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EX-32.1 - SignPath Pharma, Inc. | v181294_ex32-1.htm |
EX-31.1 - SignPath Pharma, Inc. | v181294_ex31-1.htm |
EX-10.15 - SignPath Pharma, Inc. | v181294_ex10-15.htm |
EX-10.16 - SignPath Pharma, Inc. | v181294_ex10-16.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM
10-K
x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2009
¨ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from __________ to __________
COMMISSION
FILE NUMBER 333-158474
SIGNPATH
PHARMA INC.
(Exact
name of Registrant as Specified in Its Charter)
DELAWARE
|
20-5079533
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
1375
CALIFORNIA ROAD
|
||
QUAKERTOWN,
PENNSYLVANIA
|
18951
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number, including area code: (215) 538-9996
SECURITIES
REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE
ACT: NONE
SECURITIES
REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT: NONE
Indicate
by check mark if the registrant is a well-known seasoned issuer. ¨ Yes þ No
Indicate
by check mark if 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 Securities Exchange Act during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. þ Yes ¨ No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 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). þ Yes ¨ No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-KB is not contained herein, and will not 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. þ
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act
Large
accelerated filer ¨ Accelerated
filer ¨ Non-accelerated
filer ¨
Smaller Reporting Company þ
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). ¨ Yes þ No
As of
April 15, 2010, 11,340,000 shares of the Registrant's common stock, par value
$.001 per share, were outstanding.
On June
30, 2009, the aggregate market value of voting stock (based upon the closing
price of the Registrant's common stock on that date) held by nonaffiliates of
the Registrant was $0, as there is no public market for the Company’s Common
Stock.
Documents Incorporated By
Reference: None.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Except
for historical information, the matters discussed in this document may be
considered "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Such statements include declarations regarding the
intent, belief or current expectations of SignPath Pharma Inc., and its
management and are valid only as of today, and we disclaim any obligation to
update this information. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors that may cause the Company’s
or its industry’s actual results levels of activity, performance or achievements
to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by such forward-looking
statements. Important factors to consider and evaluate that could
cause actual results to differ materially from those predicted in any such
forward-looking statements include: (i) the general economic
recession and changes in the external competitive market factors which might
impact the Company’s results of operations; (ii) unanticipated working capital
or other cash requirements including those created by the failure of the Company
to adequately anticipate the costs associated with clinical trials,
manufacturing and other critical activities; (iii) changes in the Company’s
business strategy or an inability to execute its strategy due to unanticipated
changes in the therapeutic drug industry; (iv) the inability or failure of the
Company’s management to devote sufficient time and energy to the Company’s
business; and (v) the failure of the Company to complete any or all of the
transactions described herein on the terms currently contemplated. In
light of these risks and uncertainties, many of which are described in greater
detail under “Risk Factors” below and other reports field with the Securities
and Exchange Commission (“SEC”), there can be no assurance that the
forward-looking statements contained in this report will in fact
transpire. Although the Company believes that the expectations
reflected in the forward-looking statements are reasonable, the Company cannot
guarantee future results, levels of activity, performance or
achievements. Moreover, neither the Company nor any other person
assumes responsibility for the accuracy and completeness of such
statements. We do not undertake any duty to update any of the
forward-looking statements after the date of this report to conform such
statements to actual results or changes in our expectations.
2
PART
I
ITEM
1. DESCRIPTION OF BUSINESS
Company
Overview
SignPath
is a development stage biotechnology company founded in May 2006 to develop
proprietary formulations of curcumin, a naturally occurring compound found in
the root of the Curcuma
longa (tumeric) plant, for applications in malignant
diseases.
Curcumin
has an extensive history as an oral medicinal product with safe human use, but
its potential therapeutic benefits have been limited by its low absorption when
taken orally, as well as its inactivation in the liver (due to hepatic
glucuronidation). SignPath intends to develop Investigative New Drug
(“IND”) applications and clinical trials for parenterally (taken into the body
in a manner other than the digestive tract) administered curcumin. We
believe that the liposomal and nano-sized formulations we have licensed could
overcome absorption and hepatic inactivation problems associated with oral
administration of unmodified curcumin extract, based on management’s experience
and the opinions of our consultants to expand its use for concerns, Parkinson’s
Disease and parasitic diseases the Company is developing three different
intravenous nano-particle sized formulations. Proof of efficacy of
these formulations against human tumor xenografts in mice was
published. During IND pre-clinical toxicity trials in dogs with
lipsomil curcumin, a dose-dependent hemolysis was observed, indicating specific
dose/schedules of administration will be required for trials in
humans.
SignPath
has licensed two proprietary intravenous formulations containing curcumin as the
active therapeutic agent. The first is a liposomal version licensed
from University of Texas MD Anderson Cancer Center (“UTMDACC”); the second is a
nanosized version licensed from The Johns Hopkins University
(“JHU”). The Company’s near term (next 6 to 12 months) goals are to
complete preclinical development of the first two lead compounds, liposomal
curcumin and nanocurcumin, and file an IND with the FDA to begin Phase I safety
studies. The Company believes its licensed formulations of curcumin
change the product from a naturally occurring one to novel chemical entities
making them potentially patentable. The Company seeks to develop these new
products which potentially will give SignPath proprietary curcumin
preparations with applications in a broad spectrum of malignant
diseases.
The
Company has assembled leaders experienced in pharmacologic development of
natural products to advise it on the development of its curcumin
formulations. This Scientific Advisory Board is comprised of
individuals with specific experience with natural products, formulation
development, and malignant diseases. Expertise in chemistry will come from
commercially based product chemists. Drug development will overseen
by Lawrence Helson MD, Chief Executive Officer, an oncologist with 20 years of
pharmaceutical development experience; Arniban Maitra, Phd, MPPH, of
JHU, who has expertise in nanotechnology, development of nanocurcumin, and
testing for antitumor effects; and Judith A Smith, PhD,
director of the UTMDACC pre-clinical development group for the liposomal
formulation.
The
Company’s Scientific Advisory Board members all bring relevant experience to the
Company. Professor Tauseef Ahmad, MD is an experienced principal
investigator for lymphoma, myeloma and solid tumor
studies. See Item 10. Directors, Executive Officers and
Corporate Governance below for more information about our management team and
Scientific Advisory Board members.
Clinical
application strategies will be based upon the advice of the individuals serving
on the Scientific Advisory Board, all of whom have academic and practical
experience in biopharmaceutical fields. We expect that our Phase I
and II clinical trials, if and when conducted, will be run by clinical research
organizations with whom we expect to establish collaborative
relationships.
Our
pre-clinical IND development of liposomal curcumin is scheduled to be run
by the UTMDACC group which has functional pre-clinical IND development
procedures and experience. The JHU group is experienced with non-clinical
development of nanocurcumin; however, the nanocurcumin pre-clinical
aspects will be run by the UTMDACC research and development
group. The latter has experience with curcumin and the
capability of guiding us through the IND development process of both
formulations.
During
the fiscal years ended December 31, 2009 and 2008, the Company expended $215,937
and $263,886, respectively, for net research and development. None of
these expenses were borne by customers as the final products are not
commercially available. They consisted primarily of payments made to
JHU and Brookwood Pharmaceuticals under agreements described below.
SignPath
is a privately held Delaware corporation with offices in Quakertown,
Pennsylvania in a building owned by our CEO. The Company does not pay
rent or have a lease for its space.
3
Target
Markets
The
anticipated markets for therapeutic curcumin are diseases for which current
therapeutic alternatives are not satisfactory. There are several
malignant diseases which are classified as orphan indications, defined by the FDA as
conditions with less than 200,000 patients in the United States. Some
of these conditions exhibit dependency upon NFκB (NF kappa-B, a family of
intracellular proteins), a signaling pathway component inhibited by
curcumin.1 Two
such indications are multiple myeloma and pancreatic cancer. The
Company currently plans to pursue the development and testing of therapies with
parenterally-administered curcumin to address multiple myeloma and pancreatic
cancer, two forms of cancer in which current treatment is only marginally
effective or could be greatly improved.
Preclinical
studies conducted by other scientists of curcumin-based treatments in
cancer2 therapy
suggest it may have an application as a parenteral drug for both prophylaxis and
therapy. There are current trials with oral curcumin for these diseases by other
research groups at various stages of clinical development. While
these preclinical data show potentially beneficial activity and follow
well-defined mechanisms of action, 2 the parenteral
route has not yet been substantiated as effective in controlled clinical
trials. The Company’s goal is to establish the efficacy of
parenterally administered curcumin.
Pancreatic
cancer is the fifth leading cause of cancer deaths, accounting for an estimated
30,000 deaths annually in the United States, according to published reports
found in Burro, H.A. et al (Item 5, Appendix B). This cancer is
largely resistant to the current approved drug, gemcitabene, and results in an
objective tumor response in only 5% of patients resulting in a minor impact on
survival.3 Pancreatic
cancer, thus, remains an unmet clinical need. We believe that most
patients with this diagnosis could be candidates for controlled clinical trials
alone or in combination with gemcitabene in clinical trials.
Other
potential susceptible tumor types are primary and metastatic brain tumors and
multiple myeloma in adults. The market for glioblastoma multiforme and other
malignant gliomas has an incidence of about 17,000 per year, or 59 per million
of the population, according to the scientific literature.4 Although
this represents just 2% of cancer deaths in the United States, survival rates
are quite low and cost of treatment is high. Following standard therapy, the
median survival of glioblastoma patients is 9 to 11 months with less than 5% of
patients alive after 5 years. In addition, metastases to the brain
from other sites affect an estimated 75,000 patients per year and have very poor
survival rates, making primary and metastatic brain tumors a clear unmet
need. The annual incidence of multiple myeloma is 15,000 cases in the
United States. Multiple myeloma is responsible for 10% to 20% of the
hematological malignancies, with skeletal involvement in about 80% of the
patients.5 This
disease has been shown by other non-Company researchers to have an increased
expression of the curcumin-sensitive signaling pathway, which the Company
believes may make it susceptible to therapy with our product
candidates. Based upon pre-clinical studies conducted by other
scientists with curcumin, we believe the potential patient population could
include the majority of these patients following failure of standard treatment,
or as testing advances, in combination therapy or as a first line
single-agent.
The
Company believes that its parenteral formulations of curcumin can be compared
with standard of care when used in combination with front line standard
chemotherapy in a number of diseases. Given the aging of the
population with annual incremental growth in the number of prospective patients
in chronic and acute disease categories, the Company believes a potentially
effective and potentially minimally toxic agent like curcumin could gain wide
acceptance and usage.
Product
Overview
Background
on Curcumin
Curcumin has been used primarily in its
natural state in tumeric as an ingredient in foods for hundreds of years in
India and the Asian subcontinent where it grows naturally. It also
has a history of use as a medicinal extract. 3
1 Ahn
KS, Aggarwal BB., 2005 Transcription factor NF-(kappa)B; A sensor for smoke and
stress Signals. Ann N.Y. Acad Sci 1056:218-233.
2 Aggarwal
B.B., Kumar A, Bharti C 2003. Anticancer potential of curcumin. Pre-clinical and
clinical studies. Anticancer Research 23:363-398.
3 Burris
H.A. et al. 1997 Improvements in survival and clinical benefit with gemcitabine
as first line therapy for patients with advanced pancreatic cancer: a randomized
trial. J Clinical Oncology 15:2403-2413.
4 Schouten
L.J. et al 2003, Incidence of brain metastases in a cohort of patients with
carcinoma of the breast, colon, kidney, lung and melanomas. Cancer
94:2698-2705.
5 Sung
B. Kunnumakkara AB, Sethi G. Anand P., Guha S., Aggarwal BB. Mol
Cancer ther., Ap 8(4): 959-70. 2009, Curcumin circumvents chemoresistence in
vitro and potentiates the effect of thalidomide and bortezomib against human
multiple myeloma in nude mice model.
4
Curcumin’s history includes oral human
use for a variety of benign and malignant diseases. A body of published research
explaining curcumin’s mechanisms of action at the cellular level supports its
potential application in humans. 6, 1, 2, 7 In addition, there have
been parenteral curcumin toxicology studies in animals published by other
researchers which support a finding of curcumin’s safety. 7
One
problem that has limited the therapeutic potential of curcumin is that orally
delivered curcumin has limited bioavalibility. Further, curcumin is
broken down when it passes through in the intestinal tract and when it reaches
the liver. Studies of oral curcumin by other researchers have
attributed to its low efficacy to low levels of active drug reaching the
bloodstream. Yet, uncontrolled trials conducted by third parties have
shown that oral curcumin, nonetheless, appears to have some detectable clinical
activity in a variety of diseases.
To address this problem, SignPath
intends to develop parenteral formulations (administration that bypasses the
gastrointestinal system) in the form of a liposomal version and a nanosized
version. Predicated upon the dosage schedules, needs, and population
demographics of different disease entities, the Company believes these
curcumin-based treatments will be applicable for a broad spectrum of
proliferative malignant diseases. In addition, curcumin is believed
to work as a chemopreventive agent in cancers of the colon, stomach, and skin
based upon its established antioxidant and anti-inflammatory properties.
(1)
Brief
Technology Background: Signal Transduction and Cellular
Pathways
Cells
carry out many of their functions by responding to signals transmitted from the
external environment. The surface of a cell has receptor proteins
that span or cross the cell surface and bind to their targets with high
specificity. When an external molecule binds to a surface receptor,
it provides the signal to activate (turn on or turn off) critical cell
processes. Recent scientific breakthroughs have enabled these surface
receptors and the internal pathways they control to become targets for drug
development. Several other companies have used these mechanisms to
develop products that have reached the market or advanced to late stage clinical
trials.
Once a
cell signaling pathway is activated, a series of reactions (or cascade) occurs
within the cell. Each step activates a specific protein in the
pathway, and its active products initiate the activation of the next protein in
the process. Some of the cellular processes that are controlled in
this manner include inflammatory pathways, cell proliferation, cell survival,
and cell death (apoptosis). Elevated levels of activated inflammatory survival
pathways have been correlated with many types of tumors, 8 and can also be
markers for more severe disease and/or poor prognosis. Some pathways are
associated with resistance to chemotherapy, defined as tumor cell survival in
the presence of conventional toxic chemotherapy. These are some of the tumor
cell characteristics that can make cancer a fatal disease.
3 Burris H.A. et al. 1997
Improvements in survival and clinical benefit with gemcitabine as first line
therapy for patients with advanced pancreatic cancer: a randomized trial. J
Clinical Oncology 15:2403-2413.
6 Reddy RC, Vatsala PG,
Keshamouni VG et al, 2005. Curcumin for Malaria Therapy Biochemical and
Biophysical Research Communications 326:472-474.
1 Ahn KS, Aggarwal BB., 2005
Transcription factor NF-(kappa)B; A sensor for smoke and stress Signals. Ann
N.Y. Acad Sci 1056:218-233
2 Aggarwal B.B., Kumar A, Bharti
C 2003. Anticancer potential of curcumin. Pre-clinical and clinical studies.
Anticancer Research 23:363-398.
7 Li,L., Brairteh, F. Kurzrock,R
2005. Liposome Encapsulated Curcumin. In Vitro Effects on proliferation,
apoptosis, signaling and angiogenesis. Cancer, 104:1322-1331.
8 Rakoff-Nahoum Seth, and
Medzitof, Rusian 2007 Regulation of Spontaneous Intestinal Tumorigenesis Through
the Adaptor Protein MyD88. Science 317: 124-127.
SignPath is developing curcumin, a
compound for which there are early indicators that it may be a compound that
inhibits several cell survival pathways via blockade of specific signaling
proteins called activating kinases. Two established pathway targets are
known as NFκB and AKT.
1 The net effect when these pathways are inactivated is to
turn off signals leading to cell metabolism, protein synthesis, proliferation
and activate signals leading to cell death via activation of downstream
processes. These changes also alter other pathways, including STAT3,
survivin, and pathways conferring resistance to chemotherapy.
SignPath believes inhibition of these
critical intracellular survival pathways are good targets for drug development,
and our management believes that curcumin is an attractive lead compound for
further development due to its inhibition of major survival pathways and
collateral effects of activating death pathways. It also
prohibits inflammation and release of inflammatory
cytokines such as tumor necrosis factor-ά (alpha), inflammatory cells such as
macrophages which are required for the development and spread of
tumors. Recently it has been shown that activation of NFκB (an
intracellular protein) is a critical component in cellular responses to TOLL-receptor
ligands (receptors that activate immune cell responses) and Interleukin-1 (a
cytokine). The latter are implicated in the innate immune response
promoting murine hepatocellular and colon carcinoma. 2 One of the established
effects of curcumin is to inhibit NFκB and subsequent TOLL-receptor ligand
activity. Scientific studies have suggested that a drug that can inhibit these
activated survival and inflammatory pathways should be able to stop the growth
of cancer cells. Blocking inhibitors of
death pathways are believed to shorten the cell’s ability to survive.
8
5
Liposome
Encapsulation and Nanocurcumin
SignPath
is developing liposomal and nanosized versions of curcumin. The
liposomal version is a lipid-protein coating that encases the
molecule. This helps prevent the drug from being removed from the
bloodstream by the liver, increases solubility in serum, and increases the
drug’s circulation time allowing more drug to reach tumor
sites. Micellar aggregates or nanoformulations of curcumin with
unique polymeric chemical coatings will be synthesized and contain similar
solubility characteristics to liposomal formulations; however, we believe these
nano-formulations may have discrete clinical applications compared to the
liposomal formulation. For these reasons, SignPath intends to develop both
formulations.
Nanocurc,
a polymeric parenteral formulation of nanocurcumin, in human pancreatic cancer
xenografts in nude mice has been found by the Company to have anti-cancer
effects which are synergistic when co-administered with
Gemcitabine. This formulation has activity against breast cancer and
passes the blood brain barrier. Non-clinical and pre-clinical studies
of tumor targeted PLGA curcumin have been completed at the University of Texas
(see below) and published.
Mechanism
of Action
Curcumin’s
molecular mechanisms of action involve direct and indirect inhibition or
activation of multiple biochemical targets in tumor cells. These
include genes, enzymes, proteins, and, particularly, many components of
up-regulated cell survival and down-regulated cell death
pathways. These activities result in decreased inflammatory and/or
oxidative damage, decreased migration, proliferation and invasion of tumor
cells, decreased radio- and chemoresistance, and increased chemosensitivity to
cytotoxic drugs. While not incorporated in SignPath’s initial
efforts, the Company may also develop curcumin applications to target malaria or
other parasitic diseases. These observations suggest the potential to treat
several diseases with large potential markets if the Company can develop an
economically feasible product.
1 Ahn KS, Aggarwal BB., 2005
Transcription factor NF-(kappa)B; A sensor for smoke and stress Signals. Ann
N.Y. Acad Sci 1056:218-233.
2 Aggarwal B.B., Kumar A, Bharti
C 2003. Anticancer potential of curcumin. Pre-clinical and clinical studies.
Anticancer Research 23:363-398.
8 Rakoff-Nahoum Seth, and
Medzitof, Rusian 2007 Regulation of Spontaneous
Intestinal Tumorigenesis Through the Adaptor
Protein MyD88. Science 317: 124-127.
3 Burris H.A. et al. 1997
Improvements in survival and clinical benefit with gemcitabine as first line
therapy for patients with advanced pancreatic cancer: a randomized trial. J
Clinical Oncology 15:2403-2413.
6
Cancer: Only
1% of an oral dose of curcumin is absorbed; yet in spite of this extreme
limitation, there are publications that suggest anti-cancer activity of orally
administered curcumin. 2
Additional evidence for anticancer activity is suggested
from
in vitro and
animal experiments. Its anticancer effects include promoting apoptosis (cell
death pathways) and down regulation of major pro-survival factors, including
AKT, NFκB, STAT-3, and Survivin signaling pathways. We, therefore, believe that
commercial application of parenteral curcumin formulations for cancers which
depend upon NFκB (such as multiple myeloma and pancreatic cancer) represent
prime candidates for Phase II trials assuming successful preclinical and Phase I
trials. Many other cancers such as brain tumors are also dependent
upon AKT, NFκB, and survival pathways which may render them additional potential
clinical targets. 3
Government
Regulation
Regulation
by governmental authorities in the United States and other countries is a
significant factor in the development, manufacture and marketing of
pharmaceuticals, and in our ongoing research and development activities. All of
our products will require regulatory approval by governmental agencies prior to
commercialization. In particular, pharmaceutical drugs are subject to rigorous
preclinical testing and clinical trials and other pre-marketing approval
requirements by the U.S. Food and Drug Administration (“FDA”) and regulatory
authorities in other countries. In the United States, various federal, and in
some cases, state statutes and regulations also govern or impact upon the
manufacturing, safety, labeling, storage, record-keeping and marketing of
pharmaceutical products. The lengthy process of seeking required approvals and
the continuing need for compliance with applicable statutes and regulations,
require the expenditure of substantial resources.
Regulatory
approval, when and if obtained for any of our product candidates, may be limited
in scope which may significantly limit the indicated uses for which our product
candidates may be marketed. Further, approved drugs and manufacturers are
subject to ongoing review and discovery of previously unknown problems that may
result in restrictions on their manufacture, sale or use or in their withdrawal
from the market.
FDA
Approval & Developmental Milestones
There are
three primary phases of FDA clinical trials for an FDA new drug application
(NDA) and approval for commercial sale. Before these can begin,
non-clinical/pre-clinical laboratory studies are conducted and an
Investigational New Drug application (IND) is submitted to the
FDA. After FDA approval, the Company may begin Phase I clinical
safety and dosage estimation studies, followed by Phase II studies to evaluated
clinical efficacy in selected diseases, then Phase III testing to demonstrate
statistically significant safety and efficacy.
During
the pre-clinical phase (non-clinical and pre-clinical) a compound is
studied ex-vivo in a
laboratory and
in-vivo in laboratory animals to establish its stability,
manufacturing feasibility, bioavailability, absorption, distribution, metabolism
and elimination. This phase of testing establishes pre-clinical
parameters for clinical safety and efficacy. Results of these
pre-clinical trials comprise the IND that is submitted to the FDA for review
before the drug is tested in humans. Phase I testing is a basic
safety study to determine if the drug is safe enough to be tested in humans.
During Phase I, the drug can be tested in both healthy human volunteers and/or
patients with malignant disease to determine a tolerable dosage regimen that is
sufficiently safe to proceed with further testing in a larger group of diseased
patients. Testing in disease-free volunteers can supply accurate estimates of
safety and tolerability for application in persons with non-cancer indications,
while testing in patients with pre-treated cancers can indicate different
degrees of tolerance depending upon their past medical history.
In Phase
II studies, the drug is tested in small number of patients with benign and/or
malignant forms of the disease to determine the doses at which the drug has
clinical activity and to characterize the drug’s effects on the
body. These effects include the drug’s dosage, efficacy, and side
effect profiles.
Drugs
that have a clinical benefit in Phase II trials move forward to additional
clinical testing with a larger number of patients in Phase III trials. These
trials verify Phase II results in a larger patient sample and must demonstrate
statistically significant benefits in the drug’s safety and
efficacy. Trial endpoints are designed to show a meaningful clinical
effect over a predetermined timeframe. These timeframes depend on the
disease being tested and can be in days, weeks, or years of
treatment.
The drug
being tested is typically compared with a placebo or the current standard of
treatment to show that the drug is equal to (or an improvement upon) existing
treatments. Once those studies have been completed, the new drug application
(NDA) is prepared and submitted to the FDA for approval. Under FDA
guidelines, the NDA should be answered within 10 months. At
such time, the FDA may inform the Company that drug is approved, the application
is approvable pending resolution of certain issues, or may require additional
studies to be completed for approval.
7
Other
Regulatory Requirements
Any
products that we manufacture or distribute under FDA approvals are subject to
pervasive and continuing regulation by the FDA, including record-keeping
requirements and reporting of adverse experiences with the products. Drug
manufacturers and their subcontractors are required to register with the FDA
and, where appropriate, state agencies, and are subject to periodic unannounced
inspections by the FDA and state agencies for compliance with cGMP regulations
which impose procedural and documentation requirements upon us and any third
party manufacturers we utilize. Before approving a biologics license
application, the FDA will inspect the facilities at which the product is
manufactured (including both those of the applicant and any third-party
component manufacturers) and will not approve the product unless the
manufacturing facilities are in compliance with FDA’s cGMP, which are
regulations that govern the manufacture, storage and distribution of a product.
Manufacturers of biologics also must comply with FDA’s general biological
product standards.
Following
approval, the FDA periodically inspects drug and biologic manufacturing
facilities to ensure continued compliance with the cGMP regulations. We must
ensure that any third-party manufacturers continue to expend time, money and
effort in the areas of production, quality control, record keeping and reporting
to ensure full compliance with those requirements. Failure to comply with these
requirements subjects the manufacturer to possible legal or regulatory action,
such as suspension of manufacturing or recall or seizure of product. Adverse
experiences with the product must be reported to the FDA and could result in the
imposition of marketing restrictions through labeling changes or market removal.
Product approvals may be withdrawn if compliance with regulatory requirements is
not maintained or if problems concerning safety or efficacy of the product occur
following approval.
The FDA
also closely regulates the marketing and promotion of drugs. A company can make
only those claims relating to safety and efficacy that are approved by the FDA.
Failure to comply with these requirements can result in adverse publicity,
warning letters, corrective advertising and potential civil and criminal
penalties. Physicians may prescribe legally available drugs for uses that are
not described in the product's labeling and that differ from those tested by us
and approved by the FDA. Such off-label uses are common across medical
specialties. Physicians may believe that such off-label uses are the best
treatment for many patients in varied circumstances. The FDA does not regulate
the behavior of physicians in their choice of treatments. The FDA does, however,
restrict manufacturer’s communications on the subject of off-label
use.
The FDA’s
policies may change and additional government regulations may be enacted which
could prevent or delay regulatory approval of our product candidates or approval
of new indications for our existing products. We cannot predict the likelihood,
nature or extent of adverse governmental regulations that might arise from
future legislative or administrative action, either in the United States or
abroad.
In
addition, the labeling, advertising, promotion, marketing and distribution of a
drug or biologic product also must be in compliance with FDA and
U.S. Federal Trade Commission (“FTC”) requirements which include, among
others, standards and regulations for off-label promotion, industry sponsored
scientific and educational activities, promotional activities involving the
internet, and direct-to-consumer advertising. The FDA and FTC have very broad
enforcement authority, and failure to abide by these regulations can result in
penalties, including the issuance of a warning letter directing the Company to
correct deviations from regulatory standards and enforcement actions that can
include seizures, injunctions and criminal prosecution.
Other
Uses of Curcumin
There are
other potential uses of curcumin in addition to our initial focus on multiple
myeloma and pancreatic cancer. Following our clinical trials in these two
categories, we will seek to study other cancer candidates which have an AKT or
NFkB requirement for survival and proliferation, such as breast and prostate
cancers. The unique activity of curcumin also suggests its use with other cancer
treatment modalities. For example, it may increase tumor cell susceptibility to
standard treatment with radiation or chemotherapy.
Because
of the protean nature of curcumin’s interaction with different cell components,
and based upon data derived from traditional use and non-clinical and
pre-clinical laboratory studies, we believe it may have a therapeutic role in
numerous non-cancer indications.
To expand
its use for other cancers, Parkinson’s Disease and parasitic diseases, the
Company is developing three different (liposomal, polymeric and slow release
PLGA) intravenous nanoparticle size formulations. Proof of efficacy
of these formulations against human tumor xenografts in mice was
published. During IND pre-clinical toxicity trials in dogs, with
liposomal curcumin, a dose-dependant hemolysis was observed, indicating specific
dose/schedules of administrations will be required for trials in
humans.
A
research grant of approximately $80,000 from the Michael J. Fox Parkinson’s
Disease Foundation to measure parenteral liposomal curcumin passage across the
blood brain barrier and focal distributions in mice/rat brains in collaboration
with D. S. Chiou at the University of Western Ontario, Canada. Data,
to date, has revealed intravenous curcumin localized in specific brain regions
associated with Parkinson’s Disease and memory processing. The
Company has expended approximately $30,000 to manufacture naocurcumin for this
study and is funding animal studies with Dr. Chiou with the remaining
funds.
8
To
broaden the intellectual property profile of parenteral curcumin, additional
clinical uses of curcumin have been incorporated in a CIP (continuation in
progress) application. This application has been submitted to the
Patent and Trademark Office by MD Anderson and contains claims for additional
therapeutic uses of curcumin. There is sufficient published data on
curcumin and autoimmune diseases, degenerative diseases of the joints and the
nervous system, inflammatory based diseases, aging, diabetes and cerebral
malaria to envision addressing these conditions with parenteral curcumin when
final dosage and safety data from cancer trials in cancer patients becomes
available.
Clinical
Trials
The
Company expects to submit an IND to begin human clinical trials upon completion
of the preclinical work, which is expected to be in the third quarter of
2010. The Company expects to initiate Phase I clinical trials within
three months of regulatory clearance. Clinical trials for liposomal
curcumin and nanocurcumin will use curcumin formulations made under GMP
conditions by contract manufacturers. As described below, the Company
has entered into agreements with manufacturers of curcumin, liposomal curcumin,
and polymers for nanocurcumin to produce sufficient quantities to
complete all pre-clinical requirements for submission of an IND. Agreements for
additional quantities of both formulations for Phase 1 clinical
trials will be initiated depending upon human dosage
estimates generated in pre-clinical studies. The Company plans to
pursue four Phase I liposomal curcumin and nanocurcumin parenteral trials in
cancer patients.
We have
had preliminary discussions regarding participation in Phase I and II clinical
trials during direct meetings with responsible physician investigators at
three cancer centers. All have had extensive experience with drug trials
anticancer drugs and are willing to participate in the proposed clinical
studies.
These investigators
include:
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M.D.Anderson
Cancer Center, Houston Texas. Dr. R. Kurzrock has already
evaluated oral curcumin in over 40 patients with pancreatic
cancer.
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New
York Medical College, Dr. T. Ahmad has had extensive experience as a
Phase I, II, and III clinical trial
investigator.
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At
the Algemeine Krankenhaus, in Vienna Austria, Dr. Michael Wolzt would be
in charge of Phase I and II clinical trials following initial toxicity
data from either New York Medical College (Valhalla, NY) or M.D. Anderson
Cancer Center. Our CEO inspected these facilities in December
2007, however, no agreements were entered into and management will
determine whether to pursue a clinical study of this finding depending on
cost and feasibility, when regulatory approval is
obtained.
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Additional Phase
I trials in normal volunteers may be initiated if deemed necessary by the
FDA, if a non-toxic but therapeutic dose is determined in Phase I
cancer studies. These studies are expected to be carried out by Dr.
Wolzt in Vienna, Austria and at The Johns Hopkins Hospital, Baltimore,
Maryland.
Tentative
sites for these Phase I trials include the following:
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We
expect that the SP01 (liposomal curcumin) formulation will be tested for
pharmacokinetics, safety and dosage estimation in a Phase I trial in three
centers: MD Anderson Cancer Center, Houston, Texas; Westchester
Medical Center, Valhalla, New York; and Medical University of Vienna,
Allgemeines Krankenhaus, Vienna,
Austria.
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We
expect that the SP02 (nanocurcumin) formulation will be tested for
pharmacokinetics, safety, and dosage estimates in Phase I trials in three
centers: M.D. Anderson Medical Center, Houston, Texas;
Westchester Medical Center, Valhalla, New York; and Medical University of
Vienna, Allgemeines Krankenhaus, Vienna,
Austria.
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In both
cases above, the Company expects that the trials’ subjects will be cancer
patients who have failed standard of care therapy and elected experimental
therapy.
Provided
that the safety results of Phase I trials are satisfactory and the FDA approves
the Phase II studies, the Company anticipates launching the following Phase II
trials:
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Liposomal
curcumin: Intravenous administration to pancreatic cancer
patients who fail standard
therapy.
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9
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Liposome
curcumin: Intravenous administration to multiple myeloma cancer patients
who fail standard therapy.
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Nanocurcumin: Intravenous
administration to pancreatic cancer patients who fail standard
therapy.
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Nanocurcumin: Intravenous
administration to multiple myeloma patients who fail standard
therapy.
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Market
Analysis
The
anticipated markets for therapeutic curcumin include populations with unmet
medical needs, or as combinations with established drugs to enhance their
activity in the presence of drug resistance. The preclinical studies
of curcumin in cancer suggest its potential application as a parenteral drug for
both prophylaxis and therapy.
Given the
aging of the population with an annual increment in the number of prospective
patients in chronic disease categories, the Company believes a potentially
effective and presumably minimally toxic agent like oral or parenteral curcumin
could gain wide acceptance and usage.
As stated
earlier, the Company is aware of pre-clinical data from other research
suggesting that parenteral curcumin may have anti-cancer activity. 8 The new cases of cancer
in the United States in 2009 were estimated at approximately 1,400,000 per year,
according to the American Cancer Society, Inc. Surveillance
Research. This is a large market with substantial room for
improvement over current therapies.
Curcumin
may also prove to be effective as prevention for high-risk individuals and as a
therapeutic for established disease when used alone or in combination with other
agents. As an initial approach we anticipate treating diseases with
unmet needs. These include multiple myeloma and pancreatic
cancer. While there are current clinical trials with oral preparation
of curcumin, we currently know of no competitors with publicly known plans to
develop parenteral forms of curcumin. Management believes that the
Company is positioned to leverage its rights to its licensed intellectual
property of these parenteral products in the United States and
worldwide.
Potential
Commercialization of Liposomal Curcumin and Nanocurcumin
Because
the liposomal formulation has been demonstrated by other researchers to be
effective in animal studies, 8 we anticipate that this
modification of curcumin could be more effective than the natural extract from
turmeric when administered parenterally. Assuming we obtain positive
results from our preclinical trials, clinical trials and ultimately receive FDA
approval, the Company believes that these formulations of curcumin may be
accepted by physicians for treating cancer and other diseases that fit within
the efficacy profile established by the Company.
8 Rakoff-Nahoum Seth, and
Medzitof, Rusian 2007 Regulation of Spontaneous Intestinal Tumorigenesis Through
the Adaptor Protein MyD88. Science 317: 124-127.
Modification
of water-insoluble drugs such as curcumin as liposomes or nanoparticles is a
novel formulation process. We cannot predict at this time the
biological activity of a liposomal curcumin product compared to the nanocurcumin
formulation due to possible differences in effectiveness, pharmacokinetics, and
pharmacodynamics. There may be specific pharmacological advantages
for either formulation which could confer clinical and/or commercial
value. The final cost of drug production will depend upon usage and
economies of scale; however, we intend to adopt a strategy, if possible, to
result in our products having a cost competitive with current medications for
the intended applications.
The
Company also expects to evaluate conducting potential additional development
initiatives based on its licensed curcumin formulation to treat patients with
degenerative, arthritic and parasitic diseases, such as malaria, depending upon
the results of the Phase 1 trials, clinical imperatives, and financial resources
to carry them out.
Clinical
application of parenteral administration of liposomal curcumin or nanosized
curcumin may induce varied responses in the same disease or in different disease
states. In addition, we anticipate different development and
manufacturing costs, and ultimately different commercial remuneration in the
different applications. These variations are attributed to
demographic differences in applications such as pancreatic cancer and multiple
myeloma.
10
The
Company entered into a Liposomal Formulation Manufacturing Agreement with
Polymun Scientific Immunbiologische Forschung GmbH (“Polymun”), Vienna, Austria,
dated as of September 6, 2007, which has been filed as an exhibit to the
Company’s SEC filings. Pursuant to this agreement, Polymun will apply
their GLP process and experience to encapsulate pure
synthetic curcumin provided by the Company with a layer of lipid particles
(making a liposome formulation which can be injected intravenously). After
testing for size, and stability, Polymun will deliver the liposomal curcumin to
the MD Anderson Cancer Center for intravenous animal toxicity testing.
During this developmental process they have invented and developed a
special assay to simultaneously quantify the content of lipids and curcumin in
all batches they prepare. Polymun completed scaled-up GMP manufacture
of the lipocurc formulation. The Company’s obligation to Polymun
totaled €280,000 through the first two development stages and thereafter a
€130,000 per production fee. Our agreement with Polymun expired on December 31,
2009 although the parties are continuing work under the terms of the
agreement.
On
January 30, 2008, the Company contracted with Brookwood Pharmaceuticals, Inc.,
n/k/a Surmodics Pharmaceuticals, Inc. (“Surmodics”) an Alabama based polymer
manufacturer, to synthesize a quantity of polymer for nanocurcumin development.
The polymer is designed to surround the pure curcumin to render it soluble
and ready for intravenous administration in mice, rats, and dogs which
constitutes the "nanocurcumin formulation". The total cost for
producing sufficient polymer for animal studies is $81,000. Surmodics will
provide quantities of output to the Company’s designated manufacturer in order
to fulfill final product requirements.
Both
Polymun and Surmodics are agreeable to proceed with this second phase of
development to produce clinical GMP grade curcumin. The Company will
decide between the two companies based upon their capacity and experience. Since
liposomal curcumin is an advanced stage of development (pre-clinical) and
nearing completion of FDA requirements, the Company’s interest is to proceed
with that product in its Phase 1 clinical studies. The nanocurcumin
to be developed by The Johns Hopkins University is expected to take 8 to 12
months before it can be submitted for trials. Ultimately, the final
GMP product will be shipped to Dr. Anirban Maitra at The Johns Hopkins
University, who will complete the pre-clinical aspects of the IND. Additional
batches will be sent to J.A.Smith at MD Anderson for GLP
production.
Raw
Materials; Supplies
Liposomal
curcumin was manufactured for the Company by Polymun, Inc., of
Vienna, Austria under the agreement described in the prior
section. It was obtained initially from a U.S. chemical supplier,
Sigma Aldrich Fine Chemicals (“SAFC”) and then from Sabinsa Inc., New
Jersey. The Company obtained one batch of 200 grams of GMP
manufactured liposomal curcumin under an agreement dated June 30, 2007 with
SAFC, which has been filed as an exhibit to the Company’s SEC
filings. The total cost to the Company was $98,350 for scaled-up
manufacture of 98.2% pure curcumin under GMP for human use is in process at
Sabinsa/Sami Labs, Bangalore, India. FDAand EMEA (European Medicines
Agency) compliance and validations audits relating to the curcumin manufacturing
facility in India was performed by Topaz Technology, Inc. of Bryn Mawr, PA under
an agreement with the Company dated June 30, 2009, at a total cost of $24,500
which has been paid. Analysis of the 0.1% residue is being done at
Chimic Labs, Massachusetts. Nanocurcumin is manufactured for the
Company by either SAFC or Sabinsa. The Company’s purchases from
Sabinsa were made pursuant to purchase orders without a
contract. There are very stringent new regulations concerning GMP by
the EMEA and the FDA. The polymer used for nanocurcumin development is
manufactured by Surmodics under the above-described agreement.
At
UTMDCC, GLP pharmacokinetic and toxicity studies of single and multi-dose
intravenous liposomal curcumin in mice and rats were without evidence of
toxicity at a maximal injectible volume. Dog pharmacokinetics and
single ascending dose toxicity studies identified reversible hemolysis at a
maximum tolerated dose (MTD) and irreversible hemolysis at a significantly
higher dose limiting level. In vitro studies with dog and human RBCs
corroborated these observations three anmexin V biomarker [Define]. Multidose
canine studies are planned at MTD dosages based upon these studies.
SignPath
is collaborating with Gibralter Labs, Surmodic Pharma, Johns Hopkins University
and the NCI Nanocharacterization Laboratory for corroborative non-clinical and
pre-clinical studies of polymeric nanocurcumin. GMP production is
being explored at a facility in Calcutta, India.
Intellectual
Property
The
Company has three pending patent applications for lipocurc, nanocurc and
depocurc. The U.S. Patent Office has returned office action on all
three applications. A fourth provisional patent submission concerning
curcumin infusions was submitted in November 2009, a six-month extension request
for a fifth provisional patent applications concerning a new medical application
was submitted in or about March 2010.
Internet
domains have been established for Signpathpharma.com; depocorc.com,
lipocurc.com; nanocurc.com and nanocurcumin.com. The trademark
“Nanocurc” (Sept. 15, 2009) has been registered with a six-month extension to
use in commerce.
11
Agreement
With University of Texas MD Anderson Cancer Center
A patent
is pending for liposomal curcumin. It was submitted in 2005 by the
University of Texas MD Anderson Cancer Center (the “UTMDACC”) with the title
“Liposomal Curcumin for Treatment of Cancer.” On February 21, 2007,
SignPath, the UTMDACC and the Board of Regents of the University of Texas System
(the “Board”) entered into an exclusive license for this pending patent (the
“UTMDACC License Agreement”). Pursuant to the UTMDACC License
Agreement, SignPath has a royalty-bearing exclusive, worldwide license to
manufacture, use, import and sell for human and animal use inventions and
discoveries covered by the pending patent and associated technologies. SignPath
may sublicense its rights under the UTMDACC License Agreement.
SignPath
has agreed to pay all of UTMDACC’s reasonable out-of-pocket expenses of filing,
prosecuting, enforcing and maintaining its patent rights. In addition, SignPath
is obligated to pay a $15,000 license documentation fee and an annual
maintenance fee of $10,000 for the first seven years of the UTMDACC License
Agreement both of which have been paid to date. If a patent is issued during the
first seven years of the license, this annual fee will increase to $15,000.
After the seventh anniversary of the UTMDACC License Agreement, the annual fee
will increase to $30,000 a year.
In
addition, SignPath is obligated to pay running royalties of 2.5% on net sales of
less than $250 million for products covered by an issued patent licensed under
the UTMDACC License Agreement. This royalty rate increases to 3% for sales equal
to, or greater than, $250 million. A royalty of 1.5% of net sales is
payable by SignPath for products covered under the license which are not
protected by an issued patent. After sales to the public begin, SignPath must
pay a minimum annual royalty $75,000 which can be deducted from the royalties on
net sales due under the agreement. In addition, SignPath is obligated to pay 20%
to 25% of all non-royalty consideration received under sublicensing
agreements.
The
Company will also be responsible for the following milestone payments upon the
occurrence of specified events. These consist of: (1) $10,000 upon
dosing the first patent with a licensed product in a Phase 1 Study; (2) $25,000
upon dosing the first patient within a licensed product in a Phase 2 study; (3)
$50,000 upon dosing the first patient with a licensed product in a Phase 3
Study, or $40,000 if no product has issued when this milestone is achieved; (4)
$400,000 upon the first regulatory approval of a licensed product, or $200,000
if no patent has issued and (5) $15,000 upon issuance of a
patent. The Company expects to fund the milestone payments when they
come due from the private placement of equity securities to the extent funds are
available. Further the Company has agreed to provide a minimum of
$250,000 in funding for the completion of pre-clinical studies subject to
completion of final reports.
The
UTMDACC License Agreement survives for the period that patent rights covering
the licensed intellectual property are in place, or if no patent rights are
issued, 15 years with an automatic extension of 15 years upon regulatory
approval of a licensed product. UTMDACC will, as part of a SignPath sponsored
research agreement, prosecute an IND for the pegylated liposomal curcumin
product. UTMDACC and/or the Board has the right to terminate the
agreement in any jurisdiction if SignPath fails to cure within 90 days of
receipt of written notice its failure to commercialize and actively attempt to
commercialize sales in such jurisdiction. The UTMDACC License
Agreement is terminable by UTMDACC upon 30 days’ written notice if SignPath
fails to cure a breach of payment and/or fails to fund completion of
pre-clinical studies or file an IND or upon 90 days’ written notice for any
other breach of contract.
Agreement
With The Johns Hopkins University
In
October, 2007, SignPath and The Johns Hopkins University (“JHU”) entered into an
exclusive license agreement under a provisional patent application (Serial No.
60,866/516) entitled “Biocompatible ‘Smart’ Nanogels as carriers for Hydrophobic
drugs”. This application was submitted on November 20, 2006 by JHU for a
nano-sized curcumin formulation called nano curcumin. Pursuant to the
JHU License Agreement, SignPath has an exclusive worldwide license to
manufacture, use, import and sell inventions and discoveries covered by the
pending patent and associated technologies. SignPath may sublicense its rights
under the JHU License Agreement, subject to terms and conditions set forth in
the Agreement. The JHU License Agreement shall continue until its
expiration of the last to expire patent in each country, or if no patents issue,
then for 20 years from the commencement of the agreement. The
agreement is terminable for a breach which is not cured within 30 days after
receipt of notice or by SignPath upon 90 days’ prior written
notice. Title to all inventions and discoveries made by each party
resulting from their research shall belong to each respective party with joint
ownership of inventions and discoveries which are made jointly.
12
Under the
terms of the JHU License Agreement, SignPath has agreed to exercise its best
efforts file an IND with the FDA and to exercise reasonable efforts to develop
and introduce the licensed products and services into the commercial market. In
addition, the Company entered into a sponsored research agreement (the “SRA”)
with Dr. Anirban Maitra of JHU pursuant to which we will provide $100,000 of
funding for the continuation of non-clinical and pre-clinical studies of the
nanocurcumin compound will pay JHU indirect costs of $64,000. The SRA
was entered into by the Company on October 2, 2007. Payment of the
$100,000 fee under the SRA was due in three equal installments beginning 30 days
after execution of the agreement and at 4 month intervals from development of an
IND for nanocurcumin all of which has been paid as of December 31,
2009. The term of the SRA was one year ending on September 18, 2008
which was not extended. Subject to current research activity, new opportunities
and the availability of funds, Dr. Maitra’s contract may be renewed for
additional programs. All inventions which would be filed as a
continuation patent under JHU’s patent application shall be subject to the JHU
License Agreement.
SignPath
was obligated under the JHU License Agreement to pay $50,000 in license fees
which have been paid, plus minimum annual royalties increasing from $10,000 in
the first two years to $25,000 in the third and fourth years and $30,000 in the
fifth year. An aggregate of approximately $241,000 has been paid
under this license agreement as of December 31, 2009. The JHU License
Agreement also provides that we will be obligated to pay JHU running royalty
rates of two percent (2%) of net sales less than $250 million for licensed
products covered by one or more claims in an issued patent, and three percent
(3%) of net sales equal to or greater than $250 million for licensed products
covered by one or more claims in an issued patent, or one and one half percent
(1.5%) of net sales of licensed products not covered by an issued patent. The
running royalties payable under the agreement are subject to a minimum annual
rate. SignPath is also subject to other substantial payments, including all
reasonable costs of patent reimbursement. The Company is obligated to
make the following payments upon development milestones to JHU regardless of
whether the milestone is achieved by the Company, a sublicensee or an affiliate:
(1) $25,000 upon dosing the first patient with a licensed product in a Phase
I clinical trial at a site other than JHU; (2) $50,000 upon dosing the
first patient with a licensed patent in a Phase II clinical trial at a site
other than JHU; (3) $25,000 upon dosing the first patient with the licensed
patent in a Phase III clinical trial at a site other than JHU; (4) $250,000
upon first regulatory approval of the licensed patent, or $100,000 if no patent
has issued; (5) $10,000 upon issuance of a patent sublicense fees (if
applicable), and reimbursement of costs reasonably incurred by JHU in connection
with the patent.
Agreements
with the University of North Texas
On August
18, 2008, the Company entered into a Patent and Technology License Agreement
with the University of North Texas (“UNT”) Health Science Center (the “UNT
Agreement”). UNT granted the Company a royalty-bearing exclusive
license to manufacture and sell products developed at UNT from depot
curcumin. In consideration of the license, the Company agreed to pay
an upfront license fee of $15,000, reasonable out-of-pocket expenses for patent
rights; an annual maintenance fee of $10,000 commencing on the first anniversary
date of when the UNT Agreement was signed until the first to occur of (i) the
seventh anniversary date of the contract signing; (ii) the first sale of a
product to a non-affiliated third party; or (iii) the issuance of a
patent. The annual fee increases to $30,000 after the seventh
anniversary date of the agreement being signed until the first
sale. The annual maintenance fee shall increase from $10,000 to
$15,000 following the issuance of a patent until the earlier of first sale or
the seventh anniversary date. Upon the first sale, the annual
maintenance fee shall convert into a minimum annual royalty of
$75,000. Running royalties of 2.5% of net sales less than $250
million for licensed products covered by an issued patent; 3% of net sales equal
to or greater than $250 million; and 1% of net sales of licensed products not
covered by an issued patent may be credited against the minimum annual royalty
next due.
The
Company or a sublicensee shall pay milestone payments to UNT of (i) $10,000 upon
the first dosing of a patient with a licensed product in a Phase 1 Study; (ii)
$25,000 upon the first dosing of a patient with a licensed product in a Phase 2
Study; (iii) $50,000 upon the first dosing of a patient with a licensed product
in a Phase 3 Study, the latter of which shall be reduced from $50,000 to $40,000
if no patent has been issued; $400,000 upon first regulatory approval of each
licensed product unless a patent has not been issued; $15,000 upon issuance of a
U.S. or European patent; $200,000 upon regulatory approval of a licensed patent
for each indication other than cancer, which shall be reduced to $100,000 if no
patent has been issued.
Certain
payments to the Company by a sub-licensee prior to initiation of a Phase 2 Study
shall not be included in fees paid to UNT in the amount of 25% and 20% if the
sublicense is executed after initiation of a Phase 2 Study. UNT
shall also be paid a $100,000 assignment fee.
The
Company agreed to spend at least $250,000 towards pre-clinical studies,
exclusive of overhead costs of UNT. At least $100,000 must be funded
within 18 months of the contract signing and an aggregate of $200,000 within 2 ½
years of the contract signing. The Company also agreed to pay all
costs of filing for patents, or otherwise lose its rights under the patent and
agreed to enforce patent rights against infringement.
The UNT
Agreement shall terminate the later of the expiration of any patent rights or 15
years or if no patent is issued, the agreement shall end 15 years after
regulatory approval of any licensed product. The Company must
evidence to UNT within three years that it is actively and effectively
attempting to commercialize a licensed product. The UNT Agreement
will terminate if the Company is unable to cure a payment default after 60 days
notice from UNT or upon 30 days notice if the Company fails to fund completion
of pre-clinical studies or to file an IND, or 90 days after default by the
Company of any other obligation under the agreement.
13
The
Company entered into a Sponsored Research Agreement, effective June 1, 2009,
with UNT to sponsor additional research and obtain certain patent rights and
technology resulting from such additional research. The research
under this agreement, as amended on September 8, 2009, will be carried out
through November 8, 2011, under the direction of Dr. Jamboor
Vishwanatha. Total payments to UNT consist of $167,212, with a
$30,000 payment due upon signing which was paid in June 2009; $30,000 due on
December 1, 2009, $55,000 due on May 31, 2010 and $52,121 due on November 8,
2011.
Legal
Proceedings
As of the
date hereof, there are no material legal proceedings pending or threatened to be
taken against the Company. SignPath has retained legal counsel to
evaluate and advise on our intellectual property and patent
strategy.
Employees
The
Company currently has one employee, Dr. Lawrence Helson, its Chief Executive
Officer. The Company expects to continue to use subcontractors and
independent consultants and will hire a business development director when funds
are available.
ITEM
1A. RISK FACTORS
An
investment in the Company is speculative, involves a high degree of risk and
should only be purchased by persons who can afford to lose their entire
investment. Prospective purchasers of our securities should carefully consider,
among other things, the following risk factors relating to the business of the
Company.
Risks
Related to Our Company
History
of significant losses and risk of losing entire investment.
The
Company’s financial statements reflect that it has incurred significant losses
since inception, including net losses of $571,324 and $1,695,766 for the years
ended December 31, 2009 and 2008 and a loss from inception through December 31,
2009 of $2,793,923. The Company expects to continue to have losses
and negative cash flows for the foreseeable future, and it is possible that the
Company may never reach profitability. Therefore, there is a
significant risk that public investors may lose some or all of their
investment.
Our
financial statements have been prepared assuming that the Company will continue
as a going concern.
Our
audited financial statements for the fiscal year ended December 31, 2009
have been prepared assuming the Company will continue as a going concern. As
discussed in Note 1 to the financial statements for the period ended December
31, 2009, the continuation of the Company as a going concern is dependent upon
the continued financial support from its shareholders, the ability to raise
equity or debt financing, and the attainment of profitable operations from the
Company’s planned business. Our independent registered public accounting firm
has included an explanatory paragraph expressing substantial doubt about our
ability to continue as a going concern in their audit report for the fiscal year
ended December 31, 2009. If we are unable to raise additional capital
or borrow money we will not be able to complete and file INDs with the FDA in
order to commence clinical trials. If that were to occur the Company
would be forced to suspend or terminate operations and, in all likelihood cause
investors to lose their entire investment.
We
are a development stage company, making it difficult for you to evaluate our
business and your investment.
We are in
the development stage and our operations and the development of our proposed
products are subject to all of the risks inherent in the establishment of a new
business enterprise, including:
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the
absence of an operating history;
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the
lack of commercialized products;
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an
expected reliance on third parties for the development and
commercialization of some of our proposed
products;
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uncertain
market acceptance of our proposed products;
and
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reliance
on key personnel
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Because
we are subject to these risks, you may have a difficult time evaluating our
business and your purchase of our securities.
14
No
revenue for the foreseeable future, with substantial losses and no guarantee of
profitability.
At this
stage of its growth cycle, the Company has a limited operating history and no
revenues, products ready for market, customers or marketing
resources.
As a
development stage company, the Company has a limited relevant operating history
upon which an evaluation of its prospects can be made. Such prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered in establishing a new business in the evolving and heavily-regulated
pharmaceuticals industry, which is characterized by an ever-increasing number of
market entrants, intense competition and high failure rate. In
addition, significant challenges are often encountered in shifting from
developmental to commercial activities.
In
addition, we are subject to many business risks, including but not limited to,
unforeseen capital requirements, failure of market acceptance, failure to
establish business relationships, and competitive disadvantages against larger
and more established companies. In addition, there can be no
assurance that the Company will ever be able to generate revenues or, if the
Company generates revenues, that it will ever be profitable, or that the Company
will be able to obtain sufficient additional funds to continue its planned
activities. Therefore, prospective investors may lose all or a
portion of their investment. The Company does not anticipate that it
will have any revenues for the foreseeable future.
Concentration
of ownership by a Founder and its affiliates raises a potential conflict of
interest between the Company, a Founder and certain of their
employees.
Bruce
Meyers, a Founder of the Company and President of Meyers Associates,
beneficially owns approximately 57.5% of the outstanding shares of the Company’s
common stock and Imtiaz Khan, Managing Director of Meyers Associates owns
2,500,000 shares (22% of the Company). This concentration of
ownership may not be in the best interests of the Company’s stockholders and
Meyers Associates and may be subject to potential conflicts of
interest. As a result of Meyers Associates’ ownership of the Company,
it is likely that in the event the Company becomes a publicly-traded company,
Meyers Associates’ would not be able to serve as a market maker in the Company’s
common stock. See “Principal Stockholders.”
The
Company does not have the financing resources necessary to successfully complete
development and market any formulations of curcumin.
As of
December 31, 2009, the Company had approximately $295,418 cash on
hand. The Company does not have any current sources of financing, to
complete product development and marketing. If the Company is unable to attract
sufficient additional capital, it will not be able to realize its growth
plans. If the Company does find such financing, it may be on terms
that are unfavorable or dilutive, to owners of the Company’s equity
securities.
Our drug
development program will require substantial additional capital to successfully
complete it, arising from costs to:
|
·
|
complete
research, preclinical testing and human
studies;
|
|
·
|
establish
pilot scale and commercial scale manufacturing processes;
and
|
|
·
|
establish
and develop quality control, regulatory, marketing, sales and
administrative capabilities to support these
programs.
|
Our
future operating and capital needs will depend on many factors,
including:
|
·
|
the
pace of scientific progress in our research and development programs and
the magnitude of these programs;
|
|
·
|
the
scope and results of preclinical testing and human
studies;
|
|
·
|
the
time and costs involved in obtaining regulatory
approvals;
|
|
·
|
the
time and costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims;
|
|
·
|
competing
technological and market
developments;
|
|
·
|
our
ability to establish additional
collaborations;
|
15
|
·
|
changes
in our existing collaborations;
|
|
·
|
the
cost of manufacturing scale-up; and
|
|
·
|
the
effectiveness of our commercialization
activities.
|
We base
our outlook regarding the need for funds on many uncertain variables. Such
uncertainties include regulatory approvals, the timing of events outside our
direct control such as negotiations with potential strategic partners and other
factors. Any of these uncertain events can significantly change our cash
requirements as they determine such one-time events as the receipt of major
milestones and other payments.
We cannot
be certain that additional funding will be available on acceptable terms, or at
all. To the extent that we raise additional funds by issuing equity securities,
our stockholders may experience significant dilution. Any debt financing, if
available, may involve restrictive covenants that impact our ability to conduct
our business. If we are unable to raise additional capital, when required, or on
acceptable terms, we may have to significantly delay, scale back or discontinue
the development and/or the commercialization of one or more of our product
candidates. Accordingly, any failure to raise adequate capital in a timely
manner would have a material adverse effect on our business, operating results,
financial condition and future growth prospects.
Additional
funds are required to support our operations but we may be unable to obtain them
on favorable terms, we would be required to cease or reduce further development
or commercialization of our potential products.
We
will need to increase the size of our organization, and we may experience
difficulties in managing growth.
We are a
small company with one full-time employee, our CEO, as of
the date of this report. To conduct our clinical trials and
commercialize our product candidates, we will need to expand our employee base
for managerial, operational, financial and other resources. Future growth will
impose significant added responsibilities on members of management, including
the need to identify, recruit, maintain and integrate additional employees. Our
future financial performance and our ability to commercialize our product
candidates and to compete effectively will depend, in part, on our ability to
manage any future growth effectively.
The
Company’s success is highly dependent on attracting and retaining key scientific
and management personnel, but the Company may be unable to do so.
The
Company’s future depends on the service of its scientific and management teams
and other key personnel. The Company may be unable to attract highly
qualified personnel, especially if it is unable to demonstrate to those
individuals that it has sufficient funding to adequately compensate them either
through current cash salary or with equity that could eventually have
substantial value. If the Company is unable to attract highly
qualified individuals, the Company may be unable to continue development or
commercialization efforts of its proposed products which would have a material
adverse effect on the Company’s operations.
We
have no experience in manufacturing, sales, marketing or distribution
capabilities.
The
Company has no experience in manufacturing, selling, marketing or distributing
any formulations of curcumin or any other product. The Company has
outsourced production of raw materials for production of liposomal curcumin and
will outsource production of good manufacturing practice (“GMP”) grade of
liposomal curcumin and nanocurcumin to commercial facilities. There
can be no assurance that the Company will be able successfully to sell, market,
commercialize or distribute any formulation of curcumin or any other products at
any time in the future.
Provisions
in our charter documents and Delaware law could discourage or prevent a
takeover, even if an acquisition would be beneficial to our
stockholders.
Provisions
of our certificate of incorporation and by-laws, as well as provisions of
Delaware law, could make it more difficult for a third party to acquire us, even
if doing so would be beneficial to our stockholders. These provisions
include:
|
·
|
authorizing
the issuance of “blank check” preferred that could be issued by our Board
of Directors to increase the number of outstanding shares and thwart a
takeover attempt;
|
|
·
|
prohibiting
cumulative voting in the election of directors, which would otherwise
allow less than a majority of stockholders to elect director candidates;
and
|
16
·
|
advance
notice provisions in connection with stockholder proposals that may
prevent or hinder any attempt by our stockholders to bring business to be
considered by our stockholders at a meeting or replace our board of
directors.
|
If
we lose the services of our Chief Executive Officer, our operations would be
disrupted and our business could be harmed
Our
business plan relies significantly on the continued services of our CEO, Dr.
Larry Helson, age 77. If we were to lose his services, our ability to
continue to execute our business plan would be materially impaired. While we
have entered into an employment agreement with Dr. Helson, the agreement would
not prevent him from terminating his employment with us. Dr. Helson has not
indicated he intends to leave the Company, and we are not currently aware of any
facts or circumstances that suggest he might leave us.
Risks
Related to Our Business
We
are devoting our efforts to a limited number of product candidates, and there is
no assurance of product success.
The
Company is an early stage biopharmaceutical company and, since its inception,
has focused mainly on research and development. There can be no
assurance that the Company will ever successfully develop liposomal curcumin,
nanocurcumin, or any other formulation of curcumin or any product whatsoever, or
obtain FDA approval for clinical testing in the United States or any other
country.
Our two
curcumin formulations in development will require extensive additional
development, including preclinical testing and human studies, as well as
regulatory approvals, before we can commercialize and market them. We cannot
predict if or when any of the product candidates we are developing will be
approved for marketing. There are many reasons that we may fail in our efforts
to develop our potential products, including the possibility that:
·
|
preclinical
testing or human studies may show that our potential products are
ineffective or cause harmful side
effects;
|
·
|
the
products may fail to receive necessary regulatory approvals from the FDA
in a timely manner, or at all;
|
·
|
the
products, if approved, may not be produced in commercial quantities or at
reasonable costs;
|
·
|
the
potential products, once approved, may not achieve commercial
acceptance;
|
·
|
regulatory
or governmental authorities may apply restrictions to our potential
products, which could adversely affect their commercial success;
or
|
·
|
the
proprietary rights of other parties may prevent us from marketing our
potential products.
|
Given our
limited focus on two product candidates, if these product candidates do not
prove successful in clinical trials, and are not approved or are not
commercialized because we have insufficient resources for continued development
or for any other reason, we may be required to suspend or discontinue our
operations and our business could be materially harmed.
SignPath
depends on intellectual property licensed from third parties which it may not be
able to maintain.
The
Company’s business plan depends on developing products based on intellectual
property licensed from The Johns Hopkins University (“JHU”) and The University
of Texas MD Anderson Cancer Center (“UTMDACC”). See “Business -
Intellectual Property.” The Company’s license agreements require the
Company to make payments to the licensors in the future. The Company
currently does not have sufficient resources to make all of such payments, and
there can be no assurance that the Company will be able to make such payments in
the future.
The
Company’s exclusive license with UTMDACC is for the life of patent rights or, if
no patent rights are issued, for up to 30 years; however, is terminable upon 30
days’ written notice if the Company fails to cure a breach of payment or funding
requirement, or upon up to 90 days’ written notice for any other breach of
contract by the Company.
The
Company’s license agreement with JHU is for the life of the last patent to
expire or 20 years if no patents issue. It is terminable for a breach
of contract by SignPath not cured within 30 days after receipt of
notice.
17
Additional
patents and pending patent applications filed by third parties, if issued, may
cover aspects of products the Company intends to develop or may develop and test
in the future. As a result, the Company may be required to obtain
additional licenses from third-party patent holders in order to use, manufacture
or sell the Company’s product candidates.
There can
be no assurance that the Company’s current arrangements with JHU or UTMDACC, or
any future arrangements will lead to the development of any products with any
commercial potential, that the Company will be able to obtain proprietary rights
or licenses for proprietary rights with respect to any technology development in
connection with these arrangements or that the Company will be able to ensure
the confidentiality of any proprietary rights and information developed with JHU
or UTMDACC will prevent the public disclosure thereof. The Company is
not aware of any litigation, threatened litigation, or challenge to intellectual
property, however, once any patents are issued to the Company, we may be subject
to future litigation.
There can
be no assurance that the Company will be able to maintain its existing license
agreements or obtain additional necessary licenses on reasonably acceptable
terms or at all. The Company’s inability to maintain its existing
licenses or obtain additional licenses on acceptable terms would have a material
adverse effect on the Company’s business, financial condition and results of
operations.
The
US FDA regulatory process is costly, lengthy and requires specific
expertise.
The
Company will rely initially on consultants and service organizations with prior
experience working with the FDA to guide the product through the regulatory
process. The Company expects to hire experienced employees and/or consultants to
analyze, prepare and present Investigational New Drug (“IND”) applications to
the FDA and conduct clinical trials. The process of obtaining regulatory
approvals can be extremely costly and time-consuming, and there is no guarantee
of success. If the Company does not receive approval of any of its IND
applications, it will not be able to proceed with Phase I clinical testing. In
addition, clinical testing is not predictable. Even if the FDA approves an IND
application, the Company cannot guarantee that the FDA will approve Phase I
clinical results. The Company’s failure to obtain required regulatory approvals
would have a material adverse effect on the Company’s business, financial
condition and results of operations and could require the Company to curtail or
cease its operations.
Delays
in clinical testing could result in increased cost to us and delay our ability
to generate revenue.
We may
experience delays in clinical testing of our product candidates. We do not know
whether planned clinical trials will need to be redesigned or will be completed
on schedule, if at all. Clinical trials can be delayed for a variety of reasons,
including delays in obtaining regulatory approval to commence a trial, in
reaching agreement on acceptable clinical trial terms with prospective sites, in
obtaining institutional review board approval to conduct a trial at a
prospective site, in recruiting patients to participate in a trial or in
obtaining sufficient supplies of clinical trial materials. Many factors affect
patient enrollments, including the size of the patient population, the proximity
of patients to clinical sites, the eligibility criteria for the trial, competing
clinical trials and new drugs approved for the conditions we are investigating.
Prescribing physicians will also have to decide to use our product candidates
over existing drugs that have established safety and efficacy profiles. Any
delays in completing our clinical trials will increase our cost, slow down our
product development and approval process and delay our ability to generate
revenue.
We
may be required to suspend or discontinue clinical trials due to unexpected side
effects or other safety risks that could preclude approval of our product
candidates.
Our
clinical trials may be suspended at any time for a number of reasons. For
example, we may voluntarily suspend or terminate our clinical trials if at any
time we believe that they present an unacceptable risk to the clinical trial
patients. In addition, regulatory agencies may order the temporary or permanent
discontinuation of our clinical trials at any time if they believe that the
clinical trials are not being conducted in accordance with requirements or that
they present an unacceptable safety risk to the clinical trial
patients.
The
Company has not encountered any adverse effects in mice or rats with liposomal
curcumin or nanocurcumin. However, studies in humans have not yet
been initiated by the Company. Administering any product candidates
to humans may produce undesirable side effects. These side effects could
interrupt, delay or halt clinical trials of our product candidates and could
result in the FDA or other regulatory authorities denying further developments
or approval of our product candidates for any or all targeted indications.
Ultimately, some or all of our product candidates may prove to be unsafe for
human use. Moreover, we could be subject to significant liability if any
volunteer or patient suffers, or appears to suffer, adverse health effects as a
result of participating in our clinical trials.
18
If
testing of a particular product candidate does not yield successful results,
then we will be unable to commercialize that product.
Our
product candidates in clinical trials must meet rigorous testing standards. We
must demonstrate the safety and efficacy of our potential products through
extensive preclinical and clinical testing. Clinical trials are subject to
continuing oversight by governmental regulatory authorities, such as the FDA,
and institutional review boards and must meet the requirements of these
authorities in the United States, including those for informed consent and good
clinical practices. We may not be able to comply with these requirements, which
could disqualify completed or ongoing clinical trials. We may experience
numerous unforeseen events during, or as a result of, the testing process that
could delay or prevent commercialization of our product candidates, including
the following:
·
|
safety
and efficacy results from human clinical trials may show the product
candidate to be less effective or safe than desired or those results may
not be replicated in later clinical
trials;
|
·
|
the
results of preclinical studies may be inconclusive or they may not be
indicative of results that will be obtained in human clinical
trials;
|
·
|
after
reviewing relevant information, including preclinical testing or human
clinical trial results, we may abandon or substantially restructure
projects that we might previously have believed to be
promising;
|
·
|
we
or the FDA may suspend or terminate clinical trials if the participating
patients are being exposed to unacceptable health risks or for other
reasons; and
|
·
|
the
effects of our product candidates may not be the desired effects or may
include undesirable side effects or other characteristics that interrupt,
delay or cause us or the FDA to halt clinical trials or cause the FDA or
foreign regulatory authorities to deny approval of the product candidate
for any or all target indications.
|
Data from
our completed clinical trials, when and if completed, may not be sufficient to
support approval by the FDA. The clinical trials of our product candidates may
not be completed as or when planned, and the FDA may not approve any of our
product candidates for commercial sale. If we fail to demonstrate the safety or
efficacy of a product candidate to the satisfaction of the FDA, this will delay
or prevent regulatory approval of that product candidate. Therefore, any delay
in obtaining, or inability to obtain, FDA approval of any of our product
candidates could materially harm our business and cause our stock price to
decline.
Even
if we receive regulatory approval for our product candidates, we will be subject
to ongoing significant regulatory obligations and oversight.
If we
receive regulatory approval to sell our product candidates, the FDA and foreign
regulatory authorities may, nevertheless, impose significant restrictions on the
indicated uses or marketing of such products, or impose ongoing requirements for
post-approval studies. If we fail to comply with applicable regulatory
requirements, we may be subject to fines, suspension or withdrawal of regulatory
approvals, product recalls, seizure of products, operating restrictions and
criminal prosecution. Any of these events could harm or prevent sales of the
affected products or could substantially increase the costs and expenses of
commercializing and marketing these products. In addition, if any of our product
candidates receive marketing approval and we or others later identify
undesirable side effects caused by the product, we could face one or more of the
following:
·
|
a
change in the labeling statements or withdrawal of FDA or other regulatory
approval of the product;
|
·
|
a
change in the way the product is administered;
or
|
·
|
the
need to conduct additional clinical
trials.
|
Discovery
after approval of previously unknown problems with our products, manufacturers
or manufacturing processes, or failure to comply with regulatory requirements,
may result in actions such as:
·
|
restrictions
on such products’ manufacturers or manufacturing
processes;
|
·
|
restrictions
on the marketing of a product;
|
·
|
warning
letters;
|
·
|
withdrawal
of the products from the market;
|
·
|
refusal
to approve pending applications or supplements to approved applications
that we submit;
|
19
·
|
recall
of products;
|
·
|
fines,
restitution or disgorgement of profits or
revenue;
|
·
|
suspension
or withdrawal of regulatory
approvals;
|
·
|
refusal
to permit the import or export of our
products;
|
·
|
product
seizure;
|
·
|
injunctions;
or
|
·
|
imposition
of civil or criminal penalties.
|
Our
potential products face significant regulatory hurdles prior to
commercialization and marketing which could delay or prevent sales;
No assurance of FDA approval.
The FDA
and comparable agencies in foreign countries impose substantial requirements
upon the introduction of therapeutic and diagnostic pharmaceutical and
biological products through lengthy and detailed laboratory and clinical testing
procedures, sampling activities and other costly and time-consuming
procedures. Satisfaction of these requirements typically takes
several years or more and varies substantially based upon the type, complexity
and novelty of the product. The regulatory review may result in
extensive delay in the regulatory approval process. Regulatory
requirements ultimately imposed could adversely affect the Company’s ability to
clinically test, manufacture or market potential products. Government regulation
also applies to the manufacture of pharmaceutical and biological
products.
Before we
obtain the approvals necessary to sell any of our potential products, we must
show through preclinical studies and human testing that each potential product
is safe and effective. Failure to show any potential product’s safety
and effectiveness would delay or prevent regulatory approval of the product and
could adversely affect our business. The clinical trials process is complex and
uncertain. The results of preclinical studies and initial clinical trials may
not necessarily predict the results from later large-scale clinical trials. In
addition, clinical trials may not demonstrate a potential product’s safety and
effectiveness to the satisfaction of the regulatory authorities. A number of
companies have suffered significant setbacks in advanced clinical trials or in
seeking regulatory approvals, despite promising results in earlier
trials.
The rate
at which we complete our clinical trials depends on many factors, including our
ability to obtain adequate supplies of the potential products to be tested and
patient enrollment. Patient enrollment is a function of many factors, including
the size of the patient population, the proximity of patients to clinical sites
and the eligibility criteria for the trial. Delays in patient enrollment may
result in increased costs and longer development times. In addition, under our
license agreements with UTMDACC and JHU, these universities have certain rights
to control product development and clinical programs for products developed
under the collaborations. As a result, the universities may conduct these
programs more slowly or in a different manner than we had expected. Even if
clinical trials are completed, we or the universities still may not apply for
FDA approval in a timely manner or the FDA still may not grant
approval.
We
will not have our own manufacturing facilities and will depend on third
parties.
The
Company has entered into a manufacturing agreement with Polymun Scientific
Immunbiologische Forschung GmBh, Vienna, Austria, to encapsulate pure synthetic
curcumin with lipid particles. We have also entered into a contract
with Brookwood Pharmaceutical Inc. (now known as Surmodics Pharmaceuticals,
Inc.) to synthesize polymer for noncurcumin. Notwithstanding the
foregoing, the Company cannot guarantee that it will be able to obtain adequate
supplies of liposomal curcumin or nanocurcumin that will remain stable for
clinical trials and in amounts that will be sufficient for clinical trials and
post-approval commercial production, if any. If the Company fails to
source adequate amounts of curcumin, or if there is poor manufacturing
performance on the part of the above-stated third party manufacturers, we may
not be able to complete development of our product candidates, which could have
an adverse effect on the Company’s business, financial condition and results of
operations and could require the Company to curtail or cease its
operations.
20
Competition
in the biotechnology and pharmaceutical industries is intense, and if SignPath
fails to compete effectively its financial results will suffer.
SignPath’s
business environment is characterized by extensive research efforts, rapid
developments and intense competition. Its competitors may have or may
develop superior technologies or approaches to the development of competing
products, which may provide them with competitive advantages. The
Company’s potential curcumin product candidates may not compete
successfully. The Company believes that successful competition in its
industry depends on product efficacy, safety, reliability, availability, timing,
scope of regulatory approval, acceptance and price, among other
things. Important factors to SignPath’s success also include speed in
developing product candidates, completing clinical development and laboratory
testing, obtaining regulatory approvals and manufacturing and selling commercial
quantities of potential products to the market.
The
Company expects competition to increase as technological advances are made and
commercial applications broaden. In the event it develops its initial
product candidates and any additional product candidates, the Company
anticipates it will face substantial competition from pharmaceutical,
biotechnology and other companies, universities and research institutions. The
Company is aware of other companies and academic groups that focus on cellular
signal transduction pathways and are developing specific pathway or related
kinase inhibitors. These competitors include Exelixis Inc., Onyx
Pharmaceuticals, and several major pharmaceutical companies.
Many of
the Company’s competitors have substantially greater capital resources, research
and development staffs, facilities and experience in conducting clinical trials
and obtaining regulatory approvals, as well as in manufacturing and marketing
pharmaceutical products. In addition, many of SignPath’s competitors
may achieve product commercialization or patent protection earlier than SignPath
achieves commercialization or patent protection, if at all.
If we or
our collaborators receive regulatory approvals for our product candidates, some
of our products will compete with well-established, FDA-approved therapies that
have generated substantial sales over a number of years. In addition, we will
face competition based on many different factors, including:
·
|
the
safety and effectiveness of our
products;
|
·
|
the
timing and scope of regulatory approvals for these
products;
|
·
|
the
availability and cost of manufacturing, marketing and sales
capabilities;
|
·
|
the
effectiveness of our marketing and sales
capabilities;
|
·
|
the
price of our products;
|
·
|
the
availability and amount of third-party reimbursement;
and
|
·
|
the
strength of our patent position.
|
We also
anticipate that we will face increased competition in the future as new
companies enter our target markets and scientific developments surrounding
cancer therapies and drugs for treatment of inflammatory conditions continue to
accelerate. Competitors may develop more effective or more affordable products,
or may achieve patent protection or commercialize products before us or our
collaborators. In addition, the health care industry is characterized by rapid
technological change. New product introductions, technological advancements, or
changes in the standard of care for our target diseases could make some or all
of our products obsolete.
The
Company may be unable to defend or protect its intellectual
property.
The
Company intends to protect its intellectual property through patents and
trademarks. The patent positions of biotechnology companies generally
are highly uncertain and involve complex legal and factual questions that will
determine who has the right to develop a particular product or
process. As a result, the Company cannot predict which of its patent
applications will result in the granting of patents or the timing of the
granting of the patents. Additionally, many of the Company’s competitors have
significantly greater capital with which to pursue patent litigation. There can
be no assurance that the Company would have the resources to defend
its patents in the face of a lawsuit.
Further,
the Company relies on trade secrets, know-how and other proprietary
information. The Company seeks to protect this information, in part,
through the use of confidentiality agreements with employees, consultants,
advisors and others. Nonetheless, there can be no assurance that
those agreements will provide adequate protection for the Company’s trade
secrets, know-how or other proprietary information and prevent their
unauthorized use or disclosure. While the Company is not aware of any
challenges to its intellectual property, once any patents are issued to the
Company litigation may ensue. There is also the risk that the
Company’s employees, consultants, advisors or others will not maintain
confidentiality of such trade secrets or proprietary information, or that this
information may become known in some other way or be independently developed by
the Company’s competitors.
21
SignPath
is exposed to product liability risks.
The
Company’s business exposes it to potential product liability risks that are
inherent in the testing, including testing in human clinical trials,
manufacturing, marketing and sale of biotechnology products. There can be no
assurance that product liability claims will not be asserted against the
Company.
We plan
to have product liability insurance covering our clinical trials which we
currently believe will be adequate to cover any product liability exposure we
may have. Clinical trial and product liability insurance is becoming
increasingly expensive. As a result, we may be unable to obtain sufficient
insurance coverage at a reasonable cost to protect us against losses that could
have a material adverse effect on our business. An individual may bring a
product liability claim against us if one of our products or product candidates
causes, or is claimed to have caused, an injury or is found to be unsuitable for
consumer use. Any product liability claim brought against us, with or without
merit, could result in:
·
|
liabilities
that substantially exceed our product liability insurance, which we would
then be required to pay from other sources, if
available;
|
·
|
an
increase of our product liability insurance rates or the inability to
maintain insurance coverage in the future on acceptable terms, or at
all;
|
·
|
withdrawal
of clinical trial volunteers or
patients;
|
·
|
damage
to our reputation and the reputation of our products, resulting in lower
sales;
|
·
|
regulatory
investigations that could require costly recalls or product
modifications;
|
·
|
litigation
costs; and
|
·
|
the
diversion of management’s attention from managing our
business.
|
A
successful product liability claim or series of claims brought against the
Company could have a material adverse effect on the Company’s business,
financial condition and results of operation.
The
Company may be sued by third parties who claim that its products infringe on
their intellectual property rights.
The
Company may be exposed to future litigation by third parties based on claims
that its patents, products or activities infringe on the intellectual property
rights of others or that the Company has misappropriated the trade secrets of
others. Any litigation or claims against the Company, whether or not
valid, could result in substantial costs, could place a significant strain on
the Company’s financial and managerial resources, and could harm the Company’s
reputation. In addition, intellectual property litigation or claims
could force the Company to do one or more of the following, any of which could
have a material adverse effect on the Company or cause the Company to curtail or
cease its operations:
·
|
Cease
testing, developing, using and/or commercializing liposomal curcumin,
nanocurcumin, or other formulations of curcumin or other products that it
may develop; or
|
·
|
Obtain
a license from the holder of the infringed intellectual property right,
which could also be costly or may not be available on reasonable
terms.
|
SignPath
may be subject to damages resulting from claims that it or its employees have
wrongfully used or disclosed alleged trade secrets of their former
employers.
The
Company’s current employee and/or future employees have been previously employed
by other biotechnology or pharmaceutical companies. Although no
claims against the Company are currently pending or threatened, the Company may
be subject to claims that these employees or the Company have inadvertently or
otherwise used or disclosed trade secrets or other proprietary information of
their former employers. Litigation may be necessary to defend against
these claims. Even if SignPath is successful in defending against
these claims, litigation could result in substantial costs and be a distraction
to management. If the Company fails in defending such claims, in
addition to paying money claims, it may lose valuable intellectual property
rights or personnel. A loss of key research personnel or their work
product could hamper or prevent its ability to commercialize certain product
candidates, which could severely harm SignPath’s business.
22
Governmental
and third-party payors may impose sales and pharmaceutical pricing restrictions
or controls on SignPath’s potential products that could limit its future product
revenues and adversely affect profitability.
The
commercial success of the Company’s potential products is substantially
dependent on whether third-party reimbursement is available for the ordering of
its products by the medical profession for use by their
patients. Medicare, Medicaid, health maintenance organizations and
other third-party payors may not cover or provide adequate payment for
SignPath’s potential products. They may not view the Company’s
potential products as cost-effective and reimbursement may not be available to
consumers or may not be sufficient to allow its potential products to be
marketed on a competitive basis. Likewise, legislative or regulatory
efforts to control or reduce health care costs or reform government health care
programs could result in lower prices or rejection of its potential
products. Changes in reimbursement policies or health care cost
containment initiatives that limit or restrict reimbursement for the Company’s
products may cause its revenue to decline.
Rapid
technological change could make any products that SignPath eventually develops
obsolete.
Biopharmaceutical
technologies have undergone rapid and significant change and the Company expects
that they will continue to do so. Any compounds, products or
processes that SignPath develops may become obsolete or uneconomical before the
Company recovers any expenses incurred in connection with their
development.
We
expect to rely heavily on third party relationships and termination of any of
these programs could reduce the financial resources available to us, including
research funding and milestone payments.
Our
strategy for developing and commercializing many of our potential product
candidates, including products aimed at larger markets, includes entering into
collaborations with research partners, licensors, licensees and others. These
collaborations will provide us with research and development resources for
potential products. These agreements also will give our collaborative partners
significant discretion when deciding whether or not to pursue any development
program. Our collaborations may not be successful. Currently, we have
collaborative relationships with JHU and UTMDACC. See “Business –
Intellectual Property”.
In
addition, JHU and UTMDACC may develop products, either alone or with others,
that compete with the types of drugs they currently are developing with us. This
would result in less support and increased competition for our programs. If
either of our two licensors breach or terminate their agreements with us or
otherwise fail to conduct their collaborative activities successfully, our
product development under these agreements will be delayed or
terminated.
We may
have disputes in the future with JHU and UTMDACC, including disputes concerning
who owns the rights to any technology developed. These and other possible
disagreements between us and our licensors could delay our ability and the
ability of the universities to achieve milestones or our receipt of other
payments. In addition, any disagreements could delay, interrupt or terminate the
collaborative research, development and commercialization of certain potential
products, or could result in litigation or arbitration. The occurrence of any of
these problems could be time-consuming and expensive and could adversely affect
our business.
In
general, collaborative agreements provide that they may be terminated under
certain circumstances. There can be no assurance that the Company
will be able to extend either of its agreements with the universities upon their
termination or expiration, or that the Company will be able to enter into new
collaborative agreements with existing or new partners in the
future. To the extent the Company chooses not to or is unable to
establish any additional third party arrangements, it would require
substantially greater capital to undertake research, development and marketing
of its proposed products at its own expense. In addition, the Company
may encounter significant delays in introducing its proposed products into
certain markets or find that the development, manufacture or sale of it proposed
products in such markets is adversely affected by the absence of such third
party agreements.
We
will rely on third parties to supply and manufacture our product candidates,
without any direct control over the timing for the supply, production and
delivery of our product candidates, thereby possibly adversely affecting any
future revenues.
We will
rely exclusively and be dependent on certain third party source suppliers to
supply pure synthetic curcumin for our product candidates. Liposomal
curcumin is manufactured in Vienna, Austria under contract with Polymun
Scientific Immunbiologische Forschung GmbH. We have obtained initial
quantities of liposomal curcumin from Sigma Aldrich Fine Chemicals (“SAFC”)
and/or Sabinsa, Inc. of New Jersey. Nanocurcumin will be manufactured
by either SAFC or Sabinsa. The polymer is manufactured by Brookwood
Pharmaceuticals in Birmingham, Alabama. See “Business – Potential
Commercialization of Liposomal Curcumin and Nanocurcumin; and Raw Materials;
Supplies.”
23
If any of
these arrangements terminate, locating additional or replacement suppliers for
these materials may take a substantial amount of time. In addition, we may have
difficulty obtaining similar supplies from other suppliers that are acceptable
to the FDA. If we have to switch to a replacement supplier, we may face
additional regulatory delays and the manufacture and delivery of our product
candidates could be interrupted for an extended period of time, which may delay
completion of our clinical trials or commercialization of our product
candidates. As a result, regulatory approval of our product candidates may not
be received at all. All these delays could cause delays in commercialization of
our product candidates, delays in our ability to generate revenue, and increase
our costs.
Further,
our contract manufacturers must comply with current Good Manufacturing
Practices, or cGMPs, and other government regulations, which may limit the
available sources of our needed supplies. The FDA periodically inspects
manufacturing facilities, including third parties who manufacture products or
active ingredients for us. The FDA may not believe that the chosen manufacturers
have sufficient experience making the dosage forms that we have contracted with
them to produce, and may subject those manufacturers to increased
scrutiny. Pharmaceutical manufacturing facilities must comply with
applicable cGMPs, and manufacturers usually must invest substantial funds, time
and effort to ensure full compliance with these standards. We will not have
control over our contract manufacturers’ compliance with these regulations and
standards. Failure to comply with applicable regulatory requirements can result
in sanctions, fines, delays or suspensions of approvals, seizures or recalls of
products, operating restrictions, manufacturing interruptions, costly corrective
actions, injunctions, adverse publicity against us and our products and possible
criminal prosecutions.
We
will rely on third parties to conduct our clinical trials. If these third
parties do not successfully carry out their contractual duties or meet expected
deadlines, we may not be able to seek or obtain regulatory approval for or
commercialize our product candidates.
We will
need to retain a third party clinical research organization, or CRO, to
implement, provide monitors and manage data for our clinical programs. We and
our CRO are required to comply with current Good Clinical Practices, or GCPs,
regulations and guidelines enforced by the FDA for all of our products in
clinical development. The FDA enforces GCPs through periodic inspections of
trial sponsors, principal investigators and trial sites. In the future, if we or
our CRO fails to comply with applicable GCPs, the clinical data generated in our
clinical trials may be deemed unreliable and the FDA may require us to perform
additional clinical trials before approving our marketing applications. We
cannot assure you that, upon inspection, the FDA will determine that any of our
clinical trials for products in clinical development comply with GCPs. In
addition, our clinical trials must be conducted with products produced under
cGMP regulations, and will require a large number of test subjects. Our failure
to comply with these regulations may require us to repeat clinical trials, which
would delay the regulatory approval process.
If CROs
do not successfully carry out their contractual duties or obligations or meet
expected deadlines, if they need to be replaced, or if the quality or accuracy
of the clinical data they obtain is compromised due to the failure to adhere to
our clinical protocols, regulatory requirements or for other reasons, our
clinical trials may be extended, delayed or terminated, and we may not be able
to obtain regulatory approval for or successfully commercialize our product
candidates. As a result, our financial results and the commercial prospects for
our product candidates would be harmed, our costs could increase, and our
ability to generate revenue could be delayed.
The
Orphan Drug Act may provide a competitor with up to seven years of market
exclusivity.
The
Orphan Drug Act was created to encourage companies to develop therapies for rare
diseases by providing incentives for drug development and
commercialization. One of the incentives provided by the act is seven
years of market exclusivity for the first product in a class licensed for the
treatment of a rare disease. We intend to target indications that
would be covered by the Orphan Drug Act, and companies may obtain orphan drug
status for therapies that are developed for this indication. In the
event that any competitor of ours is first to obtain FDA licensure for a
competitive product, we could be prevented from obtaining licensure and
marketing our product candidates.
The
commercial success of our product candidates will depend upon the degree of
market acceptance of these products among physicians, patients, health care
payors and the medical community.
Even if a
product candidate is approved for sale by the appropriate regulatory
authorities, physicians may not prescribe our product candidates, in which case
we could not generate revenue or become profitable. Market acceptance by
physicians, healthcare payors and patients will depend on a number of factors,
including:
·
|
acceptance
by physicians and patients of each such product as a safe and effective
treatment;
|
·
|
cost
effectiveness;
|
·
|
adequate
reimbursement by third parties;
|
24
·
|
potential
advantages over alternative
treatments;
|
·
|
relative
convenience and ease of administration;
and
|
·
|
prevalence
and severity of side effects.
|
We
are subject to critical accounting policies, and we may interpret or implement
required policies incorrectly.
We follow
generally accepted accounting principles for the United States in preparing our
financial statements. As part of this work, we must make many estimates and
judgments about future events. These affect the value of the assets and
liabilities, contingent assets and liabilities, and revenue and expenses that we
report in our financial statements. We believe these estimates and judgments are
reasonable, and we make them in accordance with our accounting policies based on
information available at the time. However, actual results could differ from our
estimates, and this could require us to record adjustments to expenses or
revenues that could be material to our financial position and results of
operations in future periods.
The
obligations associated with being a public company require significant resources
and management attention, which may divert from our business
operations.
We are
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act. The Exchange Act requires that we file annual,
quarterly and current reports with respect to our business and financial
condition. The Sarbanes-Oxley Act requires, among other things, that we
establish and maintain effective internal controls and procedures for financial
reporting. As a result, we will incur significant legal, accounting and other
expenses. Furthermore, the need to establish the corporate
infrastructure demanded of a public company may divert management's attention
from implementing our growth strategy, which could prevent us from improving our
business, results of operations and financial condition. We have made, and will
continue to make, changes to our internal controls and procedures for financial
reporting and accounting systems to meet our reporting obligations as a
stand-alone public company. However, the measures we take may not be sufficient
to satisfy our obligations as a public company. In addition, we cannot predict
or estimate the amount of additional costs we may incur in order to comply with
these requirements. We anticipate that these costs will materially increase our
selling, general and administrative expenses.
Section
404 of the Sarbanes-Oxley Act requires annual management assessments of the
effectiveness of our internal control over financial reporting, starting
with the second annual report that we would expect to file with the Securities
and Exchange Commission in March 2011, and will likely require in the same
report, a report by our independent registered public accounting firm on
the effectiveness of our internal control over financial reporting.
In connection with the implementation of the necessary procedures and
practices related to internal control over financial reporting, we may identify
additional deficiencies. We may not be able to remediate any future
deficiencies in time to meet the deadline imposed by the Sarbanes-Oxley Act for
compliance with the requirements of Section 404. In addition, failure to
achieve and maintain an effective internal control environment could have
a material adverse effect on our business and stock price.
Risks
Related to our Common Stock
The
value of the Company’s common stock is not certain.
The
conversion price of the Company’s outstanding Preferred Stock and the exercise
price of the warrants were arbitrarily determined through negotiations between
the Company and Meyers Associates and bear no relationship to book value,
assets, earnings, or any other accepted criteria of
value. Accordingly, such prices should not be considered as
indications of the actual value of our securities. The Company cannot assure
that these prices will accurately reflect the value of the Company’s common
stock once it is publicly traded or that these prices will be realized upon
disposition of the Company’s common stock.
Absence
of a public market for the securities offered hereby will lack
liquidity.
There is
currently no public market for any of the Company’s securities and there can be
no assurance that a public market will develop in the future. Since there
is no active trading market for the Company’s securities, an investor may be
unable to liquidate an investment in the shares and, therefore, should be
prepared to bear the economic risk of an investment in the shares for an
indefinite period and to withstand a total loss of investment. Rule
144 promulgated under the Securities Act requires, among other conditions, a six
month holding period prior to the resale of securities acquired in a non-public
offering without having to satisfy the registration requirements of the
Securities Act. In the event we do not have sufficient financial and
human resources in the future, we may not be able to fulfill our reporting
requirements under the Exchange Act or disseminate to the public any current
financial or other information concerning the Company, as required by Rule 144
as one of the conditions of its availability. In such event we will
not be absolved from liability for our failure to file these
reports.
25
If
our common stock is traded on the OTC Bulletin Board, which is not a national
securities exchange, it may be detrimental to investors
We intend
to seek to have our shares of common stock traded on the OTC Bulletin Board
maintained by FINRA. Although there is currently no market for our
securities, securities traded on the OTC Bulletin Board, as compared to the
national securities exchanges, generally have limited trading volume and exhibit
a wide spread between the bid/ask quotations. We cannot predict
whether a more active market for our common stock will develop in the
future. In the absence of an active trading market: investors may
have difficulty buying and selling our common stock or obtaining market
quotations; market visibility for our common stock may be limited; and a lack of
visibility for our common stock may have a depressive effect on the mark price
for our common stock.
Preferred
Stock as an anti-takeover device
We are
authorized to issue 5,000,000 shares of preferred stock, $0.10 par
value. The preferred stock may be issued in series from time to time
with such designation, voting and other rights, preferences and limitations as
our Board of Directors may determine by resolution. Unless the nature
of a particular transaction and applicable status require such approval, the
Board of Directors has the authority to issue these shares without stockholder
approval subject to approval of the holders of our preferred
stock. The issuance of preferred stock may have the effect of
delaying or preventing a change in control of the Company without any further
action by our stockholders.
Series
A Preferred Stock may make it difficult to obtain additional
funding
The
approval of the holders of a majority of the Series A Preferred Stock is
required for the Company to issue any capital stock with rights on parity with
or senior to Series A Preferred Stock. While this limitation is
designed to protect existing investors in a liquidation or dissolution of the
Company, it would also make it more difficult to obtain additional funding in
the event the Company’s financial or business condition has
deteriorated.
Our
common stock will be subject to restrictions on sales by broker-dealers and
penny stock rules, which may be detrimental to investors.
Our
common stock will be subject to Rules 15g-1 through 15g-9 under the
Exchange Act, which imposes certain sales practice requirements on
broker-dealers who sell our common stock to persons other than established
customers and “accredited investors” (as defined in Rule 501(a) of the
Securities Act). For transactions covered by this rule, a broker-dealer must
make a special suitability determination for the purchaser and have received the
purchaser’s written consent to the transaction prior to the sale. This
rule adversely affects the ability of broker-dealers to sell our common
stock and purchasers of our common stock to sell their shares of our common
stock.
Additionally,
our common stock is subject to SEC regulations applicable to “penny stocks.”
Penny stocks include any non-exchange listed equity security that has a market
price of less than $5.00 per share, subject to certain exceptions. The
regulations require that prior to any non-exempt buy/sell transaction in a penny
stock, a disclosure schedule proscribed by the SEC relating to the penny stock
market must be delivered by a broker-dealer to the purchaser of such penny
stock. This disclosure must include the amount of commissions payable to both
the broker-dealer and the registered representative and current price quotations
for our common stock. The regulations also require that monthly statements be
sent to holders of a penny stock that disclose recent price information for the
penny stock and information of the limited market for penny stocks. These
requirements adversely affect the market liquidity of our common
stock.
A
significant number of our shares are eligible for sale, and their sale could
depress the market price of our stock.
Sales of
a significant number of shares of common stock in the public market pursuant to
a current prospectus could harm the market price of our common stock. Pursuant
to our registration statement (No. 333-158474), an aggregate of 4,674,228 shares
of common stock were registered in August 10, 2009 and are free-trading. As
additional shares of our common stock become available for resale in the public
market pursuant to this prospectus and otherwise, the supply of our common stock
will increase, which could decrease its price. Some or all of the shares of our
common stock may be offered from time to time in the open market pursuant to
Rule 144, and these sales may have a depressive effect on the market for
the shares of our common stock. In general, a non-affiliated person who has held
restricted shares for a period of six months, under Rule 144, may sell into the
market our common stock all of their shares, subject to the Company being
current in its periodic reports filed with the SEC. An affiliate may
sell an amount equal to the greater of 1% of the outstanding shares or, if
listed on Nasdaq or another national securities exchange, the average weekly
number of shares sold in the last four weeks prior to such sale. Such sales may
be repeated once every three months, and any of the restricted shares may be
sold by a non-affiliate without any restriction after they have been held the
year.
26
Investors
may experience substantial dilution of their ownership in the
future.
Pursuant
to the Stock Option Plan to be adopted, employees, directors and independent
contractors may acquire up to an aggregate of 500,000 shares of the Company’s
common stock through the exercise of stock options that may be granted in the
future. The Company’s stockholders will incur dilution upon exercise
of such options. In addition, three are currently outstanding
warrants to purchase 2,809,352 shares of common stock and Series A Convertible
Stock to purchase 2,809,352 shares of Common Stock plus placement agent warrants
to purchase approximately 1,364,294 shares of common stock. The mere
existence of these derivative securities may have a depressive effect on any
market for our common stock which may develop. Furthermore, if the
Company issues or sells shares of common stock or any derivative securities for
less than the $0.85 per share initial conversion price, the initial conversion
price of the above-described Preferred Stock will be reset to such conversion
price and the Warrants to 150% of the Preferred Stock conversion price, as
adjusted, which will result in substantial dilution of new
investors.
In
addition, if the Company raises additional funds by issuing additional stock in
one or more additional financings, further dilution to stockholders will result,
and new investors may have rights superior to existing
stockholders.
The
Company’s officers, directors and principal stockholders may be able
significantly to influence matters requiring stockholder approval because they
will own a large percentage of the Company’s outstanding shares, even after this
Offering.
The
Company’s founder, Bruce Meyers, who is a principal of Meyers Associates, a
FINRA member firm, Dr. Lawrence Helson, CEO, and Dr. Arthur Bollon, Director,
beneficially own 4,757,500, 1,500,000 and 800,000 shares, respectively, of the
11,340,000 shares of Common Stock currently issued and outstanding, or
approximately 62% of the 11,340,000 outstanding shares of the Company’s common
stock. After giving effect to the conversion of all 2,337 outstanding
shares of Preferred Stock, but not the exercise of the warrants, those persons
will beneficially own in the aggregate approximately 53% of the 14,989,100
outstanding shares of the Company’s common stock. These stockholders
will be able to exercise control over substantially all matters requiring
approval by the Company’s stockholders, including the election of directors and
the approval of significant corporate transactions, which includes their ability
to amend the Certificate of Incorporation, approve a merger or consolidation of
the Company with another company or approve the sale of substantially all of the
assets of the Company without the agreement of minority
stockholders. This concentration of ownership may not be in the best
interests of all of the Company’s stockholders. See “Principal
Stockholders.”
Limitations
on ability to pay dividends.
The
Company does not currently expect to pay cash dividends on any of its common
stock for the foreseeable future. The ability of the Company to pay
dividends on the Company’s common stock will depend upon, among other things,
future earnings, if any, the success of the Company’s business activities,
capital requirements, the general financial condition of the Company, and
general business conditions. There can be no assurance that the
Company will ever be in a financial position to declare and pay dividends on the
Company’s capital stock or that the Board of Directors would otherwise ever
declare or pay such a dividend.
ITEM
2. DESCRIPTION OF PROPERTIES
The
Company owned about $2,400 in office equipment and about $1,000 in miscellaneous
office supplies in its headquarters and administrative offices as of December
31, 2009.
The
Company’s executive offices are located in a building owned by Dr. Lawrence
Helson, Chief Executive Officer, and are located at 1375 California Road,
Quakertown, Pennsylvania, 18951. The Company does not pay rent at
this location.
Item
3. LEGAL PROCEEDINGS
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART
II
ITEM
5.
|
PRICE
RANGE OF COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
|
Our
common stock is not publicly traded.
27
HOLDERS
OF RECORD
As of
April 15, 2010, there were approximately 22 different holders of record of our
common stock.
DIVIDEND
POLICY
We have
never declared or paid dividends on our shares of common stock. We
currently intend to retain future earnings for use in our business and,
therefore, do not anticipate paying any cash dividends on our shares of common
stock in the foreseeable future. Any future determination as to the
payment of cash dividends on our common stock will be at the discretion of our
Board of Directors and will depend on our earnings, operating and financial
condition, capital requirements and other factors deemed relevant by our Board
of Directors including the General Corporation Law of the State of Delaware,
which provides that cash dividends are only payable out of retained earnings or
if certain minimum rations of assets to liabilities are
satisfied. The declaration of cash dividends on our common stock also
may be restricted by the provisions of credit agreements that we may enter into
from time to time.
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
EQUITY
COMPENSATION PLAN INFORMATION
The
following table provides information regarding the status of our existing equity
compensation plans at December 31, 2009.
Plan category
|
Number of shares of common
stock to be issued on exercise of
outstanding options, warrants
and rights
|
Weighted-average exercise
price of outstanding
options, warrants and
rights
|
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
the previous columns)
|
|||||||||
Equity compensation plans
approved by security holders (1)
|
-0- | -0- | -0- | |||||||||
Equity
compensation plans not approved by security holders
|
-0- | -0- | -0- | |||||||||
Total
|
-0- | -0- | -0- |
(1)
Consists of our 2009 Employee Stock Incentive Plan.
RECENT
SALES OF UNREGISTERED SECURITIES
During
the twelve-month period between January 1, 2009 and December 31, 2009,
Registrant sold 810 units (the “Units”), of its securities at a price of $1,000
per Unit. Each Unit consists of (i) one share of 6.5% Series A
Convertible Preferred Stock convertible into 1,177 shares of common stock
(equivalent to $.85 per share of common stock) following the August 10, 2009
effective date of its Registration Statement (the “Effective Date”) subject to
adjustment, and (ii) one Warrant to purchase 1,177 shares of common stock at
$1.27 per share for a five-year period following the Effective
Date. The Company received gross proceeds of $810,000 and paid 10%
sales commissions of $81,000 in the aggregate, to Meyers Associates, L.P. the
Company’s placement agent.
The Units
were sold to 13 accredited investors who were customers of the placement
agent. The Company claimed an exemption from registration pursuant to
Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated
thereunder, based upon subscription agreements executed by each
investor.
The net
proceeds of the offering are being used for working capital and research and
development towards filing an investigational new drug application to commence
clinical trials.
As
required by Rule 463 under the Securities Act, the Company has not received any
proceeds under its initial registration statement (No. 333-158474) declared
effective by the SEC on August 10, 2009.
A summary
of the status of the Company's warrants as of December 31, 2009 and
changes during the periods ended December 31, 2008 and December 31, 2009 is
presented below:
28
Date of Issuance
|
Warrant
Shares
|
Exercise
Price
|
Value if
Exercised
|
Expiration
Date
|
||||||||||||
11/25/2008
|
1,259,639
|
1.27
|
1,599,742
|
8/10/2014
|
||||||||||||
11/26/2008
|
449,220
|
1.27
|
570,509
|
8/10/2014
|
||||||||||||
12/31/2008
|
1,708,859
|
2,170,251
|
||||||||||||||
3/5/2009
|
29,425
|
1.27
|
37,370
|
8/10/2014
|
||||||||||||
3/5/2009
|
58,850
|
1.27
|
74,740
|
8/10/2014
|
||||||||||||
3/5/2009
|
70,620
|
1.27
|
89,687
|
8/10/2014
|
||||||||||||
3/5/2009
|
88,275
|
1.27
|
112,109
|
8/10/2014
|
||||||||||||
3/5/2009
|
58,850
|
1.27
|
74,740
|
8/10/2014
|
||||||||||||
3/5/2009
|
41,195
|
1.27
|
52,318
|
8/10/2014
|
||||||||||||
4/1/2009
|
17,655
|
1.27
|
22,422
|
8/10/2014
|
||||||||||||
6/17/2009
|
29,425
|
1.27
|
37,370
|
*
|
||||||||||||
6/17/2009
|
29,425
|
1.27
|
37,370
|
*
|
||||||||||||
6/17/2009
|
58,850
|
1.27
|
74,740
|
*
|
||||||||||||
6/17/2009
|
117,700
|
1.27
|
149,479
|
*
|
||||||||||||
7/23/2009
|
58,850
|
1.27
|
74,740
|
*
|
||||||||||||
8/20/2009
|
58,850
|
1.27
|
74,740
|
*
|
||||||||||||
9/9/2009
|
235,400
|
1.27
|
298,958
|
*
|
||||||||||||
12/31/2009
|
2,662,229
|
3,381,034
|
* Fifth
anniversary date of the next registration statement to be filed. See
Note (4) above.
OFF-BALANCE
SHEET ARRANGEMENTS
We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
ITEM
6. SELECTED FINANCIAL DATA
Not
applicable to a smaller reporting company.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The
following discussion should be read in conjunction with the financial statements
and notes thereto included in this report. Except for the historical information
contained herein, the discussion in this prospectus contains certain
forward-looking statements that involve risk and uncertainties, such as
statements of the Company’s plans, objectives, expectations and intentions as of
the date of this filing. The cautionary statements made in this document should
be read as being applicable to all related forward-looking statements wherever
they appear in this document. The Company’s actual results could differ
materially from those discussed here. Factors that could cause differences
include those discussed in the “Risk Factors” section as well as discussed
elsewhere herein.
Liquidity
and Capital Resources
December
31, 2009 as Compared With December 31, 2008
As of
December 31, 2009 and December 31, 2008, the Company had $295,418 and $181,128,
respectively, of cash on hand. The Company’s working capital
increased from $104,129 at December 31, 2008, to $177,451 at December 31, 2009,
as a result of the sale of $810,000 securities to 13 different accredited
investors offset, in part, by an increase of $40,968 in accounts payable and
accrued expenses. The Company is a development stage company with a
limited operating history. SignPath had a deficit accumulated during
the development stage of $2,793,923, as of December 31, 2009.
29
Between
August 2007 and April 2008, Sign Path completed a Bridge Financing with 15
accredited investors pursuant to which it received gross proceeds of $847,500
from the sale of 10% promissory notes together with an aggregate of 1,340,000
shares of Common Stock (the “Bridge Shares”).
As of
November 28, 2008, SignPath sold 1451.88 units (“Units”) of its securities at a
price of $1,000 per Unit (“2008 Private Placement”). Each Unit
consists of (i) one share of 6.5% Series A Convertible Preferred Stock
convertible into 1,177 shares of common stock (equivalent to $.85 per share of
common stock) following the August 10, 2009 effective date of its Registration
Statement (the “Effective Date”) subject to adjustment, and (ii) one Warrant to
purchase 1,177 shares of common stock at $1.27 per share for a five-year period
following the Effective Date. The Company received gross proceeds of
$1,451,875 in the 2008 Private Placement and incurred stock offering costs of
$270,948 related to the offering. Between January 1, 2009 and
December 31, 2009, SignPath sold 810 Units (the “2009 Private Placement”)
consisting of the same securities sold in the 2008 Private
Placement. The Company received gross proceeds of $810,000 and
incurred stock offering costs of $166,154 related to this
offering. As part of that offering, the Company
attributed $737,584 of the total $2,261,649 of additional paid-in capital
associated with the transactions for both years to the warrants based on the
relative fair value of the warrants.
The
Company has no agreements, arrangements or understandings with any officer,
director or shareholder as to any future financing, either equity or
debt. The Company expects to continue to incur losses for the
foreseeable future and it is possible the Company may never reach
profitability. Therefore, the Company will require additional capital
resources and financing to implement its business plan and continue its
operations. The Company’s current burn rate for salaries, research
programs and professional fees averages about $15,000 per
month. Thus, it is expected that the Company currently has sufficient
cash on hand to operate through December 31, 2010. Management
believes it has enough funds to complete its pre-clinical trials. If
the Company receives favorable results, Management believes it will have the
ability to raise additional funds to complete INDs. In view of
general economic conditions, there can be no assurance that any additional
financing will be available to us, that any affiliate will provide additional
investments in the Company or that adequate funds for our operations will
otherwise be available when needed or on terms acceptable to us.
Net cash
used in operating activities during Fiscal 2009 decreased to $529,556 from
$745,653 during Fiscal 2008. This resulted from a decreased net loss
from $1,695,766 in Fiscal 2008 to a net loss of $571,324 in Fiscal 2009, offset
by an increase in accounts payable and accrued expenses of $40,968.
The
Company had net cash provided by financing activities of $643,846 in Fiscal 2009
as a result of the $810,000 received in the 2009 Private Placement described
above, reduced by $166,154 of offering costs. During Fiscal 2008, the
Company had $923,927 of net cash provided by financing activities as a result of
the $562,000 received from the 2008 Private Placement of Preferred Stock less
the stock offering costs of $270,948 plus the $632,875 raised through bridge
financing.
As a
result of the foregoing, the Company’s cash increased by $114,290 during Fiscal
2009 from $181,128 to $295,418.
The
financial statements included in this report have been prepared in conformity
with generally accepted accounting principles that contemplate our continuance
as a going concern. The Company has had no revenues and has generated
losses from operation. As set forth in Note 1 to the audited
Financial Statements, the continuation of the Company as a going concern is
dependant upon the continued financial support from its shareholders, the
ability to raise equity or debt financing, and the attainment of profitable
operations from the Company’s planned business. The financial
statements do not include any adjustments to the recoverability and
classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going
concern.
Results
of Operations for the Year Ended December 31, 2009, as Compared with the Year
Ended December 31, 2008
The
Company has not received any revenues since its inception on May 15,
2006. We do not expect to receive any revenues prior to
2012. Our total operating expenses during the year ended December 31,
2009 (“Fiscal 2009”) decreased to $612,097, as compared with $1,631,771 during
the year ended December 31, 2008 (“Fiscal 2008”). General and
administrative expense increased to $243,492 in Fiscal 2009 from $101,406 in
Fiscal 2008, primarily as a result of increased activity in the Company in
pursuing its manufacture and preclinical development of its lead curcumin
formulations.
Legal and
professional expenses decreased from $143,527 in Fiscal 2008 to $74,794 in
Fiscal 2009, as a result of the completion of the Company’s business plan during
Fiscal 2008, offset by expense related to the Company’s Registration Statement
being declared effective in Fiscal 2009.
30
There
were no advertising expenses and only $2,782 of consulting expenses paid in
Fiscal 2009, as compared with $79,481 of consulting fees paid in Fiscal 2008 to
our financial advisers and $49,175 of advertising expenses paid in Fiscal 2008
to create public awareness of the Company.
The
Company paid $102,347 in licensing fees in Fiscal 2008 as compared with $75,092
of license fees in Fiscal 2009. Fees in Fiscal 2008 included payments
of $99,412 to the
Anderson Cancer Center while licensing fees of $20,000 in Fiscal 2009
related to payments to the Anderson Cancer Center and the remaining $55,000 were
payments made to the University of Texas Health Science.
The
Company paid an aggregate of $215,937 in research and development fees in Fiscal
2009 as compared to $263,886 in Fiscal 2008. This included an annual
fee of $10,000 paid to UTMDACC for non-clinical and mouse pre-clinical non-GLP
studies of lipsomal curcumin. Payments in Fiscal 2009 included a
$10,000 annual license fee paid to JHU under the JHU Agreement, as well as
payment of approximately $66,000 paid to Surmodics for polymer for the
production of nanocurcumin under the JHU Agreement and $697 for the production
of clinical GMP grade curcumin under the UTMDACC agreement. During
Fiscal 2009, the Company paid approximately $33,000 to Dr. Maitra under the
Company’s sponsored research agreement to fund the costs of non-clinical and
pre-clinical studies of nanocurcumin at JHU; approximately $21,000 paid for
overhead under the JHU Agreement and a $1,100 patent fee paid under the JHU
Agreement; and a $30,000 payment to University of North Texas (“UNT”) Health
Science Center under an agreement entered into on August 18, 2008 for sponsored
research. During Fiscal 2009, the Company paid UTMDACC approximately
$32,000 for non-clinical and mouse pre-clinical non-GLP Studies of lipsomal
curcumin as well as payments to Polymun Scientific Immunbiologische
Fonschung GmbH under the UTMDACC agreement.
The
amount paid for research and development in Fiscal 2008 consisted of
payments for overhead and patent fees for non-clinical studies and
pre-clinical studies of the nanocurcumin compound and to produce polymer under
the JHU Agreement for animal studies of nanocurcumin. During Fiscal
2008, the Company paid UTMDACC for non-clinical and mouse pre-clinical non-GLP
studies of lipsomal curcumin and a $10,000 annual fee. It also
includes expenses relating to development of depotcurcumin, a slow release
formulation. Depotcurcumin was originally made at UNT under non-GLP
conditions from circumin extract (and PLGA, a chemical surrounding the curcumin)
originally purchased from SAFC.
As a
result of the foregoing, the Company had a net loss of $571,324 in Fiscal 2009,
as compared with a net loss of $1,695,766 in Fiscal 2008. This
translates to a loss per share of $(0.05) in Fiscal 2009 compared to $(0.15) in
Fiscal 2008.
Critical
Accounting Policies
We have
identified the policies outlined below as critical to our business operations
and an understanding of our results of operations. The list is not intended to
be a comprehensive list of all of our accounting policies. In many cases, the
accounting treatment of a particular transaction is specifically dictated by
accounting principles generally accepted in the United States, with no need for
management’s judgment in their application. The impact and any associated risks
related to these policies on our business operations is discussed throughout
Management’s Discussion and Analysis of Financial Condition and Results of
Operations where such policies affect our reported and expected financial
results. Note that our preparation of the financial statements requires us to
make estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of our
financial statements, and the reported amounts of revenue and expenses during
the reporting period. There can be no assurance that actual results will not
differ from those estimates. For a discussion of the accouting
policies most critical to our company, please refer to footnote 2 in the note to
the financial statements.
Plan
of Operations
The
Company’s current focus is on the manufacture and preclinical development of its
lead curcumin formulations (intravenous liposomal curcumin, oral and intravenous
nanocurcumin) with a view toward filing two IND applications with the
FDA. The Company’s product candidates are still in the pre-clinical
development phase.
The
Company believes that a novel pharmaceutical preparation with enhanced
absorption of the active compound with resistance to hepatic inactivation could
potentially have greater clinical efficacy than the oral
versions. The laboratory and oral administration studies by other
researchers to date suggest that curcumin has high potency. The
Company believes that an alternate route for administering this compound, such
as the Company’s parenteral (taken into the body other than through the
digestive canal) formulation, could be more effective at lower
dosages. SignPath intends to develop a parenteral liposomal
formulation, and a nanoparticle formulation, nanocurcumin, to overcome the
limitations of the oral form.
SignPath
believes that the dual development and comparison of liposomal curcumin and
nanocurcumin could expose potential differences in biological effects and
distribution to different tissues. The Company intends to manufactures good
manufacturing practice (GMP) grade of liposomal curcumin and
nanocurcumin. Both formulations will require outsourcing production
to one or more commercial facilities. Our initial goals are to obtain
sufficient material for in vitro and animal analysis and to develop these
formulations in order to submit INDs to the FDA. Determination of safety,
dosage, and efficacy of these formulations in a quantifiable manner will permit
us to pursue clinical registration trials for a variety of malignant diseases.
Following submission of the INDs, the Company plans to initially run Phase I
studies with both of the parenteral formulations in patients with treatment
refractory malignant disease. Subsequently, if the Phase I trials are
successful, the Company plans to seek FDA authorization to run Phase II trials
in selected malignancies.
31
Liposomal
Curcumin: The Company has agreements with contract
manufacturers for the manufacture, chemistry, and controls for supplies of the
drugs to be tested. Liposomal curcumin is manufactured by our
contract manufacturer, Polymun, Inc. Initial quantities of GMP grade
liposomal curcumin to conduct preclinical studies to corroborate previously
published data from other researchers were obtained from Sigma Aldrich Fine
Chemicals (“SAFC”) or from Sabinsa. Final production of liposmal
curcumin GMP was completed at Polymun in Vienna, Austria during
2009. Using lipocurc, anti-cancer activity without toxicity in human
colon and pancreatic cancer xenograft models was published. Following
the determination of safety and the optimum dosage and schedule in the most
sensitive of the three species, we will be able to estimate starting dosages for
Phase I trials in humans. We plan to outsource corroborative studies
of liposomal absorption, distribution, metabolism, and excretion (ADME), and
pharmacokinetics in rats with the aim of estimating optimum dosage schedules, as
well as dosage and safety in mice, rats and dogs to satisfy IND regulations to
GLP laboratories in M.D. Anderson Cancer Center in Houston, Texas.
Nanocurcumin: The
Company intends to obtain commercial volumes of purified curcumin from third
party manufacturers, SAFC and/or Sabinsa, in quantities suitable to satisfy
preclinical and clinical demands. The Company believes that the
manufacture of liposomal curcumin and nanocurcumin can also be scaled up as
necessary since these additional substances are readily available from
commercial sources utilizing established production technologies. We plan to
outsource nanocurcumin pre-clinical development to M.D. Anderson. We
will continue non-clinical non-clinical and pre-clinical analyses of
nanocurcumin at the NCI Nanocharacterization laboratory. The
nanocurcumin program will be managed by M.D. Anderson through the filing of the
Company’s IND. However, we intend to develop direct injection
nanocurc, a new clinical entity at Johns Hopkins Cancer Center for preventive
therapy of inducted curcumin in situ in rats. Nanocurc, a parenteral
formulation of nanocurcumin in human pancreatic cancer xenografts in nude mice
has demonstrated anti-cancer effects. This formulation has activity
against breast cancer-DCIS and passes the blood brain barrier. During
late 2010, we intend to conduct a European Phase I dose funding in Parkinson’s
Disease free volunteers in collaboration with Polymun, Vienna,
Austria. Upon completion, we will also continue studies of
nanocurcumin, PLGA-nanocurcumin and lipsomal curcumin against L-DOPA induced
dyskinesias in dogs. We will measure inhibiting effects of curcumin
on disease progression in Parkinson’s Disease patients at the University of
Western Ontario, Canada. Contracts with these institutions will be initiated
upon receipt of manufactured nanocurcumin.
ITEM
7A. Quantitative and Qualitative Disclosures About Market Risk
In the
normal course of business, our financial position is routinely subject to a
variety of risks, including market risk associated with interest rate movement.
We regularly assess these risks and have established policies and business
practices intended to protect against these and other exposures. As a result, we
do not anticipate material potential losses in these areas.
As of
December 31, 2009, we had cash and cash equivalents of
$295,418. Declines of interest rates over time will, however, reduce
our interest income.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Index
to Financial Statements appears on page F-1, the Report of the Independent
Registered Public Accounting Firm appears on page F-2, and the Financial
Statements and Notes to Financial Statements appear on pages F-3 to
F-19.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES.
None.
ITEM
9A(T). CONTROLS AND PROCEDURES
The chief
executive officer and the chief financial officer, after evaluating the
effectiveness of the Company's "disclosure controls and procedures" (as defined
in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e);
collectively, "Disclosure Controls") as of the end of the period covered by this
annual report (the "Evaluation Date") have concluded that as of the Evaluation
Date, our Disclosure Controls were not effective to provide reasonable assurance
that information required to be disclosed in our reports filed or submitted
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified by the SEC, and that material
information relating to our company and any consolidated subsidiaries is made
known to management, including the chief executive officer and chief financial
officer, particularly during the period when our periodic reports are being
prepared to allow timely decisions regarding required
disclosure.
32
Management
assessed the effectiveness of our internal control over financial reporting as
of the Evaluation Date based on criteria for effective internal control over
financial reporting described in Internal Control—Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management has determined that
as of the Evaluation Date, there were material weaknesses in our internal
control over financial reporting. The material weaknesses identified
during management’s assessment were (i) a lack of sufficient internal accounting
resources; and (ii) a lack of segregation of duties to ensure adequate review of
financial statement preparation. In light of these material weaknesses,
management has concluded that we did not maintain effective internal control
over financial reporting at the Evaluation Date.
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting for the Company. As defined by the Public Company
Accounting Oversight Board Auditing Standard No. 5, a material weakness is a
deficiency or a combination of deficiencies, such that there is a reasonable
possibility that a material misstatement of the annual or interim financial
statements will not be prevented or detected. A clear and concise segregation of
duties is important to maximize checks and balances so that no single individual
has control over two or more phases of a transaction or operation. A strong
segregation of duty also is critical to reduce effectively the risk of mistakes
and inappropriate actions preventing fraud and discourages collusion. It can be
difficult for small businesses to always have a clear separation of duties
because there simply are not enough personnel to cover each and every process
and procedure. Ultimately, checks and balances need to be in place as a
supportive measure to the business operations, but also as a fraud prevention
measure as well. Because we have limited financial personnel, and limited
resources, compliance with segregation of duties and proper oversight of control
requirements is extremely difficult In connection with the evaluation
referred to in the foregoing paragraph, we have identified no change in our
internal control of financial reporting that occurred during the quarter ended
December 31, 2009, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
We are a
non-accelerated filer and are required to comply with the internal control
reporting and disclosure requirements of Section 404 of the Sarbanes-Oxley Act
for fiscal years ending December 31, 2009. Although we are working to comply
with these requirements, we have limited financial personnel, making compliance
with Section 404 – especially with segregation of duty control requirements –
very difficult and cost ineffective, if not impossible. 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.
ITEM
9B. OTHER INFORMATION
NONE
PART
III
ITEM
10. DIRECTING EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Set forth
below is also a brief description of the relevant business and/or scientific
experience and background of each person named below.
Officers,
Directors and Other Key Staff
Our
current officers, directors, and other key advisors to the Company consist
of:
Age
|
Position
|
|||
77
|
Chief
Executive Officer, Director, and President
|
|||
M.Sci,
MD
|
||||
Arthur
P. Bollon, Ph.D.
|
64
|
Director
|
Dr.
Helson has served as Chief Executive Officer, Director and President of the
Company since May 28, 2008. From 1967 to 1986, Dr. Helson was
employed at Memorial Sloan Kettering Cancer Center NYC, the last 12 years as
attending physician. From 1982 to 1986, he was an associate attending
pediatrician at Cornell University Medical School, New York
City. From 1986-1987 he was director of Phase III clinical trials of
Zoladex ICI in Delaware. From 1987 to 1997 he was Professor of Pediatric and
Adult Oncology at New York Medical College, Valhalla, NY. From 1997
to 2007 he was a founder-scientist at Onconova Inc, a biotechnology company in
Princeton, New Jersey, and since 1993 has also been part-time Vice President of
Bio-Research at Napro Biotherapeutics, Boulder, Colorado. He has held
oncology consulting positions from 1985 to 1997 at Bambino Jesu Hospital,
Vatican City, Metaxa Hospital; Pireaus, Greece; and for the Brazilian Consulate
in New York City. From 2003 until present, he has provided unpaid
informal consulting services to HemoBiotech Inc, in Dallas, Texas. He ran
various research laboratories at Sloan Kettering Institute from 1975-1985, from
1987 to 1997 at New York Medical College, and from 2002 to 2005 for Napro
Biotherapeutics (now Tapestry Pharmaceuticals) in Allentown, Pennsylvania. Dr.
Helson has over 185 peer reviewed publications and 4 Issued Patents. He
initiated the bone marrow transplant program at Memorial Sloan Kettering
Hospital in 1973, and published the first peer reviewed paper in the journal
Nature on Tumor Necrosis Factor in 1975. His laboratory research also developed
six human neural tumor cell lines which are in the ATCC and English repositories
and are distributed worldwide. He also edits the journal Anticancer
Research , published in Athens, Greece and was an editor for Nude Mouse
Heterotransplantation Research, published by Karger and Co.
33
Arthur P.
Bollon, Ph.D., has served as a director of the Company since May 28,
2008. Dr. Bollon has more than 25 years of experience in
biotechnology as a scientist, executive and entrepreneur. Since
October 2003, he has been the Chairman, President and Chief Executive Officer of
HemoBioTech, Inc. which is developing HemoTech, a potential substitute for human
blood. He is a founder and had served as Chairman and Chief Executive Officer
of Wadley Biosciences Inc./LPL, a joint venture between Wadley
Cancer Center and Phillips Petroleum which focused on cancer and
immune disease therapeutics from 1987 to 1991. From 1992 to 2000, he was a
founder, Chairman and Chief Executive Officer of Cytoclonal Pharmaceutics Inc.
which focused on cancer and infectious disease therapeutics. While at
Cytoclonal, he completed an initial public offering. In addition, he
has completed research contracts with multiple universities including UCLA,
Montana State University, University of California at San Diego, Texas Tech
University and University of British Columbia.
From 1979
through 1987, Dr. Bollon served as Chairman of the Department of Molecular
Genetics and Director of Genetic Engineering at the Wadley Cancer Center
focusing on the cloning of human cytokine genes for treatment of cancer. Prior
to Wadley, he was a faculty member at the University of Texas Southwestern
Medical School and Adjunct Professor in the Department of Molecular and Cell
Biology at the University of Texas at Dallas. He is the author of multiple
scientific communications including Editor of “Recombinant DNA Products:
Insulin, Interferon and Growth Hormone,” by CRC Press. Dr. Bollon received his
Ph.D. in molecular genetics from the Waxman Institute of Microbiology at Rutgers
University and was a Post-Doctoral Fellow at Yale University.
Director
Independence
Presently,
we are not required to comply with the director independence requirement of any
securities exchange. In determining whether our directors are
independent, however, we intend to comply with the independent rules of Nasdaq
provided by Rule 4200(a)(15). As of the date of this report, Dr.
Arthur Bollon, one of our two directors, is a non-officer independent member of
the Board of Directors.
Scientific
Advisory Board
SignPath
has established a Scientific Advisory Board (“SAB”) to review the research
projects of SignPath and of partnerships in which SignPath is a partner and
analyze the progress and direction of the research projects; to consider and
advise SignPath with respect to any proposed or future research projects; and to
consider and suggest general areas of research to be pursued or significant
products that should be developed.
Members
of the SAB, acting as independent contractors, shall provide consulting services
to the Company from time to time as requested. Members are expected
to attend at least one meeting per year and be available for telephonic
conversations and for review of proposed products from time to
time. The consulting agreements are renewable on an annual basis and
are subject to termination on 30 days prior written notice by either
party. Members will be paid $5,000 per meeting of the SAB (a maximum
of two) attended by each adviser following the completion of a private placement
of at least $3 million. The Company will pay its SAB members a
reasonable royalty, to be negotiated on a case by case basis, from revenues
derived by the Company as a result of any inventions, improvements or projects
submitted by the advisors. The current members of the SAB and their
biographical information are as follows:
Lawrence
Helson, MD, See “Management” above.
Arthur
Bollon, Ph.D., See “Management” above.
Anirban
Maitra, MBBS, is its recipient of the Sponsored Research Agreement Johns Hopkins
Hospital Preclinical nanocurcumin development. Dr. Maitra holds a Medical
degree from All India Institute of Medical Sciences at New Delhi,
India in 1996. He then had a residency in Anatomic Pathology from University of
Texas Southwestern Medical Center Dallas followed by a Fellowship in Pediatric
Pathology Dallas Childrens Medical Center and Gastrointestinal/liver
Pathology clinical research fellowship at Johns Hopkins in 2001, with a faculty
appointment in 2002. Currently, he is Associate Professor of Pathology and
Oncology, and on the faculty of McKusick-Nathans Institute of Genetic Medicine.
He is associate editor of Current Molecular Medicine and has five major awards
for his research contributions. His research activities include
mechanism-based cancer-specific therapies for pancreatic cancer exploring small
molecule inhibitors of developmental signaling pathways, high-throughput
approaches for identification of abnormal pancreatic cancer genes, and using
targeted nanoparticles as novel drug delivery systems to enhance therapeutic
efficacy while restricting side effects. This latter research is supported by a
Sponsored Research Agreement with SignPath Pharma Inc.
34
Tauseef
Ahmed, MD, is the medical director of the Zalman A. Arlin Cancer Institute at
Westchester County Medical Center. He also serves as Chief to the division of
oncology at New York Medical College as well as Professor of
Medicine. He stands on 11 cancer-related committees including serving
as Chair of the Cancer Committee and the Oncology Steering Committee at
Westchester Medical Center. Dr. Ahmed is widely published with over
130 peer reviewed articles appearing in various medical journals.
Eric K.
Rowinsky, MD, is the Executive Vice President and Chief Medical Officer,
Imclone, Inc., New York, NY. Prior to joining ImClone in 2005, Dr.
Rowinsky was Director of Clinical Research and later Director of the Institute
for Drug Development of the Cancer Therapy and Research Center in San Antonio
from 1996-2005. He is a Clinical Professor of Medicine in the
Division of Medical Oncology at the University of Texas Health Science Center at
San Antonio. Dr. Rowinsky received his B.A. degree from New York University and
his M.D. from the Vanderbilt University School of Medicine. Following his
residency in internal medicine at the University of California, he completed
fellowship training in medical oncology at The Johns Hopkins University School
of Medicine.
Judith A.
Smith, Pharm.D. FCCP, BCOP, is Asst. Professor Dept. Gynecology, Division of
Surgery, MD Anderson Director, Translational Research Fellowship Division of
Pharmacy and Head, Curcumin Group UT MD Anderson Cancer Center. Dr. Smith
received a Bachelor of Science in Pharmacy from Union University Albany College
of Pharmacy in 1996 and completed a Doctor of Pharmacy degree in
1997. She completed a residency in Oncology Pharmacy Practice with a
Pharmacy Practice equivalent at the National Institutes of
Health. After residency, Dr. Smith completed a two-year fellowship in
Clinical Pharmacology at the University of Texas M.D. Anderson Cancer Center
(MDACC), then joined the Faculty at UT MD Anderson Cancer
Center. Currently, Dr. Smith is Director of Pharmacology Research and
an Associate Professor in the Department of Gynecologic Oncology, Division of
Surgery at MDACC. In addition, she has a joint-faculty appointment as
an Assistant Professor in the Department of Obstetrics and Gynecology at the
University of Texas Health Science Center (UTHSC) at Houston Medical School and
also in the Department of Clinical Sciences and Administration at the University
of Houston College of Pharmacy where Dr. Smith is the course coordinator for two
graduate elective courses. She is an active clinical pharmacist in
the Gynecology Oncology Center at MDACC as well as the Core Pharmacology
Laboratory Director at UTHSC Medical School at Houston. Her research focus is on
drug development for gynecologic cancers and conditions with a specific focus on
drug interactions/drug resistance with a focus on integration of herbal and
nutritional supplements for treatment of cancer.
Muhammad
Majeed, Ph.D., is the Founder, President, and Chief Executive Officer, Sabinsa
Corporation, a manufacturer of fine chemicals for nutritional, pharmaceutical
and food industries. Dr. Majeed received a B. Pharm. from Trivandrum
Medical College, India; MS in Pharmacy and PhD in Industrial Pharmacy
in New York in 1975. He worked in Pfizer, Carter Wallace and other
major companies on drug formulations prior to
establishing Sabinsa Corp. whose goal was to integrate modern
pharmaceutical technology with Ayurveda medicine. He
developed methods to extract and synthesize medicinal
products such as Boswellin, curcuminoids, gugulipids, bioperine,
citrine , petro Selenic acid, and 50 other standardized products
which are marketed globally with the US and Japan as the
major markets. Currently Sabinsa manufactures synthetic intermediates used in
pharmaceutical herb powders. Manufacturing, Research and Development is in
India. His company has 32 U.S. and international patents.
Contingency
Plan
In the
event that Dr. Helson, our current CEO is unable to fulfill his duties, the
Company expects that Dr. Tauseef Ahmed will serve as acting CEO until a
permanent replacement is found.
ITEM
11. EXECUTIVE COMPENSATION
The
Company has entered into an employment contract with Dr. Lawrence Helson to
secure his services as President and Chief Executive Officer. The
two-year period of the contract, as extended, ends May 31, 2011. Dr.
Helson will receive a base salary of $200,000 per annum plus bonuses at the
discretion of the Board. During the calendar years ended December 31,
2009 and 2008, Dr. Helson was paid approximately $85,000 and $50,000 and the
remainder of his salary was written off in exchange for 300,000 restricted
Shares of Common Stock authorized by the Board in 2010.
Dr. Helson may terminate the agreement upon 30 days’ prior written
notice. If the Company terminates without Cause (as defined) or Dr.
Helson terminates for Good Reason (as defined) or a Disability, the Company
shall pay Dr. Helson in addition to all accrued compensation, a severance
payment equal to six (6) months of the greater of (A) Dr. Helson’s then current
base salary and (B) the highest base salary in effect that any time during the
90 days prior to termination. The Company shall also pay the
severance payment in the event it fails to notify Dr. Helson of its intentions
to continue employment past the expiration date no less than 90 days prior to
the expiration date, or if they fail to reach an agreement on a new employment
agreement prior to the expiration date. Dr. Helson’s employment
agreement provides for a non-compete for one year following termination of
employment with any business primarily involved in developing proprietary
formulations of curcumin for application in malignant disorders. The shares of
Common Stock issued to Dr. Helson were subject to a one-year vesting period
which has expired.
35
Members
of the Scientific Advisory Board (SAB) are reimbursed for reasonable expenses
incurred in connection with travel to attend SAB meetings. We expect
a maximum of two SAB meetings will be held per year. Advisors will be
paid $2,000 for attending each meeting called by SignPath. Options to
purchase common shares of SignPath may be made available to the Advisor under
the 2009 Option Plan.
The
following table sets forth, with respect to the Company’s fiscal years ended
December 31, 2009 and December 31, 2009, all compensation earned by each person
who is required to be listed pursuant to Item 402(m)(2) of Regulation
S-K.
Name and
Principal Position
|
Year
|
Salary ($)
|
Bonus($)
|
Stock
Awards
($)(1)(2)
(3)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)(4)
|
All Other
Compensation
($)(5)
|
Total
($)
|
||||||||||||||||||||||
Laurence
Helson
|
2009
|
$ |
85,000
|
0
|
0
|
0
|
0
|
0
|
$ |
85,000
|
||||||||||||||||||||
President
and Chief
|
2009
|
$ |
50,000
|
(1)
|
0
|
0
|
0
|
0
|
0
|
$ |
50,000
|
|||||||||||||||||||
Executive
Officer
|
(1) Under
Dr. Helson’s employment contract he is to receive a base salary of $200,000 per
annum. He received $85,000 and $50,000 during 2009 and 2008 and the
remainder due under his employment contract was written off in exchange for
300,000 shares of restricted Common Stock.
Director’s
Compensation
Members
of the Board of Directors are reimbursed for reasonable expenses incurred in
connection with travel to attend board meetings. Board members will
be paid $2,000 for attending each meeting called by SignPath. Options
to purchase common shares of SignPath may be made available to the Director
under the 2009 Option Plan. See “Stock Option/Stock Issuance Plan”
below.
2009
Employee Stock Incentive Plan
The
Company’s 2009 Employee Stock Incentive Plan (the “2009 Option Plan”) was
adapted by the Company’s Board of Directors on February 9, 2009 in order to
motivate participants by means of stock options and restricted stock to achieve
the Company’s long-term performance goals and enable our employees, officers,
directors and consultants to participate in our long term growth and financial
success. The 2009 Plan, which is administered by our Board of Directors,
authorizes the issuance of a maximum of 500,000 shares of our common stock,
which may be authorized and unissued shares or treasury
shares. Employee options shall be deemed Incentive Stock Options (as
defined in the 2009 Option Plan) to the maximum extent permitted by
Section 422 of the Internal Revenue Code including a five-year limit on
exercise for 10% or greater stockholders with any excess grant to the above
individuals over the limits set by Section 422 being Non-Qualified Stock
Options as defined in the 2009 Option Plan. Both the Incentive Stock Options or
any Non-Qualified Stock Options must be granted at an exercise price of not less
than the fair market value of shares of common stock at the time the option is
granted and Incentive Stock Options granted to 10% or greater stockholders must
be granted at an exercise price of not less than 110% of the fair market value
of the shares on the date of grant. If any award under the 2009 Plan terminates,
expires unexercised, or is cancelled, the shares of common stock that would
otherwise have been issuable pursuant thereto will be available for issuance
pursuant to the grant of new awards. The 2009 Plan will terminate on February 9,
2019.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As
described elsewhere in this report, the Company and Meyers Associates LP, a
principal stockholder, have numerous relationships and related
transactions. Mr. Bruce Meyers, the Principal and Chief Executive
Officer of Meyers Associates LP, our placement agent, founded our
Company. Mr. Meyers beneficially owns approximately 57.5% of the
Company’s common stock and therefore, has significant influence in the affairs
and operations of the Company which may present a conflict of interest between
the Company and the Placement Agent.
On May
12, 2008, the Company sold an aggregate of 10,000,000 Founders Shares of Common
Stock, $.001 par value, to the following five (5) persons: Bruce Meyers, the
Registrant’s founder 2,600,000 shares); Meyers Associates, L.P. (2,600,000
shares); Imtiaz Khan, Managing Director of Meyers Associates (2,500,000 shares);
Dr. Arthur Bollon, a Director (800,000 shares) and Dr. Lawrence Helson, Chief
Executive Officer (1,500,000 shares). The shares were issued in
consideration of par value of $.001 per share and services
rendered.
36
Between
August 2007 and April 2008, the Company completed five separate private
financings (collectively, the “Bridge Financing”) with certain accredited
investors of units, each unit consisting of $1 in principal amount of 10%
promissory notes (referred to herein as the “Bridge Notes”) and shares of Common
Stock (the “Bridge Shares”). The Company raised gross proceeds of
approximately $847,500 in the Bridge Financing and the holders of the Bridge
Note also received for an aggregate of 1,340,000 shares of Bridge
Shares. The holders of $889,875 of Bridge Notes (including accrued
and unpaid interest) converted their Bridge Notes into Units in the Company’s
November 28, 2008 financing described below. Mr. Meyers, the
principal of Meyers Associates, L.P. which acted as the placement agent and is
the Registrant’s founder, was the holder of $57,500 in principal amount of
Bridge Notes which he exchanged for Units in the November 28, 2008 financing and
retained his 57,500 Bridge Shares.
On
November 28, 2008, SignPath sold 1451.88 units (“Units”) of its securities at a
price of $1,000 per Unit. Each Unit consists of (i) one share of 6.5%
Series A Convertible Preferred Stock convertible into 1,177 shares of common
stock (equivalent to $.85 per share of common stock), subject to adjustment, and
(ii) one Warrant to purchase, 1,177 shares of common stock at $1.27 per share
for a five-year period from August 10, 2009. The Units were sold to
21 accredited investors, including Meyers Associates, L.P., which purchased 117
Units as placement agent. Bruce Meyers, Founder of the Registrant,
President and CEO of Meyers Associates, purchased 264.67
units. Meyers Associates received sales and commissions of 10% of the
gross proceeds of $1,451,875 from the sale of Units, as well as a
non-accountable expense allowance equal to 3% of the gross proceeds of the
offering, and a Unit Purchase Option to purchase 15% of the securities sold in
the offering.
Between
February 19, 2009 and April 3, 2009, the Registrant sold 810 Units (the same as
described in the prior paragraph) pursuant to a new offering dated December 12,
2008. The Units were sold to seven accredited
investors. Meyers Associates L.P., received sales commissions of 10%
($166,154) of the gross proceeds of $810,000 from the sale of Units, as well as
a non-accountable expense allowance equal to 3% of the gross proceeds of the
offering, and a Unit Purchase Option to purchase 15% of the securities sold in
the offering.
Dr.
Lawrence Helson, our chief executive officer, has rendered informal unpaid
consulting services to and is a member of the Board of Directors of HemoBioTech,
Inc. of which Dr. Arthur Bollon, a member of the Company’s Board of Directors,
is CEO.
In
addition, as described further in “Management-Stock Option/Stock Issuance Plan”
above, Dr. Bollon may be eligible for certain stock options under the Company’s
2009 Option Plan.
Otherwise,
none of our directors or officers, nor any person who beneficially owns,
directly or indirectly, shares carrying more than 5% of the voting rights
attached to all of our outstanding shares, nor any promoter, nor any relative or
spouse of any of the foregoing persons has any material interest, direct or
indirect, in any presently proposed transaction which, in either case, has or
will materially affect us.
Our
management is involved in other business activities and may, in the future,
become involved in other business opportunities. If a specific business
opportunity becomes available, such persons may face a conflict in selecting
between our business and their other business interests. In the event that a
conflict of interest arises at a meeting of our directors, a director who has
such a conflict will disclose his interest in a proposed transaction and will
abstain from voting for or against the approval of such
transaction.
ITEM
12.
|
SELECTING
OWNERSHIP OF CERTAIN PREFERRED OWNERS AND MANAGERS AND RELATED STOCKHOLDER
MATTERS.
|
The
following table sets forth certain information regarding the beneficial
ownership of the Company’s common stock as of date of this report by (i) each
person which is known by the Company to beneficially own more than 5% of the
Company’s common stock, (ii) by each of the Company’s directors, (iii) by each
executive officer of the Company, and (iv) by all executive officers and
directors as a group.
The
address of each of the persons listed below is c/o Signpath Pharma Inc. 1375
California Road, Quakertown, PA 18951.
Name of Beneficial Owner
|
Number of Shares of
common stock Beneficially
Owned (1)
|
Percentage of common
stock Beneficially Owned
|
||||||
Dr.
Lawrence Helson (2)
|
1,500,000
|
13.2
|
%
|
|||||
Dr.
Arthur Bollon
|
800,000
|
7.1
|
%
|
|||||
Meyers
Associates, L.P.
|
5,126,067
|
(3)
|
35.7
|
%
|
||||
Bruce
Meyers
|
8,406,000
|
(4)
|
74.0
|
%
|
||||
Imtiaz
Khan (5)
|
2,500,000
|
23.0
|
%
|
|||||
All
Executive Officers and
Directors as a Group (2 people)
|
2,300,000
|
20.3
|
%
|
37
(1) Except
as otherwise noted in the footnotes to this table, the named person owns
directly and exercises sole voting and investment power over the shares listed
as beneficially owned by such person. Includes any securities that such person
has the right to acquire within sixty days pursuant to options, warrants,
conversion privileges or other rights. As of the date of this report,
there were 11,340,000 shares of our common stock issued and outstanding. As of
that date, (i) 500,000 shares of common stock were reserved for issuance
under our 2009 Option Plan of which no options had been granted;
(ii) approximately 2,750,649 shares of our common stock were reserved for
issuance pursuant to conversion of preferred stock; (iii) approximately
2,750,649 shares were reserved for issuance pursuant to exercise of warrants to
purchase common stock; (iv) 277,120 shares of our common stock were reserved for
issuance pursuant to the issuance of Dividend Shares; and (v) there were
Placement Agent Warrants to purchase approximately 1,364,294 shares of common
stock equal to 15% of the securities sold in the 2008 and 2009 Private
Placements.
(2) Dr.
Helson, our CEO, is also a consultant to Meyers Associates, L.P.
(3)
Includes 2,100,000 shares of Common Stock, an aggregate of 2,750,649 shares of
common stock issuable upon exercise of Meyers Associates’ Unit Purchase
Options and 275,418 shares of common stock underlying 117 units purchased by
Meyers Associates in the 2008 Private Placement; but does not include additional
shares of common stock beneficially owned by Bruce Meyers, the President of
Meyers Associates. Bruce Meyers has the power to vote and dispose of
the Shares owned by Meyers Associates.
(4) Mr.
Meyers is Principal and Chief Executive Officer of Meyers
Associates. This amount includes 2,657,500 shares of common
stock and an aggregate of 623,033 shares of common stock issuable underlying
264.67 Units purchased by Mr. Meyers in the 2008 Private Placement, as well as
the shares owned by Meyers Associates set forth in note (3) above.
(5) Mr.
Kahn is an employee of Meyers Associates.
Unless
otherwise indicated in the foregoing table (or the footnotes thereto), the
persons named in the table have sole voting and dispositive power with respect
to the shares of the Company’s common stock and/or options owned by such person,
subject to community property laws where applicable.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
During
Fiscal 2009, M&K CPAs, PLLC (“M&K”) served as our independent auditors.
During Fiscal 2008, Moore & Associates, Chartered (“Moore”) served as our
independent auditors. The following table presents fees for
professional audit services rendered by M&K and Moore for the audit of our
annual financial statements for the years ended December 31, 2008 and 2009 and
fees for other services rendered by such firms during those
periods.
2009
|
2008
|
|||||||
Audit
Fees
|
4,800 | 5,000 | ||||||
Audit
Related Fees
|
0 | 0 | ||||||
Tax
Fees
|
0 | 0 | ||||||
All
Other Fees
|
4,800 | 5,000 | ||||||
Total
|
Audit
Fees. Annual audit fees relate to services rendered in connection with
the audit of our consolidated annual financial statements and the quarterly
reviews of financial statements included in our Forms 10-Q.
Audit Related
Fees. Audit related services include fees for SEC registration statement
services, benefit plan audits, consultation on accounting standards or
transactions, statutory audits, business acquisitions, and assessment of risk
management controls in connection with the implementation of Section 404 of the
Sarbanes-Oxley Act of 2002.
Tax Fees.
Tax services include fees for tax compliance, tax advice and tax
planning.
All Other
Fees: The aggregate fees, including expenses, billed for all
other services, not described above, rendered to the Company by M&K during
Fiscal year 2009 was $4,800 and by Moore during Fiscal Year 2008 was
$5,000.
38
We have
been advised by M&K that neither the firm, nor any member of the firm, has
any financial interest, direct or indirect, in any capacity in the Company or
its subsidiaries.
Policy
on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent
Auditor
The
entire Board of Directors (the “Board”) is responsible for appointing, setting
compensation and overseeing the work of the independent auditor. The
Board has established a policy regarding pre-approval of all audit and non-audit
services provided by the independent auditor, as follows: on an
ongoing basis, management communicates specific projects and categories of
service for which the advance approval of the Board is requested, and the Board
reviews these requests and advises management if the Board approves the
engagement of the independent auditor. On a periodic basis, management reports
to the Board regarding the actual spending for such projects and services
compared to the approved amounts. All audit-related fees, tax fees
and all other fees were approved by the Board. The projects and
categories of service are as follows:
Audit—Annual
audit fees relate to services rendered in connection with the audit of our
consolidated financial statements and the quarterly reviews of financial
statements included in our Forms 10-Q.
Audit Related
Services—Audit related services include fees for SEC registration
statement services, benefit plan audits, consultation on accounting standards or
transactions, statutory audits, and business acquisitions.
Tax—Tax
services include fees for tax compliance, tax advice and tax
planning.
All Other
– fees for all other services provided by Cohn.
PART
IV
ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
3
|
.1
|
Certificate
of Incorporation of the registrant (1)
|
|
3
|
.2
|
Certificate
of Designation, Preferences and Rights of Series A Convertible Preferred
Stock (1)
|
|
3
|
.3
|
By-Laws
of the registrant (1)
|
|
3
|
.4
|
Amended
and Restated Certificate of Incorporation of the registrant dated August
2, 2006 (1)
|
|
3
|
.5
|
Certificate
of Amendment of the registrant dated May 27, 2008 (1)
|
|
4
|
.1
|
Form
of Common Stock Certificate (1)
|
|
4
|
.2
|
Form
of Common Stock Purchase Warrant (1)
|
|
4
|
.3
|
Form
of Bridge Note (1)
|
|
4
|
.4
|
Form
of Registration Rights Agreement (1)
|
|
4
|
.5
|
Form
of Subscription Agreement (1)
|
|
10
|
.1
|
Employment
Agreement dated as of July 1, 2007 between the registrant and Dr. Lawrence
Helson (1)
|
|
10
|
.2
|
2009
Employee Stock Incentive Plan (1)
|
|
10
|
.3
|
License
Agreement from University of Texas MD Anderson Career Center
(1)
|
|
10
|
.4
|
License
Agreement from The Johns Hopkins University (1)
|
|
10
|
.5
|
September
6, 2007 Liposomal Formulation Manufacturing Agreement with Polymun
Scientific Immunbiologische Forschung (GmbH) (1)
|
|
10
|
.6
|
January
30, 2008 Service Agreement with Brookwood Pharmaceuticals
(1)
|
|
10
|
.7
|
Sponsored
Research Agreement dated as of September 18, 2007, by and between The
Johns Hopkins University, employer of Dr. Anirban Maitra and the
registrant. (1)
|
|
10
|
.8
|
Form
of Consulting Agreement for Scientific Advisory Board Members
(1)
|
|
10
|
.9
|
Patent
and Technology License Agreement dated August 18, 2008 between the
registrant and the University of North Texas Health Science Center.
(1)
|
|
10
|
.10
|
Sponsored
Research Agreement by and between the registrant and University of North
Texas Health Science Center at Fort Worth.
(1)
|
39
10
|
.11
|
Agreement
dated June 30, 2007 by and between the Registrant and SAFC.
(1)
|
|
10
|
.12
|
Placement
Agency Agreement dated as of May 28, 2008 by and between SignPath Pharma
Inc. and Meyers Associates, L.P. (1)
|
|
10
|
.13
|
Indemnification
Agreement dated as of December, 2008 by and between SignPath Pharma Inc.
and Meyers Associates, L.P. (1)
|
|
10
|
.14
|
Extension
of Dr. Helson’s employment agreement. (1)
|
|
10
|
.15
|
Amendment
No. 1 to Sponsored Laboratory Research Agreement dated as of August 26,
2009 by and between the registrant and The University of Texas M.D.
Anderson Cancer Center.
|
|
10
|
.16
|
Agreement
dated June 30, 2009 by and between the registrant and Topaz Technology,
Inc.
|
|
23
|
.2
|
Consent
of Moore & Associates, Chartered.
|
|
31
|
.1
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of
The Sarbanes-Oxley Act of 2002.
|
|
32
|
.1
|
Certificate
of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act
of 2002.
|
(1)
Incorporated by reference to the Company’s Registration Statement on Form S-1
(Registration No. 333-158474), declared effective on August 10,
2009.
40
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors
SignPath
Pharma, Inc.
(A
Development Stage Enterprise)
Quakertown,
Pennsylvania
We have
audited the accompanying balance sheets of SignPath Pharma, Inc. (a development
stage enterprise) as of December 31, 2009 and 2008 and the related statements of
operations, shareholders' equity and cash flows for the twelve month periods
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit 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 audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of SignPath Pharma, Inc. as of
December 31, 2009 and 2008 and the results of its operations and cash flows for
the periods described above in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations,
which raises substantial doubt about its ability to continue as a going
concern. Management’s plans regarding those matters are described in
Note 1. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/
M&K CPAS, PLLC
www.mkacpas.com
Houston,
Texas
April 15,
2010
F-1
SIGNPATH
PHARMA, INC
Balance
Sheets
(A
Development Stage Company)
December 31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
(Restated)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
|
$ | 295,418 | $ | 181,128 | ||||
Total
Current Assets
|
295,418 | 181,128 | ||||||
EQUIPMENT,
net
|
2,400 | 3,200 | ||||||
TOTAL
ASSETS
|
$ | 297,818 | $ | 184,328 | ||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable and accrued expenses
|
$ | 117,967 | $ | 76,999 | ||||
Total
Current Liabilities
|
117,967 | 76,999 | ||||||
STOCKHOLDERS'
EQUITY
|
||||||||
Preferred
stock; $0.10 par value, 5,000,000 shares
|
||||||||
authorized
2,262 and 1,502 shares issued and
|
||||||||
outstanding,
respectively
|
226 | 145 | ||||||
Common
stock; $0.001 par value, 45,000,000 shares
|
||||||||
authorized;
11,340,000 and 11,340,000 shares issued
|
||||||||
and
outstanding, respectively
|
11,341 | 11,341 | ||||||
Additional
paid-in capital
|
2,962,207 | 2,318,442 | ||||||
Deficit
accumulated during the development stage
|
(2,793,923 | ) | (2,222,599 | ) | ||||
Total
Stockholders' Equity
|
179,851 | 107,329 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 297,818 | $ | 184,328 |
The
accompanying notes are an integral part of these financial
statements.
F-2
SIGNPATH
PHARMA, INC
Statements
of Operations
(A
Development Stage Company)
From Inception
|
||||||||||||
on May 15, 2006
|
||||||||||||
For the Year ended
|
Through
|
|||||||||||
December 31,
|
December 31,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
(Restated)
|
(Unaudited)
|
|||||||||||
REVENUES
|
$ | - | $ | - | $ | - | ||||||
OPERATING
EXPENSES
|
||||||||||||
General
and administrative
|
243,492 | 101,406 | 461,411 | |||||||||
Consulting
expense
|
2,782 | 79,481 | 82,263 | |||||||||
Financing
expense
|
- | 891,949 | 1,063,401 | |||||||||
Legal
and professional expenses
|
74,794 | 143,527 | 238,047 | |||||||||
Licensing
expense
|
75,092 | 102,347 | 177,439 | |||||||||
Advertising
expense
|
- | 49,175 | 49,175 | |||||||||
Research
and development
|
215,937 | 263,886 | 698,965 | |||||||||
Total
Operating Expenses
|
612,097 | 1,631,771 | 2,770,644 | |||||||||
OPERATING
LOSS
|
(612,097 | ) | (1,631,771 | ) | (2,770,644 | ) | ||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||
Grant
income
|
40,773 | - | 40,773 | |||||||||
Interest
expense
|
- | (63,995 | ) | (63,995 | ) | |||||||
Total
Other Income (Expense)
|
40,773 | (63,995 | ) | (63,995 | ) | |||||||
NET
LOSS BEFORE INCOME TAXES
|
(571,324 | ) | (1,695,766 | ) | (2,793,923 | ) | ||||||
PROVISION
FOR INCOME TAXES
|
- | - | - | |||||||||
NET
LOSS
|
$ | (571,324 | ) | $ | (1,695,766 | ) | $ | (2,793,923 | ) | |||
BASIC
LOSS PER SHARE
|
$ | (0.05 | ) | $ | (0.15 | ) | ||||||
WEIGHTED
AVERAGE NUMBER
|
||||||||||||
NUMBER
OF SHARES OUTSTANDING
|
11,340,000 | 11,174,651 |
The
accompanying notes are an integral part of these financial
statements.
F-3
SIGNPATH
PHARMA, INC
Statements
of Stockholders' Equity (Deficit)
(A
Development Stage Company)
(Restated)
Deficit
|
||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
During the
|
Total
|
||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-in
|
Development
|
Stockholders'
|
||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stage
|
Equity
|
||||||||||||||||||||||
Balance,
December 31, 2005
|
- | $ | - | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
Common
stock issued to founders for
|
||||||||||||||||||||||||||||
cash
at $0.001 per share
|
- | - | 10,000,000 | 10,000 | - | - | 10,000 | |||||||||||||||||||||
Net
loss for the year
|
||||||||||||||||||||||||||||
ended
December 31, 2006
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Balance,
December 31, 2006
|
- | - | 10,000,000 | 10,000 | - | - | 10,000 | |||||||||||||||||||||
Common
stock issued for bridge debt
|
||||||||||||||||||||||||||||
at
$0.85 per share
|
- | - | 257,500 | 258 | 218,617 | - | 218,875 | |||||||||||||||||||||
Net
loss for the year
|
||||||||||||||||||||||||||||
ended
December 31, 2007
|
- | - | - | - | - | (526,833 | ) | (526,833 | ) | |||||||||||||||||||
Balance,
December 31, 2007
|
- | - | 10,257,500 | 10,258 | 218,617 | (526,833 | ) | (297,958 | ) | |||||||||||||||||||
Preferred
stock issued for bridge debt
|
||||||||||||||||||||||||||||
at
$1,000 per share
|
890 | 89 | - | - | 889,786 | - | 889,875 | |||||||||||||||||||||
Preferred
stock issued for cash
|
||||||||||||||||||||||||||||
at
$1,000 per share
|
562 | 56 | - | - | 561,944 | - | 562,000 | |||||||||||||||||||||
Common
stock issued for bridge debt
|
||||||||||||||||||||||||||||
at
$0.85 per share
|
- | - | 1,082,500 | 1,083 | 919,043 | - | 920,126 | |||||||||||||||||||||
Stock
offering costs
|
- | - | - | - | (270,948 | ) | - | (270,948 | ) | |||||||||||||||||||
Net
loss for the year
|
||||||||||||||||||||||||||||
ended
December 31, 2008
|
- | - | - | - | - | (1,695,766 | ) | (1,695,766 | ) | |||||||||||||||||||
Balance,
December 31, 2008
|
1,452 | 145 | 11,340,000 | 11,341 | 2,318,442 | (2,222,599 | ) | 107,329 | ||||||||||||||||||||
Preferred
stock issued for cash
|
||||||||||||||||||||||||||||
at
$1,000 per share
|
810 | 81 | - | - | 809,919 | - | 810,000 | |||||||||||||||||||||
Stock
offering cost
|
- | - | - | - | (166,154 | ) | - | (166,154 | ) | |||||||||||||||||||
Net
loss for the year ended
|
||||||||||||||||||||||||||||
December
31, 2009
|
- | - | - | - | - | (571,324 | ) | (571,324 | ) | |||||||||||||||||||
Balance,
December 31, 2009
|
2,262 | $ | 226 | 11,340,000 | $ | 11,341 | $ | 2,962,207 | $ | (2,793,923 | ) | $ | 179,851 |
The
accompanying notes are an integral part of these financial
statements.
F-4
SIGNPATH
PHARMA, INC.
Statements
of Cash Flows
(A
Development Stage Company)
From Inception
|
||||||||||||
on May 15, 2006
|
||||||||||||
For the Year Ended
|
Through
|
|||||||||||
December 31,
|
December 31,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
(Restated)
|
(Unaudited)
|
|||||||||||
OPERATING
ACTIVITIES
|
||||||||||||
Net
loss
|
$ | (571,324 | ) | $ | (1,695,766 | ) | $ | (2,793,923 | ) | |||
Adjustments
to reconcile net loss to
|
||||||||||||
net
cash used by operating activities:
|
||||||||||||
Common
stock issued with bridge financing
|
- | 920,126 | 1,139,001 | |||||||||
Depreciation
expense
|
800 | 800 | 1,600 | |||||||||
Changes
in operating assets and liabilities
|
||||||||||||
Accounts
payable and accrued expenses
|
40,968 | 29,187 | 117,967 | |||||||||
Net
Cash Used in Operating Activities
|
(529,556 | ) | (745,653 | ) | (1,535,355 | ) | ||||||
INVESTING
ACTIVITIES
|
||||||||||||
Purchase
of equipment
|
- | - | (4,000 | ) | ||||||||
Net
Cash Used in Investing Activities
|
- | - | (4,000 | ) | ||||||||
FINANCING
ACTIVITIES
|
||||||||||||
Proceeds
from notes payable
|
- | 632,875 | 889,875 | |||||||||
Stock
offering costs paid
|
(166,154 | ) | (270,948 | ) | (437,102 | ) | ||||||
Preferred
stock issued for cash
|
810,000 | 562,000 | 1,372,000 | |||||||||
Common
stock issued for cash
|
- | - | 10,000 | |||||||||
Net
Cash Provided by Financing Activities
|
643,846 | 923,927 | 1,834,773 | |||||||||
NET
INCREASE (DECREASE) IN CASH
|
114,290 | 178,274 | 295,418 | |||||||||
CASH
AT BEGINNING OF PERIOD
|
181,128 | 2,854 | - | |||||||||
CASH
AT END OF PERIOD
|
$ | 295,418 | $ | 181,128 | $ | 295,418 | ||||||
SUPPLEMENTAL
DISCLOSURES OF
|
||||||||||||
CASH
FLOW INFORMATION
|
||||||||||||
CASH
PAID FOR:
|
||||||||||||
Interest
|
$ | - | $ | - | $ | - | ||||||
Income
taxes
|
$ | - | $ | - | $ | - | ||||||
NON
CASH FINANCING ACTIVITIES:
|
||||||||||||
Preferred
stock issued for bridge financing
|
$ | $ | - | $ | 889,875 |
The
accompanying notes are an integral part of these financial
statements.
F-5
NOTE
1 – NATURE OF OPERATIONS
SignPath
Pharma, Inc, (the “Company”) was incorporated under the laws of the State of
Delaware on May 15, 2006. The Company was organized to develop
proprietary formulations of curcumin (diferuloylmethane), a naturally occurring
compound found in the root of the Curcuma longa (turmeric)
plant, for applications in malignant diseases. The Company’s product
candidates are currently in the pre-clinical testing phase.
These
financial statements have been prepared on a going concern basis, which implies
that the Company will continue to realize its assets and discharge its
liabilities in the normal course of business. During the year ended December 31,
2009, the Company recognized sales revenue of $-0- and incurred a net loss of
$571,324. As of December 31, 2009, the Company had an accumulated
deficit of $2,793,923. During the year ended December 31, 2008, the
Company recognized sales revenue of $-0- and incurred a net loss of
$1,695,766. The continuation of the Company as a going concern is
dependent upon the continued financial support from its shareholders, the
ability to raise equity or debt financing, and the attainment of profitable
operations from the Company's planned business. These factors raise substantial
doubt regarding the Company’s ability to continue as a going concern. These
consolidated financial statements do not include any adjustments to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue
as a going concern.
The
Company’s plan of action over the next twelve months is to continue its
operations to develop proprietary formulations of curcumin and raise additional
capital financing to sustain operations.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
a)
|
Basis
of Presentation
|
These
financial statements and related notes are presented in accordance with
accounting principles generally accepted in the United States, and are expressed
in US dollars. The Company’s fiscal year-end is December 31.
|
b)
|
Use
of Estimates
|
The
preparation of these financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company regularly evaluates estimates and assumptions
related to valuation allowances on accounts receivable, valuation and
amortization policies on property and equipment, and valuation allowances on
deferred income tax losses. The Company bases its estimates and assumptions on
current facts, historical experience and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by the Company may differ materially and
adversely from the Company’s estimates. To the extent there are material
differences between the estimates and the actual results, future results of
operations will be affected.
F-6
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
c)
|
Cash
and Cash Equivalents
|
The
Company considers all highly liquid instruments with maturity of three months or
less at the time of issuance to be cash equivalents. As of December 31, 2009 and
2008 the Company had $295,418 and $181,128 of cash, respectively. The
Company had no cash equivalents.
|
d)
|
Revenue
Recognition
|
The
Company will recognize revenue from the sale if their products in accordance
with ASC 605 “Revenue
Recognition in Financial Statements”. Revenue will be recognized only
when the price is fixed or determinable, persuasive evidence of an arrangement
exists, the service is provided, and collectability is assured.
|
g)
|
Basic
and Diluted Net Income (Loss) Per
Share
|
The
Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share". ASC 260
requires presentation of both basic and diluted earnings per share (EPS) on the
face of the income statement. Basic EPS is computed by dividing net income
(loss) available to common shareholders (numerator) by the weighted average
number of shares outstanding (denominator) during the period. Diluted EPS gives
effect to all dilutive potential common shares outstanding during the period
using the treasury stock method and convertible preferred stock using the
if-converted method. In computing Diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be purchased from
the exercise of stock options or warrants. Diluted EPS excludes all dilutive
potential shares if their effect is anti dilutive.
For the Years Ended
|
||||||||
December 31,
|
||||||||
2009
|
2008
|
|||||||
Loss
(numerator)
|
$ | (571,324 | ) | $ | (1,695,766 | ) | ||
Shares
(denominator)
|
11,340,000 | 11,174,651 | ||||||
Per
share amount
|
$ | (0.05 | ) | $ | (0.15 | ) |
|
h)
|
Comprehensive
Loss
|
ASC 220,
“Reporting Comprehensive
Income,” establishes standards for the reporting and display of
comprehensive loss and its components in the consolidated financial statements.
As at December 31, 2009 and 2008, the Company did not record any comprehensive
income or loss.
|
i)
|
Financial
Instruments
|
The fair
value of financial instruments, which include cash, accounts receivable, other
current assets, accounts payable, and accrued liabilities were estimated to
approximate their carrying value due to the immediate or relatively short
maturity of these instruments.
F-7
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
j)
|
Advertising
Costs
|
Advertising
costs are expensed as incurred and are recorded in the consolidated financial
statements as selling expense. For the years ended December 31, 2009
and 2008, the Company recorded advertising and marketing costs of $-0- and
$49,175 respectively.
k)
|
Income
Taxes
|
Potential
benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has adopted ASC 740 “Accounting for Income Taxes”
as of its inception. Pursuant to ASC 740 the Company is required to compute tax
asset benefits for net operating losses carried forward. The potential benefits
of net operating losses have not been recognized in these consolidated financial
statements because the Company cannot be assured it is more likely than not it
will utilize the net operating losses carried forward in future
years.
l)
|
Stock-Based
Compensation
|
The
Company records stock-based compensation in accordance with ASC 718 “Share Based
Payments”, using the fair value method. All transactions in which goods or
services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably
measurable. Equity instruments issued to employees and the cost of the services
received as consideration are measured and recognized based on the fair value of
the equity instruments issued.
m)
|
Recent
Accounting Pronouncements
|
In
January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation
(Topic 810): Accounting and Reporting for Decreases in Ownership of a
Subsidiary. This amendment to Topic 810 clarifies, but does not change, the
scope of current US GAAP. It clarifies the decrease in ownership provisions of
Subtopic 810-10 and removes the potential conflict between guidance in that
Subtopic and asset derecognition and gain or loss recognition guidance that may
exist in other US GAAP. An entity will be required to follow the amended
guidance beginning in the period that it first adopts ASC 810 (now included in
Subtopic 810-10). For those entities that have already adopted ASC 810-, the
amendments are effective at the beginning of the first interim or annual
reporting period ending on or after December 15, 2009. The amendments should be
applied retrospectively to the first period that an entity adopted ASC 810. The
Company does not expect the provisions of ASU 2010-02 to have a material effect
on the financial position, results of operations or cash flows of the
Company.
In
January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic
505): Accounting for Distributions to Shareholders with Components of
Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This
amendment to Topic 505 clarifies the stock portion of a distribution to
shareholders that allows them to elect to receive cash or stock with a limit on
the amount of cash that will be distributed is not a stock dividend for purposes
of applying Topics 505 and 260. Effective for interim and annual
periods ending on or after December 15, 2009, and would be applied on a
retrospective basis. The Company does not expect the provisions of ASU 2010-01
to have a material effect on the financial position, results of operations or
cash flows of the Company.
F-8
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
m)
|
Recent
Accounting Pronouncements Continued
|
In
December 2009, the FASB issued Accounting Standards Update 2009-17,
Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities. This Accounting Standards
Update amends the FASB Accounting Standards Codification for Statement
167.
In
December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers
and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This
Accounting Standards Update amends the FASB Accounting Standards Codification
for Statement 166.
In
October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting
for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance
or Other Financing. This Accounting Standards Update amends the FASB Accounting
Standard Codification for ASC 470.
In
October 2009, the FASB issued Accounting Standards Update 2009-14, Software
(Topic 985): Certain Revenue Arrangements That Include Software Elements. This
update changed the accounting model for revenue arrangements that include both
tangible products and software elements. Effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010. Early adoption is permitted. The Company does not expect
the provisions of ASU 2009-14 to have a material effect on the financial
position, results of operations or cash flows of the Company.
In
October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue
Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update
addressed the accounting for multiple-deliverable arrangements to enable vendors
to account for products or services (deliverables) separately rather than a
combined unit and will be separated in more circumstances that under existing US
GAAP. This amendment has eliminated that residual method of
allocation. Effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15,
2010. Early adoption is permitted. The Company does not expect the
provisions of ASU 2009-13 to have a material effect on the financial position,
results of operations or cash flows of the Company.
In
September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value
Measurements and Disclosures (Topic 820): Investments in Certain Entities That
Calculate Net Asset Value per Share (or Its Equivalent). This update provides
amendments to Topic 820 for the fair value measurement of investments in certain
entities that calculate net asset value per share (or its equivalent). It is
effective for interim and annual periods ending after December 15, 2009. Early
application is permitted in financial statements for earlier interim and annual
periods that have not been issued. The Company does not expect the provisions of
ASU 2009-12 to have a material effect on the financial position, results of
operations or cash flows of the Company.
In July
2009, the FASB ratified the consensus reached by EITF (Emerging Issues Task
Force) issued ASC Topic 470 "Accounting for Own-Share Lending Arrangements in
Contemplation of Convertible Debt Issuance". The provisions of ASC 470,
clarifies the accounting treatment and disclosure of share-lending arrangements
that are classified as equity in the financial statements of the share lender.
An example of a share-lending arrangement is an agreement between the Company
(share lender) and an investment bank (share borrower) which allows the
investment bank to use the loaned shares to enter into equity derivative
contracts with investors. ASC 470 is effective for fiscal years that beginning
on or after December 15, 2009 and requires retrospective application for all
arrangements outstanding as of the beginning of fiscal years beginning on or
after December 15, 2009. Share-lending arrangements that have been
terminated as a result of counterparty default prior to December 15,
2009, but for which the entity has not reached a final settlement as of December
15, 2009 are within the scope. Effective for share-lending arrangements entered
into on or after the beginning of the first reporting period that begins on or
after June 15, 2009. The Company does not expect the provisions of ASC 470 to
have a material effect on the financial position, results of operations or cash
flows of the Company.
F-9
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
n)
|
Research
and Development Costs
|
The
Company expenses the costs of the development of its pharmaceutical products
during the period incurred. The Company incurred research and development
expenses of $215,937 and $263,886 during the years ended December 31, 2009 and
2008, respectively. The Company did receive grant income to help fund
its research and development efforts during the years ended December 31, 2009
and 2008 totaling $40,773 and $-0-, respectively.
o)
|
Fair
Value of Financial Instruments
|
The
Company adopted the standard issued by the FASB, which clarifies the definition
of fair value, prescribes methods for measuring fair value, and establishes a
fair value hierarchy to classify the inputs used in measuring fair value as
follows:
Level
1-Inputs are unadjusted quoted prices in active markets for identical assets or
liabilities available at the measurement date.
Level
2-Inputs are unadjusted quoted prices for similar assets and liabilities in
active markets, quoted prices for identical or similar assets and liabilities in
markets that are not active, inputs other then quoted prices that are
observable, and inputs derived from or corroborated by observable market
data.
Level
3-Inputs are unobservable inputs which reflect the reporting entity’s own
assumptions on what assumptions the market participants would use in pricing the
asset or liability based on the best available information.
The
carrying amounts reported in the balance sheets for cash, accounts receivable,
loans payable, and accounts payable and accrued expenses, approximate their fair
market value based on the short-term maturity of these instruments. The
following table presents assets and liabilities that are measured and recognized
at fair value as of December 31, 2009 and 2008, on a non-recurring
basis:
Total
Gains
|
||||||||||||||||
Description
|
Level 1
|
Level 2
|
Level 3
|
(Losses)
|
||||||||||||
Accounts
payable and accrued expenses
|
$ | - | $ | - | $ | $117,967 | $ |
The
standard issued by the FASB concerning the fair value option for financial
assets and liabilities, became effective for the Company on January 1, 2008. The
standard establishes a fair value option that permits entities to choose to
measure eligible financial instruments and certain other items at fair value at
specified election dates. A business entity shall report unrealized gains and
losses on items for which the fair value options have been elected in earnings
at each subsequent reporting date. For the periods ended December 31, 2009 and
2008, there were no applicable items on which the fair value option was
elected.
F-10
NOTE
3 – BRIDGE FINANCING NOTES PAYABLE
Beginning
in August 2007 the Company began a series of private financing transactions
(collectively known as “Bridge Financing”) with certain accredited investors of
units, each unit consisting of $1 in principal amount of 10%
promissory notes (“Bridge Stock”) and shares of Common Stock (“Bridge
Stock”). The Company had raised in fiscal year 2007 a total of
$257,000 in Bridge Financing. In 2008, the Company raised an
additional $562,000 through the bridge financing arrangements. As
detailed in Note 4 below, during the year ended December 31, 2008, the Bridge
Notes with all accrued interest were converted to 890 shares of the Company’s
preferred stock.
NOTE
4 – EQUITY
|
a)
|
On
March 5, 2009, the Company issued 295 shares of its par value $0.10
convertible preferred stock at $1,000 per
share.
|
|
b)
|
On
April 1, 2009, the Company issued 15 shares of its par value $0.10
convertible preferred stock at $1,000 per
share.
|
|
c)
|
On
June 17, 2009, the Company issued 200 shares of its par value $0.10
convertible preferred stock at $1,000 per
share.
|
|
d)
|
On
July 23, 2009, the Company issued 50 shares of its par value $0.10
convertible preferred stock at $1,000 per
share.
|
|
e)
|
On
August 20, 2009, the Company issued 50 shares of its par value $0.10
convertible preferred stock at $1,000 per
share.
|
|
f)
|
On
September 9, 2009, the Company issued 200 shares of its par value $0.10
convertible preferred stock at $1,000 per
share.
|
|
g)
|
On
January 24, 2008, the Company issued 632,500 common shares of the Company
at $0.85 per common share in accordance with the Bridge Note
agreements.
|
|
h)
|
On
February 26, 2008, the Company issued 25,000 common shares of the Company
at $0.85 per common share in accordance with the Bridge Note
agreements.
|
|
i)
|
On
February 27, 2008, the Company issued 175,000 common shares of the Company
at $0.85 per common share in accordance with the Bridge Note
agreements.
|
|
j)
|
On
March 4, 2008 the Company issued 25,000 common shares of the Company at
$0.85 per common share in accordance with the Bridge Note
agreements.
|
|
k)
|
On
March 11, 2008 the Company issued 50,000 common shares of the Company at
$0.85 per common share in accordance with the Bridge Note
agreements.
|
|
l)
|
On
March 17, 2008 the Company issued 50,000 common shares of the Company at
$0.85 per common share in accordance with the Bridge Note
agreements.
|
m)
|
On
April 11, 2008 the Company issued 50,000 common shares of the Company at
$0.85 per common share in accordance with the Bridge Note
agreements.
|
|
n)
|
On
April 14, 2008 the Company issued 25,000 common shares of the Company at
$0.85 per common share in accordance with the Bridge Note
agreements.
|
o)
|
On
April 15, 2008 the Company issued 75,000 common shares of the Company at
$0.85 per common share in accordance with the Bridge Note
agreements.
|
|
p)
|
On
November 25, 2008, the Company issued 890 shares of its par value $0.10
convertible preferred stock to extinguish bridge debt financing totalling
$889,875.
|
|
q)
|
On
November 25, 2008, the Company issued 562 shares of its par value $0.10
convertible preferred stock for cash at $1,000 per
share.
|
F-11
NOTE
5 – INCOME TAXES
The
Company has adopted the provisions of ASC 740, “Accounting for Income
Taxes”. Pursuant to ASC 740, the Company is required to compute tax asset
benefits for net operating losses carried forward. The potential benefit of net
operating losses have not been recognized in the consolidated financial
statements because the Company cannot be assured that it is more likely than not
that it will utilize the net operating losses carried forward in future years.
The components of the net deferred tax asset at December 31, 2009 and 2008, the
statutory tax rate, the adjustments to reconcile to income tax expense and the
amount of the valuation allowance are indicated below:
December 31,
2009
|
December 31,
2008
|
|||||||
Loss
before taxes
|
$ | (571,324 | ) | $ | (1,695,766 | ) | ||
Statutory
rate
|
39 | )% | 39 | )% | ||||
Computed
expected tax benefit
|
(222,816 | ) | (661,349 | ) | ||||
Common
stock issued for services
|
-0- | -0- | ||||||
Change
in valuation allowance
|
222,816 | 661,349 | ||||||
Reported
income taxes
|
$ | - | $ | - |
December 31,
2009
|
December 31,
2008
|
|||||||
Deferred
tax asset
|
||||||||
-
Cumulative net operating losses
|
$ | 1,004,246 | $ | 781,430 | ) | |||
-
Less valuation allowance
|
(1,004,246 | ) | (781,430 | ) | ||||
Reported
income taxes
|
$ | - | $ | - |
The
Company has incurred operating losses of $2,793,923 which, if unutilized, will
expire through to 2030. Future tax benefits, which may arise as a result of
these losses, have not been recognized in these consolidated financial
statements, and have been offset by a valuation allowance.
The
Company did not have any tax positions for which it is reasonably possible that
the total amount of unrecognized tax benefits will significantly increase or
decrease within the next 12 months.
The
Company includes interest and penalties arising from the underpayment of income
taxes in the consolidated statements of operations in the provision for income
taxes. As of December 31, 2009 and 2008, the Company had no accrued
interest or penalties related to uncertain tax positions.
The tax
years that remain subject to examination by major taxing jurisdictions are for
the years ended December 31, 2009, 2008 and 2007.
NOTE
6 – ACCRUED EXPENSES
Pursuant
to the applicable Codification literature, the Company has concluded it is
probable that it will pay $85,738 in liquidated damages pursuant to the
registration rights clause in certain of the securities sold in Note 4, the
Company was required to file a registration statement by January 27,
2009. The Company failed to do so until April 7, 2009, resulting in
liquidated damages of 2% per month of the gross proceeds, which approximated
$1.8 million as of that date. During the year ended December 31,
2009, the Company’s registration statement covering the securities was declared
effective by the SEC. Each holder is entitled to $47.32 per share
owned. The Company has resolved to pay the liquidated damages in
shares of Common Stock valued at $1.00 per share, pursuant to the terms and
provisions of the Certificate of Designation, Preferences and Rights of Series A
Convertible Preferred Stock.
F-12
NOTE
7 – EQUIPMENT
Property
and equipment are recorded at cost. Depreciation is calculated on the
straight-line method over the estimated useful life of the assets of 5 years.
Depreciation expense was $800 and $800 for the years ended December 31, 2009 and
2008, respectively.
Net Book Value
|
||||||||||||||||
Cost
|
Accumulated
Depreciation
|
December 31,
2009
|
December 31,
2008
|
|||||||||||||
Equipment
|
$ | 4,000 | $ | (1,600 | ) | $ | 2,400 | $ | 3,200 | |||||||
Totals
|
$ | 4,000 | $ | (1,600 | ) | $ | 2,400 | $ | 3,200 |
NOTE
8 – STOCK OPTIONS
The
Company’s 2009 Employee Stock Incentive Plan (the “2009 Option Plan”) was
adapted by the Company’s Board of Directors on February 9, 2009 in order to
motivate participants by means of stock options and restricted stock to achieve
the Company’s long-term performance goals and enable our employees, officers,
directors and consultants to participate in our long term growth and financial
success. The 2009 Plan, which is administered by our Board of Directors,
authorizes the issuance of a maximum of 500,000 shares of our common stock,
which may be authorized and unissued shares or treasury
shares. Employee options shall be deemed Incentive Stock Options (as
defined in the 2009 Option Plan) to the maximum extent permitted by
Section 422 of the Internal Revenue Code including a five-year limit on
exercise for 10% or greater stockholders with any excess grant to the above
individuals over the limits set by Section 422 being Non-Qualified Stock
Options as defined in the 2009 Option Plan. Both the Incentive Stock Options or
any Non-Qualified Stock Options must be granted at an exercise price of not less
than the fair market value of shares of common stock at the time the option is
granted and Incentive Stock Options granted to 10% or greater stockholders must
be granted at an exercise price of not less than 110% of the fair market value
of the shares on the date of grant. If any award under the 2009 Plan terminates,
expires unexercised, or is cancelled, the shares of common stock that would
otherwise have been issuable pursuant thereto will be available for issuance
pursuant to the grant of new awards. The 2009 Plan will terminate on February 9,
2019. As of December 31, 2009 no options had been granted under the
plan.
F-13
NOTE
9 – WARRANTS
A summary
of the status of the Company's warrants as of December 31, 2009
and changes during the periods ended December 31, 2009 and 2008 is presented
below:
Date of
|
Warrant
|
Exercise
|
Value if
|
Expiration
|
|||||||||
Issuance
|
Shares
|
Price
|
Exercised
|
Date
|
|||||||||
11/25/2008
|
1,259,639 | 1.27 | 1,599,742 |
11/25/2013
|
|||||||||
11/26/2008
|
449,220 | 1.27 | 570,509 |
11/25/2013
|
|||||||||
12/31/2008
|
1,708,859 | 2,170,251 | |||||||||||
3/5/2009
|
29,425 | 1.27 | 37,370 |
3/5/2014
|
|||||||||
3/5/2009
|
58,850 | 1.27 | 74,740 |
3/5/2014
|
|||||||||
3/5/2009
|
70,620 | 1.27 | 89,687 |
3/5/2014
|
|||||||||
3/5/2009
|
88,275 | 1.27 | 112,109 |
3/5/2014
|
|||||||||
3/5/2009
|
58,850 | 1.27 | 74,740 |
3/5/2014
|
|||||||||
3/5/2009
|
41,195 | 1.27 | 52,318 |
3/5/2014
|
|||||||||
4/1/2009
|
17,655 | 1.27 | 22,422 |
4/1/2014
|
|||||||||
6/17/2009
|
29,425 | 1.27 | 37,370 |
6/17/2014
|
|||||||||
6/17/2009
|
29,425 | 1.27 | 37,370 |
6/17/2014
|
|||||||||
6/17/2009
|
58,850 | 1.27 | 74,740 |
6/17/2014
|
|||||||||
6/17/2009
|
117,700 | 1.27 | 149,479 |
6/17/2014
|
|||||||||
7/23/2009
|
58,850 | 1.27 | 74,740 |
7/23/2014
|
|||||||||
8/20/2009
|
58,850 | 1.27 | 74,740 |
8/20/2014
|
|||||||||
9/9/2009
|
235,400 | 1.27 | 298,958 |
9/9/2014
|
|||||||||
12/31/09
|
2,662,229 | 3,381,034 |
The
warrants were issued in connection with the Preferred Stock Offering and were
valued using the Black-Scholes model using the following
assumptions: stock price at valuation, $0.85; strike price, $1.27;
risk free rate 0.90%; 5 year term; and volatility of 147%. The
Company attributed $737,584 of the total $2,261,649 of Additional Paid-in
Capital associated with the transaction to the warrants based on the relative
fair value of the warrants.
NOTE
10 – SERIES A CONVERTIBLE PREFERRED STOCK
The
Series A Convertible Preferred Stock (“Preferred Stock”) has been authorized by
resolutions adopted by the Company’s Board of Directors and set forth in a
Certificate of Designation, Preferences and Rights (“Certificate of
Designation”), filed with the Secretary of State of Delaware on November 26,
2008, which contains the designations, rights, powers, preferences,
qualifications and limitations of the Preferred Stock. The shares of
Preferred Stock are fully paid and non-assessable.
As of
December 31, 2009 the Company has issued 2,262 share of Series A Convertible
Preferred stock as detailed in Note 4 above. Below is a discussion of
the terms of these securities.
F-14
NOTE
10 – SERIES A CONVERTIBLE PREFERRED STOCK (CONTINUED)
Rank
The
Preferred Stock ranks(i) senior to the common stock and any other class or
series of the Company’s capital stock either specifically ranking by its terms
junior to the Preferred Stock or not specifically ranking by its terms senior to
or on parity with the Preferred Stock, (ii) on parity with any class or series
of the Company’s capital stock specifically ranking by its terms on parity with
the Preferred Stock, and (iii) junior to any class or series of capital stock
specifically ranking by its terms senior to the Preferred Stock, in each case,
as to payment of dividends or as to distributions of assets upon liquidation,
dissolution or winding-up of the Company, whether voluntary or
involuntary. The approval of the holders of a majority of the
Preferred Stock is required in order for the Company to issue any capital stock
with rights on parity with or senior to the Preferred Stock.
Dividends
The
holders of the Preferred Stock are entitled to receive annual cumulative per
share dividends of 6.5% of the liquidation preference of the Preferred Stock,
out of funds legally available, prior to any payment of dividends on the
Company’s common stock or any other class of stock ranking junior to the
Preferred Stock. Such dividends are payable in cash or shares of
common stock, at the option of the Company, semiannually on the last business
day of February and August of each year (each a “Dividend Payment Date”),
commencing in February 2009 with respect to the period from issuance through
such date. The holders of the Preferred Stock are entitled to share
ratably with the holders of the common stock in any dividend declared on the
common stock.
Dividends
on the Preferred Stock will accrue whether or not the Company has earnings,
whether or not there are funds legally available for the payment of such
dividends and whether or not such dividends are declared. Dividends
accumulate to the extent they are not paid on the Dividend Payment Date to which
they relate. Dividends that are due in cash and which are not paid
within (5) business days of the Dividend Payment date shall bear interest until
paid at the default rate. According to Delaware law, the Company may
declare and pay dividends or make other distributions on its capital stock only
out of legally-available funds. In addition, no dividends or
distributions may be declared, paid or made if the Company is or would be
rendered insolvent by virtue of such dividend or distribution.
The
Company may not (i) pay any dividends in respect of any shares of capital stock
ranking junior to the Preferred Stock (including the common stock), other than
dividends payable in the form of additional shares of the same junior stock as
that on which such dividend is declared, or (ii) redeem any shares of capital
stock ranking junior to the Preferred Stock (including the common stock), unless
and until all accumulated and unpaid dividends on the Preferred Stock have been,
or contemporaneously are, declared and paid in full.
Conversion
At the
election of the holder thereof, each share of Preferred Stock will be
convertible into common stock, at any time after issuance, at the Conversion
Rate, as it may be adjusted from time to time in accordance with the Certificate
of Designation. The Preferred Stock will not convert automatically
into Common Stock upon completion of this offering and only the underlying
Common Stock issuable upon conversion is registered for the resale under this
prospectus. The Conversion Rate initially will be 1,177 shares of
common stock ($.85 per share) for each Share of Preferred Stock. If
the Company issues or sells any shares of its common stock (or options, warrants
or convertible securities, convertible or exchangeable into shares of common
stock) hereinafter, a “Subsequent common stock Issuance”), then the Conversion
Rate will be adjusted so that the number of shares of common stock issuable upon
conversion of each share of preferred stock shall be equal to the quotient
obtained by dividing $1,000 by the price per share of common stock (or the
conversion price per share in the case of a sale of options, warrants or
convertible securities) sold in such Subsequent common stock
Issuance.
F-15
NOTE
10 – SERIES A CONVERTIBLE PREFERRED STOCK (CONTINUED)
The
Conversion Price is also subject to adjustment from time to time in the event of
(i) the issuance of common stock as a dividend or distribution on any class of
the Company’s capital stock; or (ii) the combination, subdivision or
reclassification of the common stock. No fractional shares will be
issued upon conversion. Payment of accumulated and unpaid dividends
will be made upon conversion to the extent of legally-available
funds.
The
shares of Preferred Stock may also be converted into common stock at the
Conversion Rate at the Company’s option following the effectiveness of a
Registration Statement, if the Company’s common stock trades above 200% of the
Conversion Rate per share for a period of 20 consecutive trading
days.
Voting
Rights
The
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Preferred Stock, voting as a class, shall be required to authorize, effect or
validate (i) any change in the rights, privileges or preferences of the
Preferred Stock that would adversely affect the Preferred Stock, or (ii) the
authorization, creation, issuance or increase in the authorized or issued amount
of any class or series of stock ranking on parity with or superior to the
Preferred Stock with respect to the declaration and payment of dividends or
distribution of assets upon liquidation, dissolution or winding-up of our
Company. In addition, the holders of Preferred Stock shall have the
right to vote, together with holders of common stock as single class, on all
matters upon which the holders of common stock are entitled to vote pursuant to
applicable Delaware law or the Company’s Certificate of
Incorporation. The Preferred Stock shall vote on an “as converted
basis” with each holder of Preferred Stock having one vote for each Conversion
Share underlying such holder’s shares of Preferred Stock.
Liquidation
In the
event of any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, before any payment or distribution of the assets of the Company
(whether capital or surplus), or the proceeds thereof, may be made or set apart
for the holders common stock or any stock ranking junior to Preferred Stock, the
holders of Preferred Stock will be entitled to receive, out of the assets of the
Company available for distribution to stockholders, a liquidating distribution
of $1,000 per share, plus any accrued and unpaid dividends, subject to
adjustment upon the occurrence of certain events. If, upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the assets of the Company are insufficient to make the full payment of $1,000
per share, plus all accrued and unpaid dividends on the Preferred Stock and
similar payments on any other class of stock ranking on a parity with the
Preferred Stock upon liquidation, then the holders of Preferred Stock and such
other shares will share ratably in any such distribution of the Company’s assets
in proportion to the full respective distributable amounts to which they are
entitled. Certain events, including a consolidation or merger of the
Company with or into another corporation or sale or conveyance of all or
substantially all the property and assets of the Company will be deemed to be a
liquidation, dissolution or winding-up of the Company for purposes of the
foregoing.
NOTE
11 – RESTATEMENT OF FINANCIAL STATEMENTS
On August
27, 2009 the Company was informed that the Public Company Accounting Oversight
Board ("PCAOB") revoked the registration of Moore & Associates who was
serving as the Company’s independent registered public accounting
firm. The revocation was a result of Moore’s violation of PCAOB rules
and auditing standards. This revocation of Moore’s registration
required the Company to have the financial statements previously issued
reaudited for the fiscal year ended December 31, 2008.
F-16
NOTE
11 – RESTATEMENT OF FINANCIAL STATEMENTS (CONTINUED)
This
reaudit produced material differences from the previously filed
versions. These misstatements are the result of the following
errors:
The
Company inappropriately recorded a warrant expense for the fair value of the
warrants issued in conjunction with the sale of its convertible preferred
stock. This resulted in an overstatement of Additional Paid-in
Capital and General & Administrative Expense of $799,184 (item
A). Additionally, the Company recorded the issuance of 57,500 shares
in both the period ended December 31, 2007 and 2008. This resulted in
an overstatement of Common Stock of $58, Additional Paid-in Capital of $38,467
and Stock Offering Costs of $38,524 (item B). The $38,524 overstatement of stock
offering costs offsets the overstatement of Additional Paid-in Capital thus only
the $799,184 change due to item A is reflected in the net change column
below.
The
Company also discovered that there were various timing differences in accruing
accounts payable and the associated operating expense at period
ends. The aggregate of these difference are found in Items
C. The Company also misstated the number of preferred and common
stock issued and outstanding which required adjustments to be made to common
stock, preferred stock and additional paid-in capital (Items D). The
difference between the net change in the statement of operations and the net
change in retained earnings on the balance sheet is due to $90,768 of changes
that affected the statement of operations for the year ended December 31,
2007. This effect is also being realized as part of the restatement
of the 2008 financial statements.
Included
in this filing are the restated 2008 fiscal year financial
statements. For comparative purposes, the table below presents the
reaudited balance sheets and income statements compared to the original
filing.
F-17
NOTE
11 – RESTATEMENT OF FINANCIAL STATEMENTS (CONTINUED)
Balance
Sheets
December 31,
|
December 31,
|
|||||||||||
2008
|
Net Change
|
2008
|
||||||||||
(Original)
|
(Restated)
|
|||||||||||
ASSETS
|
||||||||||||
CURRENT
ASSETS
|
181,128 | - | 181,128 | |||||||||
EQUIPMENT,
net
|
3,200 | - | 3,200 | |||||||||
TOTAL
ASSETS
|
$ | 184,328 | - | $ | 184,328 | |||||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||||||
CURRENT
LIABILITIES
|
||||||||||||
Accounts
payable and accrued expenses
|
$ | - |
76,999
|
(C)
|
$ | 76,999 | ||||||
Total
Current Liabilities
|
- | 76,999 | 76,999 | |||||||||
STOCKHOLDERS'
EQUITY
|
||||||||||||
Preferred
stock; $0.10 par value, 5,000,000 shares authorized 2,312
and 1,502 shares issued and outstanding,
respectively
|
150 | (5 |
)
(D)
|
145 | ||||||||
Common
stock; $0.001 par value, 45,000,000 shares authorized; 11,307,500 and
11,307,500 shares issued and outstanding, respectively
|
11,365 | (58 |
)
(B)
|
11,341 | ||||||||
34 |
(D)
|
|||||||||||
Additional
paid-in capital
|
2,898,931 | (799,126 |
)
(A)
|
2,318,442 | ||||||||
218,637
|
(D)
|
|||||||||||
Deficit
accumulated during the development stage
|
(2,726,118 | ) |
58
|
(B)
|
(2,222,599 | ) | ||||||
799,126
|
(A)
|
|||||||||||
(295,665 | ) | |||||||||||
Total
Stockholders' Equity
|
184,328 | (76,999 | ) | 107,329 | ||||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 184,328 | - | $ | 184,328 |
F-18
NOTE
11 – RESTATEMENT OF FINANCIAL STATEMENTS (CONTINUED)
Statements
of Operations
For
the Year ended
|
||||||||||||
December
31,
|
||||||||||||
2008
|
Net
Change
|
2008
|
||||||||||
(Original)
|
(Restated)
|
|||||||||||
REVENUES
|
$ | - | - | $ | - | |||||||
OPERATING
EXPENSES
|
||||||||||||
General
and administrative
|
902,858 | (799,126 |
) (A)
|
101,406 | ||||||||
(2,326 |
) (C)
|
|||||||||||
Consulting
expense
|
79,481 | - | 79,481 | |||||||||
Financing
expense
|
720,763 | 171,186 |
(D)
|
891,949 | ||||||||
Legal
and professional expenses
|
137,444 | 6,083 |
(C)
|
143,527 | ||||||||
Licensing
expense
|
102,347 | - | 102,347 | |||||||||
Advertising
expense
|
49,175 | - | 49,175 | |||||||||
Research
and development, net
|
233,990 | 29,896 |
(C)
|
263,886 | ||||||||
Total
Operating Expenses
|
2,226,058 | (594,287 | ) | 1,631,771 | ||||||||
OPERATING
LOSS
|
(2,226,058 | ) | 594,287 | (1,631,771 | ) | |||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||
Interest
expense
|
(63,995 | ) | - | (63,995 | ) | |||||||
Total
Other Income (Expense)
|
(63,995 | ) | - | (63,995 | ) | |||||||
NET
LOSS BEFORE INCOME TAXES
|
(2,290,053 | ) | 594,287 | (1,695,766 | ) | |||||||
PROVISION
FOR INCOME TAXES
|
- | - | - | |||||||||
NET
LOSS
|
$ | (2,290,053 | ) | 594,287 | $ | (1,695,766 | ) | |||||
BASIC
LOSS PER SHARE
|
$ | (0.20 | ) | 0.05 | $ | (0.15 | ) | |||||
WEIGHTED
AVERAGE NUMBER NUMBER OF SHARES OUTSTANDING
|
11,365,000 | (190,349 | ) | 11,174,651 |
NOTE
12 – SUBSEQUENT EVENTS
In
accordance with ASC 855-10 Company management reviewed all material events
through the date of this report and there are no subsequent events to
report.
F-19
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SIGNPATH
PHARMA INC.
|
|
By:
/s/ Lawrence Helson
|
|
Lawrence
Helson, M.D.
|
|
Chief
Executive Officer
|
|
(Principal
Executive Officer and Principal Accounting Officer)
|
|
Dated:
April 15, 2010
|
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signatures
|
Title
|
Date
|
||
/s/
Lawrence Helson
|
Chief
Executive Officer and Chief
Financial
Officer
|
April
15, 2010
|
||
Lawrence
Helson
|
||||
/s/
Arthur P. Bollon
|
Director
|
April
15, 2010
|
||
Arthur
P. Bollon, Ph.D.
|
||||
41