10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on November 12, 2009
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2009
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934
|
Commission
file number: 000-51476
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
20-2903526
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
Number)
|
248
Route 25A, No. 2
East
Setauket, New York 11733
(Address
of principal executive offices)
(631)
942-7959
(Registrant’s
telephone number, including area code)
Not
applicable
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).
|
Large
accelerated filer o
|
Accelerated
filer o
|
|
Non-accelerated
filer o
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x
As of
October 30, 2009, the Company had 29,502,178 shares of common stock, $0.0001 par
value, issued and outstanding.
Documents
incorporated by reference: None
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
INDEX
|
Page
Number
|
||
|
PART
I - FINANCIAL INFORMATION
|
||
|
Item
1. Condensed Consolidated Financial Statements
|
||
|
Condensed
Consolidated Balance Sheets -
|
||
|
September
30, 2009 (Unaudited) and December 31, 2008
|
4
|
|
|
Condensed
Consolidated Statements of Operations (Unaudited) -
|
||
|
Three
Months and Nine Months Ended September 30, 2009 and 2008, and Period from
August 9, 2005 (Inception) to September 30, 2009
(Cumulative)
|
5
|
|
|
Condensed
Consolidated Statement of Changes in Stockholders’ Equity (Deficiency)
–
August 9,
2005 (Inception) to September 30, 2009
|
6
|
|
|
Condensed
Consolidated Statements of Cash Flows (Unaudited) -
|
||
|
Nine
Months Ended September 30, 2009 and 2008, and Period from August 9,
2005 (Inception) to September 30, 2009 (Cumulative)
|
7
|
|
|
Notes
to Condensed Consolidated Financial Statements (Unaudited)
-
|
||
|
Three
Months and Nine Months Ended September 30, 2009 and 2008, and Period from
August 9, 2005 (Inception) to September 30, 2009
(Cumulative)
|
8
|
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
25
|
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
36
|
|
|
Item
4T. Controls and Procedures
|
36
|
|
|
PART
II - OTHER INFORMATION
|
||
|
Item
1. Legal Proceedings
|
37
|
|
|
Item
1A. Risk Factors
|
37
|
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
37
|
|
|
Item
3. Defaults Upon Senior Securities
|
37
|
|
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
37
|
|
|
Item
5. Other Information
|
37
|
|
|
Item
6. Exhibits
|
37
|
|
|
SIGNATURES
|
38
|
2
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934. For example, statements regarding the Company’s
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. The
Company believes that the assumptions and expectations reflected in such
forward-looking statements are reasonable, based on information available to it
on the date hereof, but the Company cannot provide assurances that these
assumptions and expectations will prove to have been correct or that the Company
will take any action that the Company 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, available cash, research results, competition from other
similar businesses, and market and general economic factors. This discussion
should be read in conjunction with the condensed consolidated financial
statements and notes thereto included in Item 1 of this Quarterly Report on
Form 10-Q.
3
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
(a
development stage company)
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
September 30,
|
|
December 31,
|
|
|||
|
|
|
2009
|
|
|
2008
|
|
||
|
(Unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$
|
110,431
|
$
|
10,381
|
||||
|
Advances
on research and development contract services
|
—
|
12,500
|
||||||
|
Prepaid
expenses and other current assets
|
38,479
|
28,644
|
||||||
|
Total
current assets
|
148,910
|
51,525
|
||||||
|
Office
equipment, net of
accumulated depreciation of $1,909 and $1,782 at
September
30, 2009 and December 31, 2008, respectively
|
—
|
128
|
||||||
|
Total
assets
|
$
|
148,910
|
$
|
51,653
|
||||
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable and accrued expenses
|
$
|
104,245
|
$
|
108,484
|
||||
|
Notes
payable to consultant
|
100,000
|
100,000
|
||||||
|
Research
and development contract liabilities
|
56,500
|
—
|
||||||
|
Liquidated
damages payable under registration rights agreement
|
74,000
|
74,000
|
||||||
|
Due
to stockholder
|
92,717
|
92,717
|
||||||
|
Total
current liabilities
|
427,462
|
375,201
|
||||||
|
Commitments
and contingencies
|
||||||||
|
Stockholders’
deficiency:
|
||||||||
|
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 - 29,502,178 shares and 27,932,178 shares
at
September 30, 2009 and December 31, 2008, respectively
|
2,950
|
2,793
|
||||||
|
Additional
paid-in capital
|
4,192,297
|
3,171,877
|
||||||
|
Deficit
accumulated during the development stage
|
(4,473,799
|
)
|
(3,498,218
|
)
|
||||
|
Total
stockholders’ deficiency
|
(278,552
|
)
|
(323,548
|
)
|
||||
|
Total
liabilities and stockholders’ deficiency
|
$
|
148,910
|
$
|
51,653
|
||||
See
accompanying notes to condensed consolidated financial
statements.
4
LIXTE
BIOTECHNOLOGY HOLDINGS, INC. AND SUBSIDIARY
(a
development stage company)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
|
Period from
August 9,
2005
(Inception) to
|
||||||||||||||||||||
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
September 30,
2009
|
||||||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
(Cumulative)
|
||||||||||||||||
|
Revenues
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||
|
Costs
and expenses:
|
||||||||||||||||||||
|
General
and administrative, including $231,282 and $254,915 of stock-based expense
during the three months ended September 30, 2009 and 2008,
respectively, $306,692 and $319,709 of stock-based
expense during the nine months ended September 30, 2009 and
2008, respectively, and $1,652,523 of stock-based expense for the period
from August 9, 2005 (inception) to September 30, 2009
(cumulative)
|
300,850
|
348,514
|
555,743
|
566,385
|
2,671,867
|
|||||||||||||||
|
Depreciation
|
—
|
155
|
128
|
473
|
1,909
|
|||||||||||||||
|
Research
and development costs, including $19,236 and $61,493 of stock-based
expense during the three months ended September 30, 2009 and 2008,
respectively, $116,835 and $144,862 of stock-based expense during the
nine months ended September 30, 2009 and 2008, respectively, and $380,732
of stock based expense for the period from August 9, 2005 (inception)
to September 30, 2009 (cumulative)
|
152,235
|
147,818
|
419,341
|
446,051
|
1,700,130
|
|||||||||||||||
|
Reverse
merger costs
|
—
|
—
|
—
|
—
|
50,000
|
|||||||||||||||
|
Total
costs and expenses
|
453,085
|
496,487
|
975,212
|
1,012,909
|
4,423,906
|
|||||||||||||||
|
(453,085
|
)
|
(496,487
|
)
|
(975,212
|
)
|
(1,012,909
|
)
|
(4,423,906
|
)
|
|||||||||||
|
Interest
income
|
31
|
342
|
83
|
3,181
|
25,796
|
|||||||||||||||
|
Interest
expense
|
—
|
—
|
(452
|
)
|
—
|
(1,689
|
)
|
|||||||||||||
|
Liquidated
damages under registration rights agreement
|
—
|
—
|
—
|
—
|
(74,000
|
)
|
||||||||||||||
|
Net
loss
|
$
|
(453,054
|
)
|
$
|
(496,145
|
)
|
$
|
(975,581
|
)
|
$
|
(1,009,728
|
)
|
$
|
(4,473,799
|
)
|
|||||
|
Net
loss per common share -
basic
and diluted
|
$
|
(0.02
|
)
|
$
|
(0.02
|
)
|
$
|
(0.03
|
)
|
$
|
(0.04
|
)
|
||||||||
|
Weighted
average common shares outstanding -
basic
and diluted
|
29,458,156
|
27,932,178
|
29,054,705
|
27,921,959
|
||||||||||||||||
See
accompanying notes to condensed consolidated financial
statements.
5
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
(a
development stage company)
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
Period
from August 9, 2005 (Inception) to September 30, 2009
|
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Deficit
Accumulated
During the
Development
|
|
|
Total
Stockholders’
Equity
|
|
||||||||
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
(Deficiency)
|
|
|||||
|
Balance,
August 9, 2005 (inception)
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||||||||
|
Shares
issued to founding stockholder
|
19,021,786
|
1,902
|
(402
|
)
|
—
|
1,500
|
||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
(16,124
|
)
|
(16,124
|
)
|
|||||||||||||
|
Balance,
December 31, 2005
|
19,021,786
|
1,902
|
(402
|
)
|
(16,124
|
)
|
(14,624
|
)
|
||||||||||||
|
Shares issued in connection with
reverse merger
transaction
|
4,005,177
|
401
|
62,099
|
—
|
62,500
|
|||||||||||||||
|
Shares
issued in private placement, net of offering costs
of $214,517
|
3,555,220
|
355
|
969,017
|
—
|
969,372
|
|||||||||||||||
|
Stock-based
compensation
|
—
|
—
|
97,400
|
—
|
97,400
|
|||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
(562,084
|
)
|
(562,084
|
)
|
|||||||||||||
|
Balance,
December 31, 2006
|
26,582,183
|
2,658
|
1,128,114
|
(578,208
|
)
|
552,564
|
||||||||||||||
|
Shares
issued in private placement, net of offering costs
of $118,680
|
999,995
|
100
|
531,220
|
—
|
531,320
|
|||||||||||||||
|
Stock-based
compensation
|
250,000
|
25
|
890,669
|
—
|
890,694
|
|||||||||||||||
|
Stock-based
research and development
Costs
|
—
|
—
|
50,836
|
—
|
50,836
|
|||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
(1,648,488
|
)
|
(1,648,488
|
)
|
|||||||||||||
|
Balance,
December 31, 2007
|
27,832,178
|
2,783
|
2,600,839
|
(2,226,696
|
)
|
376,926
|
||||||||||||||
|
Stock-based
compensation
|
—
|
—
|
357,987
|
—
|
357,987
|
|||||||||||||||
|
Stock-based
research and development costs
|
100,000
|
10
|
213,051
|
—
|
213,061
|
|||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
(1,271,522
|
)
|
(1,271,522
|
)
|
|||||||||||||
|
Balance,
December 31, 2008
|
27,932,178
|
2,793
|
3,171,877
|
(3,498,218
|
)
|
(323,548
|
)
|
|||||||||||||
|
Shares
issued in private placement, net of offering costs of
$112,950
|
1,420,000
|
142
|
596,908
|
—
|
597,050
|
|||||||||||||||
|
Stock-based
compensation
|
150,000
|
15
|
306,677
|
—
|
306,692
|
|||||||||||||||
|
Stock-based
research and development costs
|
—
|
—
|
116,835
|
—
|
116,835
|
|||||||||||||||
|
Net
loss for the nine months ended September 30, 2009
|
—
|
—
|
—
|
(975,581
|
)
|
(975,581
|
)
|
|||||||||||||
|
Balance,
September 30, 2009 (Unaudited)
|
29,502,178
|
$
|
2,950
|
$
|
4,192,297
|
$
|
(4,473,799
|
)
|
$
|
(278,552
|
)
|
|||||||||
See
accompanying notes to condensed consolidated financial
statements.
6
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
(a
development stage company)
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
Nine Months Ended
September 30,
|
Period from
August 9,
2005
(Inception) to
September 30,
2009
|
|||||||||||
|
2009
|
|
|
2008
|
(Cumulative)
|
||||||||
|
Cash
flows from operating activities:
|
||||||||||||
|
Net
loss
|
$
|
(975,581
|
)
|
$
|
(1,009,728
|
)
|
$
|
(4,473,799
|
)
|
|||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
|
Depreciation
|
128
|
473
|
1,909
|
|||||||||
|
Stock-based
compensation
|
306,692
|
319,709
|
1,652,523
|
|||||||||
|
Stock-based
research and development
|
116,835
|
144,862
|
380,732
|
|||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||
|
(Increase)
decrease in -
|
||||||||||||
|
Advances
on research and development contract services
|
12,500
|
38,180
|
—
|
|||||||||
|
Prepaid
expenses and other current assets
|
(9,835
|
)
|
6,663
|
(38,479
|
)
|
|||||||
|
Increase
(decrease) in -
|
||||||||||||
|
Accounts
payable and accrued expenses
|
(4,239
|
)
|
27,280
|
104,245
|
||||||||
|
Liquidated
damages payable under registration rights agreement
|
—
|
—
|
74,000
|
|||||||||
|
Research
and development contract liabilities
|
56,500
|
(11,725
|
)
|
56,500
|
||||||||
|
Net
cash used in operating activities
|
(497,000
|
)
|
(484,286
|
)
|
(2,242,369
|
)
|
||||||
|
Cash
flows from investing activities:
|
||||||||||||
|
Purchase
of office equipment
|
—
|
—
|
(1,909
|
)
|
||||||||
|
Net
cash used in investing activities
|
—
|
—
|
(1,909
|
)
|
||||||||
|
Cash
flows from financing activities:
|
||||||||||||
|
Proceeds
from sale of common stock to consulting firm
|
—
|
—
|
250
|
|||||||||
|
Proceeds
from sale of common stock to founder
|
—
|
—
|
1,500
|
|||||||||
|
Proceeds
from note payable to consultant
|
100,000
|
—
|
200,000
|
|||||||||
|
Repayment
of note payable to consultant
|
(100,000
|
)
|
—
|
(100,000
|
)
|
|||||||
|
Cash
acquired in reverse merger transaction
|
—
|
—
|
62,500
|
|||||||||
|
Gross
proceeds from sale of common stock
|
710,000
|
—
|
2,543,889
|
|||||||||
|
Payment
of private placement offering costs
|
(112,950
|
)
|
—
|
(446,147
|
)
|
|||||||
|
Advances
from stockholder
|
—
|
—
|
92,717
|
|||||||||
|
Net
cash provided by financing activities
|
597,050
|
—
|
2,354,709
|
|||||||||
|
Net
increase (decrease) in cash
|
100,050
|
(484,286
|
)
|
110,431
|
||||||||
|
Cash
at beginning of period
|
10,381
|
508,070
|
—
|
|||||||||
|
Cash
at end of period
|
$
|
110,431
|
$
|
23,784
|
$
|
110,431
|
||||||
|
Supplemental
disclosures of cash flow information:
|
||||||||||||
|
Cash
paid for -
|
||||||||||||
|
Interest
|
$
|
851
|
$
|
—
|
$
|
1,685
|
||||||
|
Income
taxes
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||
See
accompanying notes to condensed consolidated financial
statements.
7
‘
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
(a
development stage company)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Three
Months and Nine Months Ended September 30, 2009 and 2008, and
Period
from August 9, 2005 (Inception) to September 30, 2009 (Cumulative)
1.
Basis of Presentation
The
condensed consolidated financial statements of Lixte Biotechnology Holdings,
Inc. and its wholly-owned subsidiary, Lixte Biotechnology, Inc. (the “Company”)
at September 30, 2009, for the three months and nine months ended September 30,
2009 and 2008, and for the period from August 9, 2005 (inception) to September
30, 2009 (cumulative), are unaudited. In the opinion of management, all
adjustments (including normal recurring adjustments) have been made that are
necessary to present fairly the financial position of the Company as of
September 30, 2009, the results of its operations for the three months and nine
months ended September 30, 2009 and 2008, and for the period from August 9, 2005
(inception) to September 30, 2009 (cumulative), and its cash flows for the nine
months ended September 30, 2009 and 2008, and for the period from August 9, 2005
(inception) to September 30, 2009 (cumulative). Operating results for the
interim periods presented are not necessarily indicative of the results to be
expected for a full fiscal year. The condensed balance sheet at
December 31, 2008 has been derived from the audited financial
statements.
The
statements and related notes have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. These financial statements
should be read in conjunction with the financial statements and other
information included in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2008, as filed with Securities and Exchange
Commission.
2.
Organization and Business Operations
Organization
On June
30, 2006, Lixte Biotechnology, Inc., a privately-held Delaware corporation
(“Lixte”), completed a reverse merger transaction with SRKP 7, Inc. (“SRKP”), a
non-trading public shell company, whereby Lixte became a wholly-owned subsidiary
of SRKP. On December 7, 2006, SRKP amended its Certificate of Incorporation to
change its name to Lixte Biotechnology Holdings, Inc.
(“Holdings”). Unless the context indicates otherwise, Lixte and
Holdings are hereinafter referred to as the “Company”.
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 the historical financial results of SRKP. The stockholders’ equity
section of SRKP has been retroactively restated for all periods presented to
reflect the accounting effect of the reverse merger transaction. All costs
associated with the reverse merger transaction were expensed as
incurred.
Lixte 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.
The
Company is considered a “development stage company” under current accounting
standards, as it has not yet commenced any revenue-generating operations, does
not have any cash flows from operations, and is dependent on debt and equity
funding to finance its operations. The Company has selected December 31 as its
fiscal year end.
The
Company’s common stock was listed for trading on the OTC Bulletin Board
commencing September 24, 2007.
8
Operating
Plans
The
Company is concentrating on developing new treatments for the most common and
most aggressive type of brain cancer of adults, glioblastoma multiforme (“GBM”),
and the most common cancer of children, neuroblastoma. The Company has expanded
the scope of its anti-cancer investigational activities to include the most
common brain tumor of children, medulloblastoma, and also to several other types
of more common cancers. This expansion of activity is based on documentation
that each of two distinct types of drugs being developed by the Company inhibits
the growth of cell lines of breast, colon, lung, prostate, pancreas, ovary,
stomach and liver cancer, as well as the major types of leukemias. Activity of
lead compounds of both types of drugs was recently demonstrated against human
pancreatic cancer cells in a mouse model. Because there is a great need for any
kind of effective treatment for pancreatic cancer, this cancer will be studied
concomitantly with the primary target of the Company’s research program focused
on brain cancers. More recently, studies in animal models of human melanoma,
lymphoma, sarcoma, and the rare neuroendocrine cancer, pheochromocytoma, have
demonstrated potent anti-tumor activity of the Lixte LB-100 series of compounds
in conjunction with standard chemotherapeutic drugs, which on their own have
only modest activity. These new studies confirm that the LB-100 compounds
combined with any of several “standard anti-cancer drugs” have broad activity,
affecting many different cell types of cancer. This is unusual and important
because these compounds may be useful for treatment of cancer in
general.
The
research on brain tumors is proceeding in collaboration with the National
Institute of Neurological Disorders and Stroke (“NINDS”) of the National
Institutes of Health (“NIH”) under a Cooperative Research and Development
Agreement (“CRADA”) entered into on March 22, 2006, as amended. The research at
NINDS continues to be led by Dr. Zhengping Zhuang, an internationally recognized
investigator in the molecular pathology of cancer. Dr. Zhuang is aided by two
senior research technicians supported by the Company as part of the CRADA. The
goal of the CRADA is to develop more effective drugs for the treatment of GBM
through the processes required to gain Food and Drug Administration (“FDA”)
approval for clinical trials. The Company has entered into an amendment to the
CRADA to extend its term from September 30, 2009 through September 30,
2011.
The
Company filed five patent applications on August 1, 2008. Two of these patent
filings deal with applications filed earlier jointly with NIH for work done
under the CRADA as follows: (1) a filing entering the regional stage of a PCT
application involving the use of certain compounds to treat human tumors
expressing a biomarker for brain and other human cancers; and (2) an application
for the treatment of the pediatric tumors, medulloblastoma (the most common
brain tumor in children) and neuroblastoma (a tumor arising from neural cells
outside the brain that is the most common cancer of children). The three new
patent applications include: (1) a joint application with NIH identifying a new
biomarker for many common human cancers that when targeted by compounds
developed by the Company result in inhibition of growth and death of cancer
cells; (2) an application by the Company regarding the structure, synthesis and
use of a group of new homologs of its LB-1 compounds; and (3) an application by
the Company for the use of certain homologs of its drugs as neuroprotective
agents with potential application to common neurodegenerative conditions such as
Alzheimer’s and Parkinson’s diseases.
During
the nine months ended September 30, 2009, the Company filed eight patent
applications. The U.S. Patent Office Examiner began review of the
initial patent submitted jointly by the Company and the NINDS. The
chemical formula of one of the Company’s lead compounds, LB-100, was disclosed
in that patent, and was found to be novel. The Company considers this
finding a milestone in the development of the Company’s intellectual
property. The specific claims for the structures and methods of
synthesis of all compounds in the LB series were filed on the same day in a
separate patent application and are the sole property of the
Company. The review of this patent will be the determinant of the
validity of the novelty of the LB-100 compounds, and the outcome thereof will
therefore have a material impact on the future business prospects of the
Company.
The
results of studies characterizing the novel and potent anti-cancer activity and
mechanism of action of LB-102 alone and in combination with standard
chemotherapy drugs were published in a leading scientific journal, the
Proceedings of the National Academy of Sciences (print version dated July 14,
2009). The primary conclusion was that one of the Company’s lead
compounds appears to inhibit cancer cells by stimulating cancer cells to attempt
to grow in the presence of a standard cancer drug and interferes with cancer
cell defense mechanisms, with the end result being much greater damage to the
cancer than occurs when treatment is limited to the standard anti-cancer
drug. The authors concluded that treatment with the Company’s
compound LB-1.2 may be a general method for enhancing the therapeutic benefit of
a number of standard cancer regimens, not limited to the original targets of
brain tumors of adults and children. On the basis of this article, the authors
were invited to discuss this new approach to drug treatment of cancer in a
leading journal focused largely on understanding how to more efficiently attack
the cancer cell and published another article expanding on the mechanisms
underlying how the LB-100 series of compounds enhances the benefits of common
anticancer drugs (Cell Cycle, October 15, 2009).
9
In
addition, an abstract of the characterization of the neuroprotective effects of
two lead compounds in standard assays of injury to normal embryonic mouse
neurons supporting their continued development for the possible treatment of
chronic neurodegenerative diseases such as Alzheimer’s Disease and Parkinson’s
Disease was presented at the annual meeting of the Society for Neuroscience in
Chicago, Illinois on October 17, 2009.
The
Company continues to evaluate compounds for activity against several types of
fungi that cause serious infections, particularly in immuno-compromised
individuals, such as those with HIV-AIDS, and those having bone marrow
transplantations. The Company is also exploring indications that its compounds
have against strains of fungi that cause the most common fungal infections of
the skin and nails. Discussions are in progress with experts in fungal
infections regarding the most reliable methods of assessing the potential of new
agents for the management of common fungal diseases.
The
Company expects that its products will derive directly from the intellectual
property from its research activities. The development of lead compounds with
different mechanisms of action that have activity against brain tumors and other
common human cancers, as well as against serious fungal infections, originated
from the discovery of a biomarker in GBM. The Company will continue to use
discovery and/or recognition of molecular variants characteristic of specific
human cancers as a guide to drug discovery and potentially new diagnostic tests.
Examples of the productivity of this approach to discovery of new therapeutics
are: (1) the recent patent application filing for a new biomarker of several
common cancers that when targeted by certain of the Company’s drugs results in
inhibition of growth and death of cancer cells displaying the marker; and (2)
the filing of a patent on certain homologs of one group of compounds as
potentially useful for the treatment of neurodegenerative diseases.
Management’s
goal is to secure one or more strategic partnerships with pharmaceutical
companies with major programs in cancer, anti-fungal treatments, and/or
neuroprotective measures. The immediate focus has shifted to obtaining
approval from the FDA to carry a lead compound of the LB-100 series into
clinical trial. The Company believes the potent activity of these drugs in
combination with standard non-specific chemotherapeutic drugs against a diverse
array of common and uncommon cancers of adults and children merits bringing this
treatment to patients as rapidly as possible. In addition, the demonstration of
clinical benefit would be very important to potential investors and to large
pharmaceutical companies looking to add an entirely new approach to their
anti-cancer drug pipelines.
The
significant diversity of the potential therapeutic value of the Company’s
compounds stems from the fact that these agents modify critical pathways in
cancer cells and in microorganisms such as fungi and appear to ameliorate
pathologic processes that lead to brain injury, caused by trauma or toxins or
through as yet unknown mechanisms that underlie the major chronic neurologic
diseases, including Alzheimer’s Disease, Parkinson’s Disease, and Amyotrophic
Lateral Sclerosis (ALS, or Lou Gherig’s Disease). Studies of the
potential neuroprotective effects of homologs of each class of the Company’s
compounds are continuing under a contract with Southern Research Institute,
Birmingham, Alabama. However, the majority of the Company’s resources will be
directed to the clinical study of LB-100 for cancer therapy.
Going
Concern
The
Company’s consolidated financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Company is in
the development stage and has not generated any revenues from operations to
date. The Company has experienced continuing losses since inception
and had a stockholders’ deficiency at December 31, 2008 and September 30,
2009. As a result, the Company’s independent registered public
accounting firm, in their report on the Company’s 2008 consolidated financial
statements, have raised substantial doubt about the Company’s ability to
continue as a going concern.
The
Company’s ability to continue as a going concern is dependent upon its ability
to develop additional sources of capital and to ultimately achieve profitable
operations. The Company’s consolidated financial statements do not include any
adjustments that might result from the outcome of these
uncertainties.
10
At
September 30, 2009, the Company had not yet commenced any revenue-generating
operations. All activity through September 30, 2009 has been related to the
Company’s formation, capital raising efforts and research and development
activities. As such, the Company has yet to generate any cash flows from
operations, and is dependent on debt and equity funding from both related and
unrelated parties to finance its operations. Prior to June 30, 2006, the
Company’s cash requirements were funded by advances from the Company’s
founder.
Because
the Company is currently engaged in research at an early stage, it will likely
take a significant amount of time to develop any product or intellectual
property capable of generating revenues. As such, the Company’s 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 the
Company will be able to generate a profit.
As
previously disclosed, the Company estimated that it would require minimum
funding in calendar 2009 of approximately $750,000 in order to fund operations
and continuing drug discovery and to attempt to bring two drugs through the
pre-clinical evaluation process needed for submission of an Investigational New
Drug (“IND”) application. In February, March and April 2009, the Company
completed three closings from a private placement of its securities, which
generated net proceeds aggregating approximately $597,000. The Company utilized
a portion of such net proceeds to repay a $100,000 short-term note in February
2009, as described at Note 6. Additionally, on September 30, 2009, the Company
borrowed $100,000 from one of its consultants on an unsecured demand promissory
note bearing interest at the rate of 5% per annum.
Effective
November 6, 2009, the Company raised $500,000 through the sale of 1,000,000
units at a purchase price of $0.50 per unit. Each unit consisted of
one share of common stock, one three-year warrant to purchase a share of common
stock at an exercise price of $0.50 per share, and one three year-year warrant
to purchase a share of common stock at an exercise price of $0.75 per
share. As a result, the Company believes that its current resources
are adequate to fund operations only through the first quarter of 2010 at a
level that will allow the continuation of the Company’s two drug development
programs currently in process and initiation of the pre-clinical studies of
LB-100. The Company is considering attempting to raise additional
equity capital during the remainder of 2009 and 2010 to fund its research and
development activities.
The
amount and timing of future cash requirements will depend on the market’s
evaluation of the Company’s technology and products, if any, and the resources
that it devotes to developing and supporting its activities. The Company will
need to fund these cash requirements from a combination of additional debt or
equity financings, or the sale, licensing or joint venturing of its intellectual
properties. Current market conditions present uncertainty as to the
Company’s ability to secure additional funds, as well as its ability to reach
profitability. There can be no assurances that the Company will be able to
secure additional financing, or obtain favorable terms on such financing if it
is available, or as to the Company’s ability to achieve positive earnings and
cash flows from operations. Continued negative cash flows and lack of liquidity
create significant uncertainty about the Company’s ability to fully implement
its operating plan, as a result of which the Company may have to reduce the
scope of its planned operations. If cash resources are insufficient to satisfy
the Company’s liquidity requirements, the Company would be required to scale
back or discontinue its technology and product development programs, or obtain
funds, if available, through strategic alliances that may require the Company to
relinquish rights to certain of its technologies products, or to discontinue its
operations entirely.
3.
Summary of Significant Accounting Policies
Principles
of Consolidation
The
accompanying consolidated financial statements include the financial statements
of Holdings and its wholly-owned subsidiary, Lixte. All intercompany balances
and transactions have been eliminated in consolidation.
Cash
and Cash Equivalents and Concentrations
The
Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents. At times, such cash
and cash equivalents may exceed federally insured limits. The Company has not
experienced a loss in such accounts to date. The Company maintains its accounts
with financial institutions with high credit ratings.
11
Research
and Development
Research
and development costs are expensed as incurred. Research and development
expenses consist primarily of fees paid to consultants and outside service
providers, patent fees and costs, and other expenses relating to the
acquisition, design, development and testing of the Company's treatments
and product candidates.
Amounts
due, pursuant to contractual commitments, 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.
The funds
paid to NINDS of the NIH, pursuant to the CRADA effective March 22, 2006,
as amended, represented an advance on research and development costs and
therefore had future economic benefit. Accordingly, such costs have been charged
to expense when they are actually expended by the provider, which is,
effectively, as they perform the research activities that they were
contractually committed to provide. Absent information that would indicate that
a different expensing schedule was more appropriate (such as, for example, from
the achievement of performance milestones or the completion of contract work),
such advances have been expensed over the contractual service term on a
straight-line basis, which reflects a reasonable estimate of when the underlying
research and development costs were being incurred.
Patent
Costs
Due to
the significant uncertainty associated with the successful development of
one or more commercially viable products based on the Company's research efforts
and any related patent applications, all patent costs, including patent-related
legal and filing fees, are expensed as incurred. Patent costs were $107,999 and
$53,075 for the three months ended September 30, 2009 and 2008, respectively,
$154,506 and $127,299 for the nine months ended September 30, 2009 and 2008,
respectively, and $480,197 for the period from August 9, 2005 (inception) to
September 30, 2009 (cumulative). Patent costs are included in research and
development costs in the Company's condensed consolidated statement of
operations.
Income
Taxes
The
Company accounts for income taxes under an asset and liability approach for
financial accounting and reporting for income taxes. Accordingly, the Company
recognizes 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, except for interest,
taxes and research and development, are deemed start-up and organization costs
and must be deferred until the Company commences business operations, at which
time they may be written off over a 180-month period. The Company has elected to
deduct research and development costs on a current basis for federal income tax
purposes.
The
Company records a valuation allowance to reduce its deferred tax assets to the
amount that is more likely than not to be realized. In the event the Company was
to determine that it would be able to realize its deferred tax assets in the
future in excess of its recorded amount, an adjustment to the deferred tax
assets would be credited to operations in the period such determination was
made. Likewise, should the Company determine that it would not be able to
realize all or part of its deferred tax assets in the future, an adjustment to
the deferred tax assets would be charged to operations in the period such
determination was made.
For
federal income tax purposes, net operating losses can be carried forward for a
period of 20 years until they are either utilized or until they
expire.
On
January 1, 2007, the Company adopted new accounting rules which address the
determination of whether tax benefits claimed or expected to be claimed on a tax
return should be recorded in the financial statements. The Company
may recognize the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position are
measured based on the largest benefit that has a greater than fifty percent
likelihood of being realized upon ultimate settlement. The new accounting
rules also provide guidance on de-recognition, classification, interest and
penalties on income taxes, accounting in interim periods and requires increased
disclosures. The adoption of the new accounting rules did not have a
material effect on the Company’s financial statements. As of September 30, 2009,
no liability for unrecognized tax benefits was required to be
recorded.
12
The
Company files income tax returns in the U.S. federal jurisdiction and is subject
to income tax examinations by federal tax authorities for the year
2005 and thereafter. The Company’s policy is to record interest and
penalties on uncertain tax provisions as income tax expense. As of September 30,
2009, the Company has no accrued interest or penalties related to uncertain tax
positions.
Stock-Based
Compensation
The
Company periodically issues stock options and warrants to officers, directors
and consultants for services rendered. Options vest and expire
according to terms established at the grant date.
The
Company accounts for share-based payments to officers and directors by measuring
the cost of services received in exchange for equity awards based on the grant
date fair value of the awards, with the cost recognized as compensation expense
in the Company’s financial statements over the vesting period of the
awards.
The
Company accounts for share-based payments to consultants by determining the
value of the stock compensation based upon the measurement date at either (a)
the date at which a performance commitment is reached or (b) at the date at
which the necessary performance to earn the equity instruments is
complete.
Options
granted to Scientific Advisory Board committee members and outside consultants
are revalued each reporting period to determine the amount to be recorded as an
expense in the respective period. As the options vest, they are valued on each
vesting date and an adjustment is recorded for the difference between the value
already recorded and the then current value on the date of vesting.
Earnings
Per Share
The
Company’s computation of earnings per share (“EPS”) includes basic and diluted
EPS. Basic EPS is measured as the income (loss) available to common
shareholders divided by the weighted average common shares outstanding for the
period. Diluted EPS is similar to basic EPS but presents the dilutive
effect on a per share basis of potential common shares (e.g., warrants and
options) as if they had been converted at the beginning of the periods
presented, or issuance date, if later. Potential common shares that have
an anti-dilutive effect (i.e., those that increase income per share or decrease
loss per share) are excluded from the calculation of diluted EPS.
Loss per
common share is computed by dividing net loss by the weighted average number of
shares of common stock outstanding during the respective periods. Basic and
diluted loss per common share are the same for all periods presented because all
warrants and stock options outstanding are anti-dilutive. The 19,021,786 shares
of common stock issued to the founder of Lixte in conjunction with the closing
of the reverse merger transaction on June 30, 2006 have been presented as
outstanding for all periods presented.
At
September 30, 2009 and 2008, the Company excluded the outstanding securities
summarized below, which entitle the holders thereof to acquire shares of common
stock, from its calculation of earnings per share as their effect would have
been anti-dilutive.
|
|
|
September 30,
|
|
|||||
|
2009
|
2008
|
|||||||
|
Warrants
|
2,457,426
|
546,626
|
||||||
|
Stock
options
|
2,540,000
|
2,340,000
|
||||||
|
Total
|
4,997,426
|
2,886,626
|
||||||
Equipment
Equipment
is recorded at cost. Depreciation expense is provided on a straight-line basis
using estimated useful lives of 3 years. Maintenance and repairs are charged to
expense as incurred. When assets are retired or otherwise disposed of, the
property accounts are relieved of costs and accumulated depreciation and any
resulting gain or loss is credited or charged to operations.
13
Fair
Value of Financial Instruments
The
carrying amounts of cash and cash equivalents, prepaid expenses, accounts
payable, accrued expenses, notes payable to consultant and due to stockholder
approximate their respective fair values due to the short-term nature of these
items.
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
expenses during the reporting period. Actual results could differ from those
estimates.
Recently
Adopted Accounting Pronouncements
In June
2009, the Financial Accounting Standards Board (“FASB”) issued authoritative
guidance on accounting standards codification and the hierarchy of generally
accepted accounting principles. The FASB Accounting Standards
Codification™ (“Codification”) has become the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in accordance with GAAP. All
existing accounting standard documents are superseded by the Codification and
any accounting literature not included in the Codification will not be
authoritative. However, rules and interpretive releases of the
Securities and Exchange Commission (“SEC”) issued under the authority of federal
securities laws will continue to be sources of authoritative GAAP for SEC
registrants. The FASB authoritative guidance is effective for interim
and annual reporting periods ending after September 15,
2009. Accordingly, beginning with the quarter ending September 30,
2009, all references made by the Company to GAAP in its consolidated financial
statements now use the new Codification numbering system. The
Codification does not change or alter existing GAAP. The adoption of
the Codification by the Company did not have any impact on the Company’s
consolidated financial statements.
In May
2009, the FASB issued new requirements for reporting subsequent
events. These requirements set forth the period after the balance
sheet date during which management of a reporting entity should evaluate events
or transactions that may occur for potential recognition or disclosure in the
financial statements, the circumstances under which an entity should recognize
events or transactions occurring after the balance sheet date in its financial
statements, and disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. Disclosure
of the date through which an entity has evaluated subsequent events and the
basis for that date is also required. The FASB authoritative guidance is
effective for interim or annual financial periods ending after June 15, 2009,
and is to be applied prospectively. Accordingly, the Company adopted
the new requirements for reporting subsequent events on June 30,
2009.
In
December 2007, the FASB issued authoritative guidance on business
combinations. The guidance retains the fundamental requirements that
the acquisition method of accounting (previously referred to as the purchase
method of accounting) be used for all business combinations, but requires a
number of changes, including changes in the way assets and liabilities are
recognized and measured as a result of business combinations. It also
requires the capitalization of in-process research and development at fair value
and requires the expensing of acquisition-related costs as
incurred. The Company adopted this new guidance on January 1, 2009,
and will apply this guidance to business combinations completed in the
future.
In
December 2007, the FASB issued authoritative guidance that changes the
accounting and reporting for noncontrolling interests. Non-controlling
interests are to be reported as a component of equity separate from the parent’s
equity, and purchases or sales of equity interests that do not result in a
change in control are to be accounted for as equity transactions. In
addition, net income attributable to a noncontrolling interest is to be included
in net income and, upon a loss of control, the interest sold, as well as any
interest retained, is to be recorded at fair value with any gain or loss
recognized in net income. The Company adopted this new guidance on January 1,
2009, and will apply this guidance to noncontrolling interests acquired in the
future. Adoption of the new guidance did not have any impact on the
Company’s consolidated financial statement presentation or
disclosures.
14
Management
does not believe that any other recently issued, but not yet effective,
accounting standards or pronouncements, if currently adopted, would have a
material effect on the Company’s consolidated financial statement presentation
or disclosures.
4.
Share Exchange Agreement and Private Placement
Share
Exchange Agreement
On June
30, 2006, pursuant to a Share Exchange Agreement dated as of June 8, 2006 (the
“Share Exchange Agreement”) by and among Holdings, Dr. John S. Kovach (“Seller”)
and Lixte, Holdings issued 19,021,786 shares of its common stock in exchange for
all of the issued and outstanding shares of Lixte (the “Exchange”). Previously,
on October 3, 2005, Lixte had issued 1,500 shares of its no par value common
stock to its founder for $1,500, which constituted all of the issued and
outstanding shares of Lixte prior to the Exchange. As a result of the Exchange,
Lixte became a wholly-owned subsidiary of Holdings.
Pursuant
to the Exchange, Holdings issued to the Seller 19,021,786 shares of its common
stock. Holdings had a total of 25,000,832 shares of common stock issued and
outstanding after giving effect to the Exchange and the 1,973,869 shares of
common stock issued in the initial closing of the private
placement.
As a
result of the Exchange and the shares of common stock issued in the initial
closing of the private placement, on June 30, 2006, the stockholders of the
Company immediately prior to the Exchange owned 4,005,177 shares of common
stock, equivalent to approximately 16% of the issued and outstanding shares of
the Company’s common stock, and the former stockholder of Lixte acquired control
of the Company.
The Share
Exchange Agreement was determined through arms-length negotiations between
Holdings, the Seller and Lixte. In connection with the Exchange, the Company
paid WestPark Capital, Inc. an aggregate cash fee of $50,000.
Private
Placements
On June
30, 2006, concurrently with the closing of the Exchange, the Company sold an
aggregate of 1,973,869 shares of its common stock to accredited investors in an
initial closing of a private placement at a per share price of $0.333, resulting
in aggregate gross proceeds to the Company of $657,299. The Company paid to
WestPark Capital, Inc., as placement agent, a commission of 10% and a
non-accountable fee of 4% of the gross proceeds of the private placement and
issued five-year warrants to purchase common stock equal to (a) 10% of the
number of shares sold in the private placement exercisable at $0.333 per share
and (b) an additional 2% of the number of shares sold in the private placement
also exercisable at $0.333 per share. A total of 236,864 warrants were issued.
Net cash proceeds to the Company, after the deduction of all private placement
offering costs and expenses, were $522,939.
On July
27, 2006, the Company sold an aggregate of 1,581,351 shares of its common stock
to accredited investors in a second closing of the private placement at a per
share price of $0.333 resulting in aggregate gross proceeds to the Company of
$526,590. The Company paid to WestPark Capital, Inc., as placement agent, a
commission of 10% and a non-accountable fee of 4% of the gross proceeds of the
private placement and issued five-year warrants to purchase common stock equal
to (a) 10% of the number of shares sold in the private placement exercisable at
$0.333 per share and (b) an additional 2% of the number of shares sold in the
private placement also exercisable at $0.333 per share. A total of 189,762
warrants were issued. Net cash proceeds to the Company were
$446,433.
In
conjunction with the private placement of common stock, the Company issued a
total of 426,626 five-year warrants to WestPark Capital, Inc. exercisable at the
per share price of the common stock sold in the private placement ($0.333 per
share). The warrants issued to WestPark Capital, Inc. do not contain any price
anti-dilution provisions. However, such warrants contain cashless exercise
provisions and demand registration rights, but the warrant holder has agreed to
waive any claims to monetary damages or financial penalties for any failure by
the Company to comply with such registration requirements. Based on the
foregoing, the warrants were accounted for as equity and were not accounted for
separately from the common stock and additional paid-in capital
accounts. The warrants had no accounting impact on the Company’s
consolidated financial statements.
15
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, and to maintain the effectiveness of such registration
statement, subject to certain conditions. 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. 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. 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 was required to pay each
investor prorated liquidated damages equal to 1.0% of the amount raised per
month, payable monthly in cash.
On the
date of the closing of the private placement, the Company believed it would meet
the deadlines under the registration rights agreement with respect to filing a
registration statement and having it declared effective by the Securities and
Exchange Commission. As a result, the Company did not record any liabilities
associated with the registration rights agreement at June 30, 2006. At December
31, 2006, the Company determined that the registration statement covering the
shares sold in the private placement would not be declared effective within the
requisite time frame and therefore accrued six months liquidated damages under
the registration rights agreement aggregating approximately $74,000, which has
been presented as a current liability for all periods presented. The Company’s
registration statement on Form SB-2 was declared effective by the Securities and
Exchange Commission on May 14, 2007. At September 30, 2009, the registration
penalty to the investors had not been paid.
On
December 12, 2007, the Company sold an aggregate of 999,995 shares of its common
stock to accredited investors in a second private placement at a per share price
of $0.65, resulting in aggregate gross proceeds to the Company of $650,000. The
Company paid to WestPark Capital, Inc., as placement agent, a commission of 10%
and a non-accountable fee of 4% of the gross proceeds of the private placement
and issued five-year warrants to purchase common stock equal to (a) 10% of the
number of shares sold in the private placement exercisable at $0.65 per share
and (b) an additional 2% of the number of shares sold in the private placement
also exercisable at $0.65 per share. Net cash proceeds to the Company were
$531,320.
In
conjunction with the second private placement of common stock, the Company
issued a total of 120,000 five-year warrants to WestPark Capital, Inc.
exercisable at the per share price of the common stock sold in the private
placement ($0.65 per share). The warrants issued to WestPark Capital, Inc. do
not contain any price anti-dilution provisions. However, such warrants contain
cashless exercise provisions and demand registration rights, but the warrant
holder has agreed to waive any claims to monetary damages or financial penalties
for any failure by the Company to comply with such registration requirements.
Based on the foregoing, the warrants were accounted for as equity and were not
accounted for separately from the common stock and additional paid-in capital
accounts. The warrants had no accounting impact on the Company’s
consolidated financial statements.
As part
of the Company’s second private placement of its securities completed on
December 12, 2007, 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 second private placement at its sole cost and expense. The
registration rights agreement terminates at such time as the common shares may
be sold in market transactions without regard to any volume limitations. The
registration rights agreement requires the Company to file a registration
statement within 75 days of receipt of written demand from holders who represent
at least 50% of the common shares issued pursuant to the second private
placement, provided that no demand shall be made for less than 500,000 shares,
and to use its best efforts to cause such registration statement to become and
remain effective for the requisite period. The registration rights agreement
also provides for unlimited piggyback registration rights. The registration
rights agreement does not provide for any penalties in the event that the
Company is unable to comply with its terms.
On
February 10, 2009, the Company sold an aggregate of 658,000 common stock units
to accredited investors in a first closing of a third private placement at a per
unit price of $0.50, resulting in aggregate gross proceeds to the Company of
$329,000. Net cash proceeds to the Company were $269,790.
On March
2, 2009, the Company sold an aggregate of 262,000 common stock units to
accredited investors in a second closing of the third private placement at a per
unit price of $0.50, resulting in aggregate gross proceeds to the Company of
$131,000. Net cash proceeds to the Company were $112,460.
16
On April
6, 2009, the Company sold an aggregate of 500,000 common stock units to
accredited investors in a third closing of the third private placement at a per
unit price of $0.50, resulting in aggregate gross proceeds to the Company of
$250,000. Net cash proceeds to the Company were $214,800.
Each unit
sold in the third private placement consists of one share of the Company’s
common stock and a five-year warrant to purchase an additional share of the
Company’s common stock on a cashless exercise basis at an exercise price of
$0.50 per common share. The Company paid to WestPark Capital, Inc., as placement
agent, a commission of 10% and a non-accountable fee of 4% of the gross proceeds
of the third private placement and issued five-year warrants to purchase common
stock equal to (a) 10% of the number of shares sold in the third private
placement exercisable at $0.50 per share and 10% of the number of shares
issuable upon exercise of warrants issued in the third private placement
exercisable at $0.50 per share; and (b) an additional 2% of the number of shares
sold in the third private placement also exercisable at $0.50 per share and 2%
of the number of shares issuable upon exercise of the warrants issued in the
third private placement exercisable at $0.50 per share.
In
conjunction with the closings of the third private placement of common stock
units during the nine months ended September 30, 2009, the Company issued to
investors a total of 1,420,000 shares of common stock and 1,420,000 warrants to
acquire common stock. Additionally, the Company issued a total of 340,800
five-year warrants to WestPark Capital, Inc., which are exercisable at the per
unit price of the common stock units sold in the third private placement ($0.50
per unit). Included in the 340,800 warrants issued to WestPark Capital, Inc. are
170,400 warrants which are only exercisable with respect to common shares that
are acquired by investors upon their exercise of the warrants acquired as part
of the units sold in the third private placement. The warrants issued to
WestPark Capital, Inc. do not contain any price anti-dilution provisions.
However, such warrants contain cashless exercise provisions and demand
registration rights, but the warrant holder has agreed to waive any claims to
monetary damages or financial penalties for any failure by the Company to comply
with such registration requirements. Based on the foregoing, the warrants were
accounted for as equity and were not accounted for separately from the common
stock and additional paid-in capital accounts. The warrants had no
accounting impact on the Company’s consolidated financial
statements.
At the
request of the holders, the Company has agreed to include any shares sold in the
third private placement and any shares issuable upon exercise of the related
warrants to be included in any registration statement filed with the Securities
and Exchange Commission permitting the resale of such shares, subject to
customary cutbacks, at the Company’s sole cost and expense.
5.
Related Party Transactions
Prior to
June 30, 2006, the Company’s founding stockholder and Chief Executive Officer,
Dr. John Kovach, had periodically made advances to the Company to meet operating
expenses. Such advances are non-interest-bearing and are due on demand. At
September 30, 2009 and 2008, stockholder advances totaled $92,717.
The
Company’s office facilities have been provided without charge by Dr. Kovach.
Such costs were not material to the financial statements and, accordingly, have
not been reflected therein.
Dr.
Kovach did not receive any compensation from the Company during the nine months
ended September 30, 2009 and 2008, and for the period from August 9, 2005
(inception) through September 30, 2009 (cumulative), in view of the Company’s
development stage status and limited resources. Any future compensation
arrangements will be subject to the approval of the Board of
Directors.
Dr.
Kovach is involved in other business activities and may, in the future, become
involved in other business opportunities that become available. Accordingly, he
may face a conflict in selecting between the Company and his other business
interests. The Company has not yet formulated a policy for the resolution of
such potential conflicts.
6.
Notes Payable to Consultant
On
October 3, 2008, the Company borrowed $100,000 from Gil Schwartzberg, a
consultant to the Company (see Note 8), pursuant to an unsecured demand
promissory note with interest at 5% per annum, to fund the Company’s short-term
working capital requirements. The note, including accrued interest of $834, was
repaid on February 7, 2009. An additional interest payment of $851 was made on
April 27, 2009.
17
On
September 30, 2009, the Company borrowed $100,000 from Gil Schwartzberg, a
consultant to the Company (see Note 8), pursuant to an unsecured demand
promissory note with interest at 5% per annum, to fund the Company’s short-term
working capital requirements.
7.
Common Stock and Preferred Stock
The
Company’s Certificate of Incorporation provides for authorized capital of
110,000,000 shares, of which 100,000,000 shares consist of common stock with a
par value of $0.0001 per share and 10,000,000 shares consist of preferred stock
with a par value of $0.0001 per share.
The
Company is authorized to issue 10,000,000 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined from
time to time by the Board of Directors.
8.
Stock Options and Warrants
On June
30, 2006, effective with the closing of the Exchange, the Company granted to
Dr. Philip Palmedo, an outside director of the Company, stock options to
purchase an aggregate of 200,000 shares of common stock, exercisable for a
period of five years at $0.333 per share, with one-third of the options (66,666
shares) vesting immediately upon joining the Board and one-third vesting
annually on each of June 30, 2007 and 2008. The fair value of these options, as
calculated pursuant to the Black-Scholes option-pricing model, was determined to
be $62,000 ($0.31 per share), of which $20,666 was charged to operations on June
30, 2006, and the remaining $41,334 was charged to operations ratably from July
1, 2006 through June 30, 2008. During the nine months ended September 30,
2008, the Company recorded a charge to operations of $10,332 with respect to
these options.
On June
30, 2006, effective with the closing of the Exchange, the Company also granted
to Dr. Palmedo additional stock 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 the business plan for Lixte, all of which were
fully vested upon issuance. The fair value of these options, as calculated
pursuant to the Black-Scholes option-pricing model, was determined to be $58,900
($0.31 per share), and was charged to operations at June 30, 2006.
On June
30, 2006, effective with the closing of the Exchange, the Company granted to two
members of its Scientific Advisory Committee stock options to purchase an
aggregate of 100,000 shares of common stock exercisable for a period of five
years at $0.333 per share, with one-half of the options vesting annually on each
of June 30, 2007 and June 30, 2008. The fair value of these options, as
calculated pursuant to the Black-Scholes option-pricing model, was charged to
operations ratably from July 1, 2006 through June 30, 2008. During the nine
months ended September 30, 2008, the Company recorded a credit to operations
of $3,336 with respect to these options. In August 2008, one of the
members resigned from his position and waived his right to his vested stock
option to purchase 50,000 shares of common stock.
On June
30, 2006, the fair value of the aforementioned stock options was initially
calculated using the following Black-Scholes input variables: stock
price - $0.333; exercise price - $0.333; expected life - 5 to 7 years; expected
volatility - 150%; expected dividend yield - 0%; risk-free interest rate - 5%.
On June 30, 2007, the Black-Scholes input variables utilized to determine the
fair value of the aforementioned stock options were stock price - $0.333;
exercise price - $0.333; expected life - 4 to 6 years; expected volatility -
150%; expected dividend yield - 0%; risk-free interest rate - 4.5%. On June 30,
2008, the fair value of the aforementioned stock options was calculated using
the following Black-Scholes input variables: stock price - $0.30; exercise price
- - $0.333; expected life - 3 to 5 years; expected volatility - 154.5%; expected
dividend yield - 0%; risk-free interest rate - 3.28%.
On June
20, 2007, the Board of Directors of the Company approved the 2007 Stock
Compensation Plan (the “2007 Plan”), which provides for the granting of awards,
consisting of common stock options, stock appreciation rights, performance
shares, or restricted shares of common stock, to employees and independent
contractors, for up to 2,500,000 shares of the Company’s common stock, under
terms and condition, as determined by the Company’s Board of
Directors.
18
On
September 12, 2007, in conjunction with his appointment as a director of the
Company, the Company granted to Dr. Stephen Carter stock options to purchase an
aggregate of 200,000 shares of common stock under the 2007 Plan, exercisable for
a period of five years from vesting date at $0.333 per share, with one-half
(100,000 shares) vesting annually on each of September 12, 2008 and 2009. The
fair value of these options, as calculated pursuant to the Black-Scholes
option-pricing model, was determined to be $204,000 ($1.02 per share), and is
being charged to operations ratably from September 12, 2007 through September
12, 2009. During the three months ended September 30, 2009 and 2008, the Company
recorded a charge to operations of $20,679 and $25,653, respectively, with
respect to these options. During the nine months ended September 30, 2009 and
2008, the Company recorded a charge to operations of $71,260 and $76,375,
respectively, with respect to these options.
On
September 12, 2007, the Company entered into a consulting agreement with Gil
Schwartzberg, pursuant to which the Company granted to Mr. Schwartzberg stock
options to purchase an aggregate of 1,000,000 shares of common stock,
exercisable for a period of four years from the vesting date at $1.00 per share,
with one-half of the options (500,000 shares) vesting immediately and one-half
(500,000 shares) vesting on September 12, 2008. The fair value of these options,
as calculated pursuant to the Black-Scholes option-pricing model, was initially
determined to be $945,000 ($0.945 per share), of which $465,000 was attributed
to the fully-vested options and was thus charged to operations on September 12,
2007. The remaining portion of the fair value of the options was charged to
operations ratably from September 12, 2007 through September 12, 2008. On
September 12, 2008, the fair value of these options, as calculated pursuant to
the Black-Scholes option-pricing model, was determined to be $325,000 ($0.65 per
share). During the three months and nine months ended September 30,
2008, the Company recorded a charge to operations of $229,262 and $236,338,
respectively, with respect to these options (see Note 6).
On
September 12, 2007, the Company entered into a consulting agreement with Francis
Johnson, a co-owner of Chem-Master International, Inc., and granted to Professor
Johnson stock options to purchase an aggregate of 300,000 shares of common
stock, exercisable for a period of four years from the vesting date at $0.333
per share, with one-third (100,000 shares) vesting annually on each of September
12, 2008, 2009 and 2010. The fair value of these options, as calculated pursuant
to the Black-Scholes option-pricing model, was initially determined to be
$300,000 ($1.00 per share), and is being charged to operations ratably from
September 12, 2007 through September 12, 2010. On September 30, 2009 and 2008,
the fair value of these options, as calculated pursuant to the Black-Scholes
option-pricing model, was determined to be $225,000 ($0.75 per share) and
$150,000 ($0.50 per share), respectively, which resulted in a charge to
operations of $13,904 and $45,925 during the three months ended September 30,
2009 and 2008, respectively, and $56,721 and $47,630 during the nine months
ended September 30, 2009 and 2008, respectively, .
On
September 12, 2007, the fair value of the aforementioned stock options was
initially calculated using the following Black-Scholes input variables: stock
price - $1.05; exercise price - $0.333 to $1.00; expected life - 4 to 6 years;
expected volatility - 150%; expected dividend yield - 0%; risk-free interest
rate - 5%. On September 30, 2008, the fair value of the aforementioned stock
options was calculated (for stock options revalued pursuant to EITF 98-16) using
the following Black-Scholes input variables: stock price - $0.50;
exercise price - $0.333 to $1.00; expected life – 4.98 years; expected
volatility – 275.7%; expected dividend yield - 0%; risk-free interest rate -
2.48%. On September 30, 2009, the fair value of the aforementioned stock options
was calculated (for stock options revalued pursuant to EITF 98-16) using the
following Black-Scholes input variables: stock price - $0.75;
exercise price - $0.333 to $1.00; expected life - 4.98 years; expected
volatility – 259.1%; expected dividend yield - 0%; risk-free interest rate –
1.91%. As the Company’s common stock commenced trading on September 24, 2007,
the Company was able to utilize such trading data to generate revised volatility
factors at September 30, 2009 and 2008.
On
October 7, 2008, the Company appointed Dr. Mel Sorensen to its Board of
Directors. Dr. Sorensen is a medical oncologist with extensive experience in
cancer drug development, first at the National Cancer Institute, then at Bayer
and GlaxoSmithKline, before becoming President and CEO of a new cancer
therapeutics company, Ascenta Therapeutics, in 2004. Dr. Sorensen was paid an
annual consulting fee of $40,000, payable in quarterly installments over a one
year period commencing October 7, 2008, to assist the Company in identifying a
strategic partner. Dr. Sorensen was also granted a stock option to purchase
200,000 shares of the Company’s common stock, exercisable at $0.50 per share for
a period of five years from each tranche’s vesting date. The option vests as to
25,000 shares on January 1, 2009, and a further 25,000 shares on the first day
of each subsequent calendar quarter until all of the shares are vested. The fair
value of these options, as calculated pursuant to the Black-Scholes
option-pricing model, was determined to be $100,000 ($0.50 per share), and is
being charged to operations ratably from October 7, 2008 through October 7,
2010. During the three months and nine months ended September 30, 2008, the
Company recorded a charge to operations of $12,603 and $37,432, respectively,
with respect to these options.
On
October 7, 2008, the fair value of the aforementioned stock options was
calculated using the following Black-Scholes input variables: stock
price - $0.50; exercise price - $0.50; expected life - 5 years; expected
volatility – 275.7%; expected dividend yield - 0%; risk-free interest rate –
2.48%.
19
Additional
information with respect to common stock warrants and stock options issued is
provided at Notes 4, 9 and 10. Warrants to purchase common stock that
were issued in conjunction with the Company’s private placements in 2006, 2007,
2008 and 2009 are included in the tables presented below.
If and
when the aforementioned stock options and warrants are exercised, the Company
expects to satisfy such stock obligations through the issuance of authorized but
unissued shares of common stock.
A summary
of stock option and warrant activity for the years ended December 31, 2007 and
2008, and the nine months ended September 30, 2009 is presented
below.
|
|
Number
of
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life
(in Years)
|
|||||||||
|
Options
and warrants outstanding at December 31, 2006
|
916,626
|
$
|
0.333
|
4.51
|
||||||||
|
Granted
|
1,720,000
|
0.743
|
4.35
|
|||||||||
|
Exercised
|
—
|
—
|
—
|
|||||||||
|
Cancelled
|
—
|
—
|
—
|
|||||||||
|
Options
and warrants outstanding at December 31, 2007
|
2,636,626
|
0.600
|
4.32
|
|||||||||
|
Granted
|
500,000
|
0.927
|
4.71
|
|||||||||
|
Exercised
|
—
|
—
|
—
|
|||||||||
|
Cancelled
|
(50,000
|
)
|
0.333
|
2.75
|
||||||||
|
Options
and warrants outstanding at December 31, 2008
|
3,086,626
|
$
|
0.658
|
3.55
|
||||||||
|
Granted
|
1,910,800
|
0.539
|
4.30
|
|||||||||
|
Exercised
|
—
|
—
|
—
|
|||||||||
|
Cancelled
|
—
|
—
|
—
|
|||||||||
|
Options
and warrants outstanding at September 30, 2009
|
4,997,426
|
$
|
0.612
|
3.38
|
||||||||
|
Options
and warrants exercisable at December 31, 2008
|
2,286,626
|
$
|
0.641
|
3.06
|
||||||||
|
Options
and warrants exercisable at September 30, 2009
|
4,502,026
|
$
|
0.603
|
3.24
|
||||||||
The
intrinsic value of exercisable but unexercised in-the-money stock options and
warrants at September 30, 2009 was $1,114,933, based on a fair market value of
$0.75 per share on September 30, 2009. The intrinsic value of exercisable but
unexercised in-the-money stock options and warrants at December 31, 2008 was
$276,490, based on a fair market value of $0.57 per share on December 31,
2008.
Total
deferred compensation expense for the outstanding value of unvested stock
options was approximately $186,000 at September 30, 2009, which will be
recognized subsequent to September 30, 2009 over a weighted-average period of
13.2 months. Total deferred compensation expense for the outstanding value of
unvested stock options was approximately $351,000 at December 31, 2008, which
will be recognized subsequent to December 31, 2008 over a weighted-average
period of 18.3 months.
Information
regarding stock options and warrants outstanding and exercisable is summarized
as follows at September 30, 2009 and December 31, 2008:
|
Warrants
and
|
Warrants
and
|
|||||||||||
|
Exercise
|
Options
Outstanding
|
Options
Exercisable
|
||||||||||
|
September 30, 2009:
|
Prices
|
(Shares)
|
(Shares)
|
|||||||||
| $ | 0.333 | 1,566,626 | 1,466,626 | |||||||||
| $ | 0.500 | 1,960,800 | 1,665,400 | |||||||||
| $ | 0.650 | 120,000 | 120,000 | |||||||||
| $ | 0.750 | 50,000 | 50,000 | |||||||||
| $ | 1.000 | 1,050,000 | 1,050,000 | |||||||||
| $ | 1.250 | 50,000 | 50,000 | |||||||||
| $ | 1.650 | 200,000 | 100,000 | |||||||||
| 4,997,426 | 4,502,026 | |||||||||||
20
|
Warrants
and
|
Warrants
and
|
|||||||||||
|
|
Exercise
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||
|
December 31, 2008:
|
Prices
|
(Shares)
|
(Shares)
|
|||||||||
| $ | 0.333 | 1,566,626 | 1,166,626 | |||||||||
| $ | 0.500 | 200,000 | — | |||||||||
| $ | 0.650 | 120,000 | 120,000 | |||||||||
| $ | 1.000 | 1,000,000 | 1,000,000 | |||||||||
| $ | 1.650 | 200,000 | — | |||||||||
| 3,086,626 | 2,286,626 | |||||||||||
Outstanding
options and warrants to acquire 325,000 shares and 800,000 shares of the
Company’s common stock had not vested at September 30, 2009 and December 31,
2008, respectively. At September 30, 2009, warrants and options exercisable do
not include warrants to acquire 170,400 shares of common stock that are
contingent upon the exercise of warrants contained in units sold as part of the
third private placement (see Note 4).
9. Commitments and
Contingencies
Effective
March 22, 2006, the Company entered into a CRADA, as amended, with the NINDS of
the NIH. The CRADA is for a term of 66 months from the effective date and can be
unilaterally terminated by either party by providing written notice within sixty
days. The CRADA provides for the collaboration between the parties in the
identification and evaluation of agents that target the Nuclear Receptor
CoRepressor (N-CoR) pathway for glioma cell differentiation. The CRADA also
provides that NINDS and the Company will conduct research to determine if
expression of N-CoR correlates with prognosis in glioma patients. Pursuant to
the CRADA, the Company initially agreed to provide funds under the CRADA in the
amount of $200,000 per year to fund two technical assistants for the technical,
statistical and administrative support for the research activities, as well as
to pay for supplies and travel expenses. The first $200,000 was due within 180
days of the effective date and was paid in full on July 6, 2006. The second
$200,000 was paid in full on June 29, 2007. In June 2008, the CRADA was extended
to September 30, 2009, with no additional funding required for the period
between July 1, 2008 and September 30, 2008. For the period from October 1, 2008
through September 30, 2009, the Company agreed to provide additional funding
under the CRADA of $200,000, to be paid in four quarterly installments of
$50,000 each commencing on October 1, 2008. The first and second quarterly
installments of $50,000 were paid on September 29, 2008 and March 5, 2009,
respectively. During August 2009, the Company entered into an
amendment to the CRADA to extend its term from September 30, 2009 through
September 30, 2011. Pursuant to such amendment, the Company has
agreed to aggregate payments of $100,000 in two installments of $50,000 payable
on October 1, 2010 and January 5, 2011, inclusive of any prior unpaid
commitments.
On
January 5, 2007, the Company entered into a Services Agreement with The Free
State of Bavaria (Germany) represented by the University of Regensburg (the
“University”) pursuant to which the Company 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 also agreed to provide certain information relating to such patients.
The Company agreed to pay the University 72,000 Euros in two equal installments.
The first installment of 36,000 Euros ($48,902) was paid on March 7, 2007. On
January 12, 2008, the Company terminated the Services Agreement in accordance
with its terms, as a result of which payment of the second installment of 36,000
Euros was cancelled. The University agreed to deliver 50% of the aforementioned
samples under the terminated Services Agreement.
21
On
February 5, 2007, the Company entered into a two-year agreement (the
“Chem-Master Agreement”) with Chem-Master International, Inc. (“Chem-Master”), a
company co-owned by Francis Johnson, a consultant to the Company, 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 Chem-Master
Agreement, the Company agreed to reimburse Chem-Master for the cost of
materials, labor, and expenses for other items used in the synthesis process,
and also agreed to grant Chem-Master a five-year option to purchase 100,000
shares of the Company’s common stock at an exercise price of $0.333 per share.
The fair value of this option, as calculated pursuant to the Black-Scholes
option-pricing model, was determined to be $31,000 ($0.31 per share) using the
following Black-Scholes input variables: stock price on date of grant - $0.333;
exercise price - $0.333; expected life - 5 years; expected volatility - 150%;
expected dividend yield - 0%; risk-free interest rate - 4.5%. The $31,000 fair
value was charged to operations as research and development costs during the
year ended December 31, 2007, since the option was fully vested and
non-forfeitable on the date of issuance. The Company has the right to terminate
the Chem-Master Agreement at any time during its term upon sixty days prior
written notice. On February 5, 2009, provided that the Chem-Master Agreement had
not been terminated prior to such date, the Company agreed to grant Chem-Master
a second five-year option to purchase an additional 100,000 shares of the
Company’s common stock at an exercise price of $0.333 per share. As of September
30, 2008, the Company determined that it was likely that this option would be
issued. Accordingly, the fair value of the option has been reflected as a charge
to operations for the period from October 1, 2008 through February 5, 2009. On
February 5, 2009, the fair value of this option, as calculated pursuant to the
Black-Scholes option-pricing model, was determined to be $60,000 ($0.60 per
share), which resulted in a charge to operations of $19,143 during the nine
months ended September 30, 2009. The Company granted the second five-year option
on February 5, 2009.
On
September 30, 2008, the fair value of the aforementioned stock option was
initially calculated using the following Black-Scholes input variables: stock
price - $0.50; exercise price - $0.333; expected life – 5.35 years; expected
volatility – 275.7%; expected dividend yield - 0%; risk-free interest rate –
2.48%. On February 5, 2009, the fair value of the aforementioned stock option
was calculated (for the stock option revalued pursuant to EITF 98-16) using the
following Black-Scholes input variables: stock price - $0.60; exercise price -
$0.333; expected life – 5 years; expected volatility – 414.1%; expected dividend
yield - 0%; risk-free interest rate – 1.89%.
On
January 29, 2008, the Chem-Master Agreement was amended to extend its term to
February 15, 2014, and to expressly provide for the design and synthesis of a
new series of compounds designated as “LB-3”. Pursuant to the amendment, the
Company issued 100,000 shares of its restricted common stock, valued at $75,000,
and granted an option to purchase 200,000 shares of common stock. The option is
exercisable for a period of two years from the vesting date at $1.65 per share,
with one-half (100,000 shares) vesting on August 1, 2009, and one-half (100,000
shares) vesting on February 1, 2011. The fair value of this option, as
calculated pursuant to the Black-Scholes option-pricing model, was initially
determined to be $96,000 ($0.48 per share) using the following Black-Scholes
input variables: stock price on date of grant - $0.75; exercise price - $1.65;
expected life - 5 years; expected volatility - 120.1%; expected dividend yield -
0%; risk-free interest rate - 3.09%.
The fair
value of the restricted common stock issued was charged to operations as
research and development costs on January 29, 2008. On September 30, 2009, the
fair value of the aforementioned stock options was determined to be $150,000
($0.75 per share) calculated using the following Black-Scholes input variables:
stock price - $0.75; exercise price - $1.65; expected life - 3.34 years;
expected volatility – 259.07%; expected dividend yield - 0%; risk-free interest
rate - 1.91%, which resulted in a charge to operations of $5,332 and $41,171
during the three months and nine months ended September 30, 2009, respectively.
On September 30, 2008, the fair value of the aforementioned stock options was
determined to be $100,000 ($0.50 per share) calculated using the following
Black-Scholes input variables: stock price - $0.50; exercise price - $1.65;
expected life - 4.34 years; expected volatility – 275.7%; expected dividend
yield - 0%; risk-free interest rate - 2.48%, which resulted in a charge to
operations of $15,568 and $22,232 during the three months and nine months ended
September 30, 2008.
Pursuant
to the Chem-Master Agreement, the Company reimbursed Chem-Master for the costs
of materials, labor, and expenses aggregating $9,000 and $8,750 during the three
months ended September 30, 2009 and 2008, respectively, and $9,000 and $37,750
during the nine months ended September 30, 2009 and 2008,
respectively.
On
September 12, 2007, the Company entered into two consulting agreements for
financial and scientific services. Compensation related to these agreements was
primarily in the form of stock options (see Note 8).
On
September 20, 2007, the Company entered into a one-year consulting agreement
(the “Mirador Agreement”) with Mirador Consulting, Inc. (“Mirador”), pursuant to
which Mirador was to provide the Company with various financial services.
Pursuant to the Mirador Agreement, the Company agreed to pay Mirador $5,000 per
month and also agreed to sell Mirador 250,000 shares of the Company’s restricted
common stock for $250 ($0.001 per share). The fair value of this transaction was
determined to be in excess of the purchase price by $262,250 ($1.049 per share),
reflecting the difference between the $0.001 purchase price and the $1.05 price
per share as quoted on the OTC Bulletin Board on the transaction date, and was
charged to operations as stock-based compensation during the year ended December
31, 2007, being that the shares were fully vested and non-forfeitable on the
date of issuance. The Company made payments under the Mirador Agreement
aggregating $10,000 during 2007. The Mirador Agreement was amended in February
2008, pursuant to which Mirador agreed to forgive all accrued but unpaid monthly
fees through February 29, 2008, and the Company agreed to pay Mirador a fee of
$2,000 per month for the remaining six months of the Mirador
Agreement.
22
In
September 2008, the Company engaged an internet-based investor information
service to enhance awareness of the Company’s progress in developing a portfolio
of pharmacological agents at an initial cost of $2,500, plus $500 per month for
a period of twelve months.
Effective
as of September 19, 2008, the Company entered into an agreement with the NIH
providing the Company with an exclusive license for all patents submitted
jointly with the NIH under the CRADA. The agreement provides for an initial
payment of $25,000 to NIH within 60 days of September 19, 2008, and for a
minimum annual royalty of $30,000 on January 1 of each calendar year following
the year in which the CRADA is terminated. The agreement also provides for the
Company to pay specified royalties based on (i) net sales by the Company and its
sub-licensees, (ii) the achievement of certain clinical benchmarks, and (iii)
the granting of sublicenses. The Company paid the initial $25,000 obligation on
November 10, 2008 and charged the amount to general and administrative costs
during the year ended December 31, 2008.
During
October 2008, the Company engaged Southern Research Institute, Birmingham,
Alabama, to assess one lead compound from each of two classes of its proprietary
pharmacological agents for effects on normal neuronal cells and to determine if
the compounds protect normal brain cells from injury in several different models
of chemical and traumatic brain injury. The goal is to determine if these agents
have promise as potentially useful for the prevention, amelioration or delay of
progression of neurodegenerative diseases such as Alzheimer’s disease and other
neurological diseases or impairments resulting from trauma and/or other diverse
or unknown origins. The Company agreed to pay a fee not to exceed a total of
$50,000 for such services. As of September 30, 2009, expenditures of $39,000 had
been incurred under this agreement.
On July
27, 2009, the Company entered into an agreement with Pro-Active Capital Group,
LLC (“Pro-Active”) to retain Pro-Active on a non-exclusive basis for a period of
twelve months to provide consulting advice to the Company to assist the Company
in obtaining research coverage, gaining web-site exposure and coverage on
financial blogs and web-sites, enhancing the Company’s visibility to the
institutional, retail brokerage and on-line trading communities, and organizing,
or assisting in organizing, investor road-shows and presentations. In
exchange for such consulting advice, at the initiation of the agreement the
Company agreed to issue to Pro-Active 150,000 shares of restricted common stock
and three-year warrants to purchase an aggregate of 150,000 shares of common
stock, exercisable 50,000 at $0.75 per share, 50,000 at $1.00 per share, and
50,000 at $1.25 per share. The fair value of the 150,000 shares issued was
determined to be $100,500 ($0.67 per share), reflecting the price per share of
the Company’s common stock, as quoted on the OTC Bulletin Board, on the
transaction date. The fair value of the three-year warrants, as calculated
pursuant to the Black-Scholes option-pricing model, was determined to be $97,500
($0.65 per share) using the following Black-Scholes input variables: stock price
on date of grant - $0.67; exercise price - $0.75 to $1.25; expected life - 3
years; expected volatility – 259.1%; expected dividend yield - 0%; risk-free
interest rate - 1.91%. The $198,000 aggregate fair value of the shares and
warrants issued was charged to operations as stock-based compensation on July
27, 2009, since the shares and warrants were fully vested and non-forfeitable on
the date of issuance.
10.
Subsequent Event
The
Company has evaluated subsequent events occurring from October 1, 2009 through
November 12, 2009, the date that the Board of Directors approved the filing of
the Company’s September 30, 2009 interim consolidated financial
statements.
23
Effective
November 6, 2009, the Company raised $500,000 through the sale to an accredited
investor of 1,000,000 units at a purchase price of $0.50 per
unit. Each unit consisted of one share of common stock, one
three-year warrant to purchase a share of common stock at an exercise price of
$0.50 per share, and one three year-year warrant to purchase a share of common
stock at an exercise price of $0.75 per share. The warrants do not
have any reset provisions. The closing price of the Company’s common
stock on November 6, 2009 was $0.50 per share. There were no
commissions paid with respect to the private placement. Upon request
by the holder, the Company has agreed to include the shares issued and those
shares issuable upon exercise of the warrants in any registration statement
filed by the Company with the Securities and Exchange Commission permitting the
resale of such securities, subject to customary cutbacks. The units sold were
not registered under the Securities Act of 1933, as amended (the “Act”) in
reliance upon the exemption from registration contained in Section 4(2) of the
Act and Regulation D promulgated thereunder. The Company intends to use the net
proceeds from the private placement to pursue development of proprietary
compounds for the submission of an IND to the FDA for a Phase I clinical trial
and for working capital. The Company expects to account for the
issuance of the units as a capital transaction.
24
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Overview
On June
30, 2006, Lixte Biotechnology, Inc., a privately held Delaware corporation
(“Lixte”), completed a reverse merger transaction with SRKP 7, Inc. (“SRKP”), a
non-trading public shell company, whereby Lixte became a wholly owned subsidiary
of SRKP. On December 7, 2006, SRKP amended its Certificate of Incorporation to
change its name to Lixte Biotechnology Holdings, Inc. (“Holdings”). Unless the
context indicates otherwise, Lixte and Holdings are hereinafter referred to as
the “Company”.
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 the historical financial results of SRKP. The stockholders’ equity
section of SRKP has been retroactively restated for all periods presented to
reflect the accounting effect of the reverse merger transaction. All costs
associated with the reverse merger transaction were expensed as
incurred.
Lixte 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.
The
Company is considered a “development stage company” under current accounting
standards, as it has not yet commenced any revenue-generating operations, does
not have any cash flows from operations, and is dependent on debt and equity
funding to finance its operations. The Company has selected December 31 as its
fiscal year end.
Going
Concern
The
Company’s consolidated financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Company is in
the development stage and has not generated any revenues from operations to
date. The Company has experienced continuing losses since inception
and had a stockholders’ deficiency at December 31, 2008 and September 30,
2009. As a result, the Company’s independent registered public
accounting firm, in their report on the Company’s 2008 consolidated financial
statements, have raised substantial doubt about the Company’s ability to
continue as a going concern.
The
Company’s ability to continue as a going concern is dependent upon its ability
to develop additional sources of capital and to ultimately achieve profitable
operations. The Company’s consolidated financial statements do not include any
adjustments that might result from the outcome of these
uncertainties.
At
September 30, 2009, the Company had not yet commenced any revenue-generating
operations. All activity through September 30, 2009 has been related to the
Company’s formation, capital raising efforts and research and development
activities. As such, the Company has yet to generate any cash flows from
operations, and is dependent on debt and equity funding from both related and
unrelated parties to finance its operations. Prior to June 30, 2006, the
Company’s cash requirements were funded by advances from the Company’s
founder.
Because
the Company is currently engaged in research at an early stage, it will likely
take a significant amount of time to develop any product or intellectual
property capable of generating revenues. As such, the Company’s 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 the
Company will be able to generate a profit.
As
previously disclosed, the Company estimated that it would require minimum
funding in calendar 2009 of approximately $750,000 in order to fund operations
and continuing drug discovery and to attempt to bring two drugs through the
pre-clinical evaluation process needed for submission of an Investigational New
Drug (“IND”) application. In February, March and April 2009, the Company
completed three closings from a private placement of its securities, which
generated net proceeds aggregating approximately $597,000. The Company utilized
a portion of such net proceeds to repay a $100,000 short-term note in February
2009. Additionally, on September 30, 2009, the Company borrowed $100,000 from
one of its consultants on an unsecured demand promissory note bearing interest
at the rate of 5% per annum.
25
Effective
November 6, 2009, the Company raised $500,000 through the sale of 1,000,000
units at a purchase price of $0.50 per unit. Each unit consisted of one share of
common stock, one three-year warrant to purchase a share of common stock at an
exercise price of $0.50 per share, and one three year-year warrant to purchase a
share of common stock at an exercise price of $0.75 per share. As a result, the
Company believes that its current resources are adequate to fund operations only
through the first quarter of 2010 at a level that will allow the continuation of
the Company’s two drug development programs currently in process and initiation
of the pre-clinical studies of LB-100. The Company is considering attempting to
raise additional equity capital during the remainder of 2009 and 2010 to fund
its research and development activities.
The
amount and timing of future cash requirements will depend on the market’s
evaluation of the Company’s technology and products, if any, and the resources
that it devotes to developing and supporting its activities. The Company will
need to fund these cash requirements from a combination of additional debt or
equity financings, or the sale, licensing or joint venturing of its intellectual
properties. Current market conditions present uncertainty as to the
Company’s ability to secure additional funds, as well as its ability to reach
profitability. There can be no assurances that the Company will be able to
secure additional financing, or obtain favorable terms on such financing if it
is available, or as to the Company’s ability to achieve positive earnings and
cash flows from operations. Continued negative cash flows and lack of liquidity
create significant uncertainty about the Company’s ability to fully implement
its operating plan, as a result of which the Company may have to reduce the
scope of its planned operations. If cash resources are insufficient to satisfy
the Company’s liquidity requirements, the Company would be required to scale
back or discontinue its technology and product development programs, or obtain
funds, if available, through strategic alliances that may require the Company to
relinquish rights to certain of its technologies products, or to discontinue its
operations entirely.
Recently
Adopted Accounting Pronouncements
In June
2009, the Financial Accounting Standards Board (“FASB”) issued authoritative
guidance on accounting standards codification and the hierarchy of generally
accepted accounting principles. The FASB Accounting Standards Codification™
(“Codification”) has become the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in accordance with GAAP. All existing
accounting standard documents are superseded by the Codification and any
accounting literature not included in the Codification will not be
authoritative. However, rules and interpretive releases of the Securities and
Exchange Commission (“SEC”) issued under the authority of federal securities
laws will continue to be sources of authoritative GAAP for SEC registrants. The
FASB authoritative guidance is effective for interim and annual reporting
periods ending after September 15, 2009. Accordingly, beginning with the quarter
ending September 30, 2009, all references made by the Company to GAAP in its
consolidated financial statements now use the new Codification numbering system.
The Codification does not change or alter existing GAAP. The adoption of the
Codification by the Company did not have any impact on the Company’s
consolidated financial statements.
In May
2009, the FASB issued new requirements for reporting subsequent events. These
requirements set forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. Disclosure of the date through which an
entity has evaluated subsequent events and the basis for that date is also
required. The FASB authoritative guidance is effective for interim or annual
financial periods ending after June 15, 2009, and is to be applied
prospectively. Accordingly, the Company adopted the new requirements
for reporting subsequent events on June 30, 2009.
In
December 2007, the FASB issued authoritative guidance on business combinations.
The guidance retains the fundamental requirements that the acquisition method of
accounting (previously referred to as the purchase method of accounting) be used
for all business combinations, but requires a number of changes, including
changes in the way assets and liabilities are recognized and measured as a
result of business combinations. It also requires the capitalization of
in-process research and development at fair value and requires the expensing of
acquisition-related costs as incurred. The Company adopted this new guidance on
January 1, 2009, and will apply this guidance to business combinations completed
in the future.
26
In
December 2007, the FASB issued authoritative guidance that changes the
accounting and reporting for noncontrolling interests. Non-controlling
interests are to be reported as a component of equity separate from the parent’s
equity, and purchases or sales of equity interests that do not result in a
change in control are to be accounted for as equity transactions. In
addition, net income attributable to a noncontrolling interest is to be included
in net income and, upon a loss of control, the interest sold, as well as any
interest retained, is to be recorded at fair value with any gain or loss
recognized in net income. The Company adopted this new guidance on January 1,
2009, and will apply this guidance to noncontrolling interests acquired in the
future. Adoption of the new guidance did not have any impact on the Company’s
consolidated financial statement presentation or disclosures.
Management
does not believe that any other recently issued, but not yet effective,
accounting standards or pronouncements, if currently adopted, would have a
material effect on the Company’s consolidated financial statement presentation
or disclosures.
Critical
Accounting Policies and Estimates
The
Company prepared its 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 the Company’s consolidated financial
statements.
Research
and Development
Research
and development costs are expensed as incurred. Research and development
expenses consist primarily of fees paid to consultants and outside service
providers, patent fees and costs, and other expenses relating to the
acquisition, design, development and testing of the Company's treatments and
product candidates.
Amounts
due, pursuant to contractual commitments, 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.
Patent
Costs
Due to
the significant uncertainty associated with the successful development of
one or more commercially viable products based on the Company's research efforts
and any related patent applications, all patent costs, including patent-related
legal and filing fees, are expensed as incurred.
Stock-Based
Compensation
The
Company periodically issues stock options and warrants to officers, directors
and consultants for services rendered. Options vest and expire according to
terms established at the grant date.
The
Company accounts for share-based payments to officers and directors by measuring
the cost of services received in exchange for equity awards based on the grant
date fair value of the awards, with the cost recognized as compensation expense
in the Company’s financial statements over the vesting period of the
awards.
The
Company accounts for share-based payments to consultants by determining the
value of the stock compensation based upon the measurement date at either (a)
the date at which a performance commitment is reached or (b) at the date at
which the necessary performance to earn the equity instruments is
complete.
27
Options
granted to Scientific Advisory Board committee members and outside consultants
are revalued each reporting period to determine the amount to be recorded as an
expense in the respective period. As the options vest, they are valued on each
vesting date and an adjustment is recorded for the difference between the value
already recorded and the then current value on the date of vesting.
The fair
value of stock-based compensation is affected by several variables, the most
significant of which are the life of the equity award, the exercise price of the
security as compared to the fair market value of the common stock on the grant
date, and the estimated volatility of the common stock over the term of the
equity award.
Income Taxes
The
Company accounts for income taxes under an asset and liability approach for
financial accounting and reporting for income taxes. Accordingly, the Company
recognizes deferred tax assets and liabilities for the expected impact of
differences between the financial statements and the tax basis of assets and
liabilities.
The
Company records a valuation allowance to reduce its deferred tax assets to the
amount that is more likely than not to be realized. In the event the Company was
to determine that it would be able to realize its deferred tax assets in the
future in excess of its recorded amount, an adjustment to the deferred tax
assets would be credited to operations in the period such determination was
made. Likewise, should the Company determine that it would not be able to
realize all or part of its deferred tax assets in the future, an adjustment to
the deferred tax assets would be charged to operations in the period such
determination was made.
Plan
of Operation
General
Overview of Plans
The
Company is concentrating on developing new treatments for the most common and
most aggressive type of brain cancer of adults, glioblastoma multiforme (“GBM”),
and the most common cancer of children, neuroblastoma. The Company has expanded
the scope of its anti-cancer investigational activities to include the most
common brain tumor of children, medulloblastoma, and also to several other types
of more common cancers. This expansion of activity is based on documentation
that each of two distinct types of drugs being developed by the Company inhibits
the growth of cell lines of breast, colon, lung, prostate, pancreas, ovary,
stomach and liver cancer, as well as the major types of leukemias. Activity of
lead compounds of both types of drugs was recently demonstrated against human
pancreatic cancer cells in a mouse model. Because there is a great need for any
kind of effective treatment for pancreatic cancer, this cancer will be studied
concomitantly with the primary target of the Company’s research program focused
on brain cancers. More recently, studies in animal models of human melanoma,
lymphoma, sarcoma, and the rare neuroendocrine cancer, pheochromocytoma, have
demonstrated potent anti-tumor activity of the Lixte LB-100 series compounds in
conjunction with standard chemotherapeutic drugs, which on their own have only
modest activity. These new studies confirm that the LB-100 compounds combined
with any of several “standard anti-cancer drugs” have broad activity, affecting
many different cell types of cancer. This is unusual and important because these
compounds may be useful for treatment of cancer in general.
The
research on brain tumors is proceeding in collaboration with the National
Institute of Neurological Disorders and Stroke (“NINDS”) of the National
Institutes of Health (“NIH”) under a Cooperative Research and Development
Agreement (“CRADA”) entered into on March 22, 2006, as amended. The research at
NINDS continues to be led by Dr. Zhengping Zhuang, an internationally recognized
investigator in the molecular pathology of cancer. Dr. Zhuang is aided by two
senior research technicians supported by the Company as part of the CRADA. The
goal of the CRADA is to develop more effective drugs for the treatment of GBM
through the processes required to gain Food and Drug Administration (“FDA”)
approval for clinical trials. The Company has entered into an
amendment to the CRADA to extend its term from September 30, 2009 through
September 30, 2011.
The
Company filed five patent applications on August 1, 2008. Two of these patent
filings deal with applications filed earlier jointly with NIH for work done
under the CRADA as follows: (1) a filing entering the regional stage of a PCT
application involving the use of certain compounds to treat human tumors
expressing a biomarker for brain and other human cancers; and (2) an application
for the treatment of the pediatric tumors, medulloblastoma (the most common
brain tumor in children) and neuroblastoma (a tumor arising from neural cells
outside the brain that is the most common cancer of children). The three new
patent applications include: (1) a joint application with NIH identifying a new
biomarker for many common human cancers that when targeted by compounds
developed by the Company result in inhibition of growth and death of cancer
cells; (2) an application by the Company regarding the structure, synthesis and
use of a group of new homologs of its LB-1 compounds; and (3) an application by
the Company for the use of certain homologs of its drugs as neuroprotective
agents with potential application to common neurodegenerative conditions such as
Alzheimer’s and Parkinson’s diseases.
28
During
the nine months ended September 30, 2009, the Company filed eight patent
applications. The U.S. Patent Office Examiner began review of the initial patent
submitted jointly by the Company and the NINDS. The chemical formula of one of
the Company’s lead compounds, LB-100, was disclosed in that patent, and was
found to be novel. The Company considers this finding a milestone in the
development of the Company’s intellectual property. The specific claims for the
structures and methods of synthesis of all compounds in the LB series were filed
on the same day in a separate patent application and are the sole property of
the Company. The review of this patent will be the determinant of the validity
of the novelty of the LB-100 compounds, and the outcome thereof will therefore
have a material impact on the future business prospects of the
Company.
The
results of studies characterizing the novel and potent anti-cancer activity and
mechanism of action of LB-102 alone and in combination with standard
chemotherapy drugs were published in a leading scientific journal, the
Proceedings of the National Academy of Sciences (print version dated July 14,
2009). The primary conclusion was that one of the Company’s lead
compounds appears to inhibit cancer cells by stimulating cancer cells to attempt
to grow in the presence of a standard cancer drug and interferes with cancer
cell defense mechanisms, with the end result being much greater damage to the
cancer than occurs when treatment is limited to the standard anti-cancer
drug. The authors concluded that treatment with the Company’s
compound LB-1.2 may be a general method for enhancing the therapeutic benefit of
a number of standard cancer regimens, not limited to the original targets of
brain tumors of adults and children. On the basis of this article, the authors
were invited to discuss this new approach to drug treatment of cancer in a
leading journal focused largely on understanding how to more efficiently attack
the cancer cell and published another article expanding on the mechanisms
underlying how the LB-100 series of compounds enhances the benefits of common
anticancer drugs (Cell Cycle, October 15, 2009).
In
addition, an abstract of the characterization of the neuroprotective effects of
two lead compounds in standard assays of injury to normal embryonic mouse
neurons supporting their continued development for the possible treatment of
chronic neurodegenerative diseases such as Alzheimer’s Disease and Parkinson’s
Disease was presented at the annual meeting of the Society for Neuroscience in
Chicago, Illinois on October 17, 2009.
The
Company continues to evaluate compounds for activity against several types of
fungi that cause serious infections, particularly in immuno-compromised
individuals, such as those with HIV-AIDS, and those having bone marrow
transplantations. The Company is also exploring indications that its compounds
have against strains of fungi that cause the most common fungal infections of
the skin and nails. Discussions are in progress with experts in fungal
infections regarding the most reliable methods of assessing the potential of new
agents for the management of common fungal diseases.
The
Company expects that its products will derive directly from the intellectual
property from its research activities. The development of lead compounds with
different mechanisms of action that have activity against brain tumors and other
common human cancers, as well as against serious fungal infections, originated
from the discovery of a biomarker in GBM. The Company will continue to use
discovery and/or recognition of molecular variants characteristic of specific
human cancers as a guide to drug discovery and potentially new diagnostic tests.
Examples of the productivity of this approach to discovery of new therapeutics
are: (1) the recent patent application filing for a new biomarker of several
common cancers that when targeted by certain of the Company’s drugs results in
inhibition of growth and death of cancer cells displaying the marker; and (2)
the filing of a patent on certain homologs of one group of compounds as
potentially useful for the treatment of neurodegenerative diseases.
Management’s
goal is to secure one or more strategic partnerships with pharmaceutical
companies with major programs in cancer, anti-fungal treatments, and/or
neuroprotective measures. The immediate focus has shifted to obtaining
approval from the FDA to carry a lead compound of the LB-100 series into
clinical trail. The Company believes the potent activity of these drugs in
combination with standard non-specific chemotherapeutic drugs against a diverse
array of common and uncommon cancers of adults and children merits bringing this
treatment to patients as rapidly as possible. In addition, of course, the
demonstration of clinicacl benefit would be very important to investors and to
large pharmaceutical companies looking to add an entirely new approach to their
anti-cancer drug pipelines.
29
The
significant diversity of the potential therapeutic value of the Company’s
compounds stems from the fact that these agents modify critical pathways in
cancer cells and in microorganisms such as fungi and appear to ameliorate
pathologic processes that lead to brain injury, caused by trauma or toxins or
through as yet unknown mechanisms that underlie the major chronic neurologic
diseases including Alzheimer’s Disease, Parkinson’s Disease, and Amyotrophic
Lateral Sclerosis (ALS, or Lou Gherig’s Disease). Studies of the
potential neuroprotective effects of homologs of each class of the Company’s
compounds are continuing under a contract with Southern Research Institute,
Birmingham, Alabama. However, the majority of resources will be directed to the
clinical study of LB-100 for cancer therapy.
Plans
for the Remainder of 2009 and Beyond
The
Company’s primary objective is to support the clinical development of a lead
compound from the LB-100 series, which would require approximately $3,000,000 of
additional operating capital. Subject to the availability of such operating
capital, the Company expects that it would be able to pursue its primary
objective of bringing LB-100 to and potentially through a clinical trial, as
well as maintain its other research studies developing the LB-200 series of
compounds to the point of pursuing a clinical trial.
The
Company’s initial goal is to take its lead phosphatase inhibitor, LB-100, up to
and possibly through initial evaluation in humans, which would include: (1)
determination of the maximum tolerable dose of the drug that can be given on a
schedule deemed optimal for combination with other cytotoxic drugs, such as
temozolomide for the treatment of patients with cancers unresponsive to known
chemotherapy regimens in so called Phase I trials; (2) determination of the
behavior of the drug in humans (what concentrations are achieved and how long
the drug remains in the blood after oral and intravenous administration
(pharmacokinetic studies); and (3) demonstration that at tolerable doses in
humans the drug inhibits its target enzyme (pharmacodynanic studies)
..
The
critical need for the next step in the clinical development of LB-100 is to
obtain investigational new drug approval (IND) from the FDA to administer the
drug to patients. In order to do this, the Company must demonstrate that LB-100
can be administered safely to human beings at a dose and at a frequency that
achieves the desired pharmacologic effect, in this case inhibition of a specific
enzyme, without being associated with toxicities considered unacceptable. As
discussed earlier, a compound that has a mechanism of action similar to that of
LB-100 has been given with safety and benefit to cancer patients outside the
United States in the past. This compound has a chemical feature which appears to
be responsible for most of its toxicity. This feature has been removed from
LB-100, making it likely that the Company’s compound will be less toxic and,
therefore, safer for human use.
The FDA
requires that before any new drug is given to human beings, its behavior and
potential toxicity must be determined in at least one and possible two species
of animals, whichever are the most sensitive among rats, rabbits and dogs. The
determination of toxicity requires formal evaluations by experts in animal
toxicology to obtain the required data while minimizing the number of animals
needed for study.
The FDA
also requires that LB-100, although already used in a purified state in studies
done by the Company to date, be prepared under strict laboratory conditions by a
certified chemical company to assure the purity of the compound and the
reproducibility of its method of synthesis so that a supply adequate for future
clinical studies is assured.
With the
approval of the FDA, the Company will also conduct an initial Phase I clinical
trial. A typical Phase I study involves up to 30 patients at an average cost of
$25,000 per patient, for a total expense of approximately $750,000. These funds
cover the non-standard expenses of the academic institution doing the study,
such as laboratory studies of patients needed because they are in a study,
pharmacologic studies during the study, and monitoring and analysis of the trial
results.
The
Company has had discussions with several leading organizations in the United
States that have extensive experience in preparing pharmaceuticals for human
use, including the conduct of pre-clinical toxicology and pharmacology studies,
preparation of an appropriate application to the FDA, and planning and
monitoring early drug trials with the National Cancer Institute. The Company
intends to work with leaders in each of these disciplines to assure that all FDA
regulatory and safety issues are addressed during development of its
drugs.
Subject
to the extent of the resources available to fund future activities, the Company
may commence animal toxicology studies of LB-100 and complete some of the
pharmacologic studies in rodents in anticipation of subsequent studies in larger
animals, necessary for FDA approval of the drug in the future. With these data
in hand, the Company would then pursue a strategic partnership with a large
pharmaceutical company to jointly bring LB-1 through FDA approval or attempt to
raise additional capital.
30
With
sufficient resources, a second goal of the Company is further characterization
of the fungal activity of certain homologs of drugs of the LB-200 series. These
studies would be done in collaboration with academic partners. Recently, the
Company confirmed that its lead compound of the LB-200 series has potential to
cure two types of fungi in a guinea pig model that are representative of the
most common skin infections of humans and domestic animals. Cure was achieved by
topical application of the drug on a daily basis for 14 days, with no evidence
of toxicity.
The
Company is also screening other homologs of lead compounds of the LB-100 and
LB-200 series for neuroprotective activity in laboratory models of brain cell
injury. During October 2008, the Company engaged Southern Research Institute,
Birmingham, Alabama, to assess one lead compound from each of two classes of its
proprietary pharmacological agents for effects on normal neuronal cells and to
determine if the compounds protect normal brain cells from injury in several
different models of chemical and traumatic brain injury. The goal is to
determine if these agents have promise as potentially useful for the prevention,
amelioration or delay of progression of neurodegenerative diseases such as
Alzheimer’s disease and other neurological diseases or impairments resulting
from trauma and/or other diverse or unknown origins. The initial studies in the
test tube support the Company’s hypothesis that one of its lead compounds
appears to have a beneficial effect upon the growth and differentiation of
normal brain cells.
Given the
progress in identifying two lead compounds with activity in animal models of
GBM, the Company is devoting its resources to bring the agents to a point at
which an Investigational New Drug (“IND”) application can be submitted to the
FDA for a Phase I clinical trial. One lead compound (LB-100) is the most
advanced in the process and, subject to the availability of capital, the Company
plans to be ready for IND submission 2010. The other lead compound (LB-205 or
LB-201), which inhibits cancer cells by a mechanism distinct from that of LB-1,
is anticipated to complete its laboratory evaluation of anti-cancer activity by
the end of 2010, and, resources permitting, would be placed into pre-clinical
evaluation aiming toward approval for clinical testing.
On
January 29, 2008, the Chem-Master Agreement was amended to extend its term to
February 15, 2014, pursuant to which Chem-Master was engaged to synthesize
certain compounds, and to expressly provide for the expansion of the Company’s
drug development program, through consultation with the medicinal chemists at
Chem-Master. The Company is exploring the synthesis of additional novel
anti-cancer drugs. Several targets for anti-cancer drug development are under
consideration. When the next group of compounds is developed, it will be
designated as “LB-3”, as distinguished from the first two classes of compounds
that were designated as “LB-1” and “LB-2”. This process is currently in the
planning stage and no compounds have been made as yet.
Existing
resources will not permit evaluation of activity of the Company’s lead drugs
against all the common cancers with respect to which the Company’s compounds may
have anti-cancer activity. Current resources also will not be sufficient to
carry out pre-clinical studies necessary to apply to the FDA for approval of
drug evaluations in Phase I trials.
The
Company faces several potential challenges in its efforts to achieve commercial
success, including raising sufficient capital to fund its business plan,
achieving commercially applicable results of its research programs, competition
from more established, well-funded companies with competitive technologies, and
future competition from companies that are developing new competitive
technologies, some of whom are larger companies with greater capital resources
than the Company. Because of these challenges, there is substantial uncertainty
as to the Company’s ability to fund its operations and continue as a going
concern (see “Going Concern” above). Should the Company be unable to raise the
required capital on a timely basis, the Company’s business plans would be
materially adversely affected, and the Company may not be able to continue to
conduct operations.
Results
of Operations
The
Company is a development stage company and had not commenced revenue-generating
operations at September 30, 2009.
31
Three
Months Ended September 30, 2009 and 2008
General and Administrative
Expenses. For the three months ended September 30, 2009, general and
administrative expenses were $300,850, which consisted of the fair value of
restricted common stock and common stock warrants issued to a vendor of
$198,000, the vested portion of the fair value of stock options issued to
directors and consultants of $33,282, consulting and professional fees of
$55,968, insurance expense of $5,983, travel and entertainment costs of $893,
and other operating costs of $6,724.
For
the three months ended September 30, 2008, general and administrative expenses
were $348,514, which consisted of the vested portion of the fair value of stock
options issued to directors and consultants of $254,915, consulting and
professional fees of $42,811, insurance expense of $5,955, travel and
entertainment costs of $6,764, licensing and royalty fees of $25,000, and other
operating costs of $13,069.
Depreciation. For the
three months ended September 30, 2009 and 2008, depreciation expense was $-0-
and $155, respectively.
Research and Development
Costs. For the three months ended September 30, 2009, research and
development costs were $152,235, which consisted of the vested portion of the
fair value of stock options issued to a consultant and a vendor of $19,236,
patent costs of $107,999, and other costs of $25,000.
For the
three months ended September 30, 2008, research and development costs were
$147,818, which consisted of the vested portion of the fair value of stock
options issued to a consultant and a vendor of $61,493, patent costs of $53,075,
and other costs of $33,250.
Interest Income. For
the three months ended September 30, 2009, interest income was $31, as compared
to interest income of $342 for the three months ended September 30,
2008.
Net loss. For the
three months ended September 30, 2009, the Company incurred a net loss of
$453,054, as compared to a net loss of $496,145 for the three months ended
September 30, 2008.
Nine
Months Ended September 30, 2009 and 2008
General and Administrative
Expenses. For the nine months ended September 30, 2009, general and
administrative expenses were $555,743, which consisted of the fair value of
restricted common stock and common stock warrants issued to a vendor of
$198,000, the vested portion of the fair value of stock options issued to
directors and consultants of $108,692, consulting and professional fees of
$204,958, insurance expense of $17,894, travel and entertainment costs of
$3,307, and other operating costs of $22,892.
For the
nine months ended September 30, 2008, general and administrative expenses were
$566,385, which consisted of stock-based compensation of $319,709, consulting
and professional fees of $148,596, insurance expense of $17,866, travel and
entertainment costs of $29,216, licensing and royalty fees of $25,000, and other
operating costs of $25,998.
Depreciation. For the
nine months ended September 30, 2009 and 2008, depreciation expense was $128 and
$473, respectively.
Research and Development
Costs. For the nine months ended September 30, 2009, research and
development costs were $419,341, which consisted of the vested portion of the
fair value of stock options issued to a consultant and a vendor of $116,835,
patent costs of $154,506, laboratory supplies of $9,000, and other costs of
$139,000.
For the
nine months ended September 30, 2008, research and development costs were
$446,051, which consisted of the fair value of restricted common stock issued to
a vendor of $75,000, the vested portion of the fair value of stock options
issued to a consultant and a vendor of $69,862, patent costs of $127,299,
laboratory supplies of $38,750, and other costs of $135,140.
Interest Income. For
the nine months ended September 30, 2009, interest income was $83, as compared
to interest income of $3,181 for the nine months ended September 30,
2008.
32
Net Loss. For the
nine months ended September 30, 2009, the Company incurred a net loss of
$975,581, as compared to a net loss of $1,009,728 for the nine months ended
September 30, 2008.
Liquidity
and Capital Resources – September 30, 2009
The
Company’s financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company is in the development
stage and has not generated any revenues from operations to date. Furthermore,
the Company has experienced continuing losses since inception and had a
stockholders’ deficiency at December 31, 2008 and September 30, 2009. The
Company’s ability to continue as a going concern is dependent upon its ability
to develop additional sources of capital and to ultimately achieve profitable
operations. The Company’s financial statements do not include any adjustments
that might result from the outcome of these uncertainties (see “Going Concern”
above”).
Operating Activities.
For the nine months ended September 30, 2009, operating activities utilized cash
of $497,000, as compared to utilizing cash of $484,286 for the nine months ended
September 30, 2008.
The
Company had working capital deficiency of $278,552 at September 30, 2009. At
December 31, 2008, the Company had working capital deficiency of $323,676. The
reduction in the working capital deficiency was due primarily as a result of the
sale of the Company’s common stock units pursuant to three closings of a third
private placement in February, March, and April 2009 that generated net proceeds
of $597,050.
Investing Activities.
There were no investing activities during the nine months ended September 30,
2009 and 2008
Financing Activities.
For the nine months ended September 30, 2009, financing activities provided net
cash of $597,050, consisting of the gross proceeds from the sale of common stock
of $710,000, reduced by the payment of private placement offering costs of
$112,950, the repayment of a note payable to a consultant in the amount of
$100,000, and the $100,000 proceeds of a new borrowing from the consultant.
There were no financing activities during the nine months ended September 30,
2008.
Principal
Commitments
At
September 30, 2009, the Company did not have any material commitments for
capital expenditures. The Company’s principal commitments at September 30, 2009
consisted of $100,000 due on a note payable to a consultant, the liquidated
damages payable under the registration rights agreement of $74,000, and the
contractual obligations as summarized below.
Effective
March 22, 2006, Lixte entered into a CRADA, as amended, with the NINDS of the
NIH. The CRADA is for a term of 66 months from the effective date and may be
unilaterally terminated by either party by providing written notice within sixty
days. The CRADA provides for the collaboration between the parties in the
identification and evaluation of agents that target the Nuclear Receptor
CoRepressor (N-CoR) pathway for glioma cell differentiation. The CRADA also
provided that NINDS and Lixte will conduct research to determine if expression
of N-CoR correlates with prognosis in glioma patients. Pursuant to the CRADA,
Lixte agreed to provide funds under the CRADA in the amount of $200,000 per year
to fund two technical assistants for the technical, statistical and
administrative support for the research activities, as well as to pay for
supplies and travel expenses. The first $200,000 was due within 180 days of the
effective date and was paid in full on July 6, 2006. The second $200,000 was
paid in full on June 29, 2007. In June 2008, the CRADA was extended to September
30, 2009, with no additional funding required for the period between July 1,
2008 and September 30, 2008. For the period from October 1, 2008 through
September 30, 2009, the Company agreed to provide additional funding under the
CRADA of $200,000, to be paid in four quarterly installments of $50,000 each
commencing on October 1, 2008. The first and second installments of $50,000 were
paid on September 29, 2008 and March 5, 2009, respectively. During
August 2009, the Company entered into an amendment to the CRADA to extend its
term from September 30, 2009 through September 30, 2011. Pursuant to
such amendment, the Company has agreed to aggregate payments of $100,000 in two
installments of $50,000 payable on October 1, 2010 and January 5, 2011,
inclusive of any prior unpaid commitments.
33
On
February 5, 2007, Lixte entered into a two-year agreement (the “Chem-Master
Agreement”) with Chem-Master International, Inc. (“Chem-Master”), a company
co-owned by Francis Johnson, a consultant to the Company, pursuant to which
Lixte engaged Chem-Master to synthesize a compound designated as “LB-1”, and any
other compound synthesized by Chem-Master pursuant to Lixte’s request, which
have potential use in treating a disease, including, without limitation, cancers
such as glioblastomas. Pursuant to the Chem-Master Agreement, Lixte agreed to
reimburse Chem-Master for the cost of materials, labor, and expenses for other
items used in the synthesis process, and also agreed to grant Chem-Master a
five-year option to purchase 100,000 shares of the Company’s common stock at an
exercise price of $0.333 per share. Lixte has the right to terminate the
Chem-Master Agreement at any time during its term upon sixty days prior written
notice. On February 5, 2009, provided that the Chem-Master Agreement had not
been terminated, the Company agreed to grant Chem-Master a second five-year
option to purchase an additional 100,000 shares of the Company’s common stock at
an exercise price of $0.333 per share. The Company granted the second five-year
option on February 5, 2009.
On
January 29, 2008, the Chem-Master Agreement was amended to extend its term to
February 15, 2014, and to expressly provide for the design and synthesis of a
new series of compounds designated as “LB-3”. Pursuant to the amendment, the
Company issued 100,000 shares of its restricted common stock and granted an
option to purchase 200,000 shares of common stock. The option is exercisable for
a period of two years from vesting date at $1.65 per share, with one-half
(100,000 shares) vesting on August 1, 2009, and one-half (100,000 shares)
vesting on February 1, 2011.
Pursuant
to the Chem-Master Agreement, the Company reimbursed Chem-Master for the costs
of materials, labor, and expenses aggregating $9,000 and $8,750 during the three
months ended September 30, 2009 and 2008, respectively, and $9,000 and $37,750
during the nine months ended September 30, 2009 and 2008,
respectively.
During
September 2008, the Company engaged an internet-based investor information
service, to enhance awareness of the Company’s progress in developing a
portfolio of pharmacological agents at an initial cost of $2,500, plus $500 per
month for a period of twelve months.
Effective
as of September 19, 2008, the Company entered into an agreement with the NIH
providing the Company with an exclusive license for all patents submitted
jointly with the NIH under the CRADA. The agreement provided for an initial
payment of $25,000 to NIH within 60 days of September 19, 2008, and for a
minimum annual royalty of $30,000 on January 1 of each calendar year following
the year in which the CRADA is terminated. The agreement also provides for the
Company to pay specified royalties based on (i) net sales by the Company and its
sub-licensees, (ii) the achievement of certain clinical benchmarks, and (iii)
the granting of sublicenses. The Company paid the initial $25,000 obligation on
November 10, 2008.
During
October 2008, the Company engaged Southern Research Institute, Birmingham,
Alabama, to assess one lead compound from each of two classes of its proprietary
pharmacological agents for effects on normal neuronal cells and to determine if
the compounds protect normal brain cells from injury in several different models
of chemical and traumatic brain injury. The goal is to determine if these agents
have promise as potentially useful for the prevention, amelioration or delay of
progression of neurodegenerative diseases such as Alzheimer’s disease and other
neurological diseases or impairments resulting from trauma and/or other diverse
or unknown origins. The Company agreed to pay a fee not to exceed a total of
$50,000 for such services. As of September 30, 2009, expenditures of $39,000 had
been incurred under this agreement.
On
October 7, 2008, the Company appointed Dr. Mel Sorensen to its Board of
Directors. Dr. Sorensen is a medical oncologist with extensive experience in
cancer drug development, first at the National Cancer Institute, then at Bayer
and GlaxoSmithKline, before becoming President and CEO of a new cancer
therapeutics company, Ascenta Therapeutics, in 2004. Dr. Sorensen was paid an
annual consulting fee of $40,000, payable in quarterly installments over a
one-year period commencing October 7, 2008, to assist the Company in identifying
a strategic partner. Dr. Sorensen was also granted a stock option to purchase
200,000 shares of the Company’s common stock, exercisable at $0.50 per share for
a period of five years from each tranche’s vesting date. The option vests as to
25,000 shares on January 1, 2009, and a further 25,000 shares on the first day
of each subsequent calendar quarter until all of the shares are
vested.
34
On July
27, 2009, the Company entered into an agreement with Pro-Active Capital Group,
LLC (“Pro-Active”) to retain Pro-Active on a non-exclusive basis for a period of
twelve months to provide consulting advice to the Company to assist the Company
in obtaining research coverage, gaining web-site exposure and coverage on
financial blogs and web-sites, enhancing the Company’s visibility to the
institutional, retail brokerage and on-line trading communities, and organizing,
or assisting in organizing, investor road-shows and presentations. In
exchange for such consulting advice, at the initiation of the agreement the
Company agreed to issue to Pro-Active 150,000 shares of restricted common stock
and three-year warrants to purchase an aggregate of 150,000 shares of common
stock, exercisable 50,000 at $0.75 per share, 50,000 at $1.00 per share, and
50,000 at $1.25 per share. The shares and warrants issued were fully vested and
non-forfeitable on the date of issuance.
Off-Balance Sheet
Arrangements
At
September 30, 2009, the Company did not have any transactions, obligations or
relationships that could be considered off-balance sheet
arrangements.
35
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET
RISK
|
Not
applicable.
|
ITEM 4T.
|
CONTROLS AND
PROCEDURES
|
(a)
Evaluation of Disclosure Controls and Procedures
The
Company carried out an evaluation, under the supervision and with the
participation of its management, including its principal executive officer and
principal financial officer (who is the same individual), of the effectiveness
of the Company’s disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of
the Exchange Act (defined below)). Based upon
that evaluation, the Company’s principal executive officer and principal
financial officer concluded that, as of the end of the period covered in this
report, the Company’s disclosure controls and procedures were effective to
ensure that information required to be disclosed in reports filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded,
processed, summarized and reported within the required time periods and is
accumulated and communicated to the Company’s management, including the
Company’s principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required
disclosure.
The
Company’s management, including its principal executive officer and principal
financial officer, does not expect that its disclosure controls and procedures
or its internal controls will prevent all error or fraud. A control
system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints and the benefits of controls must be considered
relative to their costs. Due to the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, have been detected. Accordingly,
management believes that the financial statements included in this report fairly
present in all material respects the Company’s financial condition, results of
operations and cash flows for the periods presented.
(b)
Changes in Internal Controls Over Financial Reporting
In
addition, the Company’s management, with the participation of its principal
executive officer and principal financial officer, has determined that no change
in the Company’s internal control over financial reporting (as that term is
defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of
1934) occurred during or subsequent to the quarter ended September 30, 2009 that
has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.
36
PART
II. OTHER INFORMATION
Item 1.
Legal Proceedings
The
Company is currently not a party to any pending or threatened legal
proceedings.
Item 1A.
Risk Factors
Not
applicable.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
On July
27, 2009, the Company entered into an agreement with Pro-Active Capital Group,
LLC (“Pro-Active”) to retain Pro-Active on a non-exclusive basis for a period of
twelve months to provide consulting advice to the Company to assist the Company
in obtaining research coverage, gaining web-site exposure and coverage on
financial blogs and web-sites, enhancing the Company’s visibility to the
institutional, retail brokerage and on-line trading communities, and organizing,
or assisting in organizing, investor road-shows and presentations. In
exchange for such consulting advice, at the initiation of the agreement the
Company agreed to issue to Pro-Active 150,000 shares of restricted common stock
and three-year warrants to purchase an aggregate of 150,000 shares of common
stock, exercisable 50,000 at $0.75 per share, 50,000 at $1.00 per share, and
50,000 at $1.25 per share. The shares and warrants issued were fully vested and
non-forfeitable on the date of issuance.
Item 3.
Defaults Upon Senior Securities
Not
applicable.
Item 4.
Submission of Matters to a Vote of Security Holders
Not
applicable.
Item 5.
Other Information
Not
applicable.
Item 6.
Exhibits
A list of
exhibits required to be filed as part of this report is set forth in the Index
to Exhibits, which immediately precedes such exhibits, and is incorporated
herein by reference.
37
SIGNATURES
In
accordance with the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
|
LIXTE BIOTECHNOLOGY HOLDINGS,
INC.
|
||
|
(Registrant)
|
||
|
|
||
|
Date:
November 12, 2009
|
By:
|
/s/ JOHN S. KOVACH
|
|
John
S. Kovach
|
||
|
Chief
Executive Officer and Chief Financial Officer
|
||
|
(Principal
financial and accounting
officer)
|
||
38
INDEX TO
EXHIBITS
|
Exhibit
Number
|
Description of Document
|
|
|
10.1
|
Amendment
No. 6 to Cooperative Research and Development Agreement, effective August
10, 2009, filed as Exhibit 10.1 to Current Report on Form 8-K dated August
10, 2009, and incorporated herein by reference.
|
|
|
10.2
|
Consulting
Agreement between Lixte Biotechnology Holdings, Inc. and Pro-Active
Capital Group, LLC, effective July 27, 2009. (1)
|
|
|
31.1
|
Certifications
under Section 302 of the Sarbanes-Oxley Act of 2002.
(1)
|
|
|
32.1
|
Certifications
under Section 906 of the Sarbanes-Oxley Act of 2002.
(1)
|
(1) Filed
herewith.
39