10-K: Annual report pursuant to Section 13 and 15(d)
Published on March 29, 2010
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-K
x
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ANNUAL REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 31,
2009
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¨
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TRANSITION REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from ______ to
______
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Commission
file number: 000-51476
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
Delaware
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20-2903526
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|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
Number)
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|
248
Route 25A, No. 2
East
Setauket, New York
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11733
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|
(Address
of principal executive offices)
|
(Zip
Code)
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Registrant’s
telephone number: (631) 942-7959
Securities
registered under Section 12(b) of the Act: None.
Securities
registered under Section 12(g) of the Act: Common
Stock.
Indicate
by check mark whether the registrant is a well-known seasoned issuer as defined
in Rule 405 of the Securities Act. Yes ¨ No x
Indicate
by check mark whether the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. ¨
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). ¨ Yes ¨ No
Indicate
by check mark if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure
will be contained, to the best of the registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. x
Indicate
by check mark whether registrant is a “large accelerated filer, “accelerated
filer,” non-accelerated filer” or “smaller reporting company reporting company”
as such terms are defined in Rule 12b-2 of the Exchange Act (check
one):
Large
Accelerated Filer ¨ Accelerated
Filer ¨ Non-Accelerated
Filer ¨ Smaller
Reporting Company x
Indicate
by check mark whether registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act): Yes ¨ No x
Issuer’s
revenues for its fiscal year ended December 31, 2009: $0
The
aggregate market value of the common stock held by non-affiliates of the
registrant as of June 30, 2009 was approximately $7,987,794.
There
were 35,077,189 shares of the Company’s common stock outstanding on March 22,
2010.
TABLE
OF CONTENTS
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Page
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PART
I
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ITEM
1.
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BUSINESS
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4
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ITEM
1A
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RISK
FACTORS
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11
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ITEM
1B
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UNRESOLVED
STAFF COMMENTS
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22
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ITEM
2.
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PROPERTIES
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22
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ITEM
3.
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LEGAL
PROCEEDINGS
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22
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ITEM
4.
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RESERVED
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22
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PART
II
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ITEM
5.
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MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
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22
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ITEM
6
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SELECTED
FINANCIAL DATA
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24
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ITEM
7.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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24
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ITEM
7A
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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33
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ITEM
8.
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FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
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33
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ITEM
9.
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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33
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ITEM
9A(T).
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CONTROLS
AND PROCEDURES
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34
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ITEM
9B.
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OTHER
INFORMATION
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34
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PART
III
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ITEM
10.
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DIRECTORS,
EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
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34
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ITEM
11.
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EXECUTIVE
COMPENSATION
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38
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ITEM
12.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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40
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ITEM
13.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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41
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ITEM
14.
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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42
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ITEM
15.
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EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
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43
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SIGNATURES
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45
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i
Introductory
Comment
Throughout
this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “our company,”
“Company” and “the Registrant” refer to Lixte Biotechnology Holdings, Inc.., a
Delaware corporation formerly known as SRKP 7, Inc.
FORWARD-LOOKING
STATEMENTS
This
Annual Report on Form 10-K (the “Report”) contains certain forward-looking
statements. For example, statements regarding our financial position, business
strategy and other plans and objectives for future operations, and assumptions
and predictions about future product demand, supply, manufacturing, costs,
marketing and pricing factors are all forward-looking statements. These
statements are generally accompanied by words such as “intend,” “anticipate,”
“believe,” “estimate,” “potential(ly),” “continue,” “forecast,” “predict,”
“plan,” “may,” “will,” “could,” “would,” “should,” “expect” or the negative of
such terms or other comparable terminology. We believe that the assumptions and
expectations reflected in such forward-looking statements are reasonable, based
on information available to us on the date hereof, but we cannot assure you that
these assumptions and expectations will prove to have been correct or that we
will take any action that we may presently be planning. However, these
forward-looking statements are inherently subject to known and unknown risks and
uncertainties. Actual results or experience may differ materially from those
expected or anticipated in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to,
regulatory policies, competition from other similar businesses, and market and
general policies, competition from other similar businesses, and market and
general economic factors. This discussion should be read in conjunction with the
condensed consolidated financial statements and notes thereto included in this
Report.
If
one or more of these or other risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual results may vary materially
from what we project. Any forward-looking statement you read in this Report
reflects our current views with respect to future events and is subject to these
and other risks, uncertainties and assumptions relating to our operations,
results of operations, growth strategy, and liquidity. All subsequent
forward-looking statements attributable to us or individuals acting on our
behalf are expressly qualified in their entirety by this paragraph. You should
specifically consider the factors identified in this Report, which would cause
actual results to differ before making an investment decision. We are under no
duty to update any of these forward-looking statements after the date of this
Report or to conform these statements to actual results.
GLOSSARY
The
following technical terms are used in this Report:
Assay
An assay is a method to
determine the presence, absence, or the amount of a particular substance in a
sample. Assays
of body fluids such as blood and urine can be used to detect specific products
(biomarkers)
that indicate the presence of a specific type of cancer.
Biomarker
A biomarker is a
component of a cell that is uniquely or strongly associated with a particular
feature of that cell. The detection of the biomarker in body fluid by an assay indicates that
a particular cell is very likely to be present in the body. In this Report,
“biomarkers” refer
primarily to proteins that are
uniquely produced by specific types of cancer cells or that are produced in
excess by the cancer cells compared to non-cancer cells of the same tissue or
organ.
Cancer
A disease
characterized by loss or enhancement of one or more mechanisms that regulate the
growth of cells of a specific tissue. Loss of these control mechanisms or gain
of abnormal mechanisms in a single cell that put cell growth into
overdrive allows that cell to grow, invade local tissue, and to spread to other
regions of the body. This spreading of altered cells to distant sites is the
process called metastasis.
Cell
Growth
Cell growth is the
ability of an individual cell to reproduce by dividing into two cells. During
normal development and subsequently during the life of the adult, this process
is highly controlled. Loss of this control is the distinguishing feature of
cancer cells. Although all cancer cells gain the capacity for uncontrolled
growth, in most instances they retain many of the highly specialized features
(and associated specific molecular components) that were characteristic of the
normal tissue before loss of growth control. For example, breast cancer cells
and brain cancer cells have lost control of growth and may be unrecognizable by
their appearance under the microscope but identifiable by the
presence of biomarkers specific to breast or brain cells.
CRADA
A CRADA (Cooperative
Research and Development Agreement) is a formal contractual mechanism by which a
variety of federal government agencies may agree to work collaboratively with a
non-governmental entity to study and advance a particular idea, observation, or
process under a defined plan of work.
Gene
A gene is a unit of
information that specifies the structure of one or more gene products.
Collectively, genes determine the precise composition of all molecules needed
for maintenance of the functions of life: reproduction, development,
organization, growth and metabolism. Genes are often
referred to as units of heredity because they pass on the information necessary
for all characteristics of an individual. For mammals like ourselves, one set of
genes is received from each parent.
Gene
Products
The
products of genes are the thousands of different chemical structures, called
molecules, needed for development of all cells. Most gene products are proteins.
Most proteins are enzymes, molecules that can carry out work such as digesting
and utilizing food for energy, signaling the cell to produce other gene products
in response to changing conditions in the body, and controlling cell growth. When
proteins controlling cell growth are altered, as occurs in all cancers, they
become prime candidates for biomarkers that
reveal the presence of cancer.
Glioblastoma
Multiforme (GBM)
GBM is the most
common and most aggressive type of primary human brain cancer. The name derives
from the fact that the brain cell that loses growth control and becomes a brain
cancer cell is a glial cell (glioblastoma); as the altered glial cells grow
without restraint, they take on many different shapes (multiforme). Recent
studies suggest, however, that GBMs may arise from primitive brain stem cells
rather than from glial cells.
Metastasis
Metastasis is the
process by which cancers acquire the ability to spread to other parts of the
body by entry and dissemination through the blood and/or lymph systems. The
devastating aspect of metastasis is the ability of the cancer cells to grow in a
new environment (new tissue) Examples are the metastasis of breast cancer cells
to the brain and liver and prostate cancer cells to bone.
2
Cure of
cancers is much more difficult to achieve after metastasis has
occurred. A major goal of our biomarker research is to develop assays for detection
of cancers before they have invaded extensively or metastasized,
allowing complete removal by surgery.
Mutation
A mutation is a change
in one or more building blocks of a gene. Some changes can be tolerated without
altering the integrity (function) of the product of the gene but other changes
can result in cancer.
For the
purposes of the cancer projects described in this memorandum, it is important to
distinguish between inherited mutations (inborn mutations) and acquired
(environmentally caused) mutations.
Some
inborn mutations predispose an individual to development of one or more kinds of
cancer. Because these mutations are inherited, they are present in every cell in
the body. Such mutations are responsible for the higher frequency of certain
cancers in particular families and ethnic groups. Examples are the breast cancer
predisposing genes known as BRCA I and BRCA II.
Research
on biomarkers,
however, is directed at finding the gene products (proteins) of acquired
mutations. Acquired mutations that change a single cell to a cancer cell are
present ONLY in that cell and cells arising from its uncontrolled cell growth.
If the products of the altered genes in these cancer cells are detectable in the
body, they may reveal the presence of the cancer at a stage when it is curable
by surgery.
Prognosis
Prognosis refers to
the likely course of a disease at specific stage of development. For example, a
breast or prostate cancer that is not confined to the tissue of origin, e.g. is
also present in a lymph node when first detected, has a greater likelihood of
recurrence, a worse prognosis, than if it were confined to the tissue of
origin.
Thus, the
presence of lymph node metastases is an indicator of poor
prognosis.
It is
hoped that specific biomarkers for
cancers will be found that have prognostic value. With assays for such markers,
patients with poor prognoses could consider more aggressive treatments before
obvious spread of disease and patients with good prognoses could be spared
unnecessary treatment.
Proteins
Proteins are
molecules that have many functions important to the nature and behavior of the
cell. Many proteins are enzymes that regulate and integrate a myriad of
biochemical processes essential to life.
Certain
enzymes are critical to an integrated system of cellular signaling that
regulates cell behavior in response to a constantly changing environment and
maintains the specialized nature of different types of cells. It is likely that
some biomarkers of cancers have perverted signaling functions that perpetuate
the abnormal behavior of the cancer.
Thus,
discovery of biomarkers of known function that are unique or overly abundant in
specific types of cancers may provide clues as to the biochemical
vulnerabilities of these cancers, weaknesses that can be attacked selectively by
specific classes of drugs.
3
PART
I
ITEM
1. BUSINESS
Company
Overview
We were
organized as a blank check company formed for the purpose of effecting a
business combination with an operating business. On June 30, 2006, pursuant to a
Share Exchange Agreement dated as of June 8, 2006 among us, Dr. John S. Kovach
and Lixte Biotechnology, Inc., we issued 19,021,786 shares of our common stock
to Dr. Kovach in exchange for all of the issued and outstanding shares of Lixte
Biotechnology, Inc. As a result of this transaction, Lixte is now our wholly
owned subsidiary, though from an historical perspective it was deemed to have
been the acquirer in the reverse merger and the survivor of the reorganization.
On December 7, 2006, we changed our name from SRKP 7, Inc. to Lixte
Biotechnology Holdings, Inc. Throughout this Report, when we refer to Lixte, we
are referring to Lixte Biotechnology, Inc., our operating
subsidiary.
Lixte was
created to capitalize on opportunities for the Company to develop low cost,
specific and sensitive tests for the early detection of cancers to better
estimate prognosis, to monitor treatment response, and to reveal targets for
development of more effective treatments. Over the past three and one-half
years, however, the Company has evolved into what is now primarily a cancer drug
discovery company, using biomarker technology to develop new potentially more
effective anti-cancer drugs for life-threatening diseases.
DESCRIPTION OF BUSINESS
The
Company is developing new treatments for human cancers for which better
therapies are urgently needed. The drug discovery process of Lixte is based on
discerning clues to potential new targets for cancer treatments reported in the
increasingly large body of literature characterizing the molecular variants,
which characterize human cancers. In the past decade, there has been an
unprecedented expansion in knowledge of biochemical defects in the cancer cell.
Lixte has assembled a small but intellectually diverse group which uses
information about the regulatory pathways altered in cancer cells. Lixte selects
drugs for which there are existing data suggesting that they may affect the
altered pathways of the cancer cell and may be given safely to humans. Lixte
seeks to rapidly arrive at patentable structures through analysis of the
literature rather than screening of thousands of structures for activity against
a particular biochemical pathway.
This approach has led to the
development of two classes of drugs, phosphatase inhibitors (PTase-i),
designated by the Company as the LB-100 series of compounds, and histone
deacetylase inhibitors (HDACi), designated by the Company as the LB-200 series
of compounds. The LB-100 series consists of novel structures, which have the
potential to be first in their class and the latter group contains compounds,
which have the potential to be the most effective of this class. The Company has
demonstrated that that lead compounds of both series of drugs are active against
a broad spectrum of human cancers in cell culture and, against several types of
human cancers in animal models. The research on new drug treatment was initiated
in 2006 with the National Institute of Neurologic Disorders and Stroke (NINDS),
National Institutes of Health (NIH) under a continuing Cooperative Research and
Development Agreement (CRADA). The research at NINDS is led by Dr. Zhengping
Zhuang, an internationally recognized investigator in the molecular pathology of
cancer. The initial focus of the CRADA was on the most common and uniformly
fatal brain tumor of adults, glioblastoma multiforme (GBM). The work at NIH has
now extended to the most common brain tumor of children, medulloblastoma and to
the most common cancer of children, neuroblastoma. Because of the propensity of
malignant melanoma to metastasize to the brain, recent studies have encompassed
studying the effectiveness of drugs developed for the treatment of primary brain
tumors to the treatment of melanoma as well.
4
Initial encouraging results of the use
of PTase-I (LB-100) against human GBM in a mouse model were published in the
Proceedings of the National Academy of Science (Lu et al, June 17, 2009). This
report attracted considerable attention including an invitation to submit an
article on the novel mechanisms by which this group of compounds increased
markedly the anti-cancer activity of standard widely used non-specific
chemotherapy drugs, without enhancing toxicity to normal cells. A second article
was published in a well regarded journal, Cell Cycle (Zhuang et al, Oct 15,
2009). Following this publication, several leading cancer research centers in
the United States and elsewhere have initiated studies of Lixte compounds
against a variety of other human cancer types, most notably breast cancer and
sarcomas. These studies are being done with Lixte compounds provided under
agreements, which protect the proprietary nature of the compounds, while
allowing significant expansion of the Company’s research by academic experts at
no additional expense.
The
second class of drugs (LB-200) under development by the Company are the histone
deacetylase inhibitors. Many pharmaceutical companies are also developing drugs
of this type, and two companies have an HDACi approved for clinical use, in both
cases for the treatment a type of lymphoma. Despite this significant
competition, the Company has demonstrated that its HDACi have broad activity
against many cancer types, have neuroprotective activity, and have anti-fungal
activity. In addition, these compounds have very low toxicity making them
attractive candidates for development. It may be surprising that one type of
molecule has such diverse effects but these compounds affect biochemical
processes that are fundamental to the life of the cell, whether they are cancer
cells, nerve cells, or even fungal cells. The neuroprotective activity of
Lixte’s HDACi have been demonstrated in the test tube in model systems mimicking
injury to brain cells such as occurs in stroke and Alzheimer’s disease.
Potentially, this type of protective activity may have application to a broad
spectrum of other chronic neurodegenerative diseases, including Parkinson’s
Disease and Amytrophic Lateral Sclerosis (ALS, or Lou Gehrig’s Disease). The
results of the Company’s studies done in conjunction with a neuroscientist
carrying out the work under contract were presented at the annual meeting of the
Society for Neuroscience, Chicago, Illinois, on October 17, 2009.
The
Company’s primary goal is to bring one of its lead compounds of the LB-100
series to clinical trial. In late 2009 and early 2010, the Company raised
sufficient financial resources to carry out the preclinical studies needed for a
successful application to the FDA to carry out a Phase I trial. The Company has
engaged a leading pharmaceutical company, a clinical research organization, and
a drug development company specializing in pharmacologic and toxocologic
characterization of new anticancer drugs, to oversee and carry out all studies
necessary for FDA approval to take the compounds into an initial clinical
trial.
In
addition, the Company is pursuing its collaborative work with the National
Institute of Disorders and Stroke (NINDS), National Institutes of Health (NIH)
under its ongoing Cooperative Research and Development Agreement (CRADA). This
work is focused upon increasing understanding of the mechanisms underlying the
effectiveness of the LB-100 series in enhancing the anticancer activity of
commonly used standard anticancer drugs. This work has in the past and continues
to provide insights not only as to how to use Lixte’s compounds most effectively
but also potential clues regarding possible new targets for drug discovery and
development.
Finally,
funds on hand should allow the Company to continue to grow its patent portfolio
and maintain its applications for international protection of lead compounds of
both the LB-100 and LB-200 series and to continue operations without raising
additional funds, at least, until the third quarter of 2011.
Intellectual
Property
The
Company has patent applications in seven major areas. Three of these are joint
applications with NIH and include the use of PTase-1 (LB-100 series) in the
treatment of glioblastoma multiforme (GBM), the most common and most aggressive
brain tumor of adults; the treatment of medulloblastoma, the most common brain
tumor of children; the treatment of neuroblastoma, the most common cancer of
children; and, on the mechanisms by which the PTase-1 exerts its anticancer
effects. The other four areas covered by the applications were filed solely by
the Company. These areas cover the structure, synthesis, and utility of the
Ptase-1 (LB-100) compounds and separately, for HDACi (LB-200) compounds; the use
of Lixte’ compounds as neuroprotective agents; and, the use of certain Lixte
compounds as tools in the development of human pluripotent (stem cell like)
cells for potential use as therapeutic agents.
5
The
Market
Anti-Cancer
Drugs
The
Company has developed two series of pharmacologically active drugs, the LB-100
series and the LB-200 series. The mechanism by which compounds of the LB-100
series affect cancer cell growth is different from all cancer agents currently
approved for clinical use. Lead compounds from each series have activity against
a broad spectrum of common and rarer human cancers in cell culture systems. In
addition, compounds from both series have anti-cancer activity in animal models
of glioblastoma multiforme, neuroblastoma, and medulloblastoma, all cancers of
neural tissue. Lead compounds of the LB-100 series also have activity against
melanoma, breast cancer and sarcoma in animal models and enhance the
effectiveness of commonly used anti-cancer drugs in these model systems. The
enhancement of anti-cancer activity of these anti-cancer drugs does not increase
discernable toxicity in animals. It is therefore hoped that when combined with
standard anti-cancer regimens against many tumor types, the Company’s compounds
will improve therapeutic benefit without enhancing toxicity in
humans.
If
compounds of either series are active against glioblastoma multiforme in the
clinic, the potential market for such a drug is estimated to be approximately
$800 million annually. This estimate is based on the current use and pricing of
the drug, Temozolomide. This drug is given to almost every patient with a
diagnosis of glioblastoma multiforme, some 40,000 individuals in the United
States and Europe annually. The Company’s compounds may be used in conjunction
with Temozolomide and/or following relapse after treatment with Temozolomide,
since unfortunately almost all patients with this disease relapse regardless of
therapy with current drugs. If, however, as the experimental data in model
systems suggests, the Company’s compounds are active against other tumor types
and enhance the therapeutic benefit of other standard cancer regimens for common
cancers, the Company believes that their potential market could be substantially
larger.
Diagnostic
Biomarkers
The
Company has filed patents on two biomarkers, one associated primarily with
cancers of neural tissue such as glioblastoma multiforme, and a second biomarker
that is present not only in brain cancers but also in the more common human
cancers.
Discovery
of the biomarker associated with GBMs provided the insight to the Company’s team
that led to the synthesis and development of the LB-100 and LB-200 series. Apart
from therapeutic considerations, a biomarker for GBMs reflecting the presence of
the disease in biopsies and in cerebrospinal fluid may be valuable for
confirming diagnosis and/or documenting effectiveness of treatment and
recurrence of disease. The second biomarker may be useful as a tool for
screening new compounds for anti-cancer activity in general because it appears
to be present in many human cancers.
Marketing
Plan
The
primary goal of the Company is to take LB-100 through Phase I clinical trials.
Because of the novelty and spectrum of activity of LB-100, the Company believes
it is reasonably likely it will find a partner in the pharmaceutical industry
with interest in this compound. The Company, however, would prefer to delay
partnering/licensing until the potential value of its products is augmented by
demonstrating there is no impediment to clinical evaluation and a therapeutic
dose level is determined in clinical trials. With present funding, the Company
believes it can accomplish this goal. Demonstration of clinical usefulness would
be expected to substantially increase the value of the Company’s
product.
6
Development
of biomarkers for diagnostic purposes will require a partner for development.
Resources permitting, however, the Company will develop assays for the
biomarkers through service contracts and samples of serum and/or cerebrospinal
fluid will be analyzed for the biomarker. The goal will be to show that the
biomarker(s) is present in a high percentage of samples from patients with the
same type of cancer, a requirement for a potentially useful diagnostic
test.
Research
and Development
Further
development of lead compounds from each series (LB-100 and LB-200) now requires
pharmacokinetic/pharmacodynamic characterization (how long a drug persists in
the blood and how long the drug is active at the intended target) and large
animal toxicologic evaluation under conditions meeting FDA requirements. Most
anti-cancer drugs fail in development because of unacceptable toxicity. By
analogy with mechanistically related compounds, there is good reason to believe,
however, that lead compounds of both series of drugs will be able to be given to
humans safely by routes and at doses resulting in concentration of drug
producing anti-cancer activity in animal model systems. The Company has
demonstrated that lead compounds of both types affect their intended targets at
doses that produce anti-cancer activity without discernable toxicity in animal
models.
The
Company’s most valuable resource is its scientific team, a coalition of various
experts brought together through contracts and other collaborative arrangements.
The team has expertise in cancer biology, proteomics (cancer biomarkers),
medicinal and synthetic chemistry, pharmacology, clinical oncology, and drug
evaluation. In a short period of time and at very low cost, this group has
developed lead compounds of two different classes of drugs that are poised for
development as new treatments for several types of cancer. The initial cancer
target(s) is expected to be melanoma or glioblastoma multiforme. The choice will
depend in part upon pre-IND discussions with the FDA.
Product
Overview
The
Company’s products will derive directly from its intellectual property,
consisting of patent applications. These patents now cover sole rights to the
composition and synthesis of the LB-100 and LB-200 series of drugs. Joint patent
applications with NIH have been filed for the treatment of glioblastoma
multiforme, medulloblastoma, and neuroblastoma. The Company has also filed
claims for the use of certain homologs of both series of drugs for the potential
treatment on neurodegenerative diseases such as Alzheimer’s Disease and
Parkinson’s Disease, Amyotrophic Lateral Sclerosis (ALS, or Lou Gehrig’s
Disease), stroke, and traumatic brain injury and of homologs of the LB-200
series for treatment of serious systemic fungal infections and for the treatment
of common fungal infections of the skin and nails. Other claims cover biomarkers
uniquely associated with specific types of cancer that may provide the bases for
assays suitable for cancer detection and patents for development of a tool for
screening new compounds for anti-cancer activity.
The
Company believes that there are four main markets for potential products that it
may develop.
1. Improved Anti-Cancer Treatments.
Improved chemotherapy regimens for cancers not curable by surgery or
radiation. This is the primary focus of the Company.
2. Improved Anti-Fungal Treatments.
New drug treatments for the management of life-threatening fungal
infections in immuno-suppressed patients such as those with HIV-AIDS or
undergoing bone marrow transplantation are needed due to the constant
development of drug resistance in these organisms. More effective and less toxic
drugs are also needed for the management of skin and particularly nail fungi
that affect tens of millions of people worldwide. The Company is actively
evaluating the activity of several compounds against different fungal
pathogens.
7
3. Treatments for Neurodegenerative
Diseases. Most experts believe that at present there are no significantly
effective drugs available for the delay of progression as well as prevention of
the common neurodegenerative diseases, including Alzheimer’s Disease,
Parkinson’s Disease, and Amyotrophic Lateral Sclerosis Disease (ALS, or Lou
Gehrig’s Disease), among a host of rarer chronic diseases of the brain. The
Company is exploring mechanisms to evaluate its compounds for these activities
with experts in the field, in academic or other not-for–profit
settings.
4. Biomarker Assays for Diagnosis,
Prognosis, and Assessing Treatment Benefit. Improved assays for
biomarkers of specific cancers in the body fluids, primarily blood, for the
diagnosis of cancers at stages when cure is possible through surgery and/or
radiotherapy. Such assays might also be useful for assessing therapeutic
effectiveness of treatment before gross reappearance of disease; and, assays for
the molecular classification of otherwise indistinguishable tumor types would be
helpful for selection of treatment and also potentially for estimation of
prognosis. Resources permitting, the Company will determine whether the
biomarkers of interest are present in the serum (other fluids) in most if not
all of a small number of patients with the same cancer and will explore the
interest of a large diagnostic company to undertake clinical development.
Development of biomarkers for useful clinical assays is a complex and expensive
process.
Product
Development
The
Company will become subject to FDA regulations at such time as it pursues
development of clinical trials. Additionally, any product for which the Company
obtains marketing approval, along with the manufacturing processes,
post-approval clinical data and promotional activities for such product, will be
subject to continual review and periodic inspections by the FDA and other
regulatory bodies. Even if regulatory approval of a product is granted, the
approval may be subject to limitations on the indicated uses for which the
product may be marketed or contain requirements for costly post-marketing
testing and surveillance to monitor the safety or efficacy of the product. Later
discovery of previously unknown problems with the Company’s products, including
unanticipated adverse events or adverse events of unanticipated severity or
frequency, manufacturer or manufacturing processes, or failure to comply with
regulatory requirements, may result in restrictions on such products or
manufacturing processes, withdrawal of the products from the market, voluntary
or mandatory recall, fines, suspension of regulatory approvals, product
seizures, injunctions or the imposition of civil or criminal
penalties.
Competition
The life
sciences industry is highly competitive and subject to rapid and profound
technological change. The Company believes that several companies are
investigating biomarkers for every human cancer. These companies include firms
seeking a better understanding of molecular variability in human brain tumors
with the objective to be able to use such information to design better
treatments. The Company’s present and potential competitors include major
pharmaceutical companies, as well as specialized biotechnology and life sciences
firms in the United States and in other countries. Most of these companies have
considerably greater financial, technical and marketing resources than the
Company does. Additional mergers and acquisitions in the pharmaceutical and
biotechnology industries may result in even more resources being concentrated in
the Company’s competitors. The Company’s existing or prospective competitors may
develop processes or products that are more effective than the Company’s or be
more effective at implementing their technologies to develop commercial products
faster. The Company’s competitors may succeed in obtaining patent protection
and/or receiving regulatory approval for commercializing products before the
Company does. Developments by the Company’s competitors may render the Company’s
product candidates obsolete or non-competitive.
The
Company also experiences competition from universities and other research
institutions, and the Company is likely to compete with others in acquiring
technology from those sources. There can be no assurance that others will not
develop technologies with significant advantages over those that the Company is
seeking to develop. Any such development could harm the Company’s
business.
The
Company faces competition from other companies seeking to identify and
commercialize cancer biomarkers. The Company also competes with universities and
other research institutions engaged in research in these areas. Many of the
Company’s competitors have greater technical and financial resources than the
Company does.
8
The
Company’s ability to compete successfully is based on numerous factors,
including:
·
|
the
cost-effectiveness of any product that the Company ultimately
commercializes relative to competing
products;
|
·
|
the
ease of use and ready availability of any product that the Company brings
to market;
|
·
|
the
accuracy of a diagnostic test designed by the Company in detecting
cancers, including overcoming the propensity for “false positive” results;
and
|
·
|
the
relative speed with which the Company is able to bring any product
resulting from its research to market in its target
markets.
|
If the
Company is unable to distinguish its products from competing products, or if
competing products reach the market first, the Company may be unable to compete
successfully with current or future competitors.
Employees
As of
December 31, 2009, the Company had no full-time employees. Dr. Kovach is a
Professor (part-time) in the Department of Preventive Medicine at SUNY, in Stony
Brook, New York. He received approvals from the School of Medicine of Stony
Brook University and from the New York State Ethics Commission to operate the
Company and to hold greater than 5% of the Company’s outstanding
shares.
The
Company’s investment commitments in the research efforts pursuant to the CRADA
fund two full-time technical assistants who work under the supervision of Dr.
Zhuang on the aims of the CRADA. Dr. Kovach devotes approximately 20% of his
efforts per year to research planning and design and monitoring the research
progress under the CRADA. Dr. Kovach’s contributions are made outside of his
academic responsibilities. He directs, coordinates and manages scientific and
business development with the advice of the Company’s Board, the advisory
committee, and a consultant with expertise in corporate development. The Company
is considering adding another board member with specific expertise in cancer
biotechnology development and a Chief Operating Officer, at least part-time, to
assist in management once an IND is approved.
Government
Regulation
At its
present stage of development, the Company’s business is not subject to any
specific government regulation with respect to its ongoing research and plan
service agreement. The Company’s only collaborator at present is National
Institute of Neurological Diseases and Stroke (NINDS), National Institutes of
Health. This collaboration is defined in CRADA 2165 under which NINDS evaluates
compounds for their ability to inhibit the growth of brain tumor cells. The
NINDS laboratory that is carrying out this activity is a research laboratory
that operates in compliance with various federal and state's statutes and
regulations, including OSHA. All activities of this laboratory are monitored by
the compliance office of NINDS. There are no other regulations affecting the
pursuit of the goals of the business.
Studies
done under the CRADA are carried out in compliance with applicable Statutes,
Executive Capital Orders, HHS regulations and all FDA, CDC, and NIH policies as
specified in Article 13, 13.1 and 13.2, of the PHS CRADA
agreement.
9
The
Company’s business will become subject to the regulations of the FDA when it
begins to pursue development of clinical trials. Clinical trials are research
studies to answer specific questions about new therapies or new ways of using
known treatments. Clinical trials determine whether new drugs or treatments are
both safe and effective and the FDA has determined that carefully conducted
clinical trials are the fastest and safest way to find treatment that work in
people.
The
ultimate objective of the CRADA is to identify, characterize, and bring to
clinical trial regimens for the treatment of human brain tumors (GBMs). The
Company estimates that it is at least one year from beginning a clinical trial.
The first clinical trial would be sponsored by the Company at a U.S. cancer
center experienced in such studies. The Company will file and obtain approval
from the FDA of an Investigational New Drug Application (IND). At this point,
the Company would become subject to FDA regulation as it sought to obtain an IND
for clinical evaluation of a therapeutic regimen with the long-range goal of
receiving FDA approval of the drug for commercial use. Approval of an IND from
the FDA is the process that triggers FDA review and oversight, as federal law
requires that a drug be the subject of an approved marketing application before
it is transported to clinical investigations, unless exempted. The IND is the
means through which the Company would obtain such exemption. During a new drug's
early preclinical development, the Company’s primary goal is to determine if the
product is reasonably safe for initial use in humans, and if the compound
exhibits pharmacological activity that justifies commercial development. When a
product is identified as a viable candidate for further development, the Company
would then focus on collecting the data and information necessary to establish
that the product will not expose humans to unreasonable risks when used in
limited, early-stage clinical studies. The FDA's role in the development of a
new drug begins when the Company, having screened the new molecule for
pharmacological activity and acute toxicity potential in animals, tests the
drug’s diagnostic or therapeutic potential in humans. The legal status of the
molecule changes under the Federal Food, Drug, and Cosmetic Act and becomes a
new drug subject to specific requirements of the drug regulatory system. Once
the IND is submitted, the Company must wait 30 calendar days before initiating
any clinical trials. During this time, the FDA has an opportunity to review the
IND for safety to assure that research subjects will not be subjected to
unreasonable risk.
The first
phase of clinical trials, Phase I trials, are the initial studies to determine
the metabolism and pharmacologic action of drugs in humans and side effects
associated with increasing doses, and to gain early evidence of effectiveness.
Patients entering such trials are those for whom no means of therapy is known to
be associated with benefit. Such studies, including a proposal for the conduct
of the clinical trial, require approval by the FDA.
The FDA
also requires that an independent review body consider the benefits and risks of
a clinical trial and grant approval for the proposed study including selecting
of initial doses, plans for escalation of dose, plans for modification of dose
if toxicity is encountered, plans for monitoring the well being of individuals
participating in the study and for defining and measuring to the extent possible
any untoward effects related to drug administration. Serious adverse effects
such as life-threatening toxicities and death are immediately reportable to the
review body and to the FDA. To minimize risk when studying a new drug, the
initial dose is well below that expected to cause any toxicity. No more than
three patients are entered at a given dose. In general, dose is not escalated
within patients. Once safety is established by the absence of toxicity or low
toxicity in a group of three patients, a planned higher dose is then evaluated
in a subsequent group of three individuals and so on until dose-limiting
toxicity is encountered. The dose level producing definite but acceptable
toxicity is then selected as the dose level to be evaluated in Phase II trials.
Thus, the goal of Phase I studies is to determine the appropriate dose level for
evaluation of drug efficacy in patients with the same type of tumor at
comparable stages of progression for whom no beneficial treatment is
established. The duration of a Phase I trial is generally from 4 to 9
months.
In
addition to regulations imposed by the FDA, depending on the Company’s future
activities, the Company may become subject to regulation under various federal
and state statutes and regulations, such as the Occupational Safety and Health
Act, the Environmental Protection Act, the Toxic Substances Control Act, the
Research Conservation and Recovery Act, national restrictions on technology
transfer, and import, export and customs regulations. From time to time, other
federal agencies and congressional committees have indicated an interest in
implementing further regulation of biotechnology applications. The Company is
not able to predict whether any such regulations will be adopted or whether, if
adopted, such regulations will apply to the Company’s business, or whether the
Company or its collaborators would be able to comply with any applicable
regulations.
10
In
addition, as the Company intends to market its products in international
markets, the Company may be required to obtain separate regulatory approvals
from the European Union and many other foreign jurisdictions. Approval by the
FDA does not ensure approval by regulatory authorities in other countries, and
approval by one foreign regulatory authority does not ensure approval by
regulatory authorities in other foreign countries or by the FDA. The Company may
not be able to file for regulatory approvals and may not receive necessary
approvals to commercialize its products in any market. As the Company is
currently in the development stage, the Company cannot predict the impact on it
from any such regulations.
ITEM
1A RISK
FACTORS
Please
consider the following risk factors together with the other information
presented in this Report, including the financial statements and the notes
thereto.
Risks
Related to Business
We
are engaged in early stage research and as such may not be successful in our
efforts to develop a portfolio of commercially viable products.
A key
element of our strategy is to discover, develop and commercialize a portfolio of
new drugs and diagnostic tests. We are seeking to do so through our internal
research programs. A significant portion of the research that we are conducting
involves new and unproven technologies. Research programs to identify new
disease targets and product candidates require substantial technical, financial
and human resources whether or not any candidates or technologies are ultimately
identified. Our research programs may initially show promise in identifying
potential product candidates, yet fail to yield product candidates for clinical
development for any of the following reasons:
·
|
the
research methodology used may not be successful in identifying potential
product candidates. However, the Company has identified two promising lead
candidate compounds which have activity in animal models, one of which,
LB-100, is proceeding through pre-clinical evaluation needed for
submission of a request (IND) to the FDA to conduct a clinical
trial;
|
·
|
product
candidates for diagnostic tests may on further study be shown to not
obtain an acceptable level of accuracy;
or
|
·
|
product
candidates for drugs may on further study be shown to have harmful side
effects or other characteristics that indicate they are unlikely to be
effective drugs.
|
Although
we have identified one potential product candidate in the area of brain tumors,
the work needed to demonstrate its commercial viability is at a very early
stage. The follow-up research needed to demonstrate the viability of the product
is costly and time-consuming and may reveal that the product does not function
as expected or that it is otherwise not commercially viable.
If we are
unable to discover suitable potential product candidates, develop additional
delivery technologies through internal research programs or in-license suitable
products or delivery technologies on acceptable business terms, our business
prospects will suffer.
11
Our
auditors have included a going concern assumption in their opinion; we do not
expect to obtain any revenues for several years and there is no assurance that
we will ever generate revenue or be profitable.
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. Furthermore, the Company has experienced recurring losses and negative
operating cash flows since inception, and has financed its working capital
requirements through the recurring sale of its equity securities. As a result,
the Company’s independent registered public accounting firm, in their report on
the Company’s 2009 consolidated financial statements, have raised substantial
doubt about the Company’s ability to continue as a going concern. The Company
raised $500,000 in November 2009, $1,787,500 in January 2010 (of which
$1,200,000 had been advanced to the Company at December 31, 2009), and $500,000
in February 2010, all through the sale of its securities to fund its business
activities. As a result, the Company believes that its current resources are
adequate to fund operations during 2010 and at a minimum through mid-2011, at a
level that will allow the continuation of the Company’s two drug development
programs currently in process and completion of the initial Phase 1 study of
LB-100, including initiation of a Phase I clinical trial if no unexpected delays
occur in obtaining FDA approval in late 2010 or early 2011.
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, and 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.
The
Company does not have sufficient resources to fully develop and commercialize
any products that may arise from its research. Accordingly, the Company will
need to raise additional funds in 2011 to satisfy its future working capital
requirements.
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 uncertainty about the Company’s
ability to fully implement its operating plan beyond July 2011. 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.
If
we were to materially breach our present collaboration agreement or any future
license or collaboration agreements, we could lose our ability to commercialize
the related technologies, and our business could be materially and adversely
affected.
We are
party to a research collaboration agreement and intend to enter into
intellectual property licenses and agreements, all of which will be integral to
our business. These licenses and agreements impose various research,
development, commercialization, sublicensing, royalty, indemnification,
insurance and other obligations on us. If we or our collaborators fail to
perform under these agreements or otherwise breach obligations imposed by them,
we could lose intellectual property rights that are important to our
business.
We
may not be successful in establishing additional strategic collaborations, which
could adversely affect our ability to develop and commercialize
products.
In the
future, we may seek opportunities to establish new collaborations, joint
ventures and strategic collaborations for the development and commercialization
of products we discover. We face significant competition in seeking appropriate
collaborators and the negotiation process is time-consuming and complex. We may
not be successful in our efforts to establish additional strategic
collaborations or other alternative arrangements. Even if we are successful in
our efforts to establish a collaboration or agreement, the terms that we
establish may not be favorable to us. Finally, such strategic alliances or other
arrangements may not result in successful products and associated
revenue.
12
The
life sciences industry is highly competitive and subject to rapid technological
change.
The life
sciences industry is highly competitive and subject to rapid and profound
technological change. Our present and potential competitors include major
pharmaceutical companies, as well as specialized biotechnology and life sciences
firms in the United States and in other countries. Most of these companies have
considerably greater financial, technical and marketing resources than we do.
Additional mergers and acquisitions in the pharmaceutical and biotechnology
industries may result in even more resources being concentrated in our
competitors. Our existing or prospective competitors may develop processes or
products that are more effective than ours or be more effective at implementing
their technologies to develop commercial products faster. Our competitors may
succeed in obtaining patent protection and/or receiving regulatory approval for
commercializing products before us. Developments by our competitors may render
our product candidates obsolete or non-competitive.
We also
experience competition from universities and other research institutions, and we
are likely to compete with others in acquiring technology from those sources.
There can be no assurance that others will not develop technologies with
significant advantages over those that we are seeking to develop. Any such
development could harm our business.
We
may be unable to compete successfully with our competitors.
We face
competition from other companies seeking to identify and commercialize cancer
biomarkers. We also compete with universities and other research institutions
engaged in research in these areas. Many of our competitors have greater
technical and financial resources than we do.
Our
ability to compete successfully is based on numerous factors,
including:
·
|
the
cost-effectiveness of any product we ultimately commercialize relative to
competing products;
|
·
|
the
ease of use and ready availability of any product we bring to
market;
|
·
|
the
accuracy of a diagnostic test designed by us in detecting cancers,
including overcoming the propensity for “false positive” results;
and
|
·
|
the
relative speed with which we are able to bring any product resulting from
our research to market in our target
markets.
|
If we are
unable to distinguish our products from competing products, or if competing
products reach the market first, we may be unable to compete successfully with
current or future competitors. This would cause our revenues to decline and
affect our ability to achieve profitability.
We
depend on certain key scientific personnel for our success who do not work full
time for us. The loss of any such personnel could adversely affect our business,
financial condition and results of operations.
Our
success depends on the continued availability and contributions of our Chief
Executive Officer and founder, Dr. John S. Kovach, as well as the continued
availability and contributions of Dr. Zhengping Zhuang at the NIH. In
particular, Dr. Kovach is 73 years old, and, because of his arrangement with the
State University of New York, does not devote his full time to us, although Dr.
Kovach generally devotes a minimum of twenty hours a week to our business. The
loss of services of any of these persons could delay or reduce our product
development and commercialization efforts. Furthermore, recruiting and retaining
qualified scientific personnel to perform future research and development work
will be critical to our success. The loss of members of our scientific
personnel, or our inability to attract or retain other qualified personnel or
advisors, could significant weaken our management, harm our ability to compete
effectively and harm our business.
13
Our
key personnel are involved in other business activities and may face a conflict
in selecting between their other business interests and our
business.
Dr. John
Kovach, our Chief Executive Officer, also is a Professor (part-time) in the
Department of Preventive Medicine at Stony Brook University, New York. He may
also become involved in the future with other business opportunities, which may
become available. Accordingly, our key personnel may face a conflict in
selecting between us and their other business interests. We have not formulated
a policy for the resolution of such conflicts. Dr. Zhengping Zhuang is a
full-time employee of NIH. He participates with the Company under a CRADA with
NIH that defines the scope of his collaboration, and he does not face a conflict
of interest.
We
expect to rely heavily on third parties for the conduct of clinical trials of
our product candidates. If these clinical trials are not successful, or if we or
our collaborators are not able to obtain the necessary regulatory approvals, we
will not be able to commercialize our product candidates.
In order
to obtain regulatory approval for the commercial sale of our product candidates,
we and our collaborators will be required to complete extensive preclinical
studies as well as clinical trials in humans to demonstrate to the FDA and
foreign regulatory authorities that our product candidates are safe and
effective.
Dr.
Kovach is experienced in the design and conduct of early clinical cancer trials,
having been the lead investigator for a National Cancer Institute Phase I
contract for ten years at the Mayo Clinic, Rochester, Minnesota. Lixte, however,
has no experience in conducting clinical trials and expects to rely heavily on
collaborative partners and contract research organizations for their performance
and management of clinical trials of our product candidates.
Our
products under development may not be effective in treating any of our targeted
disorders or may prove to have undesirable or unintended side effects,
toxicities or other characteristics that may prevent or limit their commercial
use. Institutional review boards or regulators, including the FDA, may hold,
suspend or terminate our clinical research or the clinical trials of our product
candidates for various reasons, including non-compliance with regulatory
requirements or if, in their opinion, the participating subjects are being
exposed to unacceptable health risks. Additionally, the failure of third parties
conducting or overseeing the operation of the clinical trials to perform their
contractual or regulatory obligations in a timely fashion could delay the
clinical trials. Failure of clinical trials can occur at any stage of testing.
Any of these events would adversely affect our ability to market a product
candidate.
The
development process necessary to obtain regulatory approval is lengthy, complex
and expensive. If we and our collaborative partners do not obtain necessary
regulatory approvals, then our business would not be successful and the market
price of our common stock would be expected to decline
substantially.
To the
extent that we, or our collaborative partners, are able to successfully advance
a product candidate through the clinic, we, or such partner, will be required to
obtain regulatory approval prior to marketing and selling such product. The
process of obtaining FDA and other required regulatory approvals is expensive.
The time required for FDA and other approvals is uncertain and typically takes a
number of years, depending on the complexity and novelty of the
product.
Any
regulatory approval to market a product may be subject to limitations on the
indicated uses for which we, or our collaborative partners, may market the
product. These limitations may restrict the size of the market for the product
and affect reimbursement by third-party payors. In addition, regulatory agencies
may not grant approvals on a timely basis or may revoke or significantly modify
previously granted approvals.
14
We, or
our collaborative partners, also are subject to numerous foreign regulatory
requirements governing the manufacturing and marketing of our potential future
products outside of the United States. The approval procedure varies among
countries, additional testing may be required in some jurisdictions, and the
time required to obtain foreign approvals often differs from that required to
obtain FDA approvals. Moreover, approval by the FDA does not ensure approval by
regulatory authorities in other countries, and vice versa.
As a
result of these factors, we or our collaborators may not successfully begin or
complete clinical trials in the time periods estimated, if at all. Moreover, if
we or our collaborators incur costs and delays in development programs or fail
to successfully develop and commercialize products based upon our technologies,
we may not become profitable and our stock price could decline.
Even
if our products are approved by regulatory authorities, if we fail to comply
with ongoing regulatory requirements, or if we experience unanticipated problems
with our products, these products could be subject to restrictions or withdrawal
from the market.
Any
product for which we obtain marketing approval, along with the manufacturing
processes, post-approval clinical data and promotional activities for such
product, will be subject to continual review and periodic inspections by the FDA
and other regulatory bodies. Even if regulatory approval of a product is
granted, the approval may be subject to limitations on the indicated uses for
which the product may be marketed or contain requirements for costly
post-marketing testing and surveillance to monitor the safety or efficacy of the
product. Later discovery of previously unknown problems with our products,
including unanticipated adverse events or adverse events of unanticipated
severity or frequency, manufacturer or manufacturing processes, or failure to
comply with regulatory requirements, may result in restrictions on such products
or manufacturing processes, withdrawal of the products from the market,
voluntary or mandatory recall, fines, suspension of regulatory approvals,
product seizures, injunctions or the imposition of civil or criminal
penalties.
Failure
to obtain regulatory approval in foreign jurisdictions will prevent us from
marketing our products abroad.
We intend
to market our products in international markets. In order to market our products
in the European Union and many other foreign jurisdictions, we must obtain
separate regulatory approvals. The approval procedure varies among countries and
can involve additional testing, and the time required to obtain approval may
differ from that required to obtain FDA approval. The foreign regulatory
approval process may include all of the risks associated with obtaining FDA
approval. We may not obtain foreign regulatory approvals on a timely basis, if
at all. Approval by the FDA does not ensure approval by regulatory authorities
in other countries, and approval by one foreign regulatory authority does not
ensure approval by regulatory authorities in other foreign countries or by the
FDA. We may not be able to file for regulatory approvals and may not receive
necessary approvals to commercialize our products in any market.
We
are subject to uncertainty relating to health care reform measures and
reimbursement policies which, if not favorable to our product candidates, could
hinder or prevent our product candidates’ commercial success.
The
continuing efforts of the government, insurance companies, managed care
organizations and other payors of health care costs to contain or reduce costs
of health care may adversely affect:
·
|
our
ability to generate revenues and achieve
profitability;
|
·
|
the
future revenues and profitability of our potential customers, suppliers
and collaborators; and
|
15
·
|
the
availability of capital.
|
In
certain foreign markets, the pricing of prescription pharmaceuticals is subject
to government control. In the United States, given recent federal and state
government initiatives directed at lowering the total cost of health care, the
U.S. Congress and state legislatures will likely continue to focus on health
care reform, the cost of prescription pharmaceuticals and on the reform of the
Medicare and Medicaid systems. While we cannot predict the effects of the
implementation of any new legislation or whether any current legislative or
regulatory proposals affecting our business will be adopted, the implementation
of new legislation or the announcement or adoption of current proposals could
have a material and adverse effect on our business, financial condition and
results of operations.
Our
ability to commercialize our product candidates successfully will depend in part
on the extent to which governmental authorities, private health insurers and
other organizations establish appropriate reimbursement levels for the cost of
our products and related treatments. Third-party payors are increasingly
challenging the prices charged for medical products and services. Also, the
trend toward managed health care in the United States, which could significantly
influence the purchase of health care services and products, as well as
legislative proposals to reform health care or reduce government insurance
programs, may result in lower prices for our product candidates or exclusion of
our product candidates from reimbursement programs. The cost containment
measures that health care payors and providers are instituting and the effect of
any health care reform could materially and adversely affect our results of
operations.
If
physicians and patients do not accept the products that we may develop, our
ability to generate product revenue in the future will be adversely
affected.
The
product candidates that we may develop may not gain market acceptance among
physicians, healthcare payors, patients and the medical community. This will
adversely affect our ability to generate revenue. Market acceptance of and
demand for any product that we may develop will depend on many factors,
including:
·
|
our
ability to provide acceptable evidence of safety and
efficacy;
|
·
|
convenience
and ease of administration;
|
·
|
prevalence
and severity of adverse side
effects;
|
·
|
availability
of alternative treatments or diagnostic
tests;
|
·
|
cost
effectiveness;
|
·
|
effectiveness
of our marketing strategy and the pricing of any product that we may
develop;
|
·
|
publicity
concerning our products or competitive products;
and
|
·
|
our
ability to obtain third-party coverage or
reimbursement.
|
We
face the risk of product liability claims and may not be able to obtain
insurance.
Our
business exposes us to the risk of product liability claims that is inherent in
the testing, manufacturing, and marketing of drugs and related devices. Although
we will obtain product liability and clinical trial liability insurance when
appropriate, this insurance is subject to deductibles and coverage limitations.
We may not be able to obtain or maintain adequate protection against potential
liabilities. In addition, if any of our product candidates are approved for
marketing, we may seek additional insurance coverage. If we are unable to obtain
insurance at acceptable cost or on acceptable terms with adequate coverage or
otherwise protect against potential product liability claims, we will be exposed
to significant liabilities, which may harm our business. These liabilities could
prevent or interfere with our product commercialization efforts. Defending a
suit, regardless of merit, could be costly, could divert management attention
and might result in adverse publicity or reduced acceptance of our products in
the market.
16
We
cannot be certain we will be able to obtain patent protection to protect our
product candidates and technology.
We cannot
be certain that any patent or patents will be issued. If a third party has also
filed a patent application relating to an invention claimed by us or our
licensors, we may be required to participate in an interference proceeding
declared by the U.S. Patent and Trademark Office to determine priority of
invention, which could result in substantial uncertainties and cost for us, even
if the eventual outcome is favorable to us. The degree of future protection for
our proprietary rights is uncertain. For example:
·
|
we
or our licensors might not have been the first to make the inventions
covered by our pending or future patent
applications;
|
·
|
we
or our licensors might not have been the first to file patent applications
for these inventions;
|
·
|
others
may independently develop similar or alternative technologies or duplicate
any of our technologies;
|
·
|
it
is possible that our patent applications will not result in an issued
patent or patents, or that the scope of protection granted by any patents
arising from our patent applications will be significantly narrower than
expected;
|
·
|
any
patents under which we hold ultimate rights may not provide us with a
basis for commercially-viable products, may not provide us with any
competitive advantages or may be challenged by third parties as not
infringed, invalid, or unenforceable under United States or foreign
laws;
|
·
|
any
patent issued to us in the future or under which we hold rights may not be
valid or enforceable; or
|
·
|
we
may develop additional proprietary technologies that are not patentable
and which may not be adequately protected through trade secrets; for
example if a competitor independently develops duplicative, similar, or
alternative technologies.
|
If
we are not able to protect and control our unpatented trade secrets, know-how
and other technological innovation, we may suffer competitive harm.
We also
rely on proprietary trade secrets and unpatented know-how to protect our
research and development activities, particularly when we do not believe that
patent protection is appropriate or available. However, trade secrets are
difficult to protect. We will attempt to protect our trade secrets and
unpatented know-how by requiring our employees, consultants and advisors to
execute a confidentiality and non-use agreement. We cannot guarantee that these
agreements will provide meaningful protection, that these agreements will not be
breached, that we will have an adequate remedy for any such breach, or that our
trade secrets will not otherwise become known or independently developed by a
third party. Our trade secrets, and those of our present or future collaborators
that we utilize by agreement, may become known or may be independently
discovered by others, which could adversely affect the competitive position of
our product candidates.
17
We
may incur substantial costs enforcing our patents, defending against third-party
patents, invalidating third-party patents or licensing third-party intellectual
property, as a result of litigation or other proceedings relating to patent and
other intellectual property rights.
We may
not have rights under some patents or patent applications that may cover
technologies that we use in our research, drug targets that we select, or
product candidates that we seek to develop and commercialize. Third parties may
own or control these patents and patent applications in the United States and
abroad. These third parties could bring claims against us or our collaborators
that would cause us to incur substantial expenses and, if successful against us,
could cause us to pay substantial damages. Further, if a patent infringement
suit were brought against us or our collaborators, we or they could be forced to
stop or delay research, development, manufacturing or sales of the product or
product candidate that is the subject of the suit. We or our collaborators
therefore may choose to seek, or be required to seek, a license from the
third-party and would most likely be required to pay license fees or royalties
or both. These licenses may not be available on acceptable terms, or at all.
Even if we or our collaborators were able to obtain a license, the rights may be
nonexclusive, which would give our competitors access to the same intellectual
property. Ultimately, we could be prevented from commercializing a product, or
forced to cease some aspect of our business operations, as a result of patent
infringement claims, which could harm our business.
There has
been substantial litigation and other proceedings regarding patent and other
intellectual property rights in the pharmaceutical and biotechnology industries.
Although we are not currently a party to any patent litigation or any other
adversarial proceeding, including any interference proceeding declared before
the United States Patent and Trademark Office, regarding intellectual property
rights with respect to our products and technology, we may become so in the
future. We are not currently aware of any actual or potential third party
infringement claim involving our products. The cost to us of any patent
litigation or other proceeding, even if resolved in our favor, could be
substantial. The outcome of patent litigation is subject to uncertainties that
cannot be adequately quantified in advance, including the demeanor and
credibility of witnesses and the identity of the adverse party, especially in
biotechnology related patent cases that may turn on the testimony of experts as
to technical facts upon which experts may reasonably disagree. Some of our
competitors may be able to sustain the costs of such litigation or proceedings
more effectively than we can because of their substantially greater financial
resources. If a patent or other proceeding is resolved against us, we may be
enjoined from researching, developing, manufacturing or commercializing our
products without a license from the other party and we may be held liable for
significant damages. We may not be able to obtain any required license on
commercially acceptable terms or at all.
Uncertainties
resulting from the initiation and continuation of patent litigation or other
proceedings could harm our ability to compete in the marketplace. Patent
litigation and other proceedings may also absorb significant management
time.
If
we are unable to protect our intellectual property rights, our competitors may
develop and market products with similar features that may reduce demand for our
potential products.
The
following factors are important to our success:
·
|
receiving
patent protection for our product
candidates;
|
·
|
preventing
others from infringing our intellectual property rights;
and
|
·
|
maintaining
our patent rights and trade
secrets.
|
We will
be able to protect our intellectual property rights in patents and trade secrets
from unauthorized use by third parties only to the extent that such intellectual
property rights are covered by valid and enforceable patents or are effectively
maintained as trade secrets.
18
Because
issues of patentability involve complex legal and factual questions, the
issuance, scope and enforceability of patents cannot be predicted with
certainty. Patents, if issued, may be challenged, invalidated or circumvented.
U.S. patents and patent applications may also be subject to interference
proceedings, and U.S. patents may be subject to reexamination proceedings in the
U.S. Patent and Trademark Office and foreign patents may be subject to
opposition or comparable proceedings in corresponding foreign patent offices,
which proceedings could result in either loss of the patent or denial of the
patent application or loss or reduction in the scope of one or more of the
claims of the patent or patent application. In addition, such interference,
reexamination and opposition proceedings may be costly. Thus, any patents that
we own or license from others may not provide any protection against
competitors. Furthermore, an adverse decision in an interference proceeding can
result in a third-party receiving the patent rights sought by us, which in turn
could affect our ability to market a potential product to which that patent
filing was directed. Our pending patent applications, those that we may file in
the future, or those that we may license from third parties may not result in
patents being issued. If issued, they may not provide us with proprietary
protection or competitive advantages against competitors with similar
technology. Furthermore, others may independently develop similar technologies
or duplicate any technology that we have developed. Many countries, including
certain countries in Europe, have compulsory licensing laws under which a patent
owner may be compelled to grant licenses to third parties. For example,
compulsory licenses may be required in cases where the patent owner has failed
to “work” the invention in that country, or the third-party has patented
improvements. In addition, many countries limit the enforceability of patents
against government agencies or government contractors. In these countries, the
patent owner may have limited remedies, which could materially diminish the
value of the patent. Moreover, the legal systems of certain countries,
particularly certain developing countries, do not favor the aggressive
enforcement of patent and other intellectual property protection, which makes it
difficult to stop infringement.
In
addition, our ability to enforce our patent rights depends on our ability to
detect infringement. It is difficult to detect infringers who do not advertise
the compounds that are used in their products. Any litigation to enforce or
defend our patent rights, even if we prevail, could be costly and time-consuming
and would divert the attention of management and key personnel from business
operations.
We will
also rely on trade secrets, know-how and technology, which are not protected by
patents, to maintain our competitive position. We will seek to protect this
information by entering into confidentiality agreements with parties that have
access to it, such as strategic partners, collaborators, employees and
consultants. Any of these parties may breach these agreements and disclose our
confidential information or our competitors might learn of the information in
some other way. If any trade secret, know-how or other technology not protected
by a patent were disclosed to, or independently developed by, a competitor, our
business, financial condition and results of operations could be materially
adversely affected.
If
our third-party manufacturers’ facilities do not follow current good
manufacturing practices, our product development and commercialization efforts
may be harmed.
There are
a limited number of manufacturers that operate under the FDA’s and European
Union’s good manufacturing practices regulations and are capable of
manufacturing products. Third-party manufacturers may encounter difficulties in
achieving quality control and quality assurance and may experience shortages of
qualified personnel. A failure of third-party manufacturers to follow current
good manufacturing practices or other regulatory requirements and to document
their adherence to such practices may lead to significant delays in the
availability of products for commercial use or clinical study, the termination
of, or hold on, a clinical study, or may delay or prevent filing or approval of
marketing applications for our products. In addition, we could be subject to
sanctions being imposed on us, including fines, injunctions and civil penalties.
Changing manufacturers may require additional clinical trials and the
revalidation of the manufacturing process and procedures in accordance with FDA
mandated current good manufacturing practices and will require FDA approval.
This revalidation may be costly and time consuming. If we are unable to arrange
for third-party manufacturing of our products, or to do so on commercially
reasonable terms, we may not be able to complete development or marketing of our
products.
19
If
we fail to obtain an adequate level of reimbursement for our products by
third-party payors, there may be no commercially viable markets for our products
or the markets may be much smaller than expected.
The
availability and levels of reimbursement by governmental and other third-party
payors affect the market for our products. The efficacy, safety and
cost-effectiveness of our products as well as the efficacy, safety and
cost-effectiveness of any competing products will determine the availability and
level of reimbursement. These third-party payors continually attempt to contain
or reduce the costs of healthcare by challenging the prices charged for
healthcare products and services. In certain countries, particularly the
countries of the European Union, the pricing of prescription pharmaceuticals is
subject to governmental control. In these countries, pricing negotiations with
governmental authorities can take six to twelve months or longer after the
receipt of regulatory marketing approval for a product. To obtain reimbursement
or pricing approval in some countries, we may be required to conduct clinical
trials that compare the cost-effectiveness of our products to other available
therapies. If reimbursement for our products is unavailable, limited in scope or
amount or if pricing is set at unsatisfactory levels, our revenues would be
reduced and our results of operations would be negatively impacted.
Another
development that may affect the pricing of drugs is regulatory action regarding
drug reimportation into the United States. The Medicare Prescription Drug,
Improvement and Modernization Act of 2003, which became law in December 2003,
requires the Secretary of the U.S. Department of Health and Human Services to
promulgate regulations allowing drug reimportation from Canada into the United
States under certain circumstances. These provisions will become effective only
if the Secretary certifies that such imports will pose no additional risk to the
public’s health and safety and result in significant cost savings to consumers.
To date, the Secretary has made no such finding, but he could do so in the
future. Proponents of drug reimportation may also attempt to pass legislation
that would remove the requirement for the Secretary’s certification or allow
reimportation under circumstances beyond those anticipated under current law. If
legislation is enacted, or regulations issued, allowing the reimportation of
drugs, it could decrease the reimbursement we would receive for any products
that we may commercialize, negatively affecting our anticipated revenues and
prospects for profitability.
Risks
Related to Capital Structure
There
is no assurance of an established public trading market, which would adversely
affect the ability of our investors to sell their securities in the public
market.
Although
our common stock is registered under the Exchange Act and our stock is listed on
the OTC Bulletin Board, an active trading market for the securities does not yet
exist and may not exist or be sustained in the future. The OTC Bulletin Board is
an inter-dealer, over-the-counter market that provides significantly less
liquidity than the NASD’s automated quotation system (the “NASDAQ Stock
Market”). Quotes for stocks included on the OTC Bulletin Board are not listed in
the financial sections of newspapers as are those for the NASDAQ Stock Market.
Therefore, prices for securities traded solely on the OTC Bulletin Board may be
difficult to obtain and holders of common stock may be unable to resell their
securities at or near their original offering price or at any price. Market
prices for our common stock will be influenced by a number of factors,
including:
·
|
the
issuance of new equity securities pursuant to a future offering or
acquisition;
|
·
|
changes
in interest rates;
|
·
|
competitive
developments, including announcements by competitors of new products or
services or significant contracts, acquisitions, strategic partnerships,
joint ventures or capital
commitments;
|
·
|
variations
in quarterly operating
results;
|
20
·
|
changes
in financial estimates by securities
analysts;
|
·
|
the
depth and liquidity of the market for our common
stock;
|
·
|
investor
perceptions of our company and the medical device industry generally;
and
|
·
|
general
economic and other national
conditions.
|
Shares
eligible for future sale may adversely affect the market price of our common
stock, as the future sale of a substantial amount of outstanding stock in the
public marketplace could reduce the price of our common stock.
Dr. John
Kovach, our current Chief Executive Officer, was the former stockholder of
Lixte, our operating subsidiary, and received shares of our stock in the Reverse
Merger. He is currently eligible to sell some of his shares of common stock by
means of ordinary brokerage transactions in the open market pursuant to Rule 144
promulgated under the Securities Act (“Rule 144”), subject to certain
limitations. Rule 144 also permits the sale of securities, without any
limitations, by a non-affiliate that has satisfied a six-month holding period.
Any substantial sale of common stock pursuant to Rule 144 may have an adverse
effect on the market price of our common stock by creating an excessive supply.
In this connection, we have sold an aggregate of 3,555,220 shares of Common
Stock in private placements occurring in June and July 2006, and 999,995 shares
in a December 2007 private placement, all of which are currently eligible to be
sold under Rule 144. Additionally, we sold an aggregate of 4,575,000 shares of
our Common Stock in private placements in November and December 2009 and
February 2010. Such shares will be eligible to be resold under Rule 144 six
months from the date of the respective placements.
Our
common stock is considered a “penny stock” and may be difficult to
sell.
Our
common stock is considered to be a “penny stock” since it meets one or more of
the definitions in Rules 15g-2 through 15g-6 promulgated under Section 15(g) of
the Exchange Act. These include but are not limited to the following: (i) the
stock trades at a price less than $5.00 per share; (ii) it is NOT traded on a
“recognized” national exchange; (iii) it is NOT quoted on the NASDAQ Stock
Market, or even if so, has a price less than $5.00 per share; or (iv) it is
issued by a company with net tangible assets less than $2.0 million, if in
business more than a continuous three years, or with average revenues of less
than $6.0 million for the past three years. The principal result or effect of
being designated a “penny stock” is that securities broker-dealers cannot
recommend the stock but must trade in it on an unsolicited basis.
Additionally,
Section 15(g) of the Exchange Act and Rule 15g-2 promulgated thereunder by the
SEC require broker-dealers dealing in penny stocks to provide potential
investors with a document disclosing the risks of penny stocks and to obtain a
manually signed and dated written receipt of the document before effecting any
transaction in a penny stock for the investor’s account.
Potential
investors in our common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be “penny stock.”
Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the
account of any investor for transactions in such stocks before selling any penny
stock to that investor. This procedure requires the broker-dealer to: (i) obtain
from the investor information concerning his or her financial situation,
investment experience and investment objectives; (ii) reasonably determine,
based on that information, that transactions in penny stocks are suitable for
the investor and that the investor has sufficient knowledge and experience as to
be reasonably capable of evaluating the risks of penny stock transactions; (iii)
provide the investor with a written statement setting forth the basis on which
the broker-dealer made the determination in (ii) above; and (iv) receive a
signed and dated copy of such statement from the investor, confirming that it
accurately reflects the investor’s financial situation, investment experience
and investment objectives. Compliance with these requirements may make it more
difficult for holders of our common stock to resell their shares to third
parties or to otherwise dispose of them in the market or
otherwise.
21
Our
principal stockholder has significant influence over our company.
As a
result of the Reverse Merger, Dr. John Kovach, our principal stockholder and our
Chief Executive Officer, beneficially owns approximately 48.5% of our
outstanding voting stock at the current time. As a result, Dr. Kovach possesses
significant influence, giving him the practical ability, among other things, to
elect all of the members of the Board of Directors and to approve significant
corporate transactions. Such stock ownership and control may also have the
effect of delaying or preventing a future change in control, impeding a merger,
consolidation, takeover or other business combination or discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain control of
us.
We
do not foresee paying cash dividends in the foreseeable future.
We have
not paid cash dividends on our stock and do not plan to pay cash dividends on
our common stock in the foreseeable future.
ITEM
1B UNRESOLVED
STAFF COMMENTS
None
ITEM
2.
PROPERTIES
At
present, we conduct all laboratory activities at NIH under the CRADA agreement.
The Company maintains a single office in a designated area of Dr. Kovach's
residence and receives mail at the post office depot, 248 Route 25A, No. 2, East
Setauket, New York 11733. No additional facilities are needed until the Company
develops its independent laboratory.
ITEM
3. LEGAL
PROCEEDINGS
The
Company is not a party to any legal proceedings.
ITEM
4. RESERVED
PART
II
ITEM
5. MARKET FOR COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Our
common stock trades on the OTC Bulletin Board under the symbol “LIXT.” There is
very limited trading of our stock on the Bulletin Board. The stock market in
general has experienced extreme stock price fluctuations in the past few years.
In some cases, these fluctuations have been unrelated to the operating
performance of the affected companies. Many companies have experienced dramatic
volatility in the market prices of their common stock. We believe that a number
of factors, both within and outside our control, could cause the price of our
common stock to fluctuate, perhaps substantially. Factors such as the following
could have a significant adverse impact on the market price of our common
stock:
·
|
Our
ability to obtain additional financing and, if available, the terms and
conditions of the financing;
|
·
|
Our
financial position and results of
operations;
|
·
|
Concern
as to, or other evidence of, the safety or efficacy of any future proposed
products and services or our competitors’ products and
services;
|
22
·
|
Announcements
of technological innovations or new products or services by us or our
competitors;
|
·
|
U.S.
and foreign governmental regulatory
actions;
|
·
|
The
development of litigation against
us;
|
·
|
Period-to-period
fluctuations in our operating
results;
|
·
|
Changes
in estimates of our performance by any securities
analysts;
|
·
|
Possible
regulatory requirements on our
business;
|
·
|
The
issuance of new equity securities pursuant to a future
offering;
|
·
|
Changes
in interest rates;
|
·
|
Competitive
developments, including announcements by competitors of new products or
services or significant contracts, acquisitions, strategic partnerships,
joint ventures or capital
commitments;
|
·
|
Variations
in quarterly operating
results;
|
·
|
Change
in financial estimates by securities
analysts;
|
·
|
The
depth and liquidity of the market for our common
stock;
|
·
|
Investor
perceptions of us; and
|
·
|
General
economic and other national
conditions.
|
The
following table sets forth the range of reported closing prices of the Company’s
Common Stock during the periods presented. Such quotations reflect prices
between dealers in securities and do not include any retail mark-up, markdown or
commissions, and may not necessarily represent actual transactions
High
|
Low
|
|||||||
Year
Ended December 31, 2009:
|
||||||||
First
Quarter
|
$ | 0.60 | $ | 0.16 | ||||
Second
Quarter
|
$ | 0.75 | $ | 0.24 | ||||
Third
Quarter
|
$ | 1.01 | $ | 0.19 | ||||
Fourth
Quarter
|
$ | 0.75 | $ | 0.30 | ||||
Year
Ended December 31, 2008:
|
||||||||
First
Quarter
|
$ | 1.10 | $ | 0.74 | ||||
Second
Quarter
|
$ | 1.10 | $ | 0.30 | ||||
Third
Quarter
|
$ | 0.80 | $ | 0.22 | ||||
Fourth
Quarter
|
$ | 1.10 | $ | 0.15 |
23
Holders
As of
March 22, 2010, 35,077,178 shares of our common stock were outstanding, held by
approximately 80 stockholders of record. This does not include an
indeterminate number of beneficial owners of securities whose shares are held in
the names of various dealers and clearing agencies.
Dividends
Our
dividend policy will be determined by our Board of Directors and will depend
upon a number of factors, including our financial condition and performance, our
cash needs and expansion plans, income tax consequences, and the restrictions
that applicable laws and our credit arrangements then impose.
Securities
Authorized For Issuance Under Equity Incentive Plans
Set forth
in the table below is information regarding awards made through compensation
plans or arrangements through December 31, 2009, the most recently completed
fiscal year.
Plan Category
|
Number of
Securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
|
Weighted
average price of
outstanding
options, warrants
and rights
|
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column 2)
|
|||||||||
Equity
Compensation Plans Approved by Security Holders
|
N/A | N/A | N/A | |||||||||
Equity
Compensation Plans Not Approved by Security Holders
|
400,000 | $ | 0.42 | 2,100,000 |
ITEM 6
|
SELECTED
FINANCIAL DATA
|
Not Applicable
ITEM
7.
|
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”) incorporated on August 9, 2005, 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”.
24
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. 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.
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’s common stock was listed for trading on the OTC Bulletin Board
commencing September 24, 2007 under the symbol “LIXT”.
Recent
Developments
In
January 2010, the Company raised $1,787,500 through the sale of its securities,
of which $1,200,000 had been advanced at December 31, 2009 (which has been
included in the Company’s balance sheet at December 31, 2009 in cash and money
market funds and as advances under equity financing), and in February 2010, the
Company raised an additional $500,000 through the sale of its
securities.
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, and does not expect to do so in the foreseeable future. The
Company has experienced recurring operating losses and negative operating cash
flows since inception, and has financed its working capital requirements through
the recurring sale of its equity securities. As a result, the
Company’s independent registered public accounting firm, in its report on the
Company’s 2009 consolidated financial statements, has 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 sustainable
revenues and profitable operations. The Company’s consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
At
December 31, 2009, the Company had not yet commenced any revenue-generating
operations. All activity through December 31, 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 sustainable revenues 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.
The
Company’s activities in 2010 will consist of continuing drug discovery and
development efforts. The Company’s primary goal will be to take the Company’s
LB-100 compound through a Phase I clinical trial by July 1, 2011. The
Company raised $500,000 in November 2009, $1,787,500 in January 2010 (of which
$1,200,000 had been advanced to the Company at December 31, 2009), and $500,000
in February 2010, all through the sale of its securities to fund its business
activities. As a result, the Company believes that its current
resources are adequate to fund operations during 2010 and at a minimum through
mid-2011, at a level that will allow the continuation of the Company’s two drug
development programs currently in process and completion of the initial Phase I
trial of LB-100, if no unexpected delays occur in obtaining FDA approval, in
late 2010 or early 2011.
25
The amount and timing of future cash
requirements will depend on the pace of these programs, in particular,
completion of the Phase I trial of LB-100. After completion of the
Phase I trial, the next step will be to determine the anti-cancer activity
against a particular type of human cancer in Phase II trials. To carry out Phase
II trials, the Company anticipates that it will be necessary to raise additional
funds in 2011 from a combination of additional debt or equity financings, and/or
the sale, licensing or joint venturing of its intellectual
properties. 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 beyond July 2011, 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
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
authoritative guidance which established a framework for measuring fair value in
accordance with generally accepted accounting principles, clarified the
definition of fair value within that framework and expanded disclosures about
fair value measurements. These new requirements apply whenever other standards
require (or permit) assets or liabilities to be measured at fair value, except
for the measurement of share-based payments. The Company adopted these new
standards effective January 1, 2008. In addition, since the issuance
of these standards, the FASB has issued several interpretations to clarify the
application of these standards. Additional disclosures required as a
result of the Company’s implementation of these new standards are presented in
Note 4 to the Company’s consolidated financial statements.
In May
2009, the FASB issued authoritative guidance for reporting subsequent
events. These new requirements set forth the period after the balance
sheet date during which management of an SEC filer 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. These new
requirements were effective for interim or annual financial periods ending after
June 15, 2009, and are to be applied prospectively. The adoption of
these new requirements by the Company on June 30, 2009 did not have any impact
on the Company’s consolidated financial statements.
In June
2009, the 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 general accepted
accounting principles (“GAAP”). All existing accounting standard
documents were superseded by the Codification and any accounting literature not
included in the Codification will not be considered
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 was effective for
interim and annual reporting periods ending after September 15,
2009. Accordingly, 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 on September
30, 2009 did not have any impact on the Company’s consolidated financial
statements.
26
Management
does not believe that any other recently issued, but not yet effective,
authoritative guidance, 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.
27
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.
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’s original focus was the development of 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 has activity against cell lines of breast, colon, lung, prostate,
pancreas, ovary, stomach and liver cancer, as well as against the major types of
leukemias. LB-100 has now been shown to have activity in animal models of brain
tumors of adults and children, and also against melanomas and
sarcomas. Studies in animal models of human melanoma, lymphoma,
sarcoma, brain tumors, and the rare neuroendocrine cancer, pheochromocytoma,
have demonstrated marked potentiation by LB-100 of the anti-tumor activity of
the widely used standard chemotherapeutic drugs. These 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.
28
During
2009, the Company signed material transfer agreements with academic
investigators at major cancer centers in the United States, as well as with one
investigator in China with a unique animal model of a sarcoma, to expand
molecular and applied studies of the anti-cancer activity of the Company’s
compounds. The Company retained the right to all discoveries made in
these studies.
The
Company’s longer-term 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 Company’s 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 Gehrig’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.
Plans
for 2010 and Beyond
The
Company’s primary objective is to complete studies needed for a successful
application to the FDA for an Investigational New Drug (“IND”) for the clinical
evaluation of LB-100 by the end of the first quarter of 2011. The estimated cost
for drug synthesis formulation, pharmacokinetic, and toxicologic studies needed
for an IND application has been revised downward to approximately $1,200,000
Accordingly, the Company believes that it currently has sufficient capital to
fund its operations, including the continued development of the LB-200 series
and the sponsorship of a Phase I clinical trial of LB-100.
The
critical need for the next step in the clinical development of LB-100 is to
obtain IND approval 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. 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.
With
current resources, the Company will further characterize of the anti-cancer and
anti-fungal activity of certain homologs of drugs of the LB-200 series. These
studies would be done in collaboration with academic partners.
Results
of Operations
The
Company is a development stage company and had not commenced revenue-generating
operations at December 31, 2009.
29
Years
Ended December 31, 2009 and 2008
General and Administrative
Expenses. For the year ended December 31, 2009, general and
administrative expenses were $1,053,611, 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 $547,980, consulting and professional fees of
$245,247, insurance expense of $24,019, travel and entertainment costs of
$4,742, and other operating costs of $33,623.
For the
year ended December 31, 2008, general and administrative expenses were $664,202,
which consisted of the vested portion of the fair value of stock options issued
to directors and consultants of $357,987, consulting and professional fees of
$192,473, insurance expense of $23,821, travel and entertainment costs of
$31,221, licensing and royalty fees of $25,000, and other operating costs of
$33,700.
Depreciation. For
the years ended December 31, 2009 and 2008, depreciation expense was $128 and
$615, respectively.
Research and Development
Costs. For the year ended December 31, 2009, research and
development costs were $496,517, which consisted of the vested portion of the
fair value of stock options issued to a consultant and a vendor of $132,933,
patent costs of $199,459, laboratory supplies of $11,000, and other costs of
$153,125.
For the
year ended December 31, 2008, research and development costs were $608,733,
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 $138,061, patent costs of $164,782, laboratory
supplies of $45,750, and other costs of $185,140.
Interest
Income. For the years ended December 31, 2009 and 2008,
interest income was $155 and $3,261, respectively.
Net
loss. For the year ended December 31, 2009, the Company
incurred a net loss of $1,551,333, as compared to a net loss of $1,271,522 for
the year ended December 31, 2008.
Liquidity
and Capital Resources – December 31, 2009
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, and does not expect to do so in the foreseeable future. The
Company has experienced recurring operating losses and negative operating cash
flows since inception, and has financed its working capital requirements through
the recurring sale of its equity securities. As a result, the
Company’s independent registered public accounting firm, in its report on the
Company’s 2009 consolidated financial statements, has raised substantial doubt
about the Company’s ability to continue as a going concern (see “Going Concern”
above”).
The
Company raised $500,000 in November 2009, $1,787,500 in January 2010 (of which
$1,200,000 had been advanced to the Company at December 31, 2009), and $500,000
in February 2010, all through the sale of its securities to fund its business
activities. As a result, the Company believes that its current
resources are adequate to fund operations during 2010 and at a minimum through
mid-2011, at a level that will allow the continuation of the Company’s two drug
development programs currently in process and completion of the initial Phase I
study of LB-100, if no unexpected delays occur in obtaining FDA approval in late
2010 or early 2011.
Operating
Activities. For the year ended December 31, 2009, operating
activities utilized cash of $638,440, as compared to utilizing cash of $597,689
for the year ended December 31, 2008.
30
At
December 31, 2008, the Company had a working capital deficiency of $323,676, as
compared to a working capital surplus of $1,301,082 at December 31, 2009. The
elimination of the working capital deficiency at December 31, 2009 was due
primarily to the sale of the Company’s securities pursuant to three closings of
a third private placement in February, March and April 2009 that generated net
proceeds of $597,050, a fourth private placement in November 2009 that generated
net proceeds of $500,000, and $1,200,000 of proceeds advanced under a private
placement pending at December 31, 2009 that closed in January 2010.
Investing
Activities. For the year ended December 31, 2009, investing
activities consisted of $25,000 placed into a money market fund. There were no
investing activities during the year ended December 31, 2008.
Financing
Activities. For the year ended December 31, 2009, financing
activities provided net cash of $2,197,050, consisting of the gross proceeds
from the sale of securities of $1,210,000, the proceeds advanced under the
private placement pending at December 31, 2009 of $1,200,000, and the proceeds
from the issuance of a note payable to a consultant of $100,000, reduced by the
payment of private placement offering costs of $112,950 and the repayment of
notes payable to a consultant of $200,000. For the year ended December 31, 2008,
financing activities consisted of the proceeds from a note payable to a
consultant of $100,000.
Principal
Commitments
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
February 5, 2007, the Company entered into a two-year agreement 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 shares of
the Company’s common stock. The Company has the right to terminate the
Chem-Master Agreement at any time during its term upon sixty days prior written
notice.
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”.
31
Pursuant
to the Chem-Master Agreement, as amended, the Company reimbursed Chem-Master for
the costs of materials, labor, and expenses aggregating $11,000 and $45,750
during the years ended December 31, 2009 and 2008, respectively.
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.
On
October 9, 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, all of which had been paid as of December 31,
2009.
On
December 23, 2009, the October 9, 2008 agreement with Southern Research
Institute was amended to include certain additional studies of neurodegenerative
diseases at an additional estimated cost of $21,200.
On
November 17, 2009, the Company entered into an agreement with Johnson Matthey
Pharma Services for the preparation of drug materials at a total estimated cost
of $45,500, of which $8,125 was paid prior to December 31, 2009.
The
following table sets forth the Company’s principal cash obligations and
commitments for the next five fiscal years as of December 31, 2009.
Payments Due By Year
|
||||||||||||
Total
|
2010
|
2011
|
||||||||||
CRADA
(1)
|
$ | 100,000 | $ | 50,000 | $ | 50,000 | ||||||
Research
and development contracts
|
58,575 | 58,575 | — | |||||||||
Liquidated
damages payable under registration rights agreement (2)
|
74,000 | 74,000 | — | |||||||||
Due
to stockholder (2)
|
92,717 | 92,717 | — | |||||||||
Total
|
$ | 325,292 | $ | 275,292 | $ | 50,000 |
|
(1)
|
Of
such amount, $50,000 is included in current liabilities in the Company’s
consolidated balance sheet at December 31,
2009.
|
|
(2)
|
Included
in current liabilities in the Company’s consolidated balance sheet at
December 31, 2009.
|
On
January 5, 2010, the Company engaged Southern Research Institute to perform
several of the pre-clinical studies of LB-100 needed for an IND application at a
total estimated cost of $109,800.
On March
17, 2010, the Company engaged Theradex to assist the Company in bring LB-100
through the FDA approval process at a total estimated cost of
$105,064.
32
Off-Balance
Sheet Arrangements
At
December 31, 2009, the Company did not have any transactions, obligations or
relationships that could be considered off-balance sheet
arrangements.
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
|
Not Applicable
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
Our
consolidated financial statements and notes thereto and the related report of
our independent registered public accounting firm are attached to this Report
beginning on page F-1.
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
On
December 17, 2008, AJ Robbins, P.C. (“Robbins”) was dismissed as the independent
accountant of the Company. The Board of Directors acting in the
capacity of an audit committee approved the dismissal of Robbins.
Robbins’
reports on the Company’s financial statements for the years ended December 31,
2007 and 2006 did not contain any adverse opinion or disclaimer of opinion, nor
were they qualified or modified as to uncertainty, audit scope or accounting
principles except that the report for both years indicated that the Company is
in the development stage and has not commenced operations and its ability to
continue as a going concern is dependent upon its ability to develop additional
sources of capital and ultimately achieve profitable
operations. Accordingly, such report indicated that there was
substantial doubt as to the Company’s ability to continue as a going concern and
that the financial statements did not include any adjustments that might result
from the outcome of this uncertainty.
During
the years ended December 31, 2007 and 2006 and through December 17, 2008, there
were no disagreements with Robbins on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Robbins, would have caused
it to make reference thereto in connection with its reports on the financial
statements for such years. During the years ended December 31, 2007
and 2006 and through December 17, 2008, there were no matters that were either
the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K
or a reportable event as described in Item 304(a)(1)(v) of Regulation
S-K.
On
December 17, 2008, the Company’s Board of Directors acting in the capacity of an
audit committee engaged Weinberg & Company, P. A. (“Weinberg”) as the
Company’s new independent accountant to act as the principal accountant to audit
the Company’s financial statements. During the Company’s fiscal years ended
December 31, 2007 and 2006 and through December 17, 2008, neither the Company,
nor anyone acting on its behalf, consulted with Weinberg regarding the
application of accounting principles to a specific completed or proposed
transaction or the type of audit opinion that might be rendered on the Company’s
financial statements, and no written report or oral advice was provided that
Weinberg concluded was an important factor considered by the Company in reaching
a decision as to any such accounting, auditing or financial reporting
issue.
33
ITEM 9A(T).
|
CONTROLS
AND PROCEDURES
|
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the reports that we file with the SEC
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and that such
information is accumulated and communicated to our management, including our
principal executive and financial officers, as appropriate, to allow for timely
decisions regarding required disclosure. As required by SEC Rule 15d-15(b), we
carried out an evaluation, under the supervision and with the participation of
the our management, including our principal executive and financial officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the most recent fiscal year covered by this
report. Based on the foregoing, our principal executive and financial
officer concluded that our disclosure controls and procedures are effective to
ensure the information required to be disclosed in our reports filed or
submitted under the Exchange Act is timely recorded, processed and reported
within the time periods specified in the SEC’s rules and forms.
Management’s
Annual Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) under the
Exchange Act. Our internal control over financial reporting is
designed to ensure that material information regarding our operations is made
available to management and the board of directors to provide them reasonable
assurance that the published financial statements are fairly
presented. There are limitations inherent in any internal control,
such as the possibility of human error and the circumvention or overriding of
controls. As a result, even effective internal controls can provide
only reasonable assurance with respect to financial statement
preparation. As conditions change over time so too may the
effectiveness of internal controls.
Our
management, with the participation of our chief executive officer and chief
financial officer, has evaluated our internal control over financial reporting
as of December 31, 2007 based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations (COSO) of the
Treadway Commission. Based on this assessment, our management
concluded that our internal control over financial reporting was effective as of
December 31, 2009.
This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
Changes
In Internal Control Over Financial Reporting
There were no changes in our internal
controls over financial reporting during the fourth quarter of 2009 that
materially affected or are reasonably likely to affect our internal controls
over financial reports.
ITEM
9B.
|
OTHER
INFORMATION
|
None
PART
III
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
The
following table and text set forth the names of all directors and executive
officer of our Company as of December 31, 2009. The Board of
Directors is comprised of only one class. All of the directors will
serve until the next annual meeting of stockholders and until their successors
are elected and qualified, or until their earlier death, retirement, resignation
or removal. There are no family relationships between or among the
directors, executive officers or persons nominated or charged by our Company to
become directors or executive officers. The executive officer serves
at the discretion of the Board of Directors, and is appointed to serve until the
first Board of Directors meeting following the annual meeting of
stockholders. The brief descriptions of the business experience of
each director and executive officer and an indication of directorships held by
each director in other companies subject to the reporting requirements under the
Federal securities laws are provided herein below. Also provided are
the biographies of the members of the Scientific Advisory
Committee.
34
Our
directors and executive officer are as follows:
Name
|
Age
|
Position
Held with the Registrant
|
||
Dr.
John S. Kovach
|
73
|
Chief
Executive Officer, Director
|
||
Dr.
Philip F. Palmedo
|
75
|
Director
|
||
Dr.
Stephen K. Carter
|
72
|
Director
|
||
Dr.
Mel Sorensen
|
52
|
Director
|
Biographies
of Directors and Executive Officer:
Dr.
John S. Kovach
Dr. John
S. Kovach founded Lixte in August 2005 and is its President and a member of the
Board of Directors. He received a BA (cum laude) from Princeton
University and an MD (AOA) from the College of Physicians & Surgeons,
Columbia University. Dr. Kovach trained in Internal Medicine and
Hematology at Presbyterian Hospital, Columbia University and spent six years in
the laboratory of Chemical Biology, National Institute of Arthritis and
Metabolic diseases studying control of gene expression in bacterial
systems.
Dr.
Kovach was recruited to Stony Brook University in 2000 to found the Long Island
Cancer Center (now named the Stony Brook University Cancer
Center). He is presently a professor (part-time) in the Department of
Preventive Medicine at Stony Brook University in Stony Brook, New
York. From 1994 to 2000, Dr. Kovach was Executive Vice President for
Medical and Scientific Affairs, City of Hope National Medical Center in Los
Angeles, California. His responsibilities included oversight of all
basic and clinical research initiatives at the City of Hope. During
that time he was also Director of the Beckman Research Center at City of Hope
and a member of the Arnold and Mabel Beckman Scientific Advisory Board in
Newport Beach, California.
From 1976
to 1994, Dr. Kovach was a consultant in oncology and director of the Cancer
Pharmacology Division at the Mayo Clinic in Rochester,
Minnesota. During this time, he directed the early clinical trials
program for evaluation of new anti-cancer drugs as principal investigator of
contracts from the National Cancer Institute. From 1986 to 1994, he
was also Chair of the Department of Oncology and Director of the NCI-designated
Mayo Comprehensive Cancer Center. During that time, Dr. Kovach,
working with a molecular geneticist, Steve Sommer MD, PhD, published extensively
on patterns of acquired mutations in human cancer cells as markers of
environmental mutagens and as potential indicators of breast cancer patient
prognosis. Dr. Kovach has published over 100 articles on the
pharmacology, toxicity, and effectiveness of anti-cancer treatments and on the
molecular epidemiology of breast cancer. Dr. Kovach directs Lixte
with the approval of the State University of New York at Stony Brook and the New
York State Ethics Commission.
Dr.
Philip F. Palmedo
Dr.
Palmedo joined our board of directors on June 30, 2006. Dr. Palmedo
has had a diversified career as a physicist, entrepreneur, corporate manager and
writer. Dr. Palmedo received his undergraduate degree from Williams
College and M.S. and Ph.D. degrees from MIT. He carried out
experimental nuclear reactor physics research at MIT, Oak Ridge National
Laboratory, the French Atomic Energy Commission Laboratory at Saclay and
Brookhaven National Laboratory (BNL). At BNL in 1972 he initiated and
was the first head of the Energy Policy Analysis Group. In 1974 he
served with the Energy Policy Office of the White House and in the following
year initiated the BNL Developing Country Energy Program.
35
In 1979,
Dr. Palmedo founded the International Resources Group, an international
professional services firm in energy, environment and natural
resources. He served as Chairman and CEO until 1988 and continued as
Chairman until the company’s sale in 2008. In 1985, the company was
recognized by Inc. Magazine as one of the 500 fastest growing private companies
in the U.S.
In 1988,
Dr. Palmedo joined in the formation of Kepler Financial Management, Ltd., a
quantitative financial research and trading company. Dr. Palmedo held
the position of President and Managing Director until the end of 1991 when
Renaissance Technologies Corporation acquired the company. In 2005,
he started a new hedge fund, Kepler Asset Management, and is a Managing Director
of the firm.
Dr.
Palmedo was the designer and, in 1992, became the first president of the Long
Island Research Institute. LIRI was formed by Brookhaven National
Laboratory, Cold Spring Harbor Laboratory, and Stony Brook University to
facilitate the commercialization of technologies developed in their research and
development programs. LIRI guided fledgling companies and started
several new high tech entities. In order to provide “zero-stage”
financing, LIRI created the Long Island Venture Fund, which evolved into the
$250 million Topspin Fund.
Dr.
Palmedo served on the boards of Asset Management Advisors and the Teton Trust
Company and is currently a member of the Board of Directors of EHR Investments
and the Gyrodyne Corporation of America. Dr. Palmedo also served on
the Board of Trustees of Williams College and of the Stony Brook (University)
Foundation and chaired the Foundation’s Investment Committee. He is
the founding Chairman of the non-profit Cultural Preservation Fund.
Dr.
Palmedo has served as a consultant and advisor to numerous corporations and
national and international agencies in science, technology and environmental
policy including the MacArthur Foundation, the U.S. National Academy of
Sciences, International Atomic Energy Agency, UNIDO, Organization of American
States, the Governments of Sweden, Denmark, Dominican Republic, Indonesia,
Somalia, Sudan, Egypt and Peru. He is the author of many publications
in nuclear reactor physics, energy and environment, and technology and economic
development.
Dr. Stephen
Carter
Dr.
Carter is a highly experienced leader and administrator in cancer therapeutics
and cancer drug development. For 13 years, he was associated with
Bristol-Meyers Co. and Bristol-Meyers Squibb, Co. holding successively the
positions of Senior Vice President, Anti-Cancer Research; President, Division of
Pharmaceutical Research and Development, and ultimately Senior Vice President,
Worldwide Clinical Research and Development, Pharmaceutical Research
Institute. Most recently, Dr. Carter was Senior Vice President of
Clinical and Regulatory Affairs at Sugen, Inc., after serving as Senior Vice
President for Research and Development at Boehringer Ingelheim Pharmaceuticals,
Inc. Dr. Carter held leadership roles in academia and government
including Deputy Director, Division of Cancer Treatment, National Cancer
Institute and Director, Northern California Cancer Program.
Dr.
Carter is currently a director on the boards of: Cytogen Corporation
(NASDAQ:CYTO), Alfacell Corporation (NASDAQ:ACEL), Tapestry Pharmaceuticals,
Inc. (NASDAQ:TPPH), Callisto Pharmaceuticals, Inc. (AMEX:KAL), Vion
Pharmaceuticals, Inc. (NASDAQ:VION) and Celator.
Dr.
Mel Sorensen
Dr.
Sorensen is a medical oncologist who has dedicated his career to clinical cancer
research since completing his oncology fellowship at the Mayo Clinic in
1988. Dr. Sorensen joined Ascenta Therapeutics in August 2004 as
Board Director, President and Chief Executive Officer. In less than
three years, Ascenta was transformed from a 5-person start-up with a single
preclinical program into a clinical-stage company with over 65 FTFs and
facilities in the US and China and development programs against three distinct
targets. Prior to joining Ascenta Therapeutics, he spent
approximately seven years each in patient care (St. Louis & Mayo Clinic),
the National Cancer Institute and in leadership positions of clinical cancer
research in the pharmaceutical industry (Bayer & GSK).
36
Throughout
his career, Dr. Sorensen has been active in fostering public-private
collaborations for clinical cancer research, with the National Cancer Institute
(NCI) with C-Change, with Friends of Cancer
Research (FOCR) and other organizations. He is a frequent
speaker and panel participant on optimizing cancer R&D, including
presentations at the Woodrow Wilson Center in Washington, DC in 2003 (“Confronting Cancer
Now”), the 2004 Bioethical Symposium in Tampa, FL (“Ethial Issues in
Large Clinical Trials”), the 2005 Tokyo Pharma Partnering Conference &
Shanghai’s 2005 Bio-Forum conference, the 2005 Milken Institute’s Global Conference
(“Biopharmaceuticals:
The Innovation Pipeline Race”), BIO 2006 (“Early-Stage Business Models in
Cancer”), the March 2007 R&D Readers’ Forum (“Biotech R&D Across
Borders: The Ascenta Experience”) in Philadelphia and the China 2007
R&D Summit (“Making Innovative Medicines
Faster and Cost-Efficiently”) in Shanghai.
SCIENTIFIC
ADVISORY COMMITTEE
The
Scientific Advisory Committee (the “Committee”), which is not part of
management, advises us in three areas: human molecular pathology; the clinical
management of human brain tumors; and medicinal chemistry. It is
planned that the Committee meet as a group annually, with some members
participating via telephone conference. Thus far, the Committee has
been apprised of our general objectives and several of the specific challenges
and leads for developing improved therapies for human brain
tumors. The Committee members have not provided specific advice thus
far that has modified strategy nor do they serve in any management
capacity. The Committee was formalized on June 30,
2006. The members of our Committee are:
Arndt
Hartmann, MD
Dr.
Hartmann is Professor of Pathology, Institute of Pathology, University of
Regensburg, Germany. He was trained in Internal Medicine at the
University of Jena, Germany, and in molecular genetics of cancer at Mayo Clinic,
Rochester, MN. He was subsequently trained in pathology at the
University of Regensburg and the University of Basel,
Switzerland. His research is focused on methods development in
molecular pathology. He has specific expertise in genetic alterations
in cancers of the bladder, prostate, kidney and breast.
Ferdinand
Hofstadter, MD
Dr.
Hofstadter is Professor and Director of the Institute of Pathology, University
of Regensburg Medical School, Germany. He is Research Dean of the
University of Regensburg-Medical Faculty, Chairman of the Managing Board of the
Association of German Tumor Centers, Chairman of the German Society for
Pathology, a member of the editorial boards of Virchow’s Archives and the
Journal of Pathology, and a referee for Deutsche Forschungsgesellschaft, the Dr.
Mildred Scheel-Stiftung, EU, and the European Research Framework
Program.
Iwao
Ojima, BS, MS, PhD
Professor
Ojima is Distinguished Professor of Chemistry and Director, Institute of
Chemical Biology and Drug Discovery, SUNY-Stony Brook. He is an
internationally recognized expert in medicinal chemistry, including anticancer
agents and enzyme inhibitors, development of efficient synthetic methods for
organic synthesis by means of organometallic reagents, homogeneous catalysis and
organometallic chemistry, peptide and peptide mimetics, beta-lactam chemistry,
and organoflourine chemistry at the biomedical interface.
37
Dr. Ojima
is a recipient of the Arthur C. Cope Scholar Award (1994) and the E. B.
Hershberg Award (for important discovery of medicinally active substances)
(2001) from the American Chemical Society; The Chemical Society of Japan Award
(for distinguished achievements) (1999); Outstanding Inventor Award from the
Research Foundation of the State University of New York (2002. He is
a Fellow of the J.S. Guggenheim Memorial Foundation (1995-), the American
Association for the Advancement of Science (1997-), and The New York Academy of
Sciences (2000-).
Dr. Ojima
is a member of the American Chemical Society, American Association for the
Advancement of Science, American Association for Cancer Research, American
Peptide Society, the Chemical Society of Japan, the Society of Synthetic Organic
Chemistry, Japan, New York Academy of Sciences, and Signa Xi. He has
served as a consultant for E. I. du Pont, Eli Lilly, Air Products &
Chemicals, Mitsubishi Chem. Inc., Nippon Steel Corp., Life Science Division,
Rhone-Poulenc Rorer, ImmunoGen, Inc., Taiho Pharmaceutical Co., Milliken &
Co., Aventis Pharma, OSI Pharmaceuticals, Inc., Mitsubishi Chem. Corp.
(current).
Audit
Committee
We do not
presently have an audit committee. The board of directors acts in
that capacity and has determined that we do not currently have a person
qualifying as an audit committee financial expert serving on our
board.
Code
of Ethics
Our Board
of Directors adopted a code of ethics covering all of our executive officers and
key employees. A copy of our code of ethics will be furnished without
charge to any person upon written request. Requests should be sent
to: Secretary, Lixte Biotechnology Holdings, Inc., 248 Route 25A, No.
2, Setauket, New York 11733.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934, as
Amended:
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
directors and executive officers and persons who own more than 10% of a
registered class of the Company’s equity securities to file various reports with
the Securities and Exchange Commission concerning their holdings of, and
transactions in, securities of the Company. Copies of these filings
must be furnished to the Company.
To the
Company’s knowledge based solely on its review of the copies of the Section
16(a) reports furnished to the Company and written representations to the
Company that no other reports were required, the Company believes that all
individual filing requirements applicable to the Company’s directors and
executive officers were complied with under Section 16(a) during
2009.
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
For the
fiscal years ended December 31, 2009 and 2008, no individual, including Dr. John
Kovach, our current Chief Executive Officer, received any
compensation. Dr. Kovach is reimbursed for any out-of-pocket
expenses. Any future compensation arrangements will be subject to the
approval of the board of directors.
Option
Grants in 2008 and 2009
None.
Aggregated
Option Exercises in 2008 and 2009 Option Values at December 31, 2008 and at
2009
None.
38
Employment
Agreements; Compensation
We have
not entered into any employment agreements. As of December 31, 2009,
we had no full-time employees. For the current fiscal year, Dr.
Kovach does not anticipate receiving any compensation from us in view of our
early stage status. He is reimbursed for any out-of-pocket
expenses. Any future compensation arrangements will be subject to the
approval of the board of directors. Dr. Phillip Palmedo, one of our
outside directors, has received options to purchase 200,000 shares of common
stock 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 for two years
on the anniversary of that date. Dr. Palmedo has also received
options to purchase 190,000 shares of common stock at $0.333 per share for
services rendered in developing the business plan for Lixte. Stephen
Carter, one of our other outside directors, has received options to purchase
200,000 shares of common stock at $0.333 per share with one half vesting
annually on each of September 12, 2008 and 2009.
On
October 7, 2008, in conjunction with his appointment as director of the
Company, the Company granted to Dr. Mel Sorensen 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 the date of exercisable at $0.50 per share
vesting 12.5% on January 1, 2009 and 12.5% on the first date of each
subsequent quarter. In addition, in connection with Dr. Sorensen
acting in an advisory role for a period of one year in connection with the
strategic development of the Company’s intellectual properties, the Company has
agreed to pay Dr. Sorensen $40,000 payable in quarterly installments of
$10,000 commencing on October 7, 2008. Dr. Sorensen is also
eligible to receive a bonus at the sole discretion of the board of
directors.
Consulting
Agreements
In
September 2007, the Company entered into a consulting agreement with Gil
Schwartzberg and 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 vesting date at $1.00 per share, with one-half of the options
(500,000 shares) vesting immediately and one-half (500,000 share) vesting on
September 12, 2008. The consulting agreement was amended in October
2009 to extend the term to October 2013. In connection with the
extension, Mr. Schwartzberg was granted options to purchase an additional
1,000,000 shares at $1.00 per share, 50% of which vested immediately and 50%
will vest in October 2010.
In
September 2007, the Company entered into a consulting agreement with Francis
Johnson 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.
In July
2009, the Company entered into a consulting agreement with Pro-Active Capital
Group, LLC (“Pro-Active”) to provide consulting services for the Company for a
period of 12 months and granted to Pro-Active 150,000 shares of restricted stock
and three-year warrants to purchase an aggregate of 150,000 shares with exercise
prices as follows: 50,000 shares at $0.75 per share; 50,000 shares at $1.00 per
share; and 50,000 shares at $1.25 per share.
Director
Compensation
Members
of the Board of Directors
On June
30, 2006, Dr. Palmedo was granted options to purchase 200,000 shares of common
stock at the initial private placement price of $0.333 per share with one third
of the options (66,666 shares) vesting on such date and one third vesting
annually for two years on the anniversary of that date. On June 30,
2006, Dr. Palmedo also was granted options to purchase 190,000 shares of common
stock exercisable for a period of five years at $0.333 per share for services
rendered in developing our business plan, all of which were fully vested upon
issuance.
39
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 the vesting date at $0.333 per share, with one-half
(100,000 shares) vesting annually on each of September 12, 2008 and
2009.
On
October 7, 2008, in conjunction with his appointment as director of the
Company, the Company granted to Dr. Mel Sorensen 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 the date of exercisable at $0.50 per share
vesting 12.5% on January 1, 2009 and 12.5% on the first date of each
subsequent quarter. In addition, in connection with Dr. Sorensen
acting in an advisory role for a period of one year in connection with the
strategic development of the Company’s intellectual properties, the Company has
agreed to pay Dr. Sorensen $40,000 payable in quarterly installments of
$10,000 commencing on October 7, 2008. Dr. Sorensen is also
eligible to receive a bonus at the sole discretion of the board of
directors.
DIRECTOR
COMPENSATION TABLE
Name and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)(1)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Non-Qualified
Deferred
Compensation
Earnings ($)
|
All Other
Compensation
($)(1)
|
Total
($)
|
|||||||||||||||||||||||||||
Philip
F.
Palmedo
Director
|
2009
2008
2007
|
0
0
0
|
0
0
0
|
0
0
0
|
0
10,332
20,668
|
0
0
0
|
0
0
0
|
0
0
0
|
0
10,332
20,668
|
|||||||||||||||||||||||||||
Stephen Carter
Director
|
2009
2008
2007
|
0
0
0
|
0
0
0
|
0
0
0
|
0
102,085
30,655
|
0
0
0
|
0
0
0
|
0
0
0
|
0
102,085
30,655
|
|||||||||||||||||||||||||||
Mel
Sorensen
Director
|
2009
2008
|
0
0
|
0
0
|
0
0
|
0
12,568
|
0
0
|
0
0
|
30,000
10,000
|
30,000
22,568
|
(1)
|
Consists of grant
date fair value calculated pursuant to Black-Scholes option-pricing model
recognized as compensation expense in each fiscal
year.
|
Members
of the Scientific Advisory Committee
On June
30, 2006, Iwao Ojima, a member of the Scientific Advisory Committee,
received options to purchase 50,000 shares of common stock at the initial
private placement price of $0.333 per share with one-half of the options (25,000
shares) vesting on the first anniversary of joining the Scientific Advisory
Committee and one-half vesting on the second anniversary.
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
|
The
following table sets forth, as of March 22, 2010, certain information regarding
beneficial ownership of our common stock by (i) each person or entity who is
known by us to own beneficially more than 5% of the outstanding shares of common
stock, (ii) each of our directors, and (iii) all directors and executive
officers as a group. As of March 22, 2010, there were 35,077,189
shares of our common stock issued and outstanding. In computing the
number and percentage of shares beneficially owned by a person, shares of common
stock that a person has a right to acquire within sixty (60) days of March 22,
2010, pursuant to options, warrants or other rights are counted as outstanding,
while these shares are not counted as outstanding for computing the percentage
ownership of any other person. Unless otherwise indicated, the
address for each stockholder listed in the following table is c/o Lixte
Biotechnology Holdings, Inc., 248 Route 25A, No. 2, East Setauket, New York
11733. This table is based upon information supplied by directors,
officers and principal stockholders and reports filed with the Securities and
Exchange Commission.
40
Name and Address of Beneficial Owner
|
Amount and Nature
of Beneficial
Ownership
|
Percent of Class
|
||||||
Officers,
Directors and 5% stockholders
|
||||||||
Dr.
John S. Kovach
248
Route 25A, No. 2
East
Setauket, New York 11733
|
17,021,786 | 48.5 | % | |||||
Dr.
Philip F. Palmedo
248
Route 25A, No. 2
East
Setauket, New York 11733
|
1,390,000 | (1) | 3.9 | % | ||||
Dr.
Stephen K. Carter
248
Route 25A, No. 2
East
Setauket, New York 11733
|
200,000 | (2) | 0.6 | % | ||||
Dr.
Mel Sorensen
248
Route 25A, No. 2
East
Setauket, New York 11733
|
150,000 | (3) | 0.4 | % | ||||
All
officers and directors as a group (four persons)
|
18,761,786 | (1)(2)(3) | 51.5 | % | ||||
Gil
Schwartzberg
269
South Beverly Drive, No. 1315
Beverly
Hills, California 90212
|
6,640,572
|
(4)
|
16.9 | % | ||||
Debbie
Schwartzberg
269
South Beverly Drive, No. 1315
Beverly
Hills, California 90212
|
6,838,845
|
(5)
|
17.5 | % |
(1)
|
Includes
options to purchase 390,000 shares of common stock and warrants to
purchase 600,000 shares of common stock, which are immediately
exercisable.
|
(2)
|
Consists
of options to purchase 200,000 shares of common stock, which are
immediately exercisable or within 60
days.
|
(3)
|
Consists
of options to purchase 150,000 shares of common stock, which are
immediately exercisable.
|
(4)
|
Includes
790,000 shares of common stock, options to purchase 1,311,872 shares of
common stock, and warrants to purchase 1,000,000 shares of common stock
owned directly by Mr. Schwartzberg. Also includes 204,700
shares of common stock owned by Continuum Capital Partners, LP, as to
which Mr. Schwartzberg has sole voting, disposition and investment
control; 684,000 shares of common stock and warrants to purchase 1,000,000
shares of common stock owned by the Julie Schwartzberg Trust, as to which
Mr. Schwartzberg is the co-trustee; and 650,000 shares of common stock and
warrants to purchase 1,000,000 shares of common stock owned by the David
N. Sterling Trust, as to which Mr. Schwartzberg is the
co-trustee. Excludes 1,504,845 shares of common stock and
warrants to purchase 2,000,000 shares of common stock owned directly by
Debbie Schwartzberg, the wife of Mr. Schwartzberg, as to which Mr.
Schwartzberg disclaims beneficial ownership or control. Options
and warrants are immediately exercisable or within 60
days.
|
(5)
|
Includes
1,504,845 shares of common stock and warrants to purchase 2,000,000 shares
of common stock owned directly by Ms. Schwartzberg. Also
includes 684,000 shares of common stock and warrants to purchase 1,000,000
shares of common stock owned by the Julie Schwartzberg Trust, as to which
Ms. Schwartzberg is the co-trustee; and 650,000 shares of common stock and
warrants to purchase 1,000,000 shares of common stock owned by the David
N. Sterling Trust, as to which Ms. Schwartzberg is the
co-trustee. Excludes 204,700 shares of common stock owned by
Continuum Capital Partners, LP, as to which Mr. Schwartzberg, the husband
of Ms. Schwartzberg, has sole voting, disposition and investment control;
and 790,000 shares of common stock, options to purchase 1,311,872 shares
of common stock, and warrants to purchase 1,000,000 shares of common stock
owned directly by Mr. Schwartzberg, as to which Ms. Schwartzberg
disclaims beneficial ownership or control. The warrants are
immediately exercisable.
|
Information
with respect to securities authorized for issuance under equity compensation
plans is provided in “ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.”
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
(a) Related Party
Transactions
This
section describes the transactions we have engaged in with persons who were
directors, officers or affiliates before and at the time of the transaction, and
persons known by us to be the beneficial owners of 5% or more of our common
stock as of December 31, 2009.
Most
office services are provided without charge by Dr. Kovach, our
president. Such costs are immaterial to the financial statements and
accordingly, have not been reflected therein. Dr. Kovach is involved
in other business activities and may, in the future, become involved in other
business opportunities that become available, as a result of which he may face a
conflict in selecting between us and his other business interests. We
have not formulated a policy for the resolution of such conflicts.
41
Also, Dr.
Kovach has advanced to us an aggregate of $92,717 through December 31, 2009
to meet operating expenses. Such advances are non-interest bearing
and are due on demand.
See “ITEM
11. EXECUTIVE COMPENSATION - Directors Compensation” for disclosure with respect
to payments to certain of our directors for services rendered.
(b) Director
Independence
The
Company considers Drs. Palmedo, Sorensen and Carter to be “independent
directors” as such term is defined by the NASDAQ Rules or Rule 10A-3 of the
Exchange Act.
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
AJ.
Robbins, P.C. acted as our independent registered public accounting firm for the
fiscal year ended December 31, 2007 and through the interim period ended
September 30, 2008. Weinberg & Company, P.C. acted as our
independent registered public accounting firm for the fiscal years ended
December 31, 2008 and 2009 and for the interim periods in 2009. The
following table shows the fees that were incurred by us for audit and other
services provided by AJ. Robbins, P.C. in fiscal 2008 through the interim period
ended September 30, 2008, and by Weinberg & Company, P.C. in fiscal
2009. As Weinberg & Company, P.C. was retained as the Company’s
independent registered public accounting firm effective December 17, 2008, such
firm did not incur any professional fees in fiscal 2008.
2008
|
2009
|
|||||||
AJ
Robbins, P.C.
|
||||||||
Audit
Fees (1)
|
$ | 38,760 | $ | - | ||||
Audit-Related
Fees (2)
|
- | - | ||||||
Tax
Fees (3)
|
6,000 | - | ||||||
All
Other Fees
|
- | - | ||||||
Total
|
$ | 44,760 | $ | - |
2008
|
2009
|
|||||||
Weinberg
& Company, P.C.
|
||||||||
Audit
Fees (1)
|
$ | - | $ | 41,401 | ||||
Audit-Related
Fees (2)
|
- | - | ||||||
Tax
Fees (3)
|
- | 2,275 | ||||||
All
Other Fees (4)
|
- | 2,373 | ||||||
Total
|
$ | - | $ | 46,049 |
(1)
|
Audit
fees represent fees for professional services provided in connection with
the audit of our annual financial statements and the review of our
financial statements included in our Form 10-QSB quarterly reports and
services that are normally provided in connection with statutory or
regulatory filings.
|
(2)
|
Audit-related
fees represent fees for assurance and related services that are reasonably
related to the performance of the audit or review of our financial
statements and not reported above under “Audit
Fees.”
|
42
(3)
|
Tax
fees represent fees for professional services related to tax compliance,
tax advice and tax planning.
|
(4)
|
All
other fees represent fees related to Sarbanes-Oxley compliance
work.
|
All audit
related services, tax services and other services rendered by AJ. Robbins, P.C.
and Weinberg & Company, P.C. were pre-approved by our Board of
Directors. The Board has adopted a pre-approval policy that provides
for the pre-approval of all services performed for us by our independent
registered public accounting firm.
ITEM 15.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
Exhibits
- -
Exhibit
No.
|
Description
|
|
2.1
|
Share
Exchange Agreement dated as of June 8, 2006 among the Company, John S.
Kovach and Lixte Biotechnology, Inc.1
|
|
3.1
|
Certificate
of Incorporation, as filed with the Delaware Secretary of State on May 24,
2005.2
|
|
3.2
|
Certificate
of Amendment of Certificate of Incorporation3
|
|
3.2
|
Bylaws2
|
|
10.1
|
Cooperative
Research and Development Agreement (CRADA) between the U.S. Department of
Health and Human Services, as represented by National Institute of
Neurological Disorders and Stroke of the National Institutes of Health and
Lixte Inc., as amended.4
|
|
10.2
|
Amendment
No. 6 to CRADA5
|
|
10.3
|
Agreement
between Lixte Biotechnology Holdings, Inc. and Chem-Master International,
Inc. dated as of February 5, 2007.6
|
|
10.4
|
Amendment
dated January 28, 2008 to Agreement with Chem-Master International,
Inc.7
|
|
10.5
|
Stock
Option Agreement between Lixte Biotechnology Holdings, Inc. and Stephen K.
Carter dated September 12, 2007.8
|
|
10.6
|
Stock
Option Agreement between Lixte Biotechnology Holdings, Inc. and Francis
Johnson dated September 12, 2007.8
|
|
10.7
|
Stock
Option Agreement between Lixte Biotechnology Holdings, Inc. and Gil
Schwartzberg dated September 12, 2007.8
|
|
10.8
|
Consulting
Agreement between Lixte Biotechnology Holdings, Inc. and Gil Schwartzberg
dated September 12, 2007.8
|
|
10.9
|
Amendment
to Consulting Agreement with Gil Schwartzberg dated October 15, 2009.12
|
|
10.10
|
Consulting
Agreement between Lixte Biotechnology Holdings, Inc. and Francis Johnson
dated September 12, 2007.8
|
|
10.11
|
Consulting
Agreement between Lixte Biotechnology Holdings, Inc. and Pro-Active
Capital Group, LLC dated July 27, 20099
|
43
Exhibit
No.
|
Description
|
|
10.12
|
License
Agreement dated as of September 19, 2008 between the Company and the
United States Public Health Services.10
|
|
10.13
|
Stock
Option Agreement between the Company and Mel Sorensen dated October 7,
2008.11
|
|
10.14
|
Consulting
Agreement between the Company and Mel Sorensen dated October 7, 2008.11
|
|
31
|
Officer’s
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.12
|
|
32
|
Officer’s
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.12
|
1
|
Filed
as an Exhibit to the Company’s Current Report on Form 8-K, as filed with
the Securities and Exchange Commission on July 7, 2006, and incorporated
herein by reference.
|
2
|
Filed
as an Exhibit to the Company’s Registration Statement on Form 10-SB, as
filed with the Securities and Exchange Commission on August 3, 2005 and
incorporated herein by reference.
|
3
|
Filed
as Appendix A to the Company’s Information Statement, as filed with the
Securities and Exchange Commission on September 20, 2006 and
incorporated herein by reference.
|
4
|
Filed
as an Exhibit to the Company’s Registration on Form SB-2 as filed with the
Securities and Exchange Commission on March 13, 2007 and incorporated
herein by reference.
|
5
|
Filed
as an Exhibit to the Company’s Current Report on Form 8-K, as filed with
the Securities and Exchange Commission on August 12, 2009 and
incorporated herein by reference.
|
6
|
Filed
as an Exhibit to the Company’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on February 9, 2007 and
incorporated herein by reference.
|
7
|
Filed
as an Exhibit to the Company’s Quarterly Report on Form 10-Q, as filed
with the Securities and Exchange Commission on May 14, 2008 and
incorporated herein by reference.
|
8
|
Filed
as an Exhibit to the Company’s Current Report on Form 8-K, as filed with
the Securities and Exchange Commission on August 12, 2009 and incorporated
herein by reference.
|
9
|
Filed
as an Exhibit to the Company’s Quarterly Report on Form 10-Q, as filed
with the Securities and Exchange Commission on November 12, 2009 and
incorporated herein by reference.
|
10
|
Filed
as an Exhibit to the Company’s Annual Report on Form 10-K, as filed with
the Securities and Exchange Commission on March 31, 2009 and
incorporated herein by reference.
|
11
|
Filed
as an Exhibit to the Company’s Quarterly Report on Form 10-Q as filed with
the Securities and Exchange Commission on November 12, 2008 and
incorporated herein by reference.
|
12
|
Filed
herewith.
|
Financial
Statement Schedules – None
44
SIGNATURES
In
accordance with Section 13 and 15(d) of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: March
24, 2010
|
LIXTE BIOTECHNOLOGY HOLDINGS, INC. | |
(Registrant)
|
||
By:
|
/s/ John
S. Kovach
|
|
Name: John
S. Kovach
|
||
Title: Chief
Executive
Officer
|
In
accordance with the Securities Exchange Act of 1934, this Report has been signed
below by the following persons on behalf of the Registrant in the capacity and
on the dates indicated.
Signature
|
Title
|
Date
|
||
/s/ John S. Kovach
|
Chief
Executive Officer, Principal Financial Officer,
|
March
24, 2010
|
||
John
S. Kovach
|
Principal
Accounting Officer and Director
|
|||
/s/ Philip F. Palmedo
|
Director
|
March
24, 2010
|
||
Philip
F. Palmedo
|
||||
Director
|
March
__, 2010
|
|||
Stephen
K. Carter
|
||||
/s/ Mel Sorensen
|
Director
|
March
24, 2010
|
||
Mel
Sorensen
|
45
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
(a
development stage company)
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM)
Years
Ended December 31, 2009 and 2008, and
Period
from August 9, 2005 (Inception) to December 31, 2009 (Cumulative)
Report
of Independent Registered Public Accounting Firm
|
F-2
|
||
Consolidated
Balance Sheets - December 31, 2009 and 2008
|
F-3
|
||
Consolidated
Statements of Operations - Years Ended December 31, 2009 and 2008,
and Period from August 9, 2005 (Inception) to December 31, 2009
(Cumulative)
|
F-4
|
||
Consolidated
Statement of Stockholders’ Equity (Deficiency) - Period from
August 9, 2005 (Inception) to December 31, 2009
|
F-5
|
||
Consolidated
Statements of Cash Flows - Years Ended December 31, 2009 and 2008,
and Period from August 9, 2005 (Inception) to December 31, 2009
(Cumulative)
|
F-6
|
||
Notes
to Consolidated Financial Statements – Years Ended December 31, 2009 and
2008, and Period from August 9, 2005 (Inception) to December 31, 2009
(Cumulative)
|
F-7
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors
Lixte
Biotechnology Holdings, Inc.
East
Setauket, New York
We have
audited the accompanying consolidated balance sheets of Lixte Biotechnology
Holdings, Inc. and subsidiary (a development stage company) as of December 31,
2009 and 2008, and the related consolidated statements of operations,
stockholders’ equity (deficiency) and cash flows for the years then ended and
for the period from August 9, 2005 (inception) to December 31, 2009
(cumulative). These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
we considered appropriate under the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Accordingly,
we express no such opinion. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Lixte Biotechnology
Holdings, Inc. and subsidiary as of December 31, 2009 and 2008, and the results
of their operations and their cash flows for the years then ended and for the
period from August 9, 2005 (inception) to December 31, 2009 (cumulative), in
conformity with accounting principles generally accepted in the United States of
America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. The Company is in the development
stage and has not generated any revenues from operations to date, and does not
expect to do so in the foreseeable future. The Company has
experienced recurring operating losses and negative operating cash flows since
inception, and has financed its working capital requirements through the
recurring sale of its equity securities. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern. Management’s
plans in regard to these matters are described in Note 1 to the consolidated
financial statements. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
WEINBERG
& COMPANY, P.A.
CERTIFIED
PUBLIC ACCOUNTANTS
Los
Angeles, California
March 24,
2010
F-2
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
(a
development stage company)
CONSOLIDATED
BALANCE SHEETS
|
|
December 31,
|
||||||
|
|
2009
|
|
|
2008
|
|
||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash,
including $1,175,000 of advances under equity financing
|
$
|
1,543,991
|
$
|
10,381
|
||||
Money
market funds, consisting of advance under equity financing
|
25,000
|
—
|
||||||
Advances
on research and development contract services
|
5,000
|
12,500
|
||||||
Prepaid
expenses and other current assets
|
27,354
|
28,644
|
||||||
Total
current assets
|
1,601,345
|
51,525
|
||||||
Office
equipment,
net of accumulated depreciation of $1,782 at
December 31, 2008
|
—
|
128
|
||||||
Total
assets
|
$
|
1,601,345
|
$
|
51,653
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$
|
83,546
|
$
|
108,484
|
||||
Notes
payable to consultant
|
—
|
100,000
|
||||||
Research
and development contract liabilities
|
50,000
|
—
|
||||||
Liquidated
damages payable under registration rights agreement
|
74,000
|
74,000
|
||||||
Due
to stockholder
|
92,717
|
92,717
|
||||||
Total
current liabilities
|
300,263
|
375,201
|
||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity (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 - 30,502,178 shares and 27,932,178 shares at
December 31, 2009 and 2008, respectively
|
3,050
|
2,793
|
||||||
Advances
under equity financing
|
1,200,000
|
—
|
||||||
Additional
paid-in capital
|
5,147,583
|
3,171,877
|
||||||
Deficit
accumulated during the development stage
|
(5,049,551
|
)
|
(3,498,218
|
)
|
||||
Total
stockholders’ equity (deficiency)
|
1,301,082
|
(323,548
|
)
|
|||||
Total
liabilities and stockholders’ equity (deficiency)
|
$
|
1,601,345
|
$
|
51,653
|
See
accompanying notes to consolidated financial statements.
F-3
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
(a
development stage company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
Years Ended
December 31,
|
Period from
August 9,
2005
(Inception) to
December 31,
2009
|
|||||||||||
2009
|
2008
|
(Cumulative)
|
||||||||||
Revenues
|
$ | — | $ | — | $ | — | ||||||
Costs
and expenses:
|
||||||||||||
General
and administrative costs, including $745,980, $357,987 and $2,091,811of
stock-based compensation costs for the years ended December 31, 2009 and
2008, and the period from August 9, 2005 (inception) to December 31, 2009
(cumulative), respectively
|
1,053,611 | 664,202 | 3,169,734 | |||||||||
Depreciation
|
128 | 615 | 1,910 | |||||||||
Research
and development costs, including $132,933, $213,061 and $396,830 of
stock-based costs for the years ended December 31, 2009 and 2008, and the
period from August 9, 2005 (inception) to December 31, 2009 (cumulative),
respectively
|
496,517 | 608,733 | 1,777,305 | |||||||||
Reverse
merger costs
|
— | — | 50,000 | |||||||||
Total
costs and expenses
|
1,550,256 | 1,273,550 | 4,998,949 | |||||||||
Loss
from operations
|
(1,550,256 | ) | (1,273,550 | ) | (4,998,949 | ) | ||||||
Interest
income
|
155 | 3,261 | 25,867 | |||||||||
Interest
expense
|
(1,232 | ) | (1,233 | ) | (2,469 | ) | ||||||
Liquidated
damages under registration rights agreement
|
— | — | (74,000 | ) | ||||||||
Net
loss
|
$ | (1,551,333 | ) | $ | (1,271,522 | ) | $ | (5,049,551 | ||||
Net
loss per common share – Basic
and diluted
|
$ | (0.05 | ) | $ | (0.05 | ) | ||||||
Weighted
average common shares outstanding – Basic
and diluted
|
29,318,178 | 27,924,528 |
See
accompanying notes to consolidated financial statements.
F-4
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
(a
development stage company)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
Period
from August 9, 2005 (Inception) to December 31, 2009
|
Common Stock
|
Advances
Under
Equity
|
|
|
Additional
Paid-in
|
|
|
Deficit
Accumulated
During the
Development
|
|
|
Total
Stockholders’
Equity
|
|
||||||||||
|
Shares
|
Amount
|
|
|
Financing
|
|
|
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
|
4,01
|
—
|
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 costs
|
—
|
—
|
—
|
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 costs
|
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 costs
|
—
|
—
|
—
|
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 placements, net of offering costs of
$112,950
|
2,420,000
|
242
|
—
|
1,096,808
|
—
|
1,097,050
|
||||||||||||||||
Advances
under equity financing
|
—
|
—
|
1,200,000
|
—
|
—
|
1,200,000
|
||||||||||||||||
Stock-based
compensation costs
|
150,000
|
15
|
—
|
745,965
|
—
|
745,980
|
||||||||||||||||
Stock-based
research and development costs
|
—
|
—
|
—
|
132,933
|
—
|
132,933
|
||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
(1,551,333
|
)
|
(1,551,333
|
)
|
||||||||||||||
Balance,
December 31, 2009
|
30,502,178
|
$
|
3,050
|
$
|
1,200,000
|
$
|
5,147,583
|
$
|
(5,049,551
|
)
|
$
|
1,301,082
|
See
accompanying notes to consolidated financial statements.
F-5
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
(a
development stage company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Years Ended
December 31,
|
|
|
Period from
August 9,
2005
(Inception) to
December 31,
2009
|
|
||||||
|
|
2009
|
|
|
2008
|
|