a third party, most
probably a large pharmaceutical company to carry the new therapies into
phase I trials.
After
completion of phase I trials, we, potentially in partnership with NIH or on
our own, would collaborate with the third party to carry new therapies
found to
be safe for administration to humans in the phase I trials into
phase II trials.
Phase II
trials test the safety and effectiveness, as well as the best estimate
of the
proper dose of the new therapies in a group of patients with the same type
of
cancer at the same stage. For our initial studies the focus will be brain
tumors. The duration of phase II trials may run from 6 to 24 months. New
regimens showing beneficial activity in phase II trials may then be
considered for evaluation in phase III trials. Phase III trials for
the evaluation of new cancer treatments are comparative trials in which
the
therapeutic benefit of a new regimen is compared to the therapeutic benefit
of
the best standard regimen in a randomized study.
Whether
we will participate or be in a position to participate in any clinical
trials
will depend upon partnerships and specific licensing agreements. In all
cases of
clinical trial participation, however, we will be subject to FDA regulation.
These regulations are specific and form the basis for assessing the potential
clinical benefit of new therapeutic regimens while safeguarding the health
of
patients participating in investigational studies. Even after a drug receives
approval from the FDA for sale as a new treatment for a specific disease
indication, the sponsors of the drug are subject to reporting potentially
adverse effects of a new regimen to the FDA.
In
addition to regulations imposed by the FDA, depending on our future activities
we may become subject to regulation under various federal and state
statutes and regulations such as the Occupational Safety and Health Act,
the
Environmental Protection Act, the Toxic Substances Control Act, the Research
Conservation and Recovery Act, national restrictions on technology
transfer, and import, export and customs regulations. From time to time,
other
federal agencies and congressional committees have indicated an interest
in
implementing further regulation of biotechnology applications. We are not
able
to predict whether any such regulations will be adopted or whether, if
adopted,
such regulations will apply to our business, or whether we or our collaborators
would be able to comply with any applicable regulations.
In
addition, as we intend to market our products in international markets, we
may
be required to obtain separate regulatory approvals from the European Union
and
many other foreign jurisdictions. Approval by the FDA does not ensure approval
by regulatory authorities in other countries, and approval by one foreign
regulatory authority does not ensure approval by regulatory authorities in
other
foreign countries or by the FDA. We may not be able to file for regulatory
approvals and may not receive necessary approvals to commercialize our products
in any market. As we are currently in the development stage, we can predict
the
impact on us from any such regulations.
We
are
not a party to any legal proceedings.
The
following table and text set forth the names of all directors and executive
officer of our Company as of April 30, 2007. The Board of Directors is
comprised of only one class. All of the directors will serve until the next
annual meeting of stockholders and until their successors are elected and
qualified, or until their earlier death, retirement, resignation or removal.
There are no family relationships between or among the directors, executive
officers or persons nominated or charged by our Company to become directors
or
executive officers. The executive officer serves at the discretion of the Board
of Directors, and is appointed to serve until the first Board of Directors
meeting following the annual meeting of stockholders. The brief descriptions
of
the business experience of each director and executive officer and an indication
of directorships held by each director in other companies subject to the
reporting requirements under the Federal securities laws are provided herein
below. Also provided are the biographies of the members of the Scientific
Advisory Committee.
Our
directors and executive officer are as follows:
Name
|
Age
|
Position
Held with the Registrant
|
||
Dr. John S.
Kovach
|
70
|
Chief
Executive Officer, Director
|
||
Dr. Philip F.
Palmedo
|
72
|
Director
|
We
intend
to add at least one more independent director as soon as possible.
Biographies
of Directors and Executive Officer:
Dr.
John S. Kovach
Dr. John S.
Kovach, age 70, founded Lixte in August 2005 and was its President and a member
of the Board of Directors. He received a BA (cum laude) from Princeton
University and an MD (AOA) from the College of Physicians & Surgeons,
Columbia University. Dr. Kovach trained in Internal Medicine and Hematology
at Presbyterian Hospital, Columbia University and spent six years in the
laboratory of Chemical Biology, National Institute of Arthritis and Metabolic
diseases studying control of gene expression in bacterial systems.
Dr. Kovach
was recruited to Stony Brook University in 2000 to found the Long Island Cancer
Center (now named the Stony Brook University Cancer Center). He is presently
Chair of the Department of Preventive Medicine at Stony Brook University in
Stony Brook, New York. From 1994 to 2000, Dr. Kovach was Executive Vice
President for Medical and Scientific Affairs, City of Hope National Medical
Center in Los
Angeles,
California. His responsibilities included oversight of all basic and clinical
research initiatives at the City of Hope. During that time he was also Director
of the Beckman Research Center at City of Hope and a member of the Arnold and
Mabel Beckman Scientific Advisory Board in Newport Beach,
California.
From
1976
to 1994, Dr. Kovach was a consultant in oncology and director of the Cancer
Pharmacology Division at the Mayo Clinic in Rochester, Minnesota. During this
time, he directed the early clinical trials program for evaluation of new
anti-cancer drugs as principal investigator of contracts from the National
Cancer Institute. From 1986 to 1994, he was also Chair of the Department of
Oncology and Director of the NCI-designated Mayo Comprehensive Cancer Center.
During that time, Dr. Kovach, working with a molecular geneticist, Steve
Sommer MD, PhD, published extensively on patterns of acquired mutations in
human
cancer cells as markers of environmental mutagens and as potential indicators
of
breast cancer patient prognosis. Dr. Kovach has published over 100 articles
on the pharmacology, toxicity, and effectiveness of anti-cancer treatments
and
on the molecular epidemiology of breast cancer. Dr. Kovach directs Lixte
with the approval of the State University of New York at Stony Brook and the
New
York State Ethics Commission.
Chief
Executive Officer
Initially,
leadership and management of our company will be provided by Dr. Kovach
with the advice of the board of Directors and the Scientific Advisory Committee.
The activities for the first year at least will be confined to achieving the
goals of the CRADA through the collaborative arrangement of the company by
which
Dr. Kovach and Dr. Zhuang, aided by two full time technical personnel,
will pursue development of lead compounds for the treatment of malignant brain
tumors. During the initial year, Dr. Kovach will also oversee the
collection of the clinical samples needed to validate the biomarker observations
regarding GBMs and to be in a position to extend the discovery process to
ovarian and stomach cancers. At this point, we will consider seeking another
CRADA to extend the scope of our research or establishing an independent
laboratory. The timing of this expansion will depend on raising additional
capital of approximately $2.3 million by sale of additional shares of stock.
A
chief executive officer would then be recruited to manage our business affairs.
It is anticipated that this may require less than full time effort for the
second year with a need developing for a full time CEO and at least a part
time
financial officer in the third year of operation.
Dr.
Philip F. Palmedo
Dr.
Palmedo joined our board of directors on June 30, 2006. Dr. Palmedo has had
a
diversified career as a physicist, entrepreneur, corporate manager and writer.
Dr. Palmedo received his undergraduate degree from Williams College and
M.S. and Ph.D. degrees from MIT. He carried out experimental nuclear reactor
physics research at MIT, Oak Ridge National Laboratory, the French Atomic Energy
Commission Laboratory at Saclay and Brookhaven National Laboratory (BNL). At
BNL
in 1972 he initiated and was the first head of the Energy Policy Analysis Group.
In 1974 he served with the Energy Policy Office of the White House and in the
following year initiated the BNL Developing Country Energy Program.
In
1979,
Dr. Palmedo founded the International Resources Group, an international
professional services firm in energy, environment and natural resources. He
served as Chairman and CEO until 1988 and since that time remains as Chairman
of
the company. In 1985 the company was recognized by Inc.
Magazine
as one
of the 500 fastest growing private companies in the U.S.
In
1988,
Dr. Palmedo joined in the formation of Kepler Financial Management, Ltd., a
quantitative financial research and trading company. Dr. Palmedo held the
position of President and Managing Director until the end of 1991 when
Renaissance Technologies Corporation acquired the company. In 2005 he started
a
new hedge fund, Kepler Asset Management, and is a Managing Director of the
firm.
Dr. Palmedo
was the designer and, in 1992, became the first president of the Long Island
Research Institute. LIRI was formed by Brookhaven National Laboratory, Cold
Spring Harbor Laboratory, and Stony
Brook
University to facilitate the commercialization of technologies developed in
their research and development programs. LIRI guided fledgling companies and
started several new high tech entities. In order to provide “zero-stage”
financing, LIRI created the Long Island Venture Fund, which evolved into the
$250 million Topspin Fund.
Dr. Palmedo
served on the boards of Asset Management Advisors and the Teton Trust Company
and is currently a member of the Board of Directors of EHR Investments and
the
Gyrodyne Corporation of America. Dr. Palmedo also served on the Board of
Trustees of Williams College and of the Stony Brook (University) Foundation
and
chaired the Foundation’s Investment Committee. He is the founding Chairman of
the non-profit Cultural Preservation Fund.
Dr. Palmedo
has served as a consultant and advisor to numerous corporations and national
and
international agencies in science, technology and environmental policy including
the MacArthur Foundation, the U. S. National Academy of Sciences, International
Atomic Energy Agency, UNIDO, Organization of American States, the Governments
of
Sweden, Denmark, Dominican Republic, Indonesia, Somalia, Sudan, Egypt and Peru.
He is the author of many publications in nuclear reactor physics, energy and
environment, and technology and economic development.
Audit
Committee
We
do not
presently have an audit committee. The board of directors acts in that capacity
and has determined that we do not currently have an audit committee financial
expert serving on our audit committee.
For
the
fiscal years ended December 31, 2005 and 2006, no individual, including Richard
Rappaport, who served as our President in 2005 through the date of the reverse
merger, and Dr. John Kovach, our current Chief Executive Officer, received
any
compensation. Dr. Kovach will be reimbursed for any out-of-pocket expenses.
Any future compensation arrangements will be subject to the approval of the
board of directors.
Option
Grants in 2005 and 2006
None.
Aggregated
Option Exercises in 2005 and 2006 Option Values at December 31, 2005
and at December 31, 2006
None.
Employment
Agreements; Compensation
We
have
not entered into any employment agreements. As of December 31, 2006, we had
no
full-time employees. For the current fiscal year, Dr. Kovach does not
anticipate receiving any compensation from us in view of our early stage status.
He will be reimbursed for any out-of-pocket expenses. Any future compensation
arrangements will be subject to the approval of the board of directors. Dr.
Phillip Palmedo, our sole outside director, has received options to purchase
200,000 shares of common stock at the initial private placement price of $0.333
per share with one third of the options (66,666 shares) vesting immediately
upon
joining the board and one third vesting annually for two years on the
anniversary of that date. Dr. Palmedo has also received options to purchase
190,000 shares of common stock at $0.333 per share for services rendered in
developing the business plan for Lixte.
Director
Compensation
Members
of the Board of Directors
On
June
30, 2006, Dr. Palmedo was granted options to purchase 200,000 shares of common
stock at the initial private placement price of $0.333 per share with one third
of the options (66,666 shares) vesting on such date and one third vesting
annually for two years on the anniversary of that date. Any
additional outside member of the Board will receive options to purchase
200,000 shares of common stock at the fair market value as of the date of the
grant with one third of the options (66,666 shares) vesting immediately upon
joining the board and one third vesting annually for two years on the
anniversary of that date. On June 30, 2006, Dr. Palmedo also was granted options
to purchase 190,000 shares of common stock exercisable for a period of five
years at $0.333 per share for services rendered in developing our business
plan,
all of which were fully vested upon issuance.
DIRECTOR
COMPENSATION TABLE
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation ($)
|
Non-Qualified
Deferred Compensation Earnings
($)
|
All
Other Compensation
($)(1)
|
Total
($)
|
Philip
F. Palmedo
Director
|
2006
|
0
|
0
|
0
|
120,900
|
0
|
0
|
--
|
120,900
|
Members
of the Scientific Advisory Committee
On
June
30, 2006 each member of the Scientific Advisory Committee (SAC), other than
Drs.
Hartmann and Hofstadter, received options to purchase 50,000 shares of
common stock at the initial private placement price of $0.333 per share with
one
half of the options (25,000 shares) vesting on the first anniversary of joining
the SAC and one half vesting on the second anniversary.
SCIENTIFIC
ADVISORY COMMITTEE
The
Committee which is not part of management advises us in three areas: human
molecular pathology; the clinical
management of human brain tumors; and medicinal chemistry. It is planned
that
the committee
will meet as a group annually with some members participating via telephone
conference.
Thus far the Committee has been apprised of our general
objectives and
several of the specific challenges and leads for developing improved therapies
for human brain
tumors. The Committee members have not provided specific advice thus far
that
has modified
strategy nor do they serve in any management capacity. The scientific advisory
committee was formalized on June 30, 2006. The members of our Advisory
Committee
are:
Arndt
Hartmann, MD
Dr. Hartmann
is Professor of Pathology, Institute of Pathology, University of Regensburg,
Germany. He was trained in Internal Medicine at the University of Jena, Germany,
and in molecular genetics of cancer at Mayo Clinic, Rochester, MN. He was
subsequently trained in pathology at the University of Regensburg and the
University of Basel, Switzerland. His research is focused on methods development
in molecular pathology. He has specific expertise in genetic alterations
in
cancers of the bladder, prostate, kidney and breast.
Ferdinand
Hofstadter, MD
Dr. Hofstadter
is Professor and Director of the Institute of Pathology, University of
Regensburg Medical School, Germany. He is Research Dean of the University
of
Regensburg-Medical Faculty, Chairman of the Managing Board of the Association
of
German Tumor Centers, Chairman of the German Society for Pathology, a member
of
the editorial boards of Virchow’s Archives and the Journal of Pathology, and a
referee for Deutsche Forschungsgesellschaft, the Dr. Mildred
Scheel-Stiftung, EU, and the European Research Framework Program.
Stefan
Madajewicz, MD, PhD
Dr. Madajewicz
is Professor of Medicine. For the past 15 years, he has been Director of
Cancer
Clinical Trials and for the past 10 years, Chief, Neoplastic Diseases at
SUNY-Stony Brook. Dr. Madajewicz is a Fellow, American College of
Physicians and a member of the American Society of Clinical Oncology, American
Association for Cancer Research, European Society of Medical Oncology an
affiliate of the Eastern Cooperative Oncology Group, and member of the National
Surgical Adjuvant Breast and Bowel Project. He is recognized as an outstanding
cancer clinician and for the design of clinical trials, particularly the
evaluation of new drugs in the treatment of cancers of the gastrointestinal
tract and brain.
Iwao
Ojima, BS, MS, PhD
Professor
Ojima is Distinguished Professor of Chemistry and Director, Institute of
Chemical Biology and Drug Discovery, SUNY-Stony Brook. He is an internationally
recognized expert in medicinal chemistry, including
anticancer agents and enzyme inhibitors, development of efficient synthetic
methods for organic synthesis by means of organometallic reagents, homogeneous
catalysis and organometallic chemistry, peptide and peptide mimetics,
beta-lactam chemistry, and organoflourine chemistry at the biomedical
interface.
Dr. Ojima
is a recipient of the Arthur C. Cope Scholar Award (1994) and the
E. B. Hershberg Award (for important discovery of medicinally active
substances) (2001) from the American Chemical Society; The Chemical Society
of
Japan Award (for distinguished achievements) (1999); Outstanding Inventor
Award
from the Research Foundation of the State University of New York (2002. He
is a
Fellow of the J.S. Guggenheim Memorial Foundation (1995-), the American
Association for the Advancement of Science (1997-), and The New York Academy
of
Sciences (2000-).
Dr. Ojima
is a member of the American Chemical Society, American Association for the
Advancement of Science, American Association for Cancer Research, American
Peptide Society, the Chemical Society of Japan, the Society of Synthetic
Organic
Chemistry, Japan, New York Academy of Sciences, and Signa Xi. He has served
as a
consultant for E. I. du Pont, Eli Lilly, Air Products &
Chemicals, Mitsubishi Chem. Inc., Nippon Steel Corp., Life Science Division,
Rhone-Poulenc Rorer, ImmunoGen, Inc., Taiho Pharmaceutical Co., Milliken
&
Co., Aventis Pharma, OSI Pharmaceuticals, Inc., Mitsubishi Chem. Corp.
(current).
AND
MANAGEMENT
The
following table sets forth, as of April 30, 2007, certain information
regarding beneficial ownership of our common stock by (i) each person or
entity who is known by us to own beneficially more than 5% of the outstanding
shares of common stock, (ii) each of our directors, and (iii) all
directors and executive officers as a group. As of April 30, 2007, there were
26,582,183 shares of our common stock issued and outstanding. In computing
the
number and percentage of shares beneficially owned by a person, shares of common
stock that a person has a right to acquire within sixty (60) days of April
30,
2007, pursuant to options, warrants or other rights are counted as outstanding,
while these shares are not counted as outstanding for computing the percentage
ownership of any other person. Unless otherwise indicated, the address for
each
stockholder listed in the following table is c/o Lixte Biotechnology Holdings,
Inc., 248 Route 25A, No. 2, East Setauket, New York 11733. This table is based
upon information supplied by directors, officers and principal stockholders
and
reports filed with the Securities and Exchange Commission.
Name
and Address of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership
|
Percent
of Class
|
|||||
Officers,
Directors and 5% stockholders
|
|
||||||
Dr. John S.
Kovach
248
Route 25A, No. 2
East
Setauket, New York 11733
|
17,021,786
|
64.03
|
%
|
||||
Dr. Philip F.
Palmedo
248
Route 25A, No. 2
East
Setauket, New York 11733
|
256,666
|
(1)
|
0.96
|
%
|
|||
Richard
Rappaport (2)
1900
Avenue of the Stars
Los
Angeles, California 90067
|
1,581,471 | 5.85 |
%
|
||||
All
Officers and directors as a group (two persons following the
consummation of the Exchange)
|
17,278,452
|
(1)
|
64.37
|
%
|
|||
(1) |
Includes
options to purchase an aggregate of 256,666 shares of common
stock, which
are immediately exercisable.
|
(2) |
Mr. Rappaport served as the Company's President
from May
2005 until June 30, 2006. Mr. Rappaport is the Chief Executive
Officer of WestPark Capital Inc. The number in the table includes
426,626
any shares of our common stock issuable upon the exercise of
warrants
issued to WestPark with respect to which Mr. Rappaport disclaims
beneficial ownership.
|
This
section describes the transactions we have engaged in with persons who were
directors, officers or affiliates before and at the time of the transaction,
and
persons known by us to be the beneficial owners of 5% or more of our common
stock as of December 31, 2006.
On
May 26, 2005, we sold 1,155,000 shares and 270,000
shares of our comon stock to Richard Rappaport and Anthony Pintsopoulos at
a per
share price of $0.009. Messrs Rappaport and Pintsopoulos were our officers
and
directors prior to our reverse merger.
Most
office services are provided without charge by Dr. Kovach,
our president. Such costs are immaterial to the financial statements and
accordingly, have not been reflected therein. Our officer and director are
involved in other business activities and may, in the future, become involved
in
other business opportunities that become available, such person may face a
conflict in selecting between us and his other business interests. We have
not
formulated a policy for the resolution of such conflicts.
In
connection with the private placement of our
securities in June and July 2006, we paid WestPark Capital, Inc. fees of
$165,744 representing a commission of 10% and a nonaccountable expense fee
of
4% on the gross proceeds. We also issued five year warrants to purchase an
aggregate of 426,626 shares of common stock equal to 12% of the number of shares
sold in the private placement at an exercise price of $0.333 per share. We
also
paid WestPark Capital, Inc. a $50,000 fee in connection with the Reverse
Merger. Richard Rappaport, the Chief Executive Officer of WestPark Capital,
Inc.
was our President from our formation through the date of the Reverse
Merger.
Also,
Dr. Kovach, our President, has advanced to us an
aggregate of $92,717 through December 31, 2006 to meet operating expenses.
Such advances are non-interest bearing and are due on demand.
General
Our
authorized capital consists of 100,000,000 shares of common stock, par value
$0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001
per share. As of December 31, 2006, we had 26,582,183 shares of common
stock outstanding. We have no shares of preferred stock issued or
outstanding, warrants to purchase an aggregate of 426,626 shares and
options to purchase 490,000 shares. We have granted registration rights to
the
investors in the private placement and certain of the shareholders who were
such
at the time of the reverse merger. The registration statement of which this
prospectus is a part covers the resale of such shares. We do not believe that
any outstanding shares are currently eligible to be sold under Rule
144.
Common
Stock
Subject
to rights which may be granted to holders of preferred stock in the future,
each
share of our common stock is entitled to one vote at all meetings of our
stockholders. Our common stockholders are not permitted to cumulate votes in
the
election of directors. All shares of our common stock are equal to each other
with respect to liquidation rights and dividend rights. There are no preemptive
rights to purchase any additional shares of our common stock. In the event
of
our liquidation, dissolution or winding up, holders of our common stock will
be
entitled to receive, on a pro rata basis, all of our assets remaining after
satisfaction of all liabilities and preferences of outstanding preferred stock,
if any.
On
May 18, 2006, we approved a stock dividend of 11% of
the issued and outstanding shares of common stock to be issued to all
stockholders of record as of May 18, 2006.
Transfer
Agent
Our
transfer agent is US Stock Transfer Corporation, located at 1745 Gardena Avenue,
Glendale, CA 91204, telephone (818) 502-1404.
Future
sales of a substantial number of shares of our common stock in the public market
could adversely affect market prices prevailing from time to time. Under the
terms of this offering, the shares of common stock offered may be resold without
restriction or further registration under the Securities Act of 1933, except
that any shares purchased by our “affiliates,” as that term is defined under the
Securities Act, may generally only be sold in compliance with Rule 144
under the Securities Act.
Sale
of Restricted Shares
Certain
shares of our outstanding common stock were issued and sold by us in private
transactions in reliance upon exemptions from registration under the Securities
Act and have not been registered for resale. Additional shares may be issued
pursuant to outstanding warrants and options. Such shares may be sold only
pursuant to an effective registration statement filed by us or an applicable
exemption, including the exemption contained in Rule 144 promulgated under
the Securities Act. The shares owned by the stockholders immediately prior
to
the reverse merger may only be sold pursuant to an effective registration
statement.
Rule 144
In
general, under Rule 144 as currently in effect, a stockholder, including
one of our affiliates, may sell shares of common stock after at least one year
has elapsed since such shares were acquired from us or our affiliate. The number
of shares of common stock which may be sold within any three-month period is
limited to one percent of our then outstanding common stock. Certain other
requirements of Rule 144 concerning availability of public information,
manner of sale and notice of sale must also be satisfied. In addition, a
stockholder who is not our affiliate, who has not been our affiliate for 90
days
prior to the sale, and who has beneficially owned shares acquired from us or
our
affiliate for over two years may resell the shares of common stock without
compliance with many of the foregoing requirements under Rule 144. The
shares owned by the stockholders immediately prior to the reverse merger may
only be sold pursuant to an effective registration statement.
The
securities being offered hereunder are being offered by the selling stockholders
listed below or their respective transferees, pledgees, donees or successors.
Each selling stockholder may from time to time offer and sell any or all of
such
selling stockholder’s shares that are registered under this prospectus. Because
no selling stockholder is obligated to sell shares, and because the selling
stockholders may also acquire publicly traded shares of our common stock, we
cannot accurately estimate how many shares each selling stockholder will own
after the offering.
All
expenses incurred with respect to the registration of the common stock covered
by this prospectus will be borne by us, but we will not be obligated to pay
any
underwriting fees, discounts, commissions or other expenses incurred by any
selling stockholder in connection with the sale of shares.
The
following table sets forth, with respect to each selling stockholder
(i) the number of shares of common stock owned as of December 31, 2006
and prior to the offering contemplated hereby, (ii) the maximum number of
shares of common stock which may be sold by the selling stockholder under this
prospectus, and (iii) the number of shares of common stock which will be
owned after the offering by the selling stockholder. All stockholders listed
below are eligible to sell their shares. None of the stockholders listed below
have had any position, office or other material relationship with us within
the
past 3 years. All New Investors have entered into a Securities Purchase
Agreement and a Registration Rights Agreement with us. The percentage ownership
set forth below is based upon 26,582,183 shares outstanding.
Prior
to Offering
|
After
Offering
|
|||||||||||||||
Investor
Name
|
Shares
|
Percent
|
Shares
Offered
|
Shares
|
Percent
|
|||||||||||
Existing
Stockholders (1)
|
||||||||||||||||
Debbie
Schwartzberg
|
1,154,845
|
4.3
|
%
|
1,154,845
|
0
|
0
|
%
|
|||||||||
Tom
Poletti
|
269,973
|
1.0
|
%
|
269,973
|
0
|
0
|
%
|
|||||||||
Glenn
Krinsky
|
149,985
|
*
|
149,985
|
0
|
0
|
%
|
||||||||||
TMC
Ulster Holdings, Inc. (2)
|
1,005,556
|
3.8
|
%
|
1,005,556
|
0
|
0
|
%
|
|||||||||
New
Investors (3)
|
||||||||||||||||
Israel
Freeman
884
Oreo Place
Pacific
Palisades, CA 90272
|
150,150
|
*
|
150,150
|
0
|
0
|
%
|
Prior
to Offering
|
After
Offering
|
|||||||||||||||
Investor
Name
|
Shares
|
Percent
|
Shares
Offered
|
Shares
|
Percent
|
|||||||||||
Solomon
Blisko
55
Broad St.
New
York, NY 10004
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
||||||||||
Alvin
S. Michaelson, Esq., (4)
Professional
Corporate Retirement Plan
1901
Avenue of the Stars, Suite 615
Los
Angeles, CA 90067
|
100,000
|
*
|
100,000
|
0
|
0
|
%
|
||||||||||
Dennis
O'Donnell
66
South Stone Hedge Dr.
Basking
Ridge, NJ 07920
|
24,024
|
*
|
24,024
|
0
|
0
|
%
|
||||||||||
Richard
& Donna Hoefer
42239
Nottingwood Ct.
Northville,
MI 48618-2024
|
75,075
|
*
|
75,075
|
0
|
0
|
%
|
||||||||||
Kagel
Family Trust (5)
1801
Century Park East, #2500
Los
Angeles, CA 90067
|
150,150
|
*
|
150,150
|
0
|
0
|
%
|
||||||||||
Allan
Berry
16940
SW 94th Ct.
Palmetto
Bay, FL 33157
|
30,030
|
*
|
30,030
|
0
|
0
|
%
|
||||||||||
Jane
M. Trigg
24
Terra Pines Gate
Yaphank,
NY 11980
|
3,000
|
*
|
3,000
|
0
|
0
|
%
|
||||||||||
Darryl
J. Tyson
3800
Lovers Lane
Dallas,
TX 75225
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
||||||||||
Arthur
Berrick & Sharon Berrick
3901
Rock Hampton Drive
Tarzana,
CA 91356
|
150,150
|
*
|
150,150
|
0
|
0
|
%
|
||||||||||
Dennis
Holman
6819
Shadowcreek Drive
Maumee,
OH 43537
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
||||||||||
Frederic
Colman
165
Harcross Road
Woodside,
CA 94106
|
240,240
|
*
|
240,240
|
0
|
0
|
%
|
||||||||||
Scott
F. Jasper
111
W. Belden St
Sherman
, Texas 75092
|
30,030
|
*
|
30,030
|
0
|
0
|
%
|
||||||||||
Mitchell
J. Lipcon Profit Sharing Keough Plan (6)
9100
S Dadeland Blvd Suite 400
Miami,
Florida 33156
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
Prior
to Offering
|
After
Offering
|
|||||||||||||||
Investor
Name
|
Shares
|
Percent
|
Shares
Offered
|
Shares
|
Percent
|
|||||||||||
J
& N Invest LLC (7)
152-E
9th St.
Lakewood,
NJ 08761
|
150,150
|
*
|
150,150
|
0
|
0
|
%
|
||||||||||
John
W. Hardy
2920
N. Foothill Dr
Provo,
UT
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
||||||||||
David
Clarke
Po
Box 210999
Palm
Beach, Florida 33421
|
60,060
|
*
|
60,060
|
0
|
0
|
%
|
||||||||||
William
& Ann Collins
64
Upper Loudon Road
Loudonville,
NY 12211
|
60,060
|
*
|
60,060
|
0
|
0
|
%
|
||||||||||
Howard
Izes
7900
Old York Road
Elkins
Park, PA 19027
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
||||||||||
Brent
D. Butcher
5960
Fardown Ct.
Salt
Lake City, Utah 84121
|
60,060
|
*
|
60,060
|
0
|
0
|
%
|
||||||||||
Rita
M. Lurie
93
Taylor Lane
Harrison,
NY 10528
|
75,075
|
*
|
75,075
|
0
|
0
|
%
|
||||||||||
David
C. Katz
54
Tarn Dr.
Morris
Plains, NY 07950
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
||||||||||
Mike
Lichtie
4198
Wildcreek
Sandy,
UT 84092
|
60,060
|
*
|
60,060
|
0
|
0
|
%
|
||||||||||
Mark
Nielsen
572
25th St.
Hermosa
Beach, CA 90254
|
150,150
|
*
|
150,150
|
0
|
0
|
%
|
||||||||||
David
R. Falk
PO
Box 189
St.
Ansgar, IA 50472
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
||||||||||
Mody
K. Boatright
629
Santa Monica
Corpus
Christi, TX 78411
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
||||||||||
Samuel
Solomon
1
S. Greenleaf, Suite A
Gurnee,
IL 60031
|
30,030
|
*
|
30,030
|
0
|
0
|
%
|
||||||||||
Phillip
& Sherrine Thomas
3
Hazelwood Lane
Kinnelon,
NJ 07405
|
30,030
|
*
|
30,030
|
0
|
0
|
%
|
Prior
to Offering
|
After
Offering
|
|||||||||||||||
Investor
Name
|
Shares
|
Percent
|
Shares
Offered
|
Shares
|
Percent
|
|||||||||||
Tae
Kang
41
Constitution Way
Jersey
City, NJ 07305
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
||||||||||
George
B. Feussner
7106
NW 11th Place, Suite A
Gainesville,
FL 32605
|
60,060
|
*
|
60,060
|
0
|
0
|
%
|
||||||||||
Gerald
C. Holman
345
Terrents Pt.
Carmel,
IN 46032
|
36,036
|
*
|
36,036
|
0
|
0
|
%
|
||||||||||
Bart
Anderson
134
Magee Road
Ringwood,
NJ 07456
|
30,030
|
*
|
30,030
|
0
|
0
|
%
|
||||||||||
Marvin
Rosenblatt
80
Weston St.
Hartford,
CT 06120
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
||||||||||
Paul
E. Northcutt
P.O.
Box 1669
Ponca
City, OK 74602
|
60,060
|
*
|
60,060
|
0
|
0
|
%
|
||||||||||
Glenn
S Shear
5690
Glen Erol Rd.
Atlanta,
GA 30327
|
30,030
|
*
|
30,030
|
0
|
0
|
%
|
||||||||||
Charanjit
S. Pangali
6333
Paseo Santa Maria
Pleasonton,
CA 94566
|
30,030
|
*
|
30,030
|
0
|
0
|
%
|
||||||||||
Doug
Kuber
575
Madison Avenue, 10th Floor
New
York, NY 10022
|
150,150
|
*
|
150,150
|
0
|
0
|
%
|
||||||||||
Richard
Rudin
17466
Farmers Mine Rd.
Paonia,
CO 81428
|
60,060
|
*
|
60,060
|
0
|
0
|
%
|
||||||||||
David
L. Boyer
P.O.
Box 672171
Chugiak,
AK 99567
|
75,075
|
*
|
75,075
|
0
|
0
|
%
|
||||||||||
Glenn
Izmarian
3381
Venture Drive
Huntington
Beach, CA 92649
|
30,000
|
*
|
30,000
|
0
|
0
|
%
|
||||||||||
Mody
K. Boatright (Round 2)
629
Santa Monica
Corpus
Christi, TX 78411
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
||||||||||
Harvey
P. Weintraub
3936
W. Loyola
Lincolnwood,
IL 66712
|
90,090
|
*
|
90,090
|
0
|
0
|
%
|
Prior
to Offering
|
After
Offering
|
|||||||||||||||
Investor
Name
|
Shares
|
Percent
|
Shares
Offered
|
Shares
|
Percent
|
|||||||||||
Ens
Defined Benefit Plan (8)
26
Spring Valley Dr.
Holmdel,
NJ 07733
|
90,090
|
*
|
90,090
|
0
|
0
|
%
|
||||||||||
Charles
M. Merkel
P.O.
Box 1388, 30 Delta Avenue
Clarksdale,
MS 38614
|
75,075
|
*
|
75,075
|
0
|
0
|
%
|
||||||||||
Dennis
O'Donnell (Round 2)
66
South Stone Hedge Dr.
Basking
Ridge, NJ 07920
|
66,066
|
*
|
66,066
|
0
|
0
|
%
|
||||||||||
Remedium
LLC (9)
141
Broad St.
New
Britain, CT 06053
|
16,517
|
*
|
16,517
|
0
|
0
|
%
|
||||||||||
Richard
Pawlinger
5425
Powers Ferry Rd.
Atlanta,
GA 30327
|
75,075
|
*
|
75,075
|
0
|
0
|
%
|
||||||||||
John
W Lahr
3570
Outlook Avenue
Cincinnati,
OH 45208
|
75,075
|
*
|
75,075
|
0
|
0
|
%
|
||||||||||
Kathleen
Datys
11
Caskey Road
Glen
Spey, NY 12737
|
90,090
|
*
|
90,090
|
0
|
0
|
%
|
||||||||||
Rebecca
Utter
3947
Las Vegas Dr.
El
Paso, TX 79902
|
45,045
|
*
|
45,045
|
0
|
0
|
%
|
||||||||||
Richard
Metsch
7
Sundale Place
Scarsdale,
NY 10583
|
36,036
|
*
|
36,036
|
0
|
0
|
%
|
||||||||||
Joan
Metsch
23
Greenville Road
Scarsdale,
NY 10583
|
12,613
|
*
|
12,613
|
0
|
0
|
%
|
||||||||||
Cynthia
Metsch
50
Phillips Place
Northampton,
MA 01060
|
15,015
|
*
|
15,015
|
0
|
0
|
%
|
||||||||||
John
O. Forrer
1714
Hoban Rd. NW
Washington,
D.C. 20007
|
54,054
|
*
|
54,054
|
0
|
0
|
%
|
||||||||||
Miriam
S. Mooney Trust FBO Joan F. Connolly (10)
1714
Hoban Rd. NW
Washington,
D.C. 20007
|
20,721
|
*
|
20,721
|
0
|
0
|
%
|
Prior
to Offering
|
After
Offering
|
|||||||||||||||
Investor
Name
|
Shares
|
Percent
|
Shares
Offered
|
Shares
|
Percent
|
|||||||||||
Miriam
S. Mooney Trust FBO David Forrer (11)
1714
Hoban Rd. NW
Washington,
D.C. 20007
|
36,036
|
*
|
36,036
|
0
|
0
|
%
|
||||||||||
Miriam
S. Mooney Trust FBO Catherine F. Sotto Forrer (12)
1714
Hoban Rd. NW
Washington,
D.C. 20007
|
27,027
|
*
|
27,027
|
0
|
0
|
%
|
||||||||||
* |
Less
than 1%
|
(1) |
The
shares were issued to the existing stockholders on May 26, 2005
at a per
share price of $0.009.
|
(2) |
The
beneficial holder of such shares is Guido
DaLessio.
|
(3) |
The
shares issued to the new investors were sold in private placements
occuring on June 30, 2006 and July 27, 2006 at a per share price
of
$0.333.
|
(4) |
Alvin
S. Michaelson has voting and investment control over the shares
owned by
this entity.
|
(5) |
David
L. Kagel and Ina P. Kagel, as trustees, have sole voting and
investment
control over the shares owned by this
entity
|
(6) |
Mitchell
Lipcon has voting and investment control over the shares owned
by this
entity.
|
(7) |
Jeffrey
Rubin, as manager, has voting and investment control over the
shares owned
by this entity.
|
(8) |
Joseph
A. Ens, Jr. is the trustee of the Joseph A. Ens, Jr. Defined
Benefit
Plan
|
(9) |
Alex
Polanski has sole voting and investment control over the shares
owned by
this entity.
|
(10) |
John
O. Forrer, as trustee, has voting and investment control over
the shares
owned by this entity.
|
(11) |
John
O. Forrer, as trustee, has voting and investment control over
the shares
owned by this entity.
|
(12) |
John
O. Forrer, as trustee, has voting and investment control over
the shares
owned by this entity.
|
General
Each
selling stockholder and any of their pledges, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on the on any stock exchange, market or trading facility on
which the shares are traded or quoted or in private transactions. Until the
shares are listed on the OTC Bulletin Board, the shares may only be sold at
a
fixed price of $0.33. Thereafter, these sales may be at fixed prices, or
prevailing market prices or privately negotiated prices. Each selling
stockholder will act independently from us in making decisions with respect
to
the manner, timing, price and size of each sale. A selling stockholder may
use
any one or more of the following methods when selling shares:
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
·
|
privately
negotiated transactions;
|
·
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a part;
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
·
|
a
combination of any such methods of
sale;
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
or
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but,
except as set forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance
with
NASDR Rule 2440; and in the case of a principal transaction a markup or
markdown in compliance with NASDR IM-2440.
In
connection with the sale of the common stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
We
are
required to pay certain fees and expenses incurred by us, incident to the
registration of the shares. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
Because
selling stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act. In addition, any securities covered by this prospectus,
which qualify for sale pursuant to Rule 144 under the Securities Act, may
be sold under Rule 144 rather than under this prospectus. Each selling
stockholder has advised us that they have not entered into any written or oral
agreements, understandings or arrangements with any underwriter or broker-dealer
regarding the sale of the resale shares. There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by
the
selling stockholders.
Registration
Obligations
We
agreed
to keep this prospectus effective until the earlier of (i) the date on
which the shares may be resold by the selling stockholders without registration
and without regard to any volume limitations by reason of Rule 144(e) under
the Securities Act or any other rule of similar effect or (ii) all of the
shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will
be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale
in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged
in
the distribution of the resale shares may not simultaneously engage in market
making activities with respect to the common stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases
and
sales of shares of the common stock by the selling stockholders or any other
person. We will make copies of this prospectus available to the selling
stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.
The
validity of the issuance of the common stock offered hereby will be passed
upon
for us by Troy & Gould P.C.
The
financial statements of Lixte Biotechnology Holdings, Inc. for the year ended
December 31, 2006 appearing in this prospectus have been audited by AJ. Robbins,
PC, Certified Public Accountants, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such reports given upon
the
authority of such firm as experts in accounting and auditing.
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Pursuant
to our certificate of incorporation and bylaws, we may indemnify an officer
or
director who is made a party to any proceeding, because of his position as
such,
to the fullest extent authorized by Delaware General Corporation Law, as the
same exists or may hereafter be amended. In certain cases, we may advance
expenses incurred in defending any such proceeding.
To
the
extent that indemnification for liabilities arising under the Securities Act
may
be permitted to directors, officers or persons controlling our company pursuant
to the foregoing provisions, we have been informed that, in the opinion of
the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. If
a
claim for indemnification against such liabilities (other than the payment
by us
of expenses incurred or paid by a director, officer or controlling person of
our
company in the successful defense of any action, suit or proceeding) is asserted
by any of our directors, officers or controlling persons in connection with
the
securities being registered, we will, unless in the opinion of our counsel
the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will be governed
by
the final adjudication of that issue.
We
have
filed with the SEC a registration statement on Form SB-2, which includes
exhibits, schedules and amendments, under the Securities Act, with respect
to
this offering of our securities. Although this prospectus, which forms a part
of
the registration statement, contains all material information included in the
registration statement, parts of the registration statement have been omitted
as
permitted by rules and regulations of the SEC. We refer you to the registration
statement and its exhibits for further information about us, our securities
and
this offering. The registration statement and its exhibits, as well as our
other
reports filed with the SEC, can be inspected and copied at the SEC’s public
reference room at 100 F Street, N.E., Washington, D.C. 20549-1004. The public
may obtain information about the operation of the public reference room by
calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a web site
at
http://www.sec.gov, which contains the Form SB-2 and other reports, proxy
and information statements and information regarding issuers that file
electronically with the SEC.
(FORMERLY
SRKP 7, INC.)
AND
SUBSIDIARY
(a
development stage company)
CONSOLIDATED
FINANCIAL STATEMENTS (Restated)
December
31, 2006
Report
of Independent Registered Public Accounting Firm
|
|
F-2
|
|
|
|
Consolidated
Balance Sheet - December 31, 2006
|
|
F-3
|
|
|
|
Consolidated
Statements of Operations - Year Ended December 31, 2006, August 9,
2005 (Inception) to December 31, 2005, and August 9, 2005 (Inception)
to December 31, 2006 (Cumulative)
|
|
F-4
|
|
|
|
Consolidated
Statement of Changes in Stockholders’ Equity (Deficiency) - August 9,
2005 (Inception) to December 31, 2006
|
|
F-5
|
|
|
|
Consolidated
Statements of Cash Flows - Year Ended December 31, 2006, August 9,
2005 (Inception) to December 31, 2005, and August 9, 2005 (Inception)
to December 31, 2006 (Cumulative)
|
|
F-6
|
|
|
|
Notes
to Consolidated Financial Statements - December 31,
2006
|
|
F-8
|
F-1
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors
Lixte
Biotechnology Holdings, Inc.
East
Setauket, New York
We
have
audited the accompanying consolidated balance sheet of Lixte Biotechnology
Holdings, Inc. (formerly SRKP 7, Inc.) and subsidiary (a development stage
company) as of December 31, 2006, and the related consolidated statements
of
operations, changes in stockholders’ equity (deficiency) and cash flows for the
year then ended and for the periods from August 9, 2005 (inception) to
December
31, 2006 and 2005, respectively. These consolidated financial statements
are the
responsibility of the Company's management. Our responsibility is to express
an
opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our
audits provide a reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present
fairly,
in all material respects, the financial position of Lixte Biotechnology
Holdings, Inc. and subsidiary as of December 31, 2006, and the results
of their
operations and their cash flows for the year then ended and for the periods
from
August 9, 2005 (inception) to December 31, 2006 and 2005, respectively,
in
conformity with accounting principles generally accepted in the United
States of
America.
As
discussed in Note 8 to the consolidated financial statements, the accompanying
consolidated balance sheet as of December 31, 2006, and the related consolidated
statements of operations, cash flows, and stockholders’ equity (deficiency) for
the year ended December 31, 2006 have been restated to properly account
for
registration payment arrangements.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As discussed in Note 2 to
the
consolidated financial statements, the Company is in the development stage
and
has not commenced operations. Its ability to continue as a going concern
is
dependent upon its ability to develop additional sources of capital, locate
and
complete a merger with another company and ultimately achieve profitable
operations. These conditions raise substantial doubt about its ability
to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
AJ.
ROBBINS, P.C.
CERTIFIED
PUBLIC ACCOUNTANTS
Denver,
Colorado
February
5, 2007 except for Note 8, as to which the date is April 4, 2007
F-2
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
(FORMERLY
SRKP 7, INC.)
AND
SUBSIDIARY
(a
development stage company)
CONSOLIDATED
BALANCE SHEET (Restated)
December
31, 2006
|
|
|||
ASSETS
|
|
|||
Current
assets:
|
|
|||
Cash
and cash equivalents
|
$
|
679,640
|
||