SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-K
[ X ] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended May 31, 2010
OR
[ ] 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: 333-119915
CANCER THERAPEUTICS, INC.
(Name of Small Business Issuer in Its Charter)
Delaware | 20-1499421 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) | |
10757 South River Front Pkwy, Suite 125 | ||
South Jordan, Utah | 84095 | |
(Address of Principal Executive Offices) | (Zip Code) |
(801) 816-2533 | ||
Issuer’s Telephone Number, Including Area Code | ||
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities ActYes [ ] No [ X ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.Yes [ ] No [ X ]
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [ ]
Smaller reporting company [ X ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ X] No [ ]
The aggregate market value of the Company’s voting stock held by non-affiliates computed by reference to the closing price as quoted on the NASD Electronic Bulletin Board on September 7, 2010, was approximately $764,815. For purposes of this calculation, voting stock held by officers, directors, and affiliates has been excluded.
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date. As of September 7, 2010, the Company had outstanding 85,541,266 shares of common stock, par value $0.001 per share.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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FORWARD LOOKING STATEMENTS
THIS ANNUAL REPORT ON FORM 10-K, IN PARTICULAR “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS” AND “ITEM 1. BUSINESS,” INCLUDE “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE STATEMENTS REPRESENT THE COMPANY’S EXPECTATIONS OR BELIEFS CONCERNING, AMONG OTHER THINGS, FUTURE REVENUE, EARNINGS, AND OTHER FINANCIAL RESULTS, PROPOSED ACQUISITIONS AND NEW PRODUCTS, ENTRY INTO NEW MARKETS, FUTURE OPERATIONS AND OPERATING RESULTS, FUTURE BUSINESS AND MARKET OPPORTUNITIES. THE COMPANY WISHES TO CAUTION AND ADVISE READERS THAT THESE STATEMENTS INVOLVE RISK AND UNCERTAINTIES THAT C OULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE EXPECTATIONS AND BELIEFS CONTAINED HEREIN. FOR A SUMMARY OF CERTAIN RISKS RELATED TO THE COMPANY’S BUSINESS, SEE “ITEM 1A. RISK FACTORS.”
Unless the context requires otherwise, references to the Company are to Cancer Therapeutics, Inc..
PART I.
ITEM 1: DESCRIPTION OF BUSINESS
Cautionary Factors That May Affect Future Results (Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)
The disclosure and analysis set forth herein contains certain forward looking statements, particularly statements relating to future actions, performance or results of current and anticipated products and services, sales efforts, expenditures, and financial results. From time to time, the Company also provides forward-looking statements in other publicly-released materials, both written and oral. Forward-looking statements provide current expectations or forecasts of future events such as new products or services, product approvals, revenues, and financial performance. These statements are identified as any statement that does not relate strictly to historical or current facts. They use words such as “anticipates,” “intends,̶ 1; “plans,” “expects,” “will,” and other words and phrases of similar meaning. In all cases, a broad variety of assumptions can affect the realization of the expectations or forecasts in those statements. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially.
The Company undertakes no obligation to update any forward-looking statements, but investors are advised to consult any further disclosures by the Company on this subject in its subsequent filings pursuant to the Securities Exchange Act of 1934. Furthermore, as permitted by the Private Securities Litigation Reform Act of 1995, the Company provides these cautionary statements identifying risk factors, listed below, that could cause the Company’s actual results to differ materially from expected and historical results. It is not possible to foresee or identify all such factors. Consequently, this list should not be considered an exhaustive statement of all potential risks, uncertainties and inaccurate assumptions.
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BUSINESS OVERVIEW
CORPORATE ORGANIZATION
Cancer Therapeutics, Inc. was originally incorporated on May 1, 1991 in the state of Tennessee under the name “Cancer Therapeutics Incorporated.” On September 7, 2004, we reincorporated Cancer Therapeutics in the state of Delaware under its present name. Cancer Therapeutics was acquired by Immune Complex Corporation on September 15, 1998 and subsequently Immune Complex Corporation liquidated its assets (which assets included all of the then-issued shares of Cancer Therapeutics) on June 8, 2000. The shareholders of Immune Complex Corporation were issued shares of Cancer Therapeutics Incorporated on a pro rata basis.
As a predecessor to Cancer Therapeutics, Immune Complex Corporation was incorporated in 1994, and was formed to develop vaccines for diseases including, malaria, influenza and hepatitis B. During the years that Cancer Therapeutics operated as a subsidiary of Immune Complex Corporation, the management of Cancer Therapeutics remained constant, with Robert K. Oldham acting as Chief Executive Officer. Immune Complex Corporation added Robert K. Oldham as a member of its board of directors, effective September 15, 1998. Mr. Oldham resigned from his position with Immune Complex Corporation effective June 8, 2000.
As of July 31, 2007, Cancer Therapeutics executed a Stock Purchase and Sale Agreement with Dr. Robert Oldham, its former Chief Executive Officer and director. In exchange for 28,211 shares of common stock of Cancer Therapeutics held by Mr. Oldham, Cancer Therapeutics transferred all of its shares of Cancer Therapeutics, Inc., a Utah corporation, to Mr. Oldham. Cancer Therapeutics, Inc., a Utah company, holds certain assets received from Cancer Therapeutics including the laboratory equipment and certain intellectual property. As a result, all of the operations of Cancer Therapeutics as a biotherapy research and development company are discontinued. Our website is www.cancer-therapeutics.com.
THE BUSINESS OF CANCER THERAPEUTICS
We have changed our focus to becoming an early stage biotechnology business incubator, with a specific emphasis on disruptive treatments using nanotechnology. We seek out disruptive cancer research and technology opportunities to invest in, develop, and commercialize. We anticipate that the end result will be therapies, treatments, and pharmaceuticals targeted at more efficiently and effectively attacking cancer. We seek partners to co-develop drugs.
Our first investment was made into NanoTherapies LLC in May 2009. We entered an agreement to acquire a 25% interest in NanoTherapies. The details were filed in an 8-k filing with the Securities and Exchange Commission dated May 29, 2009. To date the conditions of the acquisition have not been met and the acquisition of NanoTherapies may be terminated by either party.
NanoTherapies’s products introduce technology into the treatment and detection of cancer through the use of calcium phosphate nanoparticles. These particles, about 350 times smaller than a human cell, provide both a safe and effective way to transport drugs and imaging materials into diseased cells. The compatibility of the calcium phosphate nanoparticle with the biomechanics of the human body makes it unique for application in the treatment of diseases. Patient benefits from drugs jacketed with calcium phosphate nanoparticles could be immense. We are still researching and developing this technology.
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The development of these life-changing therapies for cancer treatment may possibly be achieved through an evolving set of intellectual properties and patents derived from the exploitation of calcium phosphate nanoparticles for therapeutic and diagnostic applications. NanoTherapies has sole license and patent protection for the fundamental use of calcium phosphate nanoparticles in medical applications for the treatment and detection of blood cancers (all forms of leukemia). NanoTherapies also owns all rights to manufacturing technologies and patents required to produce pharmaceutical quality drugs at the scale and yield needed for commercial viability.
We believe that the four NanoTherapies drugs for possible accelerated market delivery and potential revenue are: Methotrexate, Cytarabine, Fludarabine and Daunorubicin. Cerimide-based drugs and a newly discovered Amplified Photon Emission Therapy (APET) also comprise part of the product portfolio, but will require longer clinical trials to get to market.
In the event that the acquisition NanoTherapies discontinues then Cancer Therapeutics will be looking to effect a different merger, capital stock exchange, asset acquisition or other similar business combination with an operating business. Our efforts in identifying a prospective target business will not be limited to a particular industry. We do not have any specific business combination under consideration. We have not, nor has anyone on our behalf, taken any measure, directly or indirectly, to identify or locate any suitable acquisition candidate, nor have we engaged or retained any agent or other representative to identify or locate any such acquisition candidate. The fair market value of the target will be determined by our board of directors based upon one or more standards generally accepted by the financial community (which may include actual and potential sales, earnings, cash flow and/or book value).
We anticipate structuring a business combination to acquire 100% of the equity interests or assets of the target business. The target business or businesses that we acquire may have a collective fair market value substantially in excess of 80% of our net assets. In order to consummate such a business combination, we may issue a significant amount of debt or equity securities to the sellers of such business and/or seek to raise additional funds through a private offering of debt or equity securities. There are no limitations on our ability to incur debt or issue securities in order to consummate a business combination. If we issue securities in order to consummate a business combination, our stockholders could end up owning a minority of the combined company as there is no requirement that our stockholders own a certain p ercentage of our company after our business combination. Since we have no specific business combination under consideration, we have not entered into any such arrangement to issue our debt or equity securities and have no current intention of doing so.
REPORTS TO SECURITY HOLDERS
Cancer Therapeutics, Inc. is subject to the information requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith files quarterly and annual reports, as well as other information with the Securities and Exchange Commission (“Commission”) under File No. 333-119915. Such reports and other information filed with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates, and at various regional and district offices maintained by the Commission throughout the United States. Information about the operation of the Commission’s public reference facilities may be obtained by calling the Commission at 1-800-SE C-0330. The Commission also maintains a website at http://www.sec.gov that contains reports and other information regarding the Company and other registrants that file electronic reports and information with the Commission.
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ITEM 1A: RISK FACTORS
Operating Risks
We have Defaulted Loan Obligations. We received loans to continue operations as detailed in our financial statements. These loans are in default or may be in default upon demand by the creditors. As a result of our default position, these creditors may obtain judgment or other lawful remedies to collect on the debts now or in the future. We will still need to raise additional capital or increase our business profits to satisfy these creditors. We cannot assure you that we will be successful in repaying any or all of these creditors. As of May 31, 2010, the total amount due on these loans was $115,734 which consists of $100,000 of principal and $15,734 of interest.
We Have Consistently Operated at a Loss. Cancer Therapeutics was organized in 1991 and has consistently operated at a loss, and we cannot assure you that we will be able to operate Cancer Therapeutics profitably. In the event we are unsuccessful at operating our business profitably, we cannot assure you that Cancer Therapeutics could successfully become involved in any other business venture due to the fact that our personnel are trained only in biotherapy and not in other services. We presently have no plans, commitment, or arrangements with respect to any other potential business venture.
We have no Operating Capital, and We Must Raise Additional Capital to Remain in Business. We presently have no operating capital and are dependent upon future fundraising efforts to provide the minimum capital necessary to continue our business. Such fundraising efforts may include the sale of additional shares of Cancer Therapeutics such as is contemplated in this offering or will involve commercial borrowing. Although we believe that our status as a publicly-traded company will enhance our ability to raise additional capital, our financial condition is dire and we are currently operating with no or very little working capital and several loan obligations. We cannot assure you that our shares will ever be publicly traded and capital will be available to meet the costs of our operations, or that it will be available on acceptable terms. Even if we raise the maximum amount of fundraising, we will still need to raise additional capital to operate our company. Presently, our current offering is our sole source of potential funding and we have no commitments or arrangements from commercial lenders or other sources.
Insurance and Other Third Party Reimbursement for our Services is Limited. With respect to the services we offer, insurance reimbursement or other third-party reimbursement is only available with respect to certain patient types. Moreover, our services are not covered or reimbursed under the Medicare program. Consequently, most patients will be required to pay for such services, wholly or in part, with their own funds. We cannot assure you that significant insurance reimbursement or other third-party reimbursement for our services will be available in the future. Without this reimbursement, we will not be able to offer our services to many patients and physicians.
Our Operating Costs Will Most Likely Increase. Our income could be seriously affected by rising operating expenses such as: research and development; electricity; insurance and administrative costs, security, patent registration expenses, building repairs and maintenance, and regulatory compliance. If we cannot control operating costs or adequately cover them, our cash flow will deteriorate and we will have to raise capital or discontinue our business.
Investment Risks
No Active Market. Although the Company’s shares are traded on the NASD Electronic Bulletin Board, the Company believes that the public trading price may be an inaccurate representation of the value of the Company because there is little or no trading volume in the Company’s shares and no
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analysts or NASD market makers actively follow the Company.
We Have Never Issued a Dividend and Don’t Anticipate any Dividends in the Future. Cancer Therapeutics has never issued a dividend and we do not anticipate paying dividends on our common stock in the foreseeable future. Furthermore, we may also be restricted from paying dividends in the future pursuant to subsequent financing arrangements or pursuant to Delaware law.
You Could be Diluted from the Issuance of Additional Common and Preferred Stock. Cancer Therapeutics is authorized to issue up to 100,000,000 shares of common stock and 10,000,000 shares of preferred stock. To the extent of such authorization, our board of directors will have the ability, without seeking shareholder approval, to issue additional shares of common stock in the future for such consideration as the board may consider sufficient. The issuance of additional common stock in the future may reduce your proportionate ownership and voting power.
Volatility of Stock Prices. In the event that there is an established public market for the Company’s Common Stock, market prices will be influenced by many factors and will be more subject to significant fluctuations in response to variations in operating results of the Company and other factors such as investor perceptions of the Company, supply and demand, interest rates, general economic conditions and those specific to the industry, developments with regard to the Company’s activities, future financial condition and management.
Applicability of Low Priced Stock Risk Disclosure Requirements. The Common Stock of the Company may be considered a low priced security under rules promulgated under the Securities Exchange Act of 1934. Under these rules, broker-dealers participating in transactions in low priced securities must first deliver a risk disclosure document which describes the risks associated with such stocks, the broker-dealer’s duties, the customer’s rights and remedies, certain market and other information, and make a suitability determination approving the custo mer for low priced stock transactions based on the customer’s financial situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing to the customer, obtain specific written consent of the customer, and provide monthly account statements to the customer. With all these restrictions, the likely effect of designation as a low priced stock will be to decrease the willingness of broker-dealers to make a market for the stock, to decrease the liquidity of the stock and to increase the transaction cost of sales and purchases of such stock compared to other securities.
ITEM 2: DESCRIPTION OF PROPERTY
Cancer Therapeutics does not own any real property. We sublease approximately 300 square feet in South Jordan Utah. We have not yet adopted any policies regarding investment in real property, as we do not expect to make any real estate purchases in the foreseeable future.
ITEM 3: LEGAL PROCEEDINGS
On July 16, 2010, Cancer Therapeutics, Inc. was served a complaint in U.S. Federal Court by SB2 Capital. SB2 Capital invested $150,000 in Cancer Therapeutics in February, 2010. The lawsuit claims breach of contract against Cancer Therapeutics and its officers and directors. This lawsuit is in the process of being settled by the parties.
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ITEM 4: SUBMISSION ON MATTERS TO A VOTE OF SECURITY HOLDERS
None. |
PART II.
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a) | Market for Common Equity and Related Stockholder Matters. |
(1) | Market Information. |
The Company’s Common Stock is listed on the NASD Electronic Bulletin Board (“Bulletin Board”) under the symbol “CTHP.” The Company’s stock has been traded on the Bulletin Board since March, 2007. The following table sets forth, for the periods indicated, the high and low closing sales prices, as to Bulletin Board prices of shares of the Company’s Common Stock during the fiscal year ended May 31, 2010:
High Low
Fourth Quarter 2010 | $.073 | $.009 |
Third Quarter 2010 | $.078 | $.035 |
Second Quarter 2010 | $.235 | $.061 |
First Quarter 2010 | $.40 | $.012 |
The following table sets forth, for the periods indicated, the high and low closing sales prices, as to Bulletin Board prices of shares of the Company’s Common Stock during the fiscal year ended May 31, 2009:
Fourth Quarter 2009 | $2.00 | $.10 |
Third Quarter 2009 | $.10 | $.10 |
Second Quarter 2009 | $.10 | $.31 |
First Quarter 2009 | $.31 | $.31 |
(2) | Holders. |
As of September 7, 2010, the Company had approximately 157 holders of record of its Common Stock.
(3) | Dividends. |
The Company has not paid any cash dividends on its Common Stock since inception and does not
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anticipate paying cash dividends in the foreseeable future. The Company anticipates that any future earnings will be retained for use in developing and/or expanding the business.
(4) Issuer Purchases of its Equity Securities. |
None |
ITEM 6. SELECTED FINANCIAL DATA
As a smaller reporting company we are not required to provide this information.
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
You should read the following discussion of our financial condition and results of operations in conjunction with the audited financial statements and related notes included in this registration statement. This discussion may contain forward-looking statements, including, without limitation, statements regarding our expectations, beliefs, intentions, or future strategies that are signified by the words, “expects,” “anticipates,” “intends,” “believes,” or similar language. Actual results could differ materially than from those projected in the forward looking statements. You should carefully consider the information set forth above under the caption “Risk Factors” in addition to the other information set forth in this registration statement. We caution you that Cancer Therapeutics’ business and financial performance is subject to substantial risks and uncertainties.
Overview
Results of Operations
Following is our discussion of the relevant items affecting results of operations for the years ended May 31, 2010 and 2009.
Revenues. Cancer Therapeutics generated net revenues of $-0- during the fiscal years ended May 31, 2010 and 2009. No revenues are expected for the foreseeable future as we have discontinued normal operations.
Consulting Expense. Consulting expense for the fiscal year ended May 31, 2010 was $397,378 compared to $65,340 for the twelve months ended May 31, 2009. The Company issued 40,000,000 shares of common stock to various consulting firms as we seek potential acquisitions and disruptive cancer research and technology opportunities to invest in, develop, and commercialize. We also seek partners to co-develop drugs.
Professional Fees. Our professional fees include outside legal, accounting and other professional fees. Professional fees for the fiscal year ended May 31, 2010 were $61,427, compared to $19,715 during the twelve months ended May 31, 2009. The increase was the result of increased legal fees and transfer agent fees in regards to various transactions during the year. No major changes were expected in accounting and auditing services as they are continually provided to the company in conjunction with the audits and preparation of the financial statements.
General and Administrative Expenses. Our general and administrative expenses have been
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comprised of administrative wages and benefits; contract labor; occupancy and office expenses; travel and other miscellaneous office and administrative expenses. General and administrative expenses for the fiscal year ended May 31, 2010 was $52,596, compared to $79,659 during the twelve months ended May 31, 2009. The decrease was anticipated as during the year ended May 31, 2009 the Company updated its website in order to attract potential companies to acquire or partner with, and incurred expenses related to the conversion of debt.
Other Income (Expense). We incurred net other expense of $106,778 for the year ended May 31, 2010 compared to net other expense of $32,794 for the year ended May 31, 2009. The increase is mainly the result in the loss on investment of $96,417 during the year ended May 31, 2010 compared to a loss on investment of $1,300 during the twelve months ended May 31, 2009. The Company has written off all of the investment in its subsidiary, Nano Therapies. Other expenses incurred in this category were comprised of interest expense associated with promissory notes issued by the Company and interest due to the IRS on unpaid payroll taxes. No significant change is expected in interest expense u ntil the Company is able to pay down the promissory notes.
Off-Balance Sheet Arrangements.
Cancer Therapeutics is not subject to any off-balance sheet arrangements.
Personnel
Cancer Therapeutics has contract personnel that we utilize to carry out our business.
Liquidity and Capital Resources
Since inception, we have financed our operations from a combination of loans from our former Chief Executive Officer and from business revenues. As of May 31, 2010, our primary source of liquidity consisted of $33,686 in cash and cash equivalents. Cancer Therapeutics has sustained significant net losses which have resulted in an accumulated deficit at May 31, 2010 of $3,843,627. Our losses raise doubts about our ability to continue the business of Cancer Therapeutics as a going concern. Our current financial condition is dire. Consequently, we anticipate that we will require additional cash inflows from increased revenues or sales of debt or equity capital to maintain operations and/or finance substantial business initiatives that may a rise. We anticipate another net loss for the year ending May 31, 2011, and with the expected cash requirements for the coming months, without additional cash inflows from an increase in revenues and from the sale of shares, we have substantial doubt as to our ability to continue to
operate. We believe our present capital resources are insufficient for ongoing operation. We cannot assure you that we will be able to raise sufficient funds to continue operations. Consequently, you could incur a loss of your entire investment in Cancer Therapeutics.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are not required to provide this information.
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ITEM 8: FINANCIAL STATEMENTS REQUIRED BY FORM 10-K
FINANCIAL STATEMENTS
CANCER THERAPEUTICS, INC.
Financial Statements for the Years
Ended May 31, 2010 and 2009
and Report of Independent Registered
Public Accounting Firm
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CONTENTS | |
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Board of Directors
Cancer Therapeutics, Inc.
Salt Lake City, Utah
We have audited the accompanying balance sheet of Cancer Therapeutics, Inc. as of May 31, 2010 and 2009 and the related statements of operations, stockholders’ deficit and cash flows for the years ended May 31, 2010 and 2009. 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 audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that 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 t est basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cancer Therapeutics, Inc. as of May 31, 2010 and 2009 and the results of its operations and its cash flows for the years ended May 31, 2010 and 2009 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 10 to the financial statements, the Company has negative working capital, negative cash flows from operations, recurring operating losses, and no significant operations which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 10. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Chisholm, Bierwolf, Nilson & Morrill LLC
Bountiful, Utah
September 14, 2010
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CANCER THERAPEUTICS, INC. | ||||||||
ASSETS | ||||||||
May 31, | May 31, | |||||||
2010 | 2009 | |||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 33,686 | $ | 760 | ||||
Total Current Assets | 33,686 | 760 | ||||||
OTHER ASSETS | ||||||||
Notes receivable | 61,000 | - | ||||||
Interest receivable | 802 | - | ||||||
Investment in subsidiary | - | 42,972 | ||||||
Total Other Assets | 61,802 | 42,972 | ||||||
TOTAL ASSETS | $ | 95,488 | $ | 43,732 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 124,763 | $ | 127,115 | ||||
Due to related parties | 18,250 | 4,341 | ||||||
Other accrued expenses | 150,000 | - | ||||||
Notes payable | 100,000 | 50,000 | ||||||
Total Current Liabilities | 393,013 | 181,456 | ||||||
TOTAL LIABILITIES | 393,013 | 181,456 | ||||||
STOCKHOLDERS' DEFICIT | ||||||||
Preferred stock, $0.001 par value; 20,000,000 shares | ||||||||
authorized, 200 and -0- shares issued and outstanding | - | - | ||||||
Common stock, $0.001 par value; 100,000,000 shares | ||||||||
authorized, 85,569,477 and 84,979,477 shares issued | ||||||||
and outstanding, respectively | 85,598 | 85,008 | ||||||
Treasury stock, 28,211 shares | (14,105 | ) | (14,105 | ) | ||||
Additional paid-in capital | 3,474,609 | 3,404,199 | ||||||
Prepaid consulting fees | - | (387,378 | ) | |||||
Accumulated deficit | (3,843,627 | ) | (3,225,448 | ) | ||||
Total Stockholders' Deficit | (297,525 | ) | (137,724 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 95,488 | $ | 43,732 | ||||
The accompanying notes are an integral part of these financial statements
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CANCER THERAPEUTICS, INC. | ||||||||
For the Years Ended | ||||||||
May 31, | ||||||||
2010 | 2009 | |||||||
NET REVENUES | $ | - | $ | - | ||||
OPERATING EXPENSES | ||||||||
Consulting | 397,378 | 65,340 | ||||||
Professional fees | 61,427 | 19,715 | ||||||
General and administrative | 52,596 | 79,659 | ||||||
Total Operating Expenses | 511,401 | 164,714 | ||||||
LOSS FROM OPERATIONS | (511,401 | ) | (164,714 | ) | ||||
OTHER INCOME (EXPENSES) | ||||||||
Interest income | 802 | - | ||||||
Loss on investment | (96,417 | ) | (1,300 | ) | ||||
Interest expense | (11,163 | ) | (31,494 | ) | ||||
Total Other Income (Expenses) | (106,778 | ) | (32,794 | ) | ||||
LOSS BEFORE INCOME TAXES | (618,179 | ) | (197,508 | ) | ||||
INCOME TAX EXPENSE | - | - | ||||||
NET LOSS | $ | (618,179 | ) | $ | (197,508 | ) | ||
BASIC AND FULLY DILUTED: | ||||||||
Net loss per common share | $ | (0.01 | ) | $ | (0.02 | ) | ||
Weighted average shares outstanding | 107,084,724 | 12,374,682 | ||||||
The accompanying notes are an integral part of these financial statements
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CANCER THERAPEUTICS, INC. | ||||||||||||||||||||||||||||||||
For the Period June 1, 2008 through May 31, 2010 | ||||||||||||||||||||||||||||||||
Additional | ||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Treasury | Prepaid | Paid-in | Accumulated | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Stock | Equity | Capital | Deficit | |||||||||||||||||||||||||
Balance, June 1, 2008 | - | $ | - | 4,129,477 | $ | 4,158 | $ | (14,105 | ) | $ | - | $ | 2,517,862 | $ | (3,027,940 | ) | ||||||||||||||||
Shares issued in satisfaction of debt | - | - | 36,850,000 | 36,850 | - | - | 371,004 | - | ||||||||||||||||||||||||
Shares issued for services | - | - | 40,000,000 | 40,000 | - | (442,718 | ) | 402,718 | - | |||||||||||||||||||||||
Amortization of prepaid expenses | - | - | - | - | - | 55,340 | - | - | ||||||||||||||||||||||||
Warrants issued for debt | - | - | - | - | - | - | 72,343 | - | ||||||||||||||||||||||||
Shares issued for acquistion of 25% of | ||||||||||||||||||||||||||||||||
Nano Therapies, Inc. | - | - | 4,000,000 | 4,000 | - | - | 40,272 | - | ||||||||||||||||||||||||
Net loss for the year ended | ||||||||||||||||||||||||||||||||
May 31, 2009 | - | - | - | - | - | - | - | (197,508 | ) | |||||||||||||||||||||||
Balance, May 31, 2009 | - | $ | - | 84,979,477 | $ | 85,008 | $ | (14,105 | ) | $ | (387,378 | ) | $ | 3,404,199 | $ | (3,225,448 | ) | |||||||||||||||
Exercise of warrants | - | - | 590,000 | 590 | - | - | 58,410 | - | ||||||||||||||||||||||||
Amortization of prepaid expenses | - | - | - | - | - | 387,378 | - | - | ||||||||||||||||||||||||
Preferred stock issued for services | 200 | - | - | - | - | - | 12,000 | - | ||||||||||||||||||||||||
Net loss for the year ended | ||||||||||||||||||||||||||||||||
May 31, 2010 | - | - | - | - | - | - | - | (618,179 | ) | |||||||||||||||||||||||
Balance, May 31, 2010 | 200 | $ | - | 85,569,477 | $ | 85,598 | $ | (14,105 | ) | $ | - | $ | 3,474,609 | $ | (3,843,627 | ) | ||||||||||||||||
The accompanying notes are an integral part of these financial statements
16
CANCER THERAPEUTICS, INC. | ||||||||
For the Years Ended | ||||||||
May 31, | ||||||||
2010 | 2009 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (618,179 | ) | $ | (197,508 | ) | ||
Adjustments to reconcile net loss to net | ||||||||
cash used by operating activities: | ||||||||
Preferred stock issued for services | 12,000 | - | ||||||
Amortization of prepaid services for stock | 387,378 | 55,340 | ||||||
Warrants issued for debt | - | 72,343 | ||||||
Loss on investment in subsidiary | 96,417 | 1,300 | ||||||
Changes in operating assets and liabilities: | ||||||||
Interest receivable | (802 | ) | - | |||||
Accounts payable and accrued expenses | 147,648 | (46,127 | ) | |||||
Due to related parties | 13,909 | 115,361 | ||||||
Net Cash Provided by Operating Activities | 38,371 | 709 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Cash payments to subsidiary | (53,445 | ) | - | |||||
Cash payments for loans receivable | (61,000 | ) | - | |||||
Net Cash Used by Investing Activities | (114,445 | ) | - | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from notes payable | 50,000 | - | ||||||
Proceeds from exercise of stock warrants | 59,000 | - | ||||||
Net Cash Provided by Financing Activities | 109,000 | - | ||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | 32,926 | 709 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 760 | 51 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 33,686 | $ | 760 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash Payments For: | ||||||||
Interest | $ | - | $ | - | ||||
Income taxes | $ | - | $ | - | ||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Common stock issued for services | $ | - | $ | 442,718 | ||||
Common stock issued to convert debt | $ | - | $ | 407,854 | ||||
Common stock issued for acquisition of Nano Therapies | $ | - | $ | 44,272 | ||||
Warrants issued to convert debt | $ | - | $ | 72,343 | ||||
Preferred stock issued for services | $ | 12,000 | $ | - | ||||
The accompanying notes are an integral part of these financial statements
17
CANCER THERAPEUTICS, INC.
Notes to the Financial Statements
May 31, 2010 and 2009
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Cancer Therapeutics, Inc. (the Company), was incorporated under the laws of the State of Delaware on August 12, 2004 with authorized common stock of 100,000,000 shares and authorized preferred stock of 10,000,000 shares. Both classes of stock have a par value of $0.001 per share. The Company was organized for the purpose of producing and preserving activated cells for use in cancer treatment primarily through agreements with clinics, hospitals, and physicians. Effective July 31, 2007, the Company sold certain assets in exchange of 28,211 shares of its common stock which are now held in treasury. Following this transaction the Company has entered into shell status with no significant operations.
The Company was originally formed as Cancer Therapeutics, Incorporated, under the laws of the State of Tennessee on May 1, 1991. On September 7, 2004, the Company reincorporated into the State of Delaware by filing with the state a Certificate of Merger whereby Cancer Therapeutics, Incorporated (Tennessee) merged with and into Cancer Therapeutics, Inc. (Delaware) which was incorporated for this purpose on August 12, 2004. As part of the merger one (1) common share of Cancer Therapeutics, Inc. (Delaware) were issued for each five (5) outstanding common shares of Cancer Therapeutics, Incorporated (Tennessee) for a total of 1,947,688 common shares of Cancer Therapeutics, Inc. (Delaware) issued upon incorporation. All references t o shares issued and outstanding in the financial statements have been retroactively restated to reflect the effects of this change in capital structure. During this process the Company changed its name from Cancer Therapeutics, Incorporated to Cancer Therapeutics, Inc.
NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES |
This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. The following policies are considered to be significant:
a. Accounting Method
The Company recognizes income and expenses based on the accrual method of accounting. The Company has elected a May 31 year-end.
b. Cash and Cash Equivalents
Cash equivalents are generally comprised of certain highly liquid investments with original maturities of less than three months.
c. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles 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. Actual results could differ from those estimates.
18
CANCER THERAPEUTICS, INC.
Notes to the Financial Statements
May 31, 2010 and 2009
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
d. | Revenue Recognition Policy |
Revenue is recognized when contracts are signed and related contract activities have commenced, where the fee is fixed or determinable, and collectibility is reasonably assured. Revenue is not recognized until persuasive evidence of an arrangement exists. Advance payments are recorded as deferred revenue until such time as they are recognized. Our contracts typically state a monthly fee which is recorded as revenue on a monthly basis.
e. | Allowance for Doubtful Accounts |
Accounts receivable are recorded net of the allowance for doubtful accounts. The Company generally offers 30-day credit terms on sales to its customers and requires no collateral. The Company maintains an allowance for doubtful accounts which is determined based on a number of factors, including each customer’s financial condition, general economic trends and management judgment. As of May 31, 2010 and 2009, the allowance for doubtful accounts was $-0-. As of May 31, 2010 and 2009, the allowance for notes receivable was $-0-.
f. Basic and Fully Diluted Net Loss per Share of Common Stock
In accordance with Financial Accounting Standards No. ASC 260, “Earnings per Share,” basic net loss per common share is based on the weighted average number of shares outstanding during the periods presented. Diluted earnings per share is computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period. As of May 31, 2010, the Company has 17,835,000 stock warrants outstanding which have been included in the calculation below.
May 31, 2010 | May 31, 2009 | |||||||
Net income (loss) (numerator) | $ | (618,179 | ) | $ | (197,508 | ) | ||
Weighted average shares outstanding (denominator) | 107,084,724 | 12,374,682 | ||||||
Income (loss) per share amount | $ | (0.01 | ) | $ | (0.02 | ) |
g. | 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 FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual rep orting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160. 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.
19
CANCER THERAPEUTICS, INC.
Notes to the Financial Statements
May 31, 2010 and 2009
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. | Recent Accounting Pronouncements (continued) |
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.
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. (See FAS 167 effective date below.)
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. (See FAS 166 effective date below)
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 EITF 09-1. (See EITF 09-1 effective date below.)
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 o r 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
20
CANCER THERAPEUTICS, INC.
Notes to the Financial Statements
May 31, 2010 and 2009
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. | Recent Accounting Pronouncements (continued) |
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 EITF No. 09-1, (ASC Topic 470) "Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance" ("EITF 09-1"). The provisions of EITF 09-1, 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. EITF 09-1 is effective for fiscal years that beginning on or after December 15, 2009 and requi res 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 EITF 09-1 to have a material effect on the financial position, results of operations or cash flows of the Company.
In June 2009, FASB issued ASC 105-10 (Prior authoritative literature: SFAS No. 168, "The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162").FASB ASC 105-10 establishes the FASB Accounting Standards Codification TM (Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. FASB ASC 105-10 is effective for financial statements issued for fiscal years and interim periods ending after September 15, 2009. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ending December 31, 2009. Adoption of FASB ASC 105-10 did not have a material effect on the Company’s financial statements.
In June 2009, the FASB issued FASB ASC 810-10-65 (Prior authoritative literature: SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”) which amends the consolidation guidance applicable to a variable interest entity (“VIE”). This standard also amends the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE, and is therefore required to consolidate an entity, by requiring a qualitative analysis rather than a quantitative analysis. Previously, the standard required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred. This standard is effective for fi scal years beginning after November 15, 2009, and for interim periods within those fiscal years. Early adoption is prohibited. Adoption of FASB ASC 810-10-65 did not have a material impact on the Company’s financial statements.
In June 2009, the FASB ASC 860-10 (Prior authoritative literature: issued SFAS No. 166, “Accounting for Transfers of Financial Assets, an Amendment of FASB Statement No. 140”), which eliminates the concept of a qualifying special-purpose entity (“QSPE”), clarifies and amends the de-recognition criteria for a transfer to be accounted for as a sale, amends and |
21
CANCER THERAPEUTICS, INC.
Notes to the Financial Statements
May 31, 2010 and 2009
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. | Recent Accounting Pronouncements (continued) |
clarifies the unit of account eligible for sale accounting and requires that a transferor initially measure at fair value and recognize all assets obtained and liabilities incurred as a result of a transfer of an entire financial asset or group of financial assets accounted for as a sale. This standard is effective for fiscal years beginning after November 15, 2009. Adoption of FASB ASC 860-10 did not have a material impact on the Company’s financial statements.
In May 2009, FASB issued FASB ASC 855-10 (Prior authoritative literature: SFAS No. 165, "Subsequent Events"). FASB ASC 855-10 establishes principles and requirements for the reporting of events or transactions that occur after the balance sheet date, but before financial statements are issued or are available to be issued. FASB ASC 855-10 is effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009. As such, the Company adopted these provisions at the beginning of the interim period ended June 30, 2009.
In April 2009, the FASB issued FASB ASC 810-10-65 (Prior authoritative literature: SFAS No. 164, “Not-for-Profit Entities: Mergers and Acquisitions”) which governs the information that a not-for-profit entity should provide in its financial reports about a combination with one or more other not-for-profit entities, businesses or nonprofit activities and sets out the principles and requirements for how a not-for-profit entity should determine whether a combination is in fact a merger or an acquisition. This standard is effective for mergers occurring on or after Dec. 15, 2009 and for acquisitions where the acquisition date is on or after the beginning of the first annual reporting period, beg inning on or after Dec. 15, 2009. This standard does not apply to the Company since the Company is considered a for-profit entity
In May 2008, the FASB issued FASB ASC 944 (Prior authoritative literature: SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60"). FASB ASC 944 interprets Statement 60 and amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts included within the scope of that Statement. This standard is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended December 31, 2009. The Compa ny does not believe this standard will have any impact on the financial statements.
h. Income Taxes
The Financial Accounting Standards Board (FASB) has issued FASB ASC 740-10 (Prior authoritative literature: Financial Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 (FIN 48)). FASB ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with prior literature FASB Statement No. 109, Accounting for Income Taxes. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained will be sustained upon examination based upon the technical merits of the position. If the more-likely-than- not threshold is met, a company must measure the tax position to det ermine the amount to recognize in the financial statements. As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740-10.
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NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
h. Income Taxes (continued)
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
At May 31, 2010, the Company had net operating loss carryforwards of approximately $3,000,000 which may be offset against future taxable income through 2030. No tax benefit has been reported in the financial statements because the potential tax benefits of the net operating loss carryforwards are offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to future use.
Net deferred tax assets consist of the following components as of May 31, 2010 and 2009:
2010 | 2009 | |||||||
Deferred tax assets: | ||||||||
NOL Carryover | $ | 300,762 | $ | 258,206 | ||||
Valuation allowance | (300,762 | ) | (258,206 | ) | ||||
Net deferred tax asset | $ | - | $ | - |
The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 34% to pretax income from continuing operations for the years ended May 31, 2010 and 2009 due to the following:
2010 | 2009 | |||||||
Current Federal Tax | $ | - | $ | - | ||||
Current State Tax | - | - | ||||||
Change in NOL Benefit | 42,556 | 11,549 | ||||||
Valuation allowance | (42,556 | ) | (11,549 | ) | ||||
$ | - | $ | - |
23
h. Income Taxes (continued)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Year ended May 31, | ||||||||
2010 | 2009 | |||||||
Beginning balance | $ | - | $ | - | ||||
Additions based on tax positions related to current year | - | - | ||||||
Additions for tax positions of prior years | - | - | ||||||
Reductions for tax positions of prior years | - | - | ||||||
Reductions in benefit due to income tax expense | - | - | ||||||
Ending balance | $ | - | $ | - |
At May 31, 2010, the Company had no unrecognized tax benefits that, if recognized, would affect the effective tax rate.
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 May 31, 2010 and 2009, 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 those for the years ended May 31, 2010, 2009 and 2008.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company has been dependent upon certain individuals, officers, stockholders and other related parties to provide working capital, management services, assistance in finding new sources for debt and equity financing, and guidance in the development of the Company’s business. The related parties have generally provided services and/or incurred expenses on behalf of the Company or have provided the necessary operating capital to continue pursuing its business. At May 31, 2010, the Company had related party payables of $18,250. These amounts are non-interest bearing and due on demand. |
NOTE 4 - | ACCRUED EXPENSES |
The Company’s accounts payable and accrued expenses balance includes accrued interest of $15,734 and $9,319 as of May 31, 2010 and 2009, respectively. This interest primarily relates to notes payable. The Company also has accrued for unpaid payroll taxes for the fiscal years ended May 31, 2010 and 2009 in the amount of $42,249. As of May 31, 2010 and 2009, the Company has accrued an additional $27,895 and $23,147, respectively, as an estimate of penalties and interest relating to this balance. Both of these amounts are included in accounts payable and accrued expenses. |
24
NOTE 5 - | EQUITY TRANSACTIONS |
The Company has 10,000,000 shares of $0.001 par value preferred stock authorized. As of May 31, 2010, no rights or preferences have been designated and no preferred shares have been issued.
On June 1, 2007, the Company created a newly formed subsidiary, Cancer Therapeutics, Inc., a Utah corporation (“CTI Utah”) which had 100 shares issued and outstanding upon incorporation. As part of this transaction, certain assets of the Company were transferred to CTI Utah. Effective July 31, 2007, the Company received 28,211 shares of its common stock held by Dr. Robert Oldham (“CTI Shares”). In consideration of the CTI shares, Dr. Oldham has accepted from the Company 100 shares of common stock of CTI Utah. These 100 shares represent all of the outstanding shares of the Utah corporation. Treasury stock of $14,105 has been recorded on the balance sheet and a gain on the sale of as sets for the same amount has been recorded on the statement of operations.
Effective April 15, 2009, the Company issued 40,000,000 shares of common stock at $0.01 per share for consulting services valued at $442,718. There are two agreements in place for 20,000,000 shares each with two consulting firms. These firms will assist us in seeking potential acquisitions and disruptive cancer research and technology opportunities to invest in, develop, and commercialize. We also seek partners to co-develop drugs. As the services contract covers the period April 15, 2009 through April 14, 2010, the Company has recorded prepaid consulting fees in the amount of $387,378 in stockholders’ deficit as of May 31, 2009. This amount has been amortized over the contract period and the balan ce is zero as of May 31, 2010.
Effective May 1, 2009, the Company issued 36,850,000 shares of common stock at $0.01 per share in the amount of $407,854 for related party debt that was assigned to shareholders and converted to stock.
Effective May 15, 2009, the Company issued 4,000,000 shares of common stock at $0.01 per share as part of an agreement to purchase a 25% interest in NanoTherapies LLC.
Effective October 15, 2009, the Company issued 6,000,000 shares of common stock at $0.01 per share as part of an agreement to purchase an additional 26% interest in NanoTherapies LLC. These shares were issued in connection with a letter of intent which never materialized. Therefore, the shares were returned and cancelled and deemed void upon issuance.
Preferred Stock
During the year ended May 31, 2010, the Company approved the creation of Class A Preferred stock. The preferred shares are entitled to one million votes per share but do not have any rights of conversion into shares of common stock. Pursuant to Delaware General Corporate Law, the holder of the preferred stock cannot take any action to benefit him personally as a shareholder without the vote of a majority of the common shareholders. On April 22, 2010 the Company authorized and approved the issuance of 200 shares of Class A Preferred stock to the Company CEO/CFO in lieu of compensation for one year of $12,000.00.
25
NOTE 6 - FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments – On January 1, 2008, the Company adopted FASB ASC 820-10-50, “Fair Value Measurements. This guidance definces fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.
The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The carrying value of notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of May 31, 2010 and 2009.
NOTE 7 - NOTES RECEIVABLE
The Company has notes receivable consisting of the following:
May 31, 2010 | May 31, 2009 | ||
Note receivable from a company, 8.0% interest, due on demand | 61,000 | - | |
Total Notes Receivable Less: Current Portion | 61,000 (61,000) | - - | |
Long Term Notes Receivable | - | - |
This loan was made to an un-related party which assists the Company at times with legal matters. Accrued interest at May 31, 2010 and 2009 was $802 and $-0-, respectively.
26
NOTE 8 - NOTES PAYABLE
The Company has notes payable consisting of the following:
May 31, 2010 | May 31, 2009 | ||
Note payable to a bank, 8.25% interest, Matured December 31, 2005, secured By tangible and intangible assets of the Company, in default | 50,000 | 50,000 | |
Note payable to a company, 8.0% interest, matures at November 3, 2010, unsecured | 50,000 | - | |
Total Notes Payable Less: Current Portion | 100,000 (100,000) | 50,000 (50,000) | |
Long Term Notes Payable | - | - |
Accrued interest at May 31, 2010 and 2009 was $15,734 and $9,319, respectively.
NOTE 9 - CONCENTRATION
Food and Drug Administration
The Company is subject to extensive Federal laws and regulations. These laws, which are constantly changing, regulate various therapies through the Food and Drug Administration (“FDA”). However, the Company provides various cellular therapies for which regulations have been vague or nonexistent. Management continuously monitors activities of the FDA, particularly with regard to regulations concerning the use of autologous cells. Although management feels the Company is in compliance with existing FDA regulations, new regulations, if any, developed in the area of autologous cells, or differing interpretations of existing regulations by the FDA, could have a material effect on the Company’s operation s. Presently, such effect, if any, cannot be determined.
NOTE 10 - GOING CONCERN CONSIDERATIONS
The accompanying financial statements have been prepared using U.S. generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As reported in the financial statements, the Company has incurred losses of approximately $3,900,000 from inception of the Company through May 31, 2010. The Company’s stockholders’ deficit at May 31, 2010 was $297,525; its current liabilities exceeded its current assets by the same amount, and the company has no significant operations. These factors combined raise substantial doubt about the Company’s ability to continue as a going concern. Management 217;s plans to address and alleviate these concerns are as follows:
The Company’s management is exploring all of its options so that it can develop successful operations and have sufficient funds, therefore, as to be able to operate over the next twelve months.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually attain |
27
NOTE 10 - GOING CONCERN CONSIDERATIONS (Continued)
profitable operations. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of these uncertainties. |
NOTE 11 – WARRANTS
On May 1, 2009 the Company issued 18,425,000 stock warrants as part of the conversion agreements with certain debt holders of the company. The warrants entitle the holder to purchase common stock of the Company at an exercise price of $0.10. The warrants expire 5 years from the date of issuance.
The Company has determined the estimated value of the compensatory warrants granted to non-employees in exchange for services and financing expenses using the Black-Scholes pricing model and the following assumptions: expected term of 1 year, a risk free interest rate of 2.02 % in 2009, a dividend yield of 0% in both years and volatility of 100% in 2009. The amount of the expense charged to operations for compensatory warrants granted in exchange for services was $72,343 during the year ended May 31, 2009.
The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company. These warrants were granted in lieu of cash compensation for services performed or financing expenses. Warrants vest immediately and services are provided during the period granted.
Number of Shares | Weighted Average Exercise Price | |||||||
Outstanding as of June 1, 2008 | - | $ | 0.00 | |||||
Granted | 18,425,000 | 0.10 | ||||||
Exercised | - | 0.00 | ||||||
Cancelled | - | 0.00 | ||||||
Outstanding at May 31, 2009 | 18,425,000 | $ | 0.10 | |||||
Granted | - | 0.00 | ||||||
Exercised | 590,000 | 0.10 | ||||||
Cancelled | - | 0.00 | ||||||
Outstanding at May 31, 2010 | 17,835,000 | $ | 0.10 |
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NOTE 11 – WARRANTS (Continued)
Common stock warrants outstanding and exercisable as of May 31, 2010 are:
Warrants Outstanding | Warrants Exercisable | |||||
Year | Exercise Price | Number shares outstanding | Weighted Average Contractual Life (Years) | Number Exercisable | Weighted Average Exercise Price | |
2009 | $0.10 | 17,835,000 | 5.00 | 17,835,000 | $0.10 | |
Total | 17,835,000 | 17,835,000 |
NOTE 12 – LITIGATION
The Company has been named in various legal proceedings involving an investor arising through various financing activities. Management is defending against the litigation; however, $150,000 has been included in other accrued expenses related to the lawsuit. Management believes that this is the maximum exposure of the Company related to the litigation. Nevertheless, due to uncertainties in the litigation process, it is at least reasonably possible that management’s view of the outcome could change materially in the near term.
NOTE 13 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and has determined that there are no events that would have a material impact on the financial statements.
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ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A: CONTROLS AND PROCEDURES
Management’s Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, to allow for timely decisions regarding required disclosure.
As of May 31, 2010, the end of our fiscal year covered by this report, we carried out an evaluation, under the supervision of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, we concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report. Our board of directors has only one member. We do not have a formal audit committee.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our evaluation of internal control over financial reporting includes using the COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on our evaluation, management concluded that our internal control over financial reporting was ineffective as of May 31, 2010 due to two significant deficiencies. A material weakness in internal control over financial reporting is defined by the Public Company Accounting Oversight Board’s Audit Standard No. 5 as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.
Management’s assessment identified the following significant deficiencies in internal control over
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financial reporting:
· | Incomplete recording of the loss on investment in Nano Technologies prior to the audit conducted by our principal independent accounting firm. |
· | Incomplete recording of the contingency loss recognition (See Note 12 to the financial statements) prior to the audit conducted by our principal independent accounting firm. |
In light of the significant deficiencies described above, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
Management intends to mitigate the risk of significant deficiencies going forward by utilizing external financial consulting services prior to the review by our principal independent accounting firm to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the Commission’s rule and forms.
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.
Inherent limitations on effectiveness of controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limi tations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
Management intends to mitigate the risk of significant deficiencies going forward by utilizing external financial consulting services prior to the review by our principal independent accounting firm to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the Commission’s rule and forms.
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ITEM 9B: OTHER INFORMATION
None.
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Pursuant to the Company's Delaware Certificate of Incorporation and Bylaws, the Company's Board of Directors (the "Board") serve for one year terms. The term of office of the members of the Board will expire at the next annual shareholders meeting. No annual shareholders’ meeting is planned for the year 2010.
Directors and Executive Officers
Name | Age | Position(1) |
Chene Gardner | 46 | Chief Executive Officer (appointed fiscal year 2008), Chief Financial Officer and Director |
(1) Officers hold their position at the pleasure of the board of directors, absent any employment agreement.
Chene Gardner, age 46, is the Chief Executive Officer and Chief Financial Officer of Cancer Therapeutics and a member of the Cancer Therapeutics board of directors. Mr. Gardner was appointed as Chief Executive Officer of Cancer Therapeutics July, 2007. Mr. Gardner was appointed to the board of
directors of Cancer Therapeutics in August, 2004 for a one-year terms. Mr. Gardner has served as Chief Financial Officer to Cancer Therapeutics since May, 2004. Mr. Gardner has served as CEO and director of Global Network, Inc. since May, 2005. Mr. Gardner served as the Chief Financial Officer of Synerteck Incorporated from March, 2001 until December, 2005. Mr. Gardner has served as the Financial Controller of SportsNuts, Inc. since March, 2001. SportsNuts, is a sports management and marketing company. Prior to his association with SportsNuts, from January, 1997 to September, 1999, Mr. Gardner served as Financial Manager for Aluminum Builders, Inc., a producer of various home improvement items. 0; Mr. Gardner also has five years of auditing and accounting experience with the firm of Deloitte & Touche LLP from June 1990 to August, 1995, serving clients in the banking, manufacturing, and retail industries. Mr. Gardner holds Bachelor and Master of Accounting degrees from Weber State University. Mr. Gardner not a director of any other companies which file reports pursuant to the Securities Exchange Act of 1934.
Clayton B. Barlow, age 38, Mr. Barlow was appointed to the Board of Directors of Cancer Therapeutics in April 2010 for a one-year term. Mr. Barlow is an IT Specialist and Manager for Secure Netwerks, Inc., a computer hardware and software reseller and service provider. Mr. Barlow has been with Secure Newerks since January, 2005. From January 2001 until January 2005, Mr. Barlow was the President of Synerteck Incorporated Mr. Barlow was appointed to the board of directors of Synerteck in January, 2004 for a one-year term expiring January, 2005
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and has been the President of Synerteck prior to its corporate formation (as a division of SportsNuts, Inc.) since December, 2000. Prior to his association with Synerteck, from October, 1999 to December, 2000, Mr. Barlow was an international project manager for STSN, Inc., a Salt Lake City-based provider of high speed internet access for the hospitality industry with a focus on business hotels. At STSN, Mr. Barlow was responsible for designing and integrating hotel internet infrastructure with access units in each hotel room. From September, 1997 to October, 1999, Mr. Barlow was the President of Maxim Mortgage, Corp., a residential mortgage broker based in Salt Lake City, Utah. Mr. Barlow holds MCSE 2000, MCP, and A+ ce rtifications. Mr. Barlow is not a director of any other company filing reports pursuant to the Securities Exchange Act of 1934.
Board of Directors Meetings and Committees
Although various items were reviewed and approved by the Board of Directors during 2009-2010, the Board held no meetings during the fiscal year ended May 31, 2010.
Chene Gardner serves as our Audit Committee Financial Expert for purposes of Item 401 of Regulation S-B of the Securities Act of 1933 and the Securities Exchange Act of 1934. Mr. Gardner is our sole officer, director and is a principal shareholder of Cancer Therapeutics.
Compensation of Directors
Although we anticipate compensating the members of the Cancer Therapeutics board of directors in the future at industry levels, the current members are not paid cash compensation for their service as directors. Each director may be reimbursed for certain expenses incurred in attending board of directors and committee meetings. We are contemplating the issuance of stock or stock options to our directors for their service on the Cancer Therapeutics board of directors.
Section 16(a) Beneficial Ownership Reporting Compliance
We are required to identify each person who was an officer, director or beneficial owner of more than 10% of our registered equity securities during our most recent fiscal year and who failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934.
For the 2010 fiscal year we are unaware of tshareholders who have failed to file reports on a timely basis in accordance with Section 16(a) of the Securities Exchange Act of 1934.
ITEM 10: EXECUTIVE COMPENSATION.
The following table sets forth certain information regarding the annual and long-term compensation for services rendered in all capacities during the fiscal years ended May 31, 2010, 2009, and 2008 of Chene Gardner, our Chief Executive Officer, Chief Financial Officer and sole Director. No other executive officers of Cancer Therapeutics received more than $100,000 in total salary and bonus during these periods. Although Cancer Therapeutics may, in the future, adopt a stock option plan or a stock bonus plan, no such plans exist.
On April 22 2010, Cancer Therapeutics, Inc. approved the creation of Class “A” shares of restricted Preferred Stock (“Preferred Shares”). The Company approved the issuance of 200 Preferred shares to Chene Gardner, the company CEO and CFO, in lieu of compensation for one (1) year of service to the Company. Holders of the Preferred Shares are entitled to one million votes per share, consequently giving Mr. Gardner voting control of the Company, or
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70.39% voting control of the Company. The Preferred Shares do not have any rights of conversion into shares of common stock.
Summary Compensation Table
Long-Term Compensation | ||||||||
Annual Compensation | Awards | Payouts | ||||||
Name and Principal Position | Year | Salary | Bonus | Other Annual Compensation | Restricted Stock Awards | Securities Underlying Options | LTIP Payouts | All Other Compensation |
Chene Gardner Current CEO and CFO | 2010 2009 2008 | $ 0 0 0 | $ 0 0 0 | $ 0 0 0 | $ 0 0 0 | 0 0 0 | 0 0 0 | $ 0 0 0 |
Employment Agreements
None of our executive officers are subject to an employment agreement with
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
(a) Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding beneficial ownership of Cancer Therapeutics’ common stock as of September 7, 2010, by (i) each person (or group of affiliated persons) who is known by us to beneficially own more that 5% of the outstanding shares of our common stock, (ii) each director and executive officer of Cancer Therapeutics, and (iii) all executive officers and directors of Cancer Therapeutics as a group. Unless indicated otherwise, the address for each officer, director and 5% stockholder is c/o Cancer Therapeutics, Inc., 10757 South River Front Pkwy, Suite 125, South Jordan, Utah 84095.
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Common Stock | ||
Directors, Executive Officers and 5% Stockholders | Number | Percent of Class(1) |
Cedar Ridge Management, Inc.(2) | 20,000,000 | 23.5% |
MMAAK Holdings LLC (3) | 20,000,000 | 23.5% |
Chene Gardner(4) | 1,000,000 | 1.2% |
Clayton Barlow(5) All Officers and Directors as a Group (1 Person) | 0 1,000,000 | 0% 1.2% |
(1) For each shareholder, the calculation of percentage of beneficial ownership prior to this offering is based upon 84,979,477 shares of common stock outstanding and shares of common stock subject to options, warrants and/or conversion rights held by the shareholder that are currently exercisable or exercisable within 60 days, which are deemed to be outstanding and to be beneficially owned by the shareholder holding such options, warrants, or conversion rights. The percentage ownership of any shareholder is determined by assuming that the shareholder did not purchase any shares in this offering and has exercised all options, warrants and conversion rights to obtain additional securities and that no other shareholder has exercised such rights. 60;Except as otherwise indicated below, the persons and entity named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to applicable community property laws.
(2) Includes 20,000,000 shares of common stock held directly by Cedar Ridge Management, Inc. The beneficial owner of Cedar Ridge Management is Henry Meerveld.
(3) Includes 20,000,000 shares of common stock held directly by MMAAK Holdings LLC. The beneficial owner of MMAAK Holdings LLC is Harvey Carley.
(4) Chief Executive Officer, Chief Financial Officer and Director. Includes 1,000,000 shares of common stock held directly by Mr. Gardner. Mr. Gardner has voting control of the Company. Mr. Gardner holds 200 shares of Preferred Series A Stock with super-voting rights equal to 200 million votes.
(5) Director.
(b) Securities Authorized for Issuance Under Equity Compensation Plans.
The Company does not currently have an Equity Compensation Plan.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On May 1, 2009, we converted into common stock certain promissory notes issued by the Company to various non-affiliate creditors on September 1, 2008. Subject to the terms and conditions of
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the various conversion agreements entered into with the Creditors, the Cancer Therapeutics agreed to convert Notes amounting to an aggregate of $407,854 in principal, plus interest, into an aggregate of 36,850,000 shares of common stock of Cancer Therapeutics. The value of our shares for purposes of this debt conversion was $0.005 per share. Disclosure of the note conversion was initially filed as an 8-K with the Securities and Exchange Commission on May 7, 2009.
On April 15, 2009, we entered into consulting agreements with MMAAK Holdings, LLC and Cedar Ridge Management for the purpose of developing our new business plan for seeking to acquire NanoTherapy related companies. 20,000,000 shares were issued to each consultant pursuant to the agreements. The value of the consulting contracts was $442,718.
On May 27, 2009, we entered into a Unit Purchase Agreement with the members of Nano Therapies LLC, a Virginia limited liability company. Pursuant to the terms of the Purchase Agreement, we acquired from these members twenty-five percent (25%) of Nano Therapies in exchange for 4,000,000 shares of common stock of Cancer Therapeutics and $500,000 in cash to be paid in installments. The Purchase Agreement contains customary representations, warranties, covenants and conditions, as well as indemnification provisions subject to specific limitations. Disclosure of the Unit Purchase Agreement was initially filed as an 8-K with the Securities and Exchange Commission on May 29, 2009 as well as a filed copy of the Purchase Agreement.
On April 22 2010, Cancer Therapeutics, Inc. approved the creation of Class “A” shares of restricted Preferred Stock (“Preferred Shares”). The rights, preferences, privileges, restrictions and characteristics of the Preferred Shares are detailed in the Certificate of Designation to the Certificate of Incorporation filed as an exhibit to the Company’s 8-k filed on April 22, 2010. The Company approved the issuance of 200 Preferred shares to Chene Gardner, the company CEO and CFO, in lieu of compensation for one (1) year of service to the Company. Holders of the Preferred Shares are entitled to one million votes per share, consequently giving Mr. Gardner voting control of the Company, or 70.39% voting control of the Company. The Preferred Shares do not have any rights of conversion into shares of common stock.
The transactions described above were, in each case, independently negotiated and approved by a majority of our disinterested directors. The valuations of our shares in each issuance were determined by our board of directors, taking into account the perceived tangible and intangible benefits of the services provided, debt forgiven, and association with Cancer Therapeutics, including the fact that Cancer
Therapeutics was, at the time of issuance, minimal revenues, assets, and significant negative shareholder equity. We recorded the expenses related to the issuance of shares for services during the periods incurred. This disclosure of certain relationships and related transactions is complete and updated through September 7, 2009.
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Change in Auditors
None
Fees Billed For Audit and Non-Audit Services
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The following table represents the aggregate fees billed for professional audit services rendered to the Company by Chisholm, Bierwolf, Nilson & Morrill, LLC, our current independent auditor, for the audit of the Company’s annual financial statements for the years ended May 31, 2010 and 2009, and all fees billed for other services rendered by our auditor during those periods.
Year Ended May 31 | 2010 | 2009 | |
Audit Fees(1) | 9,000 | 8,000 | |
Audit-Related Fees(2) | 2,900 | 2,250 | |
Tax Fees(3) | 0 | 0 | |
All Other Fees(4) | 0 | 0 | |
Total Accounting Fees and Services | 11,900 | 10,250 | |
(1) Audit Fees. These are fees for professional services for the audit of the Company’s annual financial statements, and for the review of the financial statements included in the Company’s filings on Form 10-K, and for services that are normally provided in connection with statutory and regulatory filings or engagements.
(2) Audit-Related Fees. These are fees for the assurance and related services reasonably related to the performance of the audit or the review of the Company’s financial statements.
(3) Tax Fees. These are fees for professional services with respect to tax compliance, tax advice, and tax planning.
(4) All Other Fees. These are fees for permissible work that does not fall within any of the other fee categories, i.e., Audit Fees, Audit-Related Fees, or Tax Fees.
ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) | Documents Filed as a Part of this Report |
(1) | Financial Statements |
See “Item 8 - Financial Statements Required by Form 10-K.” |
(2) | Financial Statement Schedules |
The following Financial Statement Schedules of the Company, together with the report of
Chisholm, Bierwolf, Nilson & Morrill, LLC, the Company’s independent registered public accounting firm, thereon are filed as part of this Report on Form 10-K as listed below and should be read in conjunction with the consolidated financial statements of the Company:
Report of Chisholm, Bierwolf, Nilson & Morrill, LLC, Independent Accountants, on Financial Statement Schedules for 2010.
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Report of Chisholm, Bierwolf, Nilson & Morrill, LLC, Independent Accountants, on Financial Statement Schedules for 2009.
(3) | Exhibits |
See “Index to Exhibits.” |
(b) | Reports on Form 8-K |
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INDEX TO EXHIBITS
Exhibit Number | Title of Document | |
3.1 | Certificate of Incorporation of Cancer Therapeutics, Inc., a Delaware corporation. (1) | |
3.2 | Bylaws of Cancer Therapeutics, Inc., a Delaware corporation. (2) | |
4.1 4.2 4.3 | Form of Common Stock Certificate. (3) Consulting Agreement with MMAAK Holdings, Inc. Consulting Agreement with Cedar Ridge Management | |
5.1 | Opinion of Kenneth I. Denos, P.C., Attorney at Law (including consent). (4) | |
10.1 | NanoTherapies Unit Purchase Agreement. (5) | |
23.1 | Consent of Bouwhuis, Morrill and Company, LLC. (6) | |
23.2 | Consent of Kenneth I. Denos, P.C. (Filed as part of Exhibit 5.1). (7) | |
Certification by Chief Executive Officer and Chief Financial Officer, Chene Gardner, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
Certification by Chief Executive Officer and Chief Financial Officer, Chene Gardner, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
(1) | Filed as an Exhibit to the Company’s Registration Statement on Form SB-2, deemed effective by the Commission on May 15, 2006. |
(2) | Filed as an Exhibit to the Company’s Registration Statement on Form SB-2, deemed effective by the Commission on May 15, 2006. |
(3) | Filed as an Exhibit to the Company’s Registration Statement on Form SB-2, deemed effective by the Commission on May 15, 2006. |
(4) | Filed as an Exhibit to the Company’s Registration Statement on Form SB-2, deemed effective by the Commission on May 15, 2006. |
(5) | Filed as an Exhibit to the Company’s 8-K filed on May 29, 2009. |
(6) | Filed as an Exhibit to the Company’s Registration Statement on Form SB-2, deemed effective by the Commission on May 15, 2006. |
(7) | Filed as an Exhibit to the Company’s Registration Statement on Form SB-2, deemed effective by the Commission on May 15, 2006. |
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: September 14, 2010 By:/s/ Chene Gardner
Chene Gardner |
Chief Executive Officer |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Chene Gardner | Director, Chief Executive Officer and Chief Financial Officer | September 14, 2010 |
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