U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM SB-2
Registration Statement Under the Securities Act of 1933
CANCER THERAPEUTICS, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 8000 20-1499421
- ----------------------------- ---------------------------- -----------------------
(State or other Jurisdiction (Primary Standard Industrial (IRS Employer
of Organization) Classification Code Number) Identification No.)
210 West Hansell Street, Thomasville, GA 31792 (229) 403-1282
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Robert K. Oldham, M.D.
210 West Hansell Street, Thomasville, GA 31792 (229) 403-1282
(Name, address, including zip code, and telephone number
including area code, of agent for service)
with copies to:
Kenneth I. Denos, Esq.
11585 South State Street, Suite 102
Draper, Utah 84020
(801) 816-2511
FAX (801) 816-2599
Approximate date of commencement of proposed sale to the public: As soon
as possible after the registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. /_/
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. /_/
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. /_/
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box./_/
CALCULATION OF REGISTRATION FEE
- ------------------------ --------------------- ----------------------- ---------------------- ----------------------
Title of Securities Amount Proposed Maximum Proposed Maximum Amount of
to be to be Offering Price Aggregate Registration
Registered(1) Registered Per Share(2) Offering Price(2) Fee(3)
- ------------------------ --------------------- ----------------------- ---------------------- ----------------------
Common Stock 4,097,688 $0.10 $409,769 $51.92
- ------------------------ --------------------- ----------------------- ---------------------- ----------------------
(1) An indeterminate number of additional shares of common stock shall be
issuable pursuant to Rule 416 to prevent dilution resulting from stock
splits, stock dividends, or similar transactions and in such event the
number of shares registered shall automatically be increased to cover the
additional shares in accordance with Rule 416 under the Securities Act.
(2) The offering price is based on an estimate by the selling shareholders of
the anticipated maximum selling price of their shares at fixed prices or
negotiated prices. If the shares are subsequently quoted on the OTC
Electronic Bulletin Board, the shares may thereafter be sold at prevailing
market prices or at negotiated prices.
(3) The amount of the registration fee was determined pursuant to Section 457
of the Securities Act.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
PROSPECTUS
4,097,688 Shares
CANCER THERAPEUTICS, INC.
------------------
Common Stock
------------------
This prospectus relates to the offer and resale by certain selling
stockholders of Cancer Therapeutics, Inc., of up to 4,097,688 shares of our
common stock.
Prior to this offering, there has been no public market for our shares. The
shares of Cancer Therapeutics will not be listed on an exchange or quoted on the
NASDAQ system upon completion of this offering and we cannot assure you that a
market will develop or, if a market should develop, that it will continue. The
initial maximum public offering price has been arbitrarily determined by us and
bears no relationship to assets, shareholders equity, or any other recognized
criteria of value.
We will not receive any proceeds from the resale of shares of Cancer
Therapeutics stock pursuant to this prospectus. We will pay for expenses of this
offering. The selling shareholders will sell their shares on an individual
basis, without the assistance of an underwriter, and no underwriting or selling
commitments have been made to any of the selling shareholders by any person.
Our business is subject to many risks and an investment in the shares of
Cancer Therapeutics will also involve a high degree of risk. You should not
purchase shares of Cancer Therapeutics unless you can afford to risk the loss of
your entire investment. See "Risk Factors" beginning on page 3 for a discussion
of certain factors which you should consider before purchasing shares of Cancer
Therapeutics.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed.
The selling stockholders may not sell or offer these securities until this
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
You should read this prospectus in its entirety prior to making an
investment in Cancer Therapeutics.
As used in this prospectus, the terms "we," "us," "our," and "Cancer
Therapeutics" mean Cancer Therapeutics, Inc. unless otherwise indicated.
- -----------
The date of this prospectus is October 22, 2004
TABLE OF CONTENTS
PAGE
NUMBER
PROSPECTUS SUMMARY............................................................1
RISK FACTORS..................................................................3
SECURITIES AND EXCHANGE COMMISSION'S PUBLIC REFERENCE.........................7
THE OFFERING..................................................................7
DILUTION......................................................................8
USE OF PROCEEDS...............................................................8
DETERMINATION OF OFFERING PRICE...............................................8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION...................8
BUSINESS.....................................................................10
DESCRIPTION OF PROPERTY......................................................16
DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS...........................17
EXECUTIVE COMPENSATION.......................................................18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................19
DIVIDEND POLICY..............................................................19
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.....................20
SELLING SECURITY HOLDERS.....................................................21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............26
DESCRIPTION OF SECURITIES....................................................27
PLAN OF DISTRIBUTION.........................................................28
INTEREST OF NAMED EXPERTS AND COUNSEL........................................29
LEGAL PROCEEDINGS............................................................29
DISCLOSURE OF COMMISSION POSITION............................................30
ORGANIZATION WITHIN THE LAST FIVE YEARS......................................31
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS................................31
REPORTS TO SECURITY HOLDERS..................................................32
FINANCIAL STATEMENTS.........................................................33
PROSPECTUS SUMMARY
This prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of Cancer
Therapeutics. We caution you that such statements are only predictions and that
actual events or results may differ materially. In evaluating such statements,
you should specifically consider the various factors identified in this
prospectus, including the matters set forth under the caption, "Risk Factors,"
which would cause actual results to differ materially from those indicated by
such forward-looking statements. The following summary is qualified in its
entirety by the more detailed information, including "Risk Factors" and the
description of Cancer Therapeutics and its operations appearing elsewhere in
this prospectus.
Our Business
Cancer Therapeutics, Inc., was incorporated under the laws of the State of
Tennessee on May 1, 1991. On September 7, 2004 we reincorporated Cancer
Therapeutics in the state of Delaware. We are a producer and provider of
treatments for cancer, commonly grouped under the category of "biotherapy."
These biotherapy services include, tumor specimen storage, cellular therapies
and patient -specific vaccines for patients diagnosed with a malignant type of
cancer. Biotherapy is complimentary to conventional cancer treatment modalities,
and is not usually used as an independent treatment for cancer. We intend to
market our services to regionally-based oncology markets, build a strong
physician referral source, and thereby become a significant biotherapy provider
in the regional markets we serve. You can learn more about our business from our
website at www.cancer-therapeutics.com.
Our mailing address and the telephone number of our principal executive
offices are 210 West Hansell Street, Thomasville, GA 31792, (229) 403-1282.
Number of Shares Being Offered
This prospectus covers the resale by the selling stockholders named in this
prospectus of up to 4,097,688 shares of Cancer Therapeutics common stock. The
offered shares were acquired by the selling stockholders in private placement
transactions which were exempt from the registration requirements of the
Securities Act of 1933. The selling stockholders may offer to sell the shares of
common stock described in this prospectus at fixed prices, at prevailing market
prices at the time of sale, at varying prices, or at negotiated prices. Please
see the "Plan of Distribution" section on page 28 of this prospectus for a
detailed explanation of how the shares of common stock offered by the selling
stockholders may be sold.
Number of Shares Outstanding
Cancer Therapeutics had 4,097,688 shares of common stock outstanding as at
September 30, 2004. Cancer Therapeutics has no other shares of capital stock
outstanding at the present time.
Use of Proceeds
We will not receive any of the proceeds from the sale of the shares being
offered for sale by the selling stockholders. We will incur all costs associated
with this registration statement and prospectus.
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Summary of Financial Data
The summarized financial data presented below is derived from and should be
read in conjunction with our audited financial statements for the years ended
May 31, 2004 and 2003 including the notes to those financial statements which
are included elsewhere in this prospectus along with the section entitled
Management's Discussion and Analysis of Financial Condition and Results of
Operations beginning on page 8 of this prospectus.
For the year ended For the year ended
May 31, 2004 May 31, 2003
------------------- ------------------
Revenue $36,104 $36,468
Net Loss for the Year ($177,448) ($280,762)
Loss Per Share - basic and diluted ($0.39) (1) ($0.62) (1)
Working Capital $77,997 $0
Total Assets $77,997 $0
Total Number of Issued Shares of Common Stock 1,947,688 (1) 447,688 (1)
Accumulated Deficit ($2,726,721) ($2,549,273)
Total Stockholders' Deficit ($572,201) ($534,753)
(1) Adjusted to reflect the reincorporation of Cancer Therapeutics from
Tennessee to Delaware, in which each five (5) shares of Cancer Therapeutics (TN)
were exchanged for one share of Cancer Therapeutics (DE).
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RISK FACTORS
You should consider carefully the risk factors set forth below, in addition
to the other information contained in this prospectus, before making a decision
to purchase shares of Cancer Therapeutics. This prospectus contains, in addition
to historical information, forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from the results
discussed in the forward-looking statements as a result of certain factors,
including those set forth in the following "Risk Factors" and elsewhere in this
prospectus. In each instance in which a risk factor identifies an event that
would or could adversely affect Cancer Therapeutics, such risk should be viewed
as potentially adversely affecting our business, results of operations, and
financial position.
Operating Risks
We Have a Limited Operating History. 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. We presently have no plans, commitment, or arrangements with respect to
any other potential business venture.
Our Operating Capital is Limited, and We Must Raise Additional Capital to
Remain in Business. We presently have limited 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 or will involve commercial
borrowing. Although we believe that our status as a publicly-traded company will
enhance our ability to raise additional capital, we cannot assure you that such
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.
Presently, we have no commitments or arrangements from commercial lenders or
other sources.
We are Heavily Dependent Upon our Key Personnel who Have Business and Time
Conflicts. We will be totally dependent in the conduct of our business upon the
knowledge, skills, and experience of Robert K. Oldham, M.D. our President, CEO,
Medical Director and Chairman. As compared to many other public companies, we do
not have a depth of managerial and technical personnel. Accordingly, there is a
greater likelihood that loss of the services of Mr. Oldham would have a material
adverse effect upon Cancer Therapeutics. We presently have no employment
contract with or key man life insurance upon Mr. Oldham. Furthermore, Mr. Oldham
will not be employed full-time, at least initially, and is involved with other
businesses and has other interests which could give rise to conflicts of
interest with respect to the business of and amount of time devoted to Cancer
Theraputics. We cannot assure you that such conflicts will be resolved favorably
to Cancer Therapeutics.
You May Not Agree With The Decisions of Our Management Team. Although our
directors and officers will endeavor to make decisions as they reasonably deem
consistent with their fiduciary duties under Delaware corporate law, you may
disagree with these decisions. Our management has significant control over
stockholder matters, which may affect the ability of minority stockholders to
influence our activities.
Insurance and Other Third Party Reimbursement 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. Difficulties receiving reimbursement from insurance
companies or other third-parties will substantially affect our business and our
results of operations.
Our Services May be Subject to FDA Regulation. Prior to being licensed for
sale in interstate commerce, therapeutic and diagnostic health care
processes/products generally are subject to rigorous approval processes by the
Food and Drug Administration and similar health authorities in foreign
countries. The precise nature of the regulatory approvals which we may be
required to obtain are not clear at this point. Obtaining FDA and corresponding
foreign approvals for technology, processes, or products we have developed is
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likely to be costly and time consuming and will, in our opinion, require several
years. The length of such time period, however, will depend upon the use for
which approval is sought and the results of clinical testing with respect to
such use. We cannot assure you that such approval will be granted. Further, we
cannot assure you that subsequent adoption or amendment of laws or
interpretation of existing laws will not have a material adverse impact upon
Cancer Therapeutics.
We Are Susceptible to Increased Operating Costs. 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 and financial condition may be adversely affected.
We May Not Have any Patent Protection for Our Technology. We expect to
own and rely upon certain trade secrets and know-how but we have not yet sought
patent protection for our technology. It may not be possible for us to obtain
patent protection for many aspects of our technology. We cannot assure you that
that others will not independently develop substantially equivalent information
and techniques or otherwise gain access to our technology. We believe that, in
general, it is unlikely that true proprietary protection will be available to
companies such as Cancer Therapeutics which develop biologicals for commercial
use.
Our Value Can be Negatively Affected in Many Ways. The value of the
stock of a biotherapy company such as Cancer Therapeutics depends largely upon
the income generated from the services offered to patients. If our services do
not generate enough cash flow to meet our operating expenses, our ability
develop and expand our business and become profitable will be adversely
affected. Income from biotherapy may be adversely affected by a number of
factors, including, but not limited to:
- - the general economic climate (such as too much supply or too little demand
for biotherapy);
- - the failure of our products to receive requisite approvals, or significant
delays in obtaining any such approval by regulatory bodies, state, federal,
and local laws and regulations;
- - our ability to provide adequate management of our operations, maintenance
of our facilities and equipment and insurance coverage;
- - extraordinary expenses for research and development and obtaining
intellectual property protection;
- - intense competition and rapid and significant technological change in the
medical industry; and
- - increasing competitors in the U.S. and abroad.
No Underwriter is Participating in this Offering. Because neither Cancer
Therapeutics nor any of the selling stockholders have engaged the services of an
underwriter with respect to this offering, the independent due diligence review
of Cancer Therapeutics, its affairs and financial condition, which would
ordinarily be performed by an underwriter and its legal counsel, has not been
performed and you will not have the benefit of an underwriter's independent due
diligence review.
Investment Risks
A Purchase of Our Shares is a Speculative Investment. Cancer Therapeutics'
shares are a speculative investment. To date, Cancer Therapeutics has generated
losses and we cannot guarantee you that we will able to generate a profit. If we
are unsuccessful at generating profits for Cancer Therapeutics, it is unlikely
that Cancer Therapeutics would be able to meet its financial obligations and you
could lose your entire investment.
There has Never Been a Public Market For Our Shares. Prior to this
registration statement, there has been no public market for the common stock of
Cancer Therapeutics. If a public market for the common stock does develop at a
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future time, sales of shares by shareholders of substantial amounts of common
stock of Cancer Therapeutics in the public market could adversely affect the
prevailing market price and could impair our future ability to raise capital
through the sale of our equity securities.
You May Lack Liquidity in Your Shares. Because in the future, our stock may
trade on the over-the-counter bulletin board, our stockholders may have greater
difficulty in selling their shares when they want and for the price they want.
The over-the-counter bulletin board is separate and distinct from the Nasdaq
stock market. The bulletin board does not operate under the same rules and
standards as the Nasdaq stock market, including, for example, order handling
rules. The absence of these rules and standards may make it more difficult for a
stockholder to obtain execution of an order to trade and to obtain the price
they wanted for a trade. This means our shareholders may not be able to sell
their shares when they want for a price they want. In addition, because stocks
traded on the bulletin board are usually thinly traded, highly volatile, have
fewer market makers and are not followed by analysts, our stockholders may have
greater difficulty in selling their shares when they want and for the price they
want. Investors may have greater difficulty in getting orders filled because it
is anticipated that if our stock trades on a public market, it initially will
trade on the over-the-counter bulletin board rather than on Nasdaq. Investors'
orders may be filled at a price much different than expected when an order is
placed. Trading activity in general is not conducted as efficiently and
effectively as with Nasdaq-listed securities. Bulletin board transactions are
conducted almost entirely manually. Because there are no automated systems for
negotiating trades on the bulletin board, they are conducted via telephone. In
times of heavy market volume, the limitations of this process may result in a
significant increase in the time it takes to execute investor orders. Therefore,
when investors place market orders - an order to buy or sell a specific number
of shares at the current market price - it is possible for the price of a stock
to go up or down significantly during the lapse of time between placing a market
order and getting execution. Because bulletin board stocks are usually not
followed by analysts, there may be lower trading volume than for Nasdaq-listed
securities. Further, a registered broker-dealer must submit an application to
the National Association of Securities Dealers to enable our stock to be listed
on the bulletin board. Because the National Association of Securities Dealers
will conduct their own review of Cancer Therapeutics and its business, we cannot
assure you that we will be successful in getting Cancer Therapeutics listed on
the bulletin board or any other quotation medium.
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.
We Have Limited the Liability of Our Management. Cancer Therapeutics has
adopted provisions in its charter which limit the liability of our officers and
directors to the fullest extent permitted by Delaware corporate law. Cancer
Therapeutics' Certificate of Incorporation generally provides that our directors
shall have no personal liability to Cancer Therapeutics or its stockholders for
monetary damages for breaches of their fiduciary duties as directors, except for
breaches of their duties of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of law, acts involving
unlawful payment of dividends or unlawful stock purchases or redemptions, or any
transaction from which a director derives an improper personal benefit. Such
provisions substantially limit your ability to hold directors liable for
breaches of fiduciary duty.
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.
Trading of Our Stock May Be Restricted by the SEC's Penny Stock
Regulations. The Securities and Exchange Commission has adopted regulations
which generally define "penny stock" to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
"accredited investors." The term "accredited investor" refers generally to
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institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the Commission which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer's confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
NASD Sales Practices May Also Limit Your Ability to Buy and Sell Our Stock.
In addition to the "penny stock" rules described above, the National Association
of Securities Dealers has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to
recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, the NASD believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The NASD requirements make it more
difficult for broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.
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SECURITIES AND EXCHANGE COMMISSION'S PUBLIC REFERENCE
Any member of the public may read and copy any materials filed by us with
the Securities and Exchange Commission at the Commission's Public Reference Room
at 450 Fifth Street, NW, Washington, D.C. 20549. Information on the operation of
the Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. The Commission maintains an Internet website
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the
Commission.
THE OFFERING
This prospectus relates to the resale by certain selling stockholders of
Cancer Therapeutics, Inc. of up to 4,097,688 shares of our common stock in
connection with the resale of:
- - up to 447,688 shares of our common stock which were issued to various
shareholders in connection with the liquidation of Immune Complex
Corporation, the formerparent company of Cancer Therapeutics,Inc. on June
8, 2000;
- - up to 1,300,000 shares of our common stock which were issued in connection
with the engagement of corporate legal counsel on May 10, 2004 (these
shares have subsequently been sold to a single purchaser in a private
transaction);
- - up to 1,000,000 shares of our common stock which were issued in connection
with the engagement of our Chief Financial Officer on May 15, 2004;
- - up to 200,000 shares of our common stock which were sold in exchange for
cash on May 28, 2004;
- - up to 400,000 shares of our common stock which were issued in connection
with the engagement of securities counsel on July 20, 2004;
- - up to 400,000 shares of our common stock which were issued in connection
with the conversion of a promissory note on September 15, 2004 for amounts
loaned to Cancer Therapeutics by our Chief Executive Officer in 2001;
- - up to 200,000 shares of our common stock which were issued on September 20,
2004 in settlement of deferred consulting fees for healthcare advisory
services provided in 2001; and
- - up to 150,000 shares of our common stock which were issued on September 20,
2004 in connection with the engagement of a United Kingdom-based financial
advisory firm.
The selling stockholders may offer to sell the shares of common stock being
offered in this prospectus at fixed prices, at prevailing market prices at the
time of sale, at varying prices or at negotiated prices. We will not receive any
proceeds from the resale of shares of our common stock by the selling
stockholders.
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DILUTION
The common stock to be sold by the selling stockholders is the 4,097,688
shares of common stock that is currently issued and outstanding. Accordingly,
there will be no dilution to our existing stockholders.
USE OF PROCEEDS
The shares of common stock offered by this prospectus are being registered
for the account of the selling stockholders named in this prospectus. As a
result, all proceeds from the sales of the common stock will go to the selling
stockholders and we will not receive any proceeds from the resale of the common
stock by the selling stockholders. We will, however, incur all costs associated
with this registration statement and prospectus.
DETERMINATION OF OFFERING PRICE
Because the shares of Cancer Therapeutics common stock are not traded on
any exchange or quotation medium, our selling shareholders have made an estimate
of the offering price at which they will initially offer their shares, but such
offering price bears no relationship to assets, shareholders equity, or any
other recognized criteria of value. Once the shares become eligible for
quotation and trading on the OTC Electronic Bulletin Board, if at all, the
shareholders may sell their shares at prevailing market prices or at negotiated
prices, which could be greater or less than the price offered pursuant to this
registration statement of which this prospectus forms a part.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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
Cancer Therapeutics is a U.S. producer and provider of treatments for
cancer, commonly grouped under the category of "biotherapy." We provide
biotherapy services to patients on a fee-basis (50 percent to 70 percent
currently reimbursed through private insurance). These services begin when a
patient is diagnosed with a malignancy and continue to provide a biotherapy
while a patient is receiving conventional cancer treatment: chemotherapy,
radiation, and surgery. You can learn more about our business at our website
located at www.cancer-therapeutics.com.
Results of Operations
Following is our discussion of the relevant items affecting results of
operations for the years ended May 31, 2004 and 2003.
Revenues. Cancer Therapeutics generated net revenues of $36,104 during the
fiscal year ended May 31, 2004 compared to $36,468 in net revenues for the
twelve months ended May 31, 2003. We anticipate this level of revenues for the
foreseeable future.
Bad Debt Expense. Bad debt expense for the fiscal year ended May 31, 2004
was $22,190, a 88% decrease from $187,684 during the twelve months ended May 31,
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2003. Bad debts expense encompasses various accounts and loans receivable that
have been deemed uncollectible by management. The decrease is due to several
large loans which were written off during the fiscal year ended May 31, 2003.
During the fiscal year ended May 31, 2004, these types of loans were not made
and new accounts were more closely scrutinized for credit worthiness.
General and Administrative Expenses. Our general and administrative
expenses have been comprised of administrative wages and benefits; occupancy and
office expenses; travel and other miscellaneous office and administrative
expenses. General and administrative expenses for the fiscal year ended May 31,
2004 was $42,189, a 60% decrease from $104,659 during the twelve months ended
May 31, 2003. This decrease was primarily due to the efforts of management in
keeping costs to a minimum. Our payroll expense accounted for approximately
$17,939 of general and administrative expenses during the fiscal year ended May
31, 2004, as compared to $0 during the fiscal year ended May 31, 2003. We do not
anticipate any material commitments for capital expenditures in the foreseeable
future.
Professional Fees. Our professional fees include outside legal, accounting
and other professional fees. Professional fees for the fiscal year ended May 31,
2004 were $115,000, a 100% increase from $0 during the twelve months ended May
31, 2003. This increase was attributable to accounting services provided to the
company in conjunction with the audits and preparation of the financial
statements. Further contributing to this increase were legal fees associated
with the preparation of this registration statement.
Other Income (Expense). We incurred net other expense of $34,173 for the
year ended May 31, 2004 compared to net other expense of $24,887 during the
twelve months ended May 31, 2003. Expenses incurred in this category were
comprised primarily of interest expense associated with promissory notes issued
by the Company.
Personnel
Cancer Therapeutics has 1 full-time employee, 2 part-time employees, and
other project-based contract personnel that we utilize to carry out our
business. We expect to hire additional personnel as we continue to execute our
business plan.
Liquidity and Capital Resources
Since inception, we have financed our operations from a combination of
loans from our Chief Executive Officer and from business cash flows. As of May
31, 2004, our primary source of liquidity consisted of $77,997 in cash and cash
equivalents. Cancer Therapeutics has sustained significant net losses which have
resulted in an accumulated deficit at May 31, 2004 of $2,726,721. Our losses
raise doubts about our ability to continue the business of Cancer Therapeutics
as a going concern. Consequently, we anticipate that we will require additional
cash inflows from increased revenues or sales of debt or equity capital to
maintain operations and finance substantial business initiatives that may arise.
9
BUSINESS
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 fo 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.
THE BUSINESS OF CANCER THERAPEUTICS
Mission and Vision
Our mission is to commercialize innovative biotherapy approaches for the
treatment of cancer that will enhance the quality and length of life for cancer
patients. To accomplish our mission, we offer oncologists access to our
technologies and service, which we expect to increase our patient referrals. Our
vision is to become a devoted provider within the cancer treatment industry by
offering advanced services to cancer patients to be used in conjunction with
conventional treatment modalities. To accomplish our vision, we intend to market
our services to regionally based oncology markets, build a strong physician
referral source, and thereby become a significant biotherapy provider in the
regional markets that we serve. You can learn more about our business at
www.cancer-therapeutics.com.
Overview
We are an experienced U.S. producer and provider of treatments for cancer,
commonly grouped under the category of "biotherapy." Based in Thomasville,
Georgia, we are led by our founder and Chief Executive Officer, Dr. Robert K.
Oldham, who helped pioneered both the research and practical implementation of
cellular biotherapy. We provide biotherapy services - tumor specimen storage,
cellular therapies, and patient-specific vaccines - on a fee-basis to a patients
who have been diagnosed with a malignancy.
Over the past two decades, the acceptance of biotherapy treatment among
oncologists and cancer patients has dramatically increased. Biotherapy is
recognized as an exceptional treatment for the life-altering disease because it
uses the body's own natural defense system and is considered complementary to
conventional cancer treatment modalities. While undergoing other treatment
options, principally chemotherapy, radiation, or surgery, a patient can
simultaneously pursue biotherapy treatment at an affordable price (50 percent to
70 percent currently reimbursed through private insurance).
The Business Model and Value Proposition
We provide biotherapy services to patients on a fee-for-service basis.
These services begin when a patient is diagnosed with a malignancy and continue
to provide a biotherapy while a patient is receiving conventional cancer
treatment: chemotherapy, radiation, and surgery. Over the next few years, we
intend to create a marketing presence among oncologists and patients in the
Southeast region, and continue to expand to regionally based markets throughout
the U.S.
Technology
The three most standard modes of cancer treatment include: chemotherapy,
radiation therapy, and surgery. Each of these treatments, however, has
significant limitations and can cause toxicities in fighting cancer. Since 1980,
a fourth modality, biotherapy, has been used in conjunction with traditional
treatments. We believe that biotherapy offers the best opportunity for truly
10
specific and effective cancer treatments. Certain activated cells play a major
role in the battle against cancer and methodologies are being developed to
activate and expand a patient's own immune cells outside of the body and return
them safely as a therapeutic cellular product. The technologies we employ
emphasize the enhancement of the body's natural defense system.
Services
We provide clinical services to cancer patients as well as continuous
research in the biotherapy treatment of cancer pursuant to the following
services:
Cryobank. In this process, a patient's surgically removed tumor tissue
is shipped to us, specially processed, preserved and stored in a living
condition in liquid nitrogen for future use. This process of
cryopreservation is very important to biotherapy in that it provides
options for additional treatments such as Tumor Derived Activated Cells
(described below) or vaccines should standard therapy fail or cancers
recur.
Tumor Derived Activated Cells. In this process, a patient's tumor is
shipped to our laboratory by overnight delivery. Using a number of
specialized proprietary processes, technicians separate and recover the
cancer-fighting white blood cells that a patient's immune system has
produced to attack that specific cancer. These cells are known as "Tumor
Derived Activated Cells" or "Tumor Infiltrating Lymphocytes." FDA-approved
biological drugs, such as Interleukin-2, are used to stimulate or activate
the cells' cancer-fighting functions. Using a device called a "bioreactor,"
the cells are grown and multiplied for therapy. At regular intervals over
the course of a two-month period, the anti-cancer cells are harvested, and
shipped by overnight courier to the patient's physician for infusion into
the patient. The reinfusion of these activated cells can influence the
status of the immune system in a positive way and help eradicate the
disease. We anticipate that the following lifecycle will take place in the
developmental process of Tumor Derived Activated Cells cells for
biotherapy:
- Treatments using single, moderate doses of Tumor Derived
Activated Cells and Tumor Infiltrating Lymphocytes cells derived
from the patient's tumor;
- Protocols employing a series of four to six moderate size doses
of Tumor Derived Activated Cells and Tumor Infiltrating
Lymphocytes cells derived from a patient's tumor;
- Protocols exploring cell dose, schedule, and selection in
cellular therapy;
- Therapies using "designer T-cells" where a patient is infused
with Tumor Derived Activated Cells and Tumor Infiltrating
Lymphocytes cells that have been selected or genetically modified
to be cytotoxic to cancer or produce large quantities of
lymphokines or cytokines to destroy the tumors; and
- Treatments that combine activated cell therapies with other
agents and compounds to enhance overall efficacy.
Vaccines. In this process, a patient's own (autologous) cancer
cells can be grown in the laboratory, produced in mass quantities, and
used to develop a patient-specific vaccine. More specifically, the
cancer cells are cultured to develop a tumor cell line, the cells are
irradiated to prevent growth, and the vials of cells are cryopreserved
and shipped on dry ice back to the oncologist for patient treatment.
Outlook
Because many patients seeking new therapy modalities have little hope of
survival, it is not surprising that these promising treatments have, in some
cases, proven to be disappointments with only a limited percentage of patients
responding to cellular therapy such as that which is provided by Cancer
Therapeutics. Moreover, cellular technologies have excelled where chemotherapy,
surgery, and radiation therapies have traditionally had limited success. Certain
types of skin cancer and advanced kidney cancer cannot be eliminated through
traditional methods. As a result, traditional medicine has accomplished little
11
in extending the lives of patients inflicted with these cancers. Biotherapy,
however, when used concurrently with traditional treatment modalities, offers
patients with little hope of survival, an opportunity to experience effective
treatment, prolonged survival, and in some cases, a possible cure.
Research and Development
We are continually researching and developing our procedures we offer to
the public. We spent approximately 15-20 hours per week during the last two
fiscal years on research and development. We spent approximately $23,000 per
year on research and development over the past two fiscal years. The costs of
research and development have been borne by us directly, and the costs of
research and development are priced into the services we offer to our patients.
THE MARKET
Conventional Cancer Treatment Modalities
The following points briefly describe the three most common modes of cancer
treatment modalities in the marketplace:
Surgery. Surgery is typically the first treatment choice and is used
to remove localized cancerous tumors and surrounding cancerous tissues.
Approximately 60 percent of cancer patients undergo this type of treatment.
Surgical success, however, is dependent on whether the tumor has spread.
Although surgery can be used in conjunction with other treatment
modalities, approximately 30 - 40 percent of cancer patients are cured by
surgery alone.
Chemotherapy. Chemotherapy is used to treat cancerous cells that have
spread or metastasized to other parts of the body. The treatment procedure
involves either intravenously injecting or orally taking powerful
anti-cancer drugs, which are administered at intermittent intervals over
the course of approximately six months. The most common side effects
associated with chemotherapy are nausea, vomiting, hair loss, and fatigue.
Radiation. Radiation therapy treats localized cancers by using
high-energy particles or waves, such as x-rays or gamma rays, to destroy
cancerous cells so that they will not continue multiplying. Over half of
cancer patients undergo radiation therapy at some point in their treatment
process. Like surgery, radiation therapy can be used in conjunction with
other treatment modalities. The common side effects associated with
radiation include fatigue, skin changes, and loss of appetite.
Research has shown that cancer is a highly individualized disease.
Treatments such as surgery, chemotherapy, and radiation work well for some
patients, but may not be effective for others. Therefore, biotherapy has become
a promising new treatment for cancer and is often times used in conjunction with
the above modalities.
Biotherapy Treatment
There are several reasons for the biotherapy treatment modality's
increasing opportunity in the marketplace.
Increasing Incidence of Cancer. Despite the recent advancements in the
diagnosis and treatment of cancer, cancer rates and the number of deaths
from cancer continue to increase. According to the National Institute of
Cancer, approximately 9.6 million people alive today have a history of
cancer. In addition, over 1.22 million new cancer cases develop each year,
and the incidence of the disease continues to grow at three percent to four
percent per year. Despite improvements in drug, surgical, and radiation
therapies, the five-year relative survival rate for people who are living
five years after diagnosis, whether in remission, disease-free, or under
12
treatment is only 54 percent. About 563,700 Americans are expected to die
of cancer every year, more than 1,500 people per day (American Cancer
Society, 2004). Cancer is the second leading cause of death in the United
States, occurring in one out of every four deaths. According to experts,
the incidence of cancer is likely to grow in the future in response to two
significant trends:
- The gradual aging of the U.S. population - About one in every
eight, or 12.7 percent, of the population is an older adult. The
older population in the United States is projected to more than
double to about 70 million by the year 2030. Although cancer
develops in people of all ages, it most often occurs in the
middle aged and elderly.
- Exposure of the public to cancer causing agents and factors - In
all actuality, lifestyle choices are the cause of most cancers.
As demonstrated in the diagram below, tobacco and diet (and/or
lack of exercise) accounts for 60 percent of cancer related
deaths.
Within this large number of patients, the use of activated cell therapy is
believed to be effective for selected solid tumors. Melanoma and kidney
cancer are the primary cancers currently treated with activated cell
therapy. Cellular treatment is also appropriate for patients with lung,
breast, gastrointestinal, and gynecological tumors, as well.
The projected growth in the incidence of cancer will contribute to the need
for continued cancer research and development of innovative cancer
therapies as well as an increase in the sales and manufacturing of new
cancer products. The increasing prevalence of cancer and the growth in the
cell therapy market offers great opportunity for immunotherapeutic
approaches to the treatment of cancer. With the increasing
industrialization of other countries and the resultant impact upon their
environment, the incidence of cancer abroad is expected to increase,
thereby expanding our market.
The Target Market
The target market for our services is composed of two different groups:
- Individuals who have undergone conventional treatment for a newly
diagnosed cancer with an uncertain cure rate, but are ultimately
cured (candidates for our cryopreservation service); and
- Individuals with cancers incurable through ordinary therapies
(candidates for our cryopreservation, patient-specific vaccines,
and autologous T-cell therapy services).
Annual Target Market
Of the 1.22 million new cancer patients per year, approximately 54 percent
are cured by current procedures. At least 50 percent of these cured patients,
however, will have tumors where the cure rate is uncertain and, as a result,
they may need therapeutic alternatives. By placing tumor specimens in
cryopreservation, the tumors can be accessed for future therapeutic needs should
the cancer recur, thereby creating a cryopreservation market that exceeds
300,000 patients per year.
The second group of patients is derived from the 46 percent of the 1.22
million new cancer patients with incurable cancers, 70 percent of which are
estimated to choose to access better therapeutic opportunities. All of these
patients would have a need for cryopreservation services, yielding 300,000+
potential patients. This group of patients may also have some need for the
patient-specific vaccine and autologous T-cell therapies. We estimate that 20
percent of this market, exceeding 50,000 patients, could require those services.
Although these projections are based on national statistical information,
it is important to note that healthcare services are generally provided at the
local level, and the treatment of cancer is considered to be more regionally
based, with diagnosis and treatment controlled by oncologists practicing in the
local area. As such, our marketing strategy focuses on expanding through
regional markets.
Strategy
As incidence rates and the number of cancer deaths continue to increase,
more individuals will most likely be seeking biotherapy treatment to compliment
13
conventional cancer treatments. This environment creates an opportunity for a
biotherapy provider such as Cancer Therapeutics to offer cellular therapy
technologies and tumor storage services to cancer patients who have encountered
limited success using standard treatment modalities. Over time, we plan to
market our services to other regionally based markets throughout the United
States. These regional markets will be expected to serve a similar sized
community as the service area in Thomasville. We intend to expand contiguously
in each region gradually increasing our market penetration, allowing us to meet
any growing demand for biotherapy services. Our revenue model is aimed at
utilizing the cellular therapies and patient-specific vaccines to recoup
significant up-front costs, while the Cryobank services are used to generate
continuous revenue for Cancer Therapeutics.
Our marketing efforts will be directed at expanding awareness of our
services to potential patients and providers. A variety of sources may be used
to stimulate customer demand in the services provided such as research
publications, televised educational programs, advertisements in medical journals
and patient publications, as well as lectures given by Dr. Oldham.
COMPETITION
Our primary competition is other biotechnology companies and universities
pursuing research and development, manufacturing, and sales in the areas of
cryopreservation, activated cell therapy, and patient-specific vaccines. We plan
to differentiate Cancer Therapeutics from our competitors through our strategic
location, regional marketing approach, and our ability to provide clinical
services that efficiently serve a specific cancer patient population, while
continuing to research and develop cellular therapy technologies. By providing a
complementary and reasonably priced treatment for patients who are not
responding successfully to standard treatment modalities, we are positioned to
fill a market need. Through our regional marketing approach, we plan to convert
our financial performance into a high growth company. Building additional
marketing networks should enable us to develop a marketing presence among
oncologists' niches and patient communities in other regions of the country. As
a result, we hope to establish a consistent flow of referrals and expand the
business. Ultimately, cancer patients throughout the country will have access to
our services and will have the opportunity to benefit from the biotherapy
treatments we offer.
We compete with a number of competing biotechnology companies located
throughout the United States. Our competitors are focused principally on the
research and development of products. We anticipate an ability to attract
oncologists and patients seeking biotherapy clinical services - both for storage
and therapeutic purposes.
Several of our cryopreservation competitors that store and preserve tumor
tissues. Unlike Cancer Therapeutics, however, these companies ship the tumor
tissue to other biotech companies for cellular activation and patient-specific
vaccines because such services are not available at the facility. We believe
that Cancer Therapeutics maintains a competitive advantage in the area of
cryopreservation through our integrated approach, providing storage services and
also producing cellular activation therapy and patient-specific vaccines for
cancer treatment. By providing this continuum of services, we ensure the safety
of the tissue specimen as well as save time for the patient.
Finally, our business approach which includes a marketing strategy that is
expected to increase the number of patient referrals by honing in on regionally
based oncology markets is unique to Cancer Therapeutics. Through this regional
approach, we anticipate that we will meet the increasing demand for biotherapy
services in the marketplace.
Tumor Derived Activated Cells Competitor:
Xcyte Therapies Inc., Seattle, Washington - Xcyte Therapies is a
biotechnology company that develops and commercializes cancer therapeutic
products. Xcyte is targeting its first product, called Xcellerate, to treat
cancers that respond to therapeutic agents that activate the immune system.
These types of cancers include kidney cancer, melanoma, non-Hodgkin's
lymphoma, and prostate cancer. In August 2000, they began thier first
Xcellerate clinical trial on patients with advanced kidney cancer.
Patient-Specific Vaccine Competitors:
Antigenics, Inc. New York - Antigenics, Inc. is a public biotechnology
company that is developing patient-specific (autologous) cancer vaccines by
14
extracting selected "heat shock" proteins from cell surface of patient's
own tumor tissue. Its leading product, Oncophage, is currently in the
clinical phase and has been tested thus far on the following cancers:
kidney, colorectal, pancreatic, gastric, melanoma, non-Hodgkin's lymphoma,
and sarcoma.
AVAX Technologies Inc. Kansas City, Missouri - AVAX Technologies is a
public company that produces a patient-specific (autologous) cancer vaccine
by treating a patient's own tumor cell with dinitrophenyl (DNP), a chemical
that helps trigger immune responses. According to the AVAX website, this
technology is currently under human clinical trials at Thomas Jefferson
University as an outpatient, post-surgical, adjunct therapy treatment of
malignant melanoma. AVAX has established a manufacturing facility and
distribution system that allows the company to supply the entire US from
one facility, making the production process simple and efficient. The
product is also being established as commercially available internationally
as well.
Intracel Corporation. Rockville, Maryland - Intracel Corporation is a
private biopharmaceutical company headquartered in the Netherlands and
operating in the United States that develops and commercializes vaccines
and immunotherapeutic products for cancer. More specifically, it produces a
patient-specific autologous cancer vaccine by adding a patient's tumor
cells to an immunomodulating substance called BCG (bacillus-calumet
Guerin). The most advanced product that Intracel Corporation offers is
OncoVAX, a vaccine for stage II colon cancer patients, which is currently
available in the Netherlands with plans to extend the availability of the
product to Germany, Switzerland, Italy, and Spain. Intracel Corporation has
developed a refined production process for the product and plans to conduct
a small clinical trial before seeking FDA approval to market the drug in
the United States.
Cryopreservation Competitor:
Cryoma Laboratories, Inc., Cleveland, Ohio - Cryoma Laboratories is a
private company that offers tumor cell banking services and informational
services for cancer patients. They identify patients that might benefit
from new treatment therapy and ship the tumor tissue to another biotech
company for patient-specific vaccines and gene therapy.
GOVERNMENTAL APPROVAL
We have made a number of Investigational New Drug Applications with the
Food and Drug Administration. Applications IND 2792, and IND 6533 are current.
These Investigational New Drugs are used for the tumor derived activated cell
therapy and for the cryobank function of Cancer Therapeutics. IND 8725 is on
clinical hold by the Food and Drug Association due to the excessive costs
involved in getting approval. IND 8725 is associated with the vaccine process.
While an Investigational New Drug is current with the Food and Drug
Administration, we can only use the drug for research. Accordingly, each of our
patient agreements are premised on a research basis for that patient. We do not
use IND 8725 because of its hold status and therefore we are unable to use the
drug for the vaccine treatment.
PRINCIPAL SUPPLIERS
We receive laboratory and healthcare supplies from a variety of suppliers.
We do not anticipate a shortage of materials necessary to operate our business.
The following are the supplies we need and the suppliers we presently use:
Baxter Healthcare- Cell culture supplies
BEC Laboratories- Microbes for quality assurance testing
BioWhittaker- Tissue culture media, endotoxin testing kit
Daigger- Laboratory supplies
Gibco/Invitrogen- Tissue culture media, reagents
Holox/Linde Gas- Liquid nitrogen, carbon dioxide
HyClone Laboratories- Culture media/serum
Laboratory Supply Co.-Laboratory supplies
Sigma Chemical Co.- Chemicals, tissue culture reagents
15
ENVIRONMENTAL EFFECTS
We have not incurred and do not anticipate incurring costs in complying
with federal, state and local environmental laws because we use materials that
are common in medicine and the procedures for handling and disposing of
materials used is well established. We do not anticipate that our biotherapy
will have any adverse effects on the environment because we dispose of all
biological and medical materials in the same manner as other medical clinics.
DESCRIPTION OF PROPERTY
Cancer Therapeutics does not own any real property. We lease our building
located at 210 West Hansell Street, Thomasville, GA from the local hospital in
Thomasville. There is approximately 1500 square feet on the premises. We use an
estimated 1,000 square feet as a lab and about 500 square feet for offices. We
store tumors on site. 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.
16
DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS
Directors and Executive Officers
Name Age Position(1)
- ---- --- --------
Robert K. Oldham, M.D. 61 Chief Executive Officer and Director
Michael Low 49 Secretary and Director
Chene Gardner 40 Chief Financial Officer and Director
(1) Officers hold their position at the pleasure of the board of directors,
absent any employment agreement.
Robert K. Oldham, M.D., age 61, is the Chief Executive Officer of Cancer
Therapeutics and is a member of the Cancer Therapeutics board of directors. Dr.
Oldham has been the Chief Executive Officer of Cancer Therapeutics since 1991.
He was appointed to the board of directors of Cancer Therapeutics since
inception of Cancer Therapeutics and currently serves on the board of directors
for a one-year term expiring August, 2005. Prior to his association with Cancer
Therapeutics, from 1975 to 1980, Dr. Oldham was a research-oriented medical
oncoligist at Vanderbilt University and the National Cancer Institute. He has
published a variety of papers on the use of activated cells and has extensive
expertise in the development and use of monoclonal antibodies for cancer
therapy. Currently, Dr. Oldham serves as a scientific consultant to
NycoMed-Amersham, a British health care and medical research group; Xcyte
Therapies (Seattle, Washington) and Cell Genesys Inc. (Foster City, California).
He also serves as Consulting Medical Director of CBA Pharma (Lexington,
Kentucky) and serves as Associate Medical Director of the Singletary Oncology
Center in Thomasville Georgia. Dr. Oldham is not a director of any other company
filing reports pursuant to the Securities Exchange Act of 1934.
Michael Low, age 49, is a member of the Cancer Therapeutics, Inc. board of
directors and serves as corporate secretary. Mr. Low was appointed by the board
of directors of Cancer Therapeutics in August, 2004 for a one-year term,
expiring August, 2005. In addition to his association with Cancer Therapeutics,
since March 2003, Mr. Low has been Chief Executive Officer for Advisory
Services, founder and executive director of Healthcare Enterprise Group PLC, an
international healthcare products distribution company, with a strategic focus
on specialized, high-value products and markets. Based in London, Healthcare
Enterprise Group PLC is listed on the Alternative Investment Market of the
London Stock Exchange and is the parent corporation of Healthcare Enterprise
Group, Inc., in which Mr. Low has served as the Chief Executive Officer since
November 1998. Healthcare Enterprise Group, Inc. is a healthcare advisory
company based in Los Angeles. Mr. Low holds a Masters degree in Public
Administration from the University of Southern California. Mr. Low is not a
director of any other company filing reports pursuant to the Securities Exchange
Act of 1934.
Chene Gardner, age 40, is the Chief Financial Officer of Cancer
Therapeutics and a member of the Cancer Therapeutics board of directors. Mr.
Gardner was appointed to the board of directors of Cancer Therapeutics in
August, 2004 for a one-year term expiring August, 2005. Mr. Gardner has served
as Chief Financial Officer to Cancer Therapeutics since May, 2004. Mr. Gardner
also serves as the Chief Financial Officer of Synerteck Incorporated and as the
Financial Controller of SportsNuts, Inc. He has served in these capacities for
Synerteck and SportsNuts since March, 2001 and September, 1999, respectively.
Synerteck is an information technology services company and SportsNuts, the
parent corporation of Synerteck, 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. 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 is a director of Synerteck Incorporated, a
company which files reports pursuant to the Securities Exchange Act of 1934.
Other Key Personnel
Walter Lewko, Ph.D., age 55, is the principal biochemist/immunologist of
Cancer Therapeutics. Dr. Lewko was retained by Cancer Therapeutics in September,
1992, and is responsible for laboratory research and production. Prior to his
17
association with Cancer Therapeutics, from 1986 to 1989, Mr. Lewko was the
Section Head of Tumor Cell Biology at Biotherapeutics, Inc. and was responsible
for growth of tumor cell lines for therapeutic programs. These responsibilities
included the large-scale generation of seed-stock cells for bioreactors. Prior
to Biotherapeutics, Dr. Lewko held various university and government research
positions. Mr. Lewko is not a director of any company which files reports
pursuant to the Securities Exchange Act of 1934.
Board of Directors Meetings and Committees
Board of Directors. Although various items were reviewed and approved by
unanimous written consent of the board of directors during the fiscal year ended
May 31, 2004, the board held no physical meetings during such fiscal year.
Audit Committee. Cancer Therapeutics has recently created an Audit
Committee of the board of directors. The Audit Committee is responsible for
determining the application of financial reporting and internal control
principles, as well as reviewing the effectiveness of our financial reporting,
internal control and risk management procedures, and the scope, quality, and
results of our external audit. Our Audit Committee consists of Michael Low and
Chene Gardner. The Audit Committee has reviewed and approved our audited
financial statements included in this prospectus. 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 not independent because he is an officer and principal shareholder of Cancer
Therapeutics.
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, 2004, 2003, and 2002 of Robert K. Oldham, M.D., our Chief
Executive Officer. No other executive officer 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. We did not issue any shares, options, units, or
other rights to any of our executive officers during the fiscal year ended May
31, 2004.
Summary Compensation Table
Long-Term
Compensation
--------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other Annual Securities
Name and Compensation Restricted Underlying LTIP All Other
Principal Position Year Salary Bonus Stock Awards Options Payouts Compensation
- ------------------------------------------------------------------------------------------------------------------------
Robert K. Oldham, 2004 $ 0 $ 0 $ 0 $ 0 0 0 $ 0
M.D. 2003 0 0 0 0 0 0 0
CEO 2002 0 0 0 0 0 0 0
Employment Agreements
On May 15, 2004, we concluded an agreement with Chene Gardner, our Chief
Financial Officer, to receive accounting and financial services. The agreement
originally called for an engagement fee of $50,000, but has subsequently been
amended to provide instead for the payment of one million shares of Cancer
Therapeutics Stock and a cash payment of $2,000. The shares are non-refundable
and, although we may execute a subsequent employment agreement with Mr. Gardner,
the agreement provides for no other payments in the future. None of our other
executive officers is subject to an employment agreement with Cancer
Therapeutics.
18
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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 28, 2004, we issued and sold 200,000 shares of our common stock,
together with a warrant to acquire 1,300,000 shares of our common stock at an
aggregate purchase price of $25,000, to Healthcare Enterprise Group, Inc., in
exchange for $75,000 in cash proceeds. Healthcare Enterprise Group is a
principal shareholder of Cancer Therapeutics and Michael Low, a director and
Secretary of Cancer Therapeutics, is the Chief Executive Officer of Healthcare
Enterprise Group.
On September 10, 2004, we issued 400,000 shares of our common stock in
satisfaction of amounts owed to Kenneth I. Denos, P.C., a professional
corporation, in connection with an engagement dated July 20, 2004. Kenneth I.
Denos, the sole shareholder and President of Kenneth I. Denos, P.C., is a member
of the board of directors of Healthcare Enterprise Group, Inc., a principal
shareholder of Cancer Therapeutics.
On September 10, 2004, we issued 1,000,000 shares of our common stock in
satisfaction of amounts owed to our Chief Financial Officer in connection with
an engagement for accounting services dated May 15, 2004.
On September 15, 2004, we issued 400,000 shares of our common stock
pursuant to the conversion of a promissory note issued by Cancer Therapeutics in
2001 to Robert K. Oldham, M.D., our Chief Executive Officer.
On September 20, 2004, we issued 200,000 shares of our common stock in
satisfaction of amounts owed to Healthcare Enterprise Group, Inc. for healthcare
advisory services rendered to Cancer Therapeutics pursuant an advisory agreement
dated January 8, 2001. Healthcare Enterprise Group is a principal shareholder of
Cancer Therapeutics and Michael Low, a director and Secretary of Cancer
Therapeutics, is the Chief Executive Officer of Healthcare Enterprise Group.
On September 20, 2004, we issued 150,000 shares of our common stock in
connection with the execution of a financial advisory agreement with Industrial
Management & Equity Limited, which is owned and controlled by Lyndon Gaborit.
Mr. Gaborit is a member of the board of directors of Healthcare Enterprise
Group, Inc., a principal shareholder of Cancer Therapeutics.
DIVIDEND POLICY
We have not declared or paid any cash dividends since inception. We intend
to retain future earnings, if any, for use in the operation and expansion of our
business and do not intend to pay any cash dividends in the foreseeable future.
Although there are no restrictions that limit our ability to pay dividends on
our common stock, we intend to retain our future retained earnings for use in
our operations and the expansion of our business. Further, our subsequent
financing arrangements may prohibit our ability to pay dividends in the future.
19
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our shares are not presently traded on any exchange or quotation medium and
have never been traded publicly. We also intend to seek a NASD-registered broker
dealer to submit an application for our shares to trade on the OTC Electronic
Bulletin Board. Although we will seek to obtain a market for the resale of our
shares, we cannot guarantee that our shares will trade on the OTC Electronic
Bulletin Board or any other exchange or quotation medium.
As of date of this registration statement, Cancer Therapeutics had
4,097,688 shares of common stock outstanding held by 139 shareholders of record,
and warrants outstanding to purchase 1,300,000 shares of common stock held by
Healthcare Enterprise Group, Inc. The warrants will become exercisable on
January 1, 2005. We have agreed to register all shares of Cancer Therapeutics
that are currently outstanding, and we are obligated in the future to register
the shares that will be received from the exercise of the warrants held by
Healthcare Enterprise Group.
Although we are not restricted or limited by contract from paying
dividends, certain provisions of Delaware law may prohibit the payment of
dividends unless such dividends are made from surplus or net earnings. We have
never issued a dividend in the history Cancer Therapeutics and do not intend to
issue dividends in the future.
We have issued shares of our common stock to the following service
providers pursuant to individual agreements as described below:
- John Thomas. On May 10, 2004, we agreed to issue 1,300,000 shares
of our common stock to our corporate counsel for various
corporate and commercial legal services provided during the
spring and summer of 2004.
- Chene Gardner. On September 10, 2004, we agreed to convert a
preexisting obligation to pay $50,000 to our Chief Financial
Officer into 1,000,000 shares of our common stock and $2,000 in
cash.
- Kenneth I. Denos, P.C. On September 10, 2004, we agreed to
convert a portion of a preexisting obligation to pay $100,000 to
our securities counsel into 400,000 shares of our common stock.
- Healthcare Enterprise Group, Inc. On September 20, 2004, we
agreed to issue 200,000 shares of our common stock to Healthcare
Enterprise Group, Inc. in exchange for satisfaction of
preexisting obligations of Cancer Therapeutics pursuant to a
healthcare advisory services agreement entered into with
Healthcare Enterprise Group on January 8, 2001.
- Industrial Management & Equity Limited. On September 20, 2004, we
agreed to issue 150,000 shares of our common stock in connection
with a financial advisory services agreement concerning business
and financial opportunities of Cancer Therapeutics in the United
Kingdom and continental Europe
20
SELLING SECURITY HOLDERS
The selling stockholders may offer and sell, from time to time, any or all
of the common stock issued. Because the selling stockholders may offer all or
only some portion of the 4,097,688 shares of common stock to be registered, we
cannot estimate the amount or percentage of these shares of common stock that
will be held by the selling stockholders upon termination of the offering.
Consequently, we have assumed, for purposes of the table below, that all of the
selling stockholders have sold all of their shares of common stock pursuant to
this offering.
The computation of ownership in the table below is not made pursuant to the
beneficial ownership rules of the Commission under "Security Ownership of
Certain Beneficial Owners and Management" on page 26, but is instead based
solely upon the name of the titled holder of such shares as at September 30,
2004. Other than the relationships described below, none of the selling
stockholders had or have any material relationship with us. All shareholders
designated with a reference to footnote number eight have had no material
relationship with Cancer Therapeutics or any of its predecessors or affiliates
during the three-year period prior to the date of this offering. To our
knowledge, none of the selling stockholders is a broker-dealer or an affiliate
of a broker-dealer.
- --------------------------------------------------------------------------------------------------------------------------
Name of Selling Stockholder Common Stock Total Shares Number of Shares of Common
and Position, Office, or Owned by the Common Stock Stock Owned by Selling Stockholder
Material Relationship with Selling to be Regis- After Offering and Percentage of
Cancer Therapeutics Stockholder tered in this Total Issued and Outstanding (1)
(1) Offering
- ------------------------------------ ----------- ------------ ----------------------------------
Pct. of Shares Pct. of Class
Robert Oldham, M.D.(2) 428,211 428,211 10.45% -
Healthcare Enterprise Group, Inc. (3) 400,000 400,000 9.76% -
David L. Ross (4) 1,300,000 1,300,000 31.73% -
Kenneth I. Denos, P.C. (5) 400,000 400,000 9.76% -
LG Investment Trust (6) 150,000 150,000 2.94% -
Chene Gardner (7) 1,000,000 1,000,000 24.4% -
Molecular Biology Resources, Inc. (8) 42,111 42,111 1.03% -
Henry Barnes (8) 37,309 37,309 0.91% -
The Scripps Research Institute (8) 37,309 37,309 0.91% -
Ashley Birkett (8) 32,727 32,727 0.80% -
George Thornton (8) 18,654 18,654 0.46% -
William J. Blalock (8) 18,542 18,542 0.45% -
GMSF Investments LLC (8) 14,056 14,056 0.34% -
New York University (8) 12,651 12,651 0.31% -
Peter Schulz von Siemens(8) 12,440 12,440 0.30% -
Martina Schulz von Siemens (8) 12,322 12,322 0.30% -
Steve DeGraw (8) 10,473 10,473 0.26% -
Cloris L. Lam (8) 8,836 8,836 0.22% -
Gilbert Fung (8) 8,836 8,836 0.22% -
Irene Schulz von Siemens (8) 8,434 8,434 0.22% -
Karl Ransberger (8) 7,836 7,836 0.19% -
Michael Smith, Trustee of Richard J.
Stephenson Trust (8) 7,836 7,836 0.19% -
Michael L. Corrado, M.C.(8) 6,745 6,745 0.16% -
Cathie M. Oldham (8) 6,269 6,269 0.15% -
Allamar Partners, L.P. (8) 5,622 5,622 0.14% -
David R. and Pamela Scott (8) 4,980 4,980 0.12% -
Cosima Schulz von Siemens (8) 4,744 4,744 0.12% -
Julian Schulz von Siemens (8) 4,744 4,744 0.12% -
21
Marina Schulz von Siemens (8) 4,744 4,744 0.12% -
Norwest Bank Minnesota, N.A (8). 4,685 4,685 0.11% -
Zuheir Sophia (8) 4,685 4,685 0.11% -
James L. Brittle Family Trust (8) 4,285 4,285 0.10% -
Ernst Pernet (8) 4,217 4,217 0.10% -
Jerry D. Craft (8) 3,514 3,514 0.08% -
Wilson and Linda Fung (8) 3,273 3,273 0.08% -
Clay R. Caroland, III (8) 3,054 3,054 0.07% -
Robert D. Hoge, DDS (8) 2,671 2,671 0.06% -
Jack Roddey (8) 2,354 2,354 0.06% -
Avingar Properties, Inc.(8) 2,351 2,351 0.06% -
Magog Holdings Limited (8) 2,249 2,249 0.05% -
Tieh-Han(8) 2,108 2,108 0.05% -
David R. Scott (8) 1,977 1,977 0.05% -
Bryan Torrey(8) 1,898 1,898 0.05% -
Donald B. Graham (8) 1,687 1,687 0.04% -
David L. Walker (8) 1,672 1,672 0.04% -
Judy Raucy (8) 1,636 1,636 0.04% -
First National Bank in Sioux Falls(8) 1,406 1,406 0.03% -
La Vonne Melheim ( 8) 1,406 1,406 0.03% -
Robert Lamutt (8) 1,406 1,406 0.03% -
Robert D. Hoge Family Trust(8) 1,406 1,406 0.03% -
Unison Capital Group(8) 1,406 1,406 0.03% -
P.C. and S.P. Wan (8) 1,309 1,309 0.03% -
Tom W. Muir(8) 1,309 1,309 0.03% -
William P. Murphy (8) 1,254 1,254 0.03% -
Fred D. Vermeulen (8) 1,177 1,177 0.03% -
Dan Kirby (8) 1,171 1,171 0.03% -
Retirement Accounts & Co. (8) 1,171 1,171 0.03% -
Greenwood Venture Partners(8) 1,045 1,045 0.03% -
Edward P. Gamson (8) 984 984 0.02% -
Stuart L.Pinkert (8) 843 843 0.02% -
Robert K. Oldham, II (10) 784 784 0.02% -
Burch S. and Arrington H. Mixon (8) 703 703 0.01% -
Fahd S.H. Al-Soleiman (8) 703 703 0.01% -
James E. McMahon (8) 703 703 0.01% -
Jeffery W. and Marcia E. Keimer (8) 703 703 0.01% -
Nagendranath Reddy (8) 703 703 0.01% -
Sherly J.Chemopararthy (8) 703 703 0.01% -
John A. Studebaker (8) 661 661 0.01% -
Edward Lusby (8) 654 654 0.01% -
22
Maria Elena Lu (8) 654 654 0.01% -
Neal Atkinson (8) 654 654 0.01% -
Patty Gardon Seward (8) 654 654 0.01% -
Raquel Koch (8) 627 627 0.01% -
Walter M. And Judy T. Lewko (8) 627 627 0.01% -
Chasnan Inc. Employees Retirement Trust(8) 586 586 0.01% -
The Donald McKahan Revocable Trust dtd(8) 586 586 0.01% -
The Laurel McKahn Revocable Trust dtd(8) 586 586 0.01% -
Jimbuktu Insurance Co. of Georgia, Ltd.(8) 576 576 0.01% -
Frank B. Chauner (8) 562 562 0.01% -
Jeremiah D. Murphy(8) 562 562 0.01% -
Yin C. Rundellc(8) 562 562 0.01% -
Kathryn V. Hoge(8) 534 534 0.01% -
Design Inc. Pension Trust (8) 527 527 0.01% -
Howard H. Hoge (8) 478 478 0.01% -
Douglas T. Cheeseman, Jr.and Gail M.
Cheeseman(8) 468 468 0.01% -
Julie Anne Hoge Murphy(8) 464 464 0.01% -
Daryls Roy Hofer, M.D. (8) 422 422 0.01% -
Douglas T. Yeates (8) 422 422 0.01% -
Zaid F. Al-Sulaiman (8) 422 422 0.01% -
Donna M. Linton (fka Glunta) (8) 376 376 0.01% -
Richardo L. DeSoto (8) 360 360 0.01% -
Gonzalo M. Sanchez, M.D. (8) 351 351 0.01% -
Life of Georgia Credit Reinsurance Ltd.(8) 351 351 0.01% -
Chester A. Michael III(8) 313 313 0.01% -
D&B Yager Enterprises, Inc. (8) 313 313 0.01% -
Internet Services Corporation (8) 313 313 0.01% -
James N. Hueser(8) 313 313 0.01% -
Nancy S. DeMoss(8) 313 313 0.01% -
Robert C. Gannaway(8) 313 313 0.01% -
Robert L. Dennison(8) 313 313 0.01% -
Robert L. Taylor(8) 313 313 0.01% -
Robert W. Rich(8) 307 307 0.01% -
Cottes Fiderman Family Trust
dtd 10/13/94(8) 281 281 0.01% -
J. Daniel Wisinger (8) 281 281 0.01% -
Vance R. Goldhammer(8) 232 232 0.01% -
Sidney G. Cash (8) 219 219 0.01% -
Constance S. Cox (8) 219 219 0.01% -
Michael A. Strafieri,Trustee (8) 211 211 0.01% -
23
Casey Cagle(8) 197 197 * -
Terry D. Greenwood(8) 176 176 * -
Boyce C. Magli(8) 157 157 * -
Donald O. Thompson, Sr. (8) 157 157 * -
Dorthy D. Kranick(8) 157 157 * -
Lewis G. Kranick(8) 157 157 * -
Timothy M. Martin(8) 157 157 * -
Jorge Martinez (8) 140 140 * -
Willie Scott (8) 140 140 * -
Charles Q. Kamps(8) 104 104 * -
Marshall & Issley Trust Company (8) 104 104 * -
Richard M. Evans(8) 104 104 * -
Janet Hanley Haggard(8) 100 100 * -
Mitchell Thomson (8) 98 98 * -
Paul Louie (8) 98 98 * -
John M. Casper (8) 63 63 * -
Mark Desjean (8) 63 63 * -
Rita Shipes Guiney (8) 63 63 * -
Robert H. Boykin, Jr. (8) 63 63 * -
William Donald Carras (8) 63 63 * -
James P. Wellington (8) 47 47 * -
Michael Gallenberger (8) 47 47 * -
Jeffrey P. Johnson (8) 42 42 * -
John J. Koch (8) 42 42 * -
Lili A. Koch (8) 42 42 * -
John P. Bean (8) 31 31 * -
Ronald O'Shields (8) 22 22 * -
Bobby S. Poole, Jr. (8) 16 16 * -
Eddie Rollins (8) 16 16 * -
Ricardo L. DeSoto (8) 1 1 * -
Teresa G. Cloninger(8) 1 1 * -
* Denotes ownership of less than one-tenth of one percent.
(1) For each selling stockholder, the number of shares of common stock and
percentage of ownership is based upon 4,097,690 shares outstanding as of
September 30, 2004. As of such date there are no shares of common stock subject
to options, warrants, and/or conversion rights held directly by any selling
stockholder that are currently exercisable or exercisable within 60 days. The
table above attributes ownership to the named holder of the common stock and to
no other person. The table also assumes that each selling stockholder will sell
all of his, her, or its shares in the offering. Please review the tables set
forth in "Security Ownership of Beneficial Owners and Management" on page 26 to
review beneficial ownership of our common stock as of September 30, 2004,
according to the Commission's beneficial ownership rules.
(2) Chief Executive Officer and Chairman of the Board of Directors of Cancer
Therapeutics.
24
(3) Shareholder and party to a healthcare advisory agreement with Cancer
Therapeutics from January 8, 2001 to May 31, 2004.
(4) Corporate counsel to Cancer Therapeutics.
(5) Securities Counsel to Cancer Therapeutics.
(6) European financial advisor to Cancer Therapeutics and party to an advisory
agreement with Cancer Therapeutics, dated September 20, 2004.
(7) Chief Financial Officer and party to an accounting services agreement with
Cancer Therapeutics dated May 15, 2004.
(8) Denotes relationship solely as a shareholder of Cancer Therapeutics.
(9) Son of Robert K. Oldham, M.D. the Chief Executive Officer of Cancer
Therapeutics.
We may require the selling security holder to suspend the sales of the
securities offered by this prospectus upon the occurrence of any event that
makes any statement in this prospectus or the related registration statement
untrue in any material respect or that requires the changing of statements in
these documents in order to make statements in those documents not misleading.
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 30, 2004, 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., 210 West Hansell Street, Thomasville, Georgia 31792.
Common Stock
------------
Directors, Executive Officers
and 5% Stockholders Number Percent of Class(1)
- ------------------- ------ ----------------
Robert K. Oldham, M.D. (2) 428,211 10.45%
Michael K. Low(3) 400,000 9.76%
Healthcare Enterprise Group, Inc. (4) 400,000 9.76%
Chene Gardner(5) 1,000,000 24.4%
David L. Ross(6) 1,300,000 31.73%
Kenneth I. Denos(7) 800,000 19.52%
Kenneth I. Denos, P.C. (8) 400,000 9.76%
Lyndon Gaborit(9) 550,000 13.42%
------- ------
All Officers and Directors as a Group 1,828,211 44.62%
(3 Persons)
(1) For each shareholder, the calculation of percentage of beneficial ownership
is based upon 4,097,688 shares of common stock outstanding as of September 30,
2004, 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 has exercised all options, warrants and conversion rights to obtain
additional securities and that no other shareholder has exercised such rights.
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) Chief Executive Officer and Director. Includes 428,211 shares of common
stock held directly by Dr. Oldham.
(3) Secretary and Director. Includes 400,000 shares of common stock held by
Healthcare Enterprise Group, Inc. of which Mr. Low serves as the Chief Executive
Officer. Excludes 1,300,000 shares of common stock issuable upon exercise of
warrants held by Healthcare Enterprise Group that are not currently exercisable
and will not become exercisable within 60 days.
(4) Principal shareholder. Includes 400,000 shares of common stock held directly
by Healthcare Enterprise Group, Inc. Excludes 1,300,000 shares of common stock
issuable upon exercise of warrants held by Healthcare Enterprise Group that are
not currently exercisable and will not become exercisable within 60 days.
(5) Chief Financial Officer and Director. Includes 1,000,000 shares of common
stock held directly by Mr. Gardner.
(6) Principal Shareholder. Includes 1,300,000 shares of common stock held
directly by Mr. Ross.
(7) Principal shareholder. Includes 400,000 shares of common stock held by
Kenneth I. Denos, P.C. of which Mr. Denos is the President and sole shareholder,
and 400,000 shares of common stock held by Healthcare Enterprise Group, Inc. of
which Mr. Denos serves as a member of the board of directors. Excludes 1,300,000
shares of common stock issuable upon exercise of warrants held by Healthcare
Enterprise Group that are not currently exercisable and will not become
exercisable within 60 days.
(8) Principal shareholder. Includes 400,000 shares of common stock held directly
by Kenneth I. Denos, P.C.
(9) Principal shareholder. Includes 150,000 shares of common stock held by LG
Investment Trust, a family trust formed for the benefit of immediate family
members of Mr. Gaborit, and 400,000 shares of common stock held by Healthcare
Enterprise Group, Inc. of which Mr. Gaborit serves as a member of the board of
directors. Excludes 1,300,000 shares of common stock issuable upon exercise of
warrants held by Healthcare Enterprise Group that are not currently exercisable
and will not become exercisable within 60 days.
26
DESCRIPTION OF SECURITIES
Common Stock
Cancer Therapeutics is authorized to issue up to 100,000,000 shares of
common stock, par value $0.001 per share. As of September 30, 2004, there were
4,097,688 shares of common stock outstanding. Holders of our common stock are
entitled to one vote per share for the election of directors and with respect to
all other matters to be voted on by stockholders. Our shares of common stock do
not carry cumulative voting rights and, therefore, a holder of a majority of our
shares of common stock will be able to elect the entire board of directors. If
any holder or group of holders constituting a majority of our shares of common
stock elect the entire board of directors, minority shareholders would not be
able to elect any members to the board of directors. Our board of directors has
authority, without action by our shareholders, to issue all or any portion of
the authorized but unissued shares of common stock, which would reduce your
percentage ownership of Cancer Therapeutics and the percentage ownership of
other shareholders, and may also dilute the book value of your common stock.
Shareholders of the Company have no pre-emptive rights to acquire
additional shares of common stock. Our shares of common stock are not subject to
redemption and carry no subscription, sinking fund, or conversion rights. As a
holder of our common stock, you will be entitled to receive ratably such
dividends as may be declared by our board of directors from time to time out of
funds legally available therefor. Cancer Therapeutics has not paid dividends on
its common stock in the past and we do not anticipate that we will pay dividends
in the foreseeable future. In the event of liquidation of Cancer Therapeutics,
all shares of our common stock are entitled to share equally in the corporate
assets after satisfaction of all liabilities.
Preferred Stock
Cancer Therapeutics is authorized to issue up to 10,000,000 shares of
preferred stock, par value $0.001 per share, in one or more series and to fix
the rights, preferences, privileges, qualifications, limitations, and
restrictions thereof, and the number of shares constituting any series or the
designation of such series without shareholder approval. The existence of
unissued preferred stock may enable our board of directors, without further
action by the stockholders, to issue such stock to persons friendly to current
management or to issue such stock with terms that could render more difficult or
discourage an attempt to obtain control of Cancer Therapeutics, thereby
protecting the continuity of our management. No shares of preferred stock are
outstanding and we have no current plans to issue any shares of preferred stock.
Warrants
On May 28, 2004 we issued and sold a warrant to Healthcare Enterprise
Group, Inc. in connection with an investment into Cancer Therapeutics. The
warrant gives Healthcare Enterprise Group the right, at any time during the
period commencing January 1, 2005 and ending May 27, 2007, to purchase 1,300,000
shares of our common stock for an aggregate purchase price of $25,000. The
warrant provides for proportionate adjustment of the number of shares receivable
from the exercise thereof in the event of a reorganization of our share capital,
as well as a merger, consolidation, stock dividend, or stock split. The warrant
also gives Healthcare Enterprise Group the right, commencing January 1, 2005, to
demand that we register with the Commission the shares receivable from the
exercise thereby. The warrant is transferable only to a parent, subsidiary, or
other company under common control with Healthcare Enterprise Group, and any
such transfer must be, in our opinion, in compliance with the Securities Act of
1933. No other warrants, rights, options, or other instruments convertible into
capital stock of Cancer Therapeutics are outstanding.
Transfer Agent and Registrar
The transfer agent and registrar for our shares of common stock is
Integrity Stock Transfer and Registrar, 3663 E. Sunset Road, Suite 104, Las
Vegas, Nevada 89120, telephone (702) 212-8797.
27
Dividend Policy
Cancer Therapeutics has not previously paid any cash dividends on any
of its shares and does not anticipate paying dividends in the foreseeable
future. Our present intention is to utilize all available funds for the
development of our business. The only restrictions that limit the ability to pay
dividends on common equity or that are likely to do so in the future, are those
restrictions imposed by law. Under Delaware corporate law, no dividends or other
distributions may be made which would render Cancer Therapeutics insolvent or
would reduce assets to less than the sum of its liabilities plus the amount
needed to satisfy outstanding liquidation preferences.
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell all or a portion
of their shares of common stock on any market or exchange medium upon which our
shares may be quoted in the future, in privately negotiated transactions, or
otherwise. Such sales may be at fixed prices prevailing at the time of sale, at
prices related to the market prices or at negotiated prices. The shares of
common stock being offered for resale by this prospectus may be sold by the
selling stockholders by one or more of the following methods, without
limitation:
- block trades in which the broker or dealer so engaged will
attempt to sell the shares of common stock as agent but may
position and resell a portion of the block as principal to
facilitate the transaction;
- purchases by broker or dealer as principal and resale by the
broker or dealer for its account pursuant to this prospectus;
- an exchange distribution in accordance with the rules of the
exchange;
- ordinary brokerage transactions;
- privately negotiated transactions; and
- a combination of any aforementioned methods of sale.
The shares may also be sold in compliance with the Securities and
Exchange Commission's Rule 144.
In the event of the transfer by any selling stockholder of his or her shares to
any pledgee, donee or other transferee, we will amend this prospectus and the
registration statement of which this prospectus forms a part by the filing of a
post-effective amendment in order to have the pledgee, donee or other transferee
in place of the selling stockholder who has transferred his or her shares of
common stock.
In effecting sales, brokers and dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the selling stockholders or,
if any of the broker-dealers act as an agent for the purchaser of such shares,
from the purchaser in amounts to be negotiated which are not expected to exceed
those customary in the types of transactions involved. Broker-dealers may agree
with the selling stockholders to sell a specified number of the shares of common
stock at a stipulated price per share. Such an agreement may also require the
broker-dealer to purchase as principal any unsold shares of common stock at the
price required to fulfill the broker-dealer commitment to the selling
stockholders if such broker-dealer is unable to sell the shares on behalf of the
selling stockholders. Broker-dealers who acquire shares of common stock as
principal may thereafter resell the shares of common stock from time to time in
transactions which may involve block transactions and sales to and through other
broker-dealers, including transactions of the nature described above. Such sales
by a broker-dealer could be at prices and on terms then prevailing at the time
of sale, at prices related to the then-current market price or in negotiated
transactions. In connection with such resales, the broker-dealer may pay to or
receive from the purchasers of the shares, commissions as described above.
The selling stockholders and any broker-dealers or agents that
participate with the selling stockholders in the sale of the shares of common
stock may be deemed to be "underwriters" within the meaning of the Securities
Act in connection with these sales. In that event, any commissions received by
28
the broker-dealers or agents and any profit on the resale of the shares of
common stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
To the extent required under the Securities Act, a post effective
amendment to this registration statement will be filed, disclosing, the name of
any broker-dealers, the number of shares of common stock involved, the price at
which the common stock is to be sold, the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable, that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus and other facts material to
the transaction.
All expenses of the registration statement including, but not limited
to, legal, accounting, printing and mailing fees are and will be borne by Cancer
Therapeutics. Any commissions, discounts or other fees payable to brokers or
dealers in connection with any sale of the shares of common stock will be borne
by the selling stockholders, the purchasers participating in such transaction,
or both.
Any shares of common stock covered by this prospectus which qualify for
sale pursuant to Rule 144 under the Securities Act, as amended, may be sold
under Rule 144 rather than pursuant to this prospectus.
INTEREST OF NAMED EXPERTS AND COUNSEL
Kenneth I. Denos, P.C., a Utah professional corporation, has been
engaged by Cancer Therapeutics to prepare and file our registration statement
(of which this prospectus forms a part) in exchange for cash and 400,000 shares
of our common stock, which are part of the shares being offered hereby. Kenneth
I. Denos is the President and sole shareholder of Kenneth I. Denos, P.C., and is
also a member of the board of directors of Healthcare Enterprise Group, Inc., a
principal shareholder of Cancer Therapeutics.
The financial statements of Cancer Therapeutics included in this
registration statement have been audited by Bouwhuis, Morrill & Co., LLC,
independent chartered accountants, for the periods set forth in their report
appearing elsewhere in this registration statement, and included in such
reliance upon such report given upon the authority of said firm as experts in
accounting and auditing.
LEGAL PROCEEDINGS
On July 31, 2002, Cancer Therapeutics entered into a structured
settlement with the Internal Revenue Service in connection with unpaid payroll
taxes during 1999 and 2000. We agreed to pay the IRS a total of $42,690.81,
exclusive of penalties and interest. The IRS filed a tax lien in 2002 against
Cancer Therapeutics to secure payment of the settlement amount. The settlement
amount calls for a payment of $1,000 per month until the settlement amount is
paid in full, although the IRS may require us to increase our monthly payments
if our financial condition improves. As of August 18, 2004, the total amount
owing to the IRS, including penalties and interest, is $34,455.16. As of the
date of this prospectus, we are current with respect to our obligations under
this settlement.
29
DISCLOSURE OF COMMISSION POSITION
ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 102(b)(7) of the Delaware General Corporation Law allows a
corporation to eliminate or limit the personal liability of a director to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty except for:(i) any breach of the duty of loyalty to the corporation or its
stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) declaration of
unlawful dividends or unlawful stock repurchases or redemptions; (iv) any
transaction from which the director derived an improper benefit; or (v) any act
or omission occurring prior to the date any such provision eliminating or
limiting such liability became effective.
Section 145(a) of the Delaware General Corporation Law provides that a
corporation may indemnify an officer or director who is or is threatened to be
made a party to a proceeding (other than an action by or in the right of the
corporation) by reason of the fact that such officer or director is or was (i)
serving as an officer, director, employee, or agent of the corporation, or (ii)
served at the request of such corporation as an officer, director, employee, or
agent of another corporation or other enterprise or entity. Such indemnification
may only be made if the officer's or director's conduct was in good faith and in
a manner such person reasonably believed to be in or not opposed to the
corporation's best interests, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful.
Section 145(c) of the Delaware General Corporation Law provides that a
corporation shall indemnify an officer or director for his reasonable expenses
in connection with the defense of any proceeding if the officer or director has
been successful, on the merits or otherwise. Section 145(e) provides that a
corporation may advance expenses to an officer or director who is made a party
to a criminal or civil proceeding before a final disposition is made, if the
corporation receives an undertaking by or on behalf of such officer or director
to repay any amounts advanced if it is determined that such officer or director
was not entitled to indemnification. Section 145(j) provides that the
indemnification provisions of Section 145 continue for a person who has ceased
to be an officer or director, and inures to the benefit of the heirs, executors,
and administrators of such person. Section 145(g) provides that a corporation
may purchase and maintain insurance on behalf of officers or directors, among
others, against liabilities imposed upon them by reason of actions in their
capacities as such, and whether or not the corporation would have the power to
indemnify them against such liability under Section 145.
Certificate of Incorporation
Article VI of our Certificate of Incorporation provides that the
liability of directors to Cancer Therapeutics or its stockholders is eliminated
to the fullest extent permitted under the Delaware General Corporation Law, as
described in the preceding paragraphs.
Bylaws
Article VI, Section 6.1(a) of our Bylaws provides that an officer or
director who was or is made party to, or is threatened to be made a party to, or
is involved in any proceeding by reason of the fact that he or she is or was an
officer or director, or is or was serving at the request of Cancer Therapeutics
as a director, officer, employee, or agent of another corporation, or as its
representative in another enterprise shall be indemnified and held harmless to
the fullest extent permitted and subject to the standards of conduct,
procedures, and other requirements under Delaware law. Article, VI, Section
6.1(a) further provides that Cancer Therapeutics may purchase and maintain
insurance on behalf of an officer or director against any liability arising out
of their status as such, whether or not the corporation would have the power to
indemnify such officer or director.
Article VI, Section 6.1(b) of our Bylaws provides that the right of an
officer or director to indemnification shall continue beyond termination and
such right inures to the benefit of the heirs and personal representatives of
such officer or director.
30
Article VI, Section 6.1(d) of our Bylaws provides that Cancer
Therapeutics shall, from time to time, reimburse or advance to an officer or
director the funds necessary for payment of expenses incurred in connection with
defending any proceeding for which he or she is indemnified by Cancer
Therapeutics, in advance of the final disposition of such proceeding, provided
that, if then required by the Delaware General Corporation Law, such
advancements may only be paid upon the receipt by the corporation of an
undertaking by or on behalf of such officer or director to repay any such amount
so advanced if it is ultimately determined by a final and unappealable judicial
decision that the officer or director is not entitled to be indemnified for such
expenses.
Insofar as indemnification for liabilities under the Securities Act may
be permitted to directors, officers and controlling persons of Cancer
Therapeutics under Delaware law or otherwise, we have been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Cancer Therapeutics of expenses incurred or paid by a
director, officer, or controlling person of Cancer Therapeutics in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Cancer Therapeutics will, unless the opinion of its counsel the
matter has been decided by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
ORGANIZATION WITHIN THE LAST FIVE YEARS
Not Applicable.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
31
REPORTS TO SECURITY HOLDERS
Commencing with our fiscal year ended May 31, 2005, we will send an
annual report to our stockholders, together with our annual audited financial
statements. As of the effective date of this registration statement of which
this prospectus forms a part, Cancer Therapeutics became subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
and, in accordance therewith, will file annual, quarterly and current reports,
proxy statements, and other information with the Commission. Reports and other
information filed by Cancer Therapeutics with the Commission pursuant to the
informational requirements of the Exchange Act will be available for inspection
and copying at prescribed rates at the Public Reference Room maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. The
public may also obtain information on the operation of the Public Reference Room
by calling the Commission at 1-800-SEC-0330. Our filings with the Commission are
also available to the public over the Internet at the Commission's website at
http://www.sec.gov.
32
FINANCIAL STATEMENTS
CANCER THERAPEUTICS, INCORPORATED
Financial Statements for the Years
Ended May 31, 2004 and 2003
and Report of Independent Registered
Public Accounting Firm
33
CONTENTS
Report of Independent Registered Public Accounting Firm................. F/S-3
Balance Sheet........................................................... F/S-4
Statements of Operations................................................ F/S-5
Statements of Stockholders' Deficit......................................F/S-6
Statements of Cash Flows................................................ F/S-7
Notes to the Financial Statements....................................... F/S-8
Unaudited Financial Statements and Notes................................ F/S-15
Prospectus................................................................... 1
F/S-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
Board of Directors
Cancer Therapeutics, Inc.
Thomasville, Georgia
We have audited the accompanying balance sheet of Cancer Therapeutics, Inc. as
of May 31, 2004 and the related statements of operations, stockholders' deficit
and cash flows for the years ended May 31, 2004 and 2003. 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 audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cancer Therapeutics, Inc. as of
May 31, 2004 and the results of its operations and its cash flows for the
years ended May 31, 2004 and 2003 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 11 to the
financial statements, the Company has negative working capital, negative cash
flows from operations and recurring operating losses 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 11. These financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Bouwhuis, Morrill & Company,LLC
- -----------------------------------------
Bouwhuis, Morrill & Company, LLC
Layton, Utah
October 18, 2004
F/S-3
CANCER THERAPEUTICS, INC.
Balance Sheet
ASSETS
May 31,
2004
------------------
CURRENT ASSETS
Cash and cash equivalents $ 77,997
------------------
Total Current Assets 77,997
------------------
TOTAL ASSETS $ 77,997
==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses (Note 4) $ 171,178
Due to related parties (Note 3) 64,076
Notes payable (Note 8) 50,000
Notes payable - related parties (Note 7) 364,944
------------------
Total Current Liabilities 650,198
------------------
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value; 100,000,000 shares
authorized, 1,947,688 shares issued and outstanding 1,948
Additional paid-in capital 2,152,572
Accumulated deficit (2,726,721)
------------------
Total Stockholders' Deficit (572,201)
------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 77,997
==================
The accompanying notes are an integral part of these financial statements
F/S-4
CANCER THERAPEUTICS, INC.
Statements of Operations
May 31,
-----------------------------------------
2004 2003
------------------ -------------------
NET REVENUES $ 36,104 $ 36,468
------------------ -------------------
OPERATING EXPENSES
Bad debt expense 22,190 187,684
General and administrative 42,189 104,659
Professional fees 115,000 -
------------------ -------------------
Total Operating Expenses 179,379 292,343
------------------ -------------------
LOSS FROM OPERATIONS (143,275) (255,875)
------------------ -------------------
OTHER INCOME (EXPENSES)
Interest expense (34,173) (24,887)
------------------ -------------------
Total Other Income (Expenses) (34,173) (24,887)
------------------ -------------------
NET LOSS BEFORE INCOME TAXES (177,448) (280,762)
PROVISION FOR INCOME TAXES - -
------------------ -------------------
NET LOSS $ (177,448) $ (280,762)
================== ===================
BASIC NET LOSS PER SHARE $ (0.38) $ (0.63)
================== ===================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 468,236 447,688
================== ===================
The accompanying notes are an integral part of these financial statements
F/S-5
CANCER THERAPEUTICS, INC.
Statements of Stockholders' Deficit
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
----------------- ---------------- ------------------- ---------------
Balance May 31, 2002 447,688 $ 448 $ 2,014,072 $ (2,268,511)
Net loss for the year ended
May 31, 2003 - - - (280,762)
----------------- ---------------- ------------------- ---------------
Balance, May 31, 2003 447,668 448 2,014,072 (2,549,273)
Common stock issued for cash at
$0.375 per share, May 2004 200,000 200 74,800 -
Common stock issued for services at
$0.05 per share, May 2004 1,300,000 1,300 63,700 -
Net loss for the year ended
May 31, 2004 - - - (177,448)
----------------- ---------------- ------------------- ---------------
Balance, May 31, 2004 1,947,688 $ 1,948 $ 2,152,572 $ (2,726,721)
================= ================ =================== ===============
The accompanying notes are an integral part of these financial statements
F/S-6
CANCER THERAPEUTICS, INC.
Statements of Cash Flows
May 31,
-------------------------------------
2004 2003
---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (177,448) $ (280,762)
Adjustments to reconcile net loss to
net cash used by operating activities:
Common stock issued for services 65,000 -
Change in operating assets and liabilities:
Decrease in accounts receivable - 38,382
Decrease in loans receivable - 65,939
Increase in accounts payable and accrued expenses 69,924 17,814
Increase in due to related parties 10,626 53,450
---------------- -----------------
Net Cash Used by Operating Activities (31,898) (105,177)
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES - -
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft (1,429) 1,429
Proceeds from issuance of common stock 75,000 -
Proceeds from issuance of notes payable - related parties 44,691 94,663
Payment on notes payable - related parties (8,367) -
---------------- ----------------
Net Cash Provided by Financing Activities 109,895 96,092
---------------- ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 77,997 (9,085)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR - 9,085
---------------- -----------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 77,997 $ -
================ =================
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ - $ -
Cash paid for income taxes - -
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for services $ 65,000 $ -
The accompanying notes are an integral part of these financial statements
F/S-7
CANCER THERAPEUTICS, INC.
Notes to the Financial Statements
May 31, 2004 and 2003
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.
The Company was originally formed as Cancer Therapeutics,
Incorporated, under the laws of the State of Tennessee on May 1,
1991. The Company determined that its business purpose would be
better served if it reincorporated into the State of Delaware
(Note 12).
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.
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
F/S-8
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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, 2004, the allowance for doubtful accounts was $-0-. Bad
debt expense was $22,190 and $187,684 for the years Eded May 31,
2004 and 2003, respectively.
f. Basic Net Loss per Share of Common Stock
In accordance with Financial Accounting Standards No. 128,
"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.
g. Recent Accounting Pronouncements
In April 2002, the Financial Accounting Standards Board
issued Statement No. 145 ("SFAS 145"), "Rescission of FASB
Statements Nos. 4, 44, and 64 and Amendment of FASB Statement
No. 13." SFAS 145 addresses the presentation for losses
on early retirements of debt in the statement of operations.
The Company has adopted SFAS 145 and will not present
losses on early retirements of debt as an extraordinary item.
In June 2002, the Financial Accounting Standards Board issued
Statement No. 146 ("SFAS 146"), "Accounting for Costs Associated
with Exit or Disposal Activities." The provisions of SFAS 146
become effective for exit or disposal activities commenced
subsequent to December 31, 2002. The adoption of SFAS 146 had no
impact on the Company's financial position, results of operations
or cash flows.
In November 2002, the Financial Accounting Standards Board issued
FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." This interpretation
elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations
under certain guarantees that it has issued. It also clarifies
(for guarantees issued after January 1, 2003) that a guarantor is
required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligations undertaken in
issuing the guarantee. At May 31, 2004, the Company does
not have any outstanding guarantees and accordingly does not
expect
F/S-9
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
the adoption of FIN 45 to have any impact on their financial
position, results of operations or cash flows.
h. Income Taxes
The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards Board (SFAS) No. 109,
"Accounting for Income Taxes." Under this method, deferred income
taxes are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which differences are expected
to reverse. In accordance with the provisions of SFAS No. 109, a
valuation allowance would be established to reduce deferred tax
assets if it were more likely than not that all or some portion,
of such deferred tax assets would not be realized. A full
allowance against deferred tax assets was provided as of May 31,
2004.
At May 31, 2004, the Company had net operating loss carryforwards
of approximately $2,700,000 that may be offset against future
taxable income through 2024. No tax benefits have been reported in
the financial statements, because the potential tax benefits of
the net operating loss carry forwards 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.
i. Checks Written in Excess of Cash in Bank
Under the Company's cash management system, checks issued but not
presented to banks frequently result in overdraft balances for
accounting purposes. Additionally, at times banks may temporarily
lend funds to the Company by paying out more funds than are in the
Company's account. These overdrafts are included as a current
liability in the balance sheets.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company has been dependent upon certain individuals, officers,
stockholders and other related parties to provide 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, 2004, the Company had related party
payables of $64,076. These amounts are payable to the Company's
president and are without terms.
F/S-10
NOTE 4 - ACCRUED EXPENSES
The Company's accounts payable and accrued expenses balance
includes accrued interest of $79,511 as of May 31,
2004. This interest primarily relates to notes payable.
NOTE 5 - EQUITY TRANSACTIONS
The Company has 10,000,000 shares of $0.001 par value preferred
stock authorized. As of May 31, 2004, no rights or preferences
have been designated and no preferred shares have been issued.
During the year ended May 31, 2004, the Company issued 1,300,000
shares of common stock to an attorney for services. The shares
were valued at the market price of the services on the date the
shares were authorized for issuance of $0.05 per share.
During the year ended May 31, 2004, the Company issued 200,000
shares of common stock to a company in exchange for cash of
$75,000 or $0.375 per share. Pursuant to the stock purchase
agreement, and in addition to the common shares purchased, the
company also received warrants for the purchase of 1,300,000
shares of common stock at a aggregate exercise price of $25,000
or approximately $0.019 per share. The warrants become exercisable
on January 1, 2005 and expire on May 27, 2007.
NOTE 6 - FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 (SFAS 107),
"Disclosures about Fair Value of Financial Instruments" requires
disclosure of the fair value of financial instruments held by the
Company. SFAS 107 defines the fair value of a financial instrument
as the amount at which the instrument could be exchanged in a
current transaction between willing parties. The following methods
and assumptions were used to estimate fair value:
The carrying amount of cash equivalents, accounts payable and
accrued expenses approximate fair value due to their short-term
nature.
F/S-11
NOTE 7 - NOTES PAYABLE - RELATED PARTIES
The Company has notes payable due to related parties consisting of
the following:
May 31,
2004
------------------
Convertible note payable to a company, 8% interest,
due May 1, 2004, unsecured, in default $ 110,000
Notes payable to an individual, 6% interest,
due on demand, unsecured 229,944
Note payable to an individual, 9% interest,
due on demand, unsecured 25,000
------------------
Total Notes Payable - Related Parties 364,944
Less: Current Portion (364,944)
-------------------
Long-Term Notes Payable - Related Parties $ -
===================
The convertible note payable indicated above is convertible, at
the holders option, into shares of preferred stock at a rate equal
to that of other purchasers of preferred stock. The note is
currently in default. No preferred shares have been authorized or
issued as of the date of these financial statements.
NOTE 8 - NOTES PAYABLE
The Company has notes payable consisting of the following:
May 31,
2004
------------------
Note payable to a bank, 4.5% interest, due
August 1, 2003, secured by all tangible and
intangible assets of the Company, in default $ 50,000
------------------
Total Notes Payable 50,000
Less: Current Portion (50,000)
--------------------
Long-Term Notes Payable $ -
====================
NOTE 9 - CONTINGENCIES
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
F/S-12
NOTE 9 - CONTINGENCIES (Continued)
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 operations. Presently, such
effect, if any, cannot be determined.
The Company has been utilizing the offices of another, unrelated,
entity. The Company has not been billed for nor has it paid rent
for several years and believes that the rent is being donated as
the building would otherwise be empty. It is estimated that the
fair market value of this office space is approximately $900 per
month. It is possible that the entity which owns the building may
request monthly rental payments or even payment in arrears for the
past occupancy. No amount has been accrued in the financial
statements for this contingency.
NOTE 10 - COMMON STOCK WARRANTS
During 2004 the Company issued warrants to purchase 1,300,000
shares of common stock (see Note 5). The following schedules
summarize the changes during the year and the warrants issued and
outstanding at May 31, 2004:
May 31, 2004
-------------
Outstanding, May 31, 2003 -
Issued 1,300,000
---------
Outstanding, May 31, 2004 1,300,000
=========
Weighted average exercise price of warrants
outstanding as of May 31, 2004 $0.019
======
Outstanding Exercisable
-------------------------------------------- -------------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 5/31/04 Life (in Yrs.) Price at 5/31/04 Price
--------------- ------------- --------------- ---------- ----------- ----------
$ 0.019 1,300,000 2.95 $ 0.019 - $ N/A
============ ============== ======= ========= ==========
F/S-13
NOTE 11 - GOING CONCERN CONSIDERATIONS
The accompanying financial statements have been prepared using
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 $2,700,000 from inception of the Company
through May 31, 2004. The Company's stockholders' deficit at May
31, 2004 was $572,201 and its current liabilities exceeded its
current assets by the same amount. These factors combined, raise
substantial doubt about the Company's ability to continue as a
going concern. Management'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.
As a part of this plan, management is currently seeking to
transform into a publicly traded entity. Management believes that
its business model has significant potential as long as extra
working capital is received through operations and/or business
development.
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
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 12 - SUBSEQUENT EVENTS
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, Inc. (Tennessee) for a total of 1,947,688 common
shares of Cancer Therapeutics, Inc. (Delaware) issued upon
incorporation. All references to shares issued and outstanding in
the financial statements have been retroactively restated to
reflect the effects of this change in capital structure.
During September 2004 the Company issued an additional 2,150,000
shares of its common stock to various companies and individuals
for services rendered and amounts owed to these companies and
individuals.
F/S-14
CANCER THERAPEUTICS, INC.
Unaudited Financial Statements for the Three Months
Ended August 31, 2004 and 2003
CANCER THERAPEUTICS, INC.
Balance Sheets
ASSETS
August 31, May 31,
2004 2004
------------------ ------------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 604,962 $ 77,997
------------------ ------------------
Total Current Assets 64,962 77,997
------------------ ------------------
TOTAL ASSETS $ 64,962 $ 77,997
================== ==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses (Note 4) $ 178,815 $ 171,178
Due to related parties (Note 3) 61,682 64,076
Notes payable (Note 8) 50,000 50,000
Notes payable - related parties (Note 7) 372,844 364,944
------------------ ------------------
Total Current Liabilities 663,341 650,198
------------------ ------------------
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value; 100,000,000 shares
authorized, 1,947,688 shares issued and
outstanding 1,948 1,948
Additional paid-in capital 2,152,572 2,152,572
Accumulated deficit (2,752,899) (2,726,721)
------------------ ------------------
Total Stockholders' Deficit (598,379) (572,201)
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 64,962 $ 77,997
================== ==================
The accompanying notes are an integral part of these financial statements
F/S-16
CANCER THERAPEUTICS, INC.
Statements of Operations
(Unaudited)
For the Three Months Ended
August 31,
-----------------------------------------
2004 2003
------------------ -------------------
NET REVENUES $ 6,376 $ 5,563
------------------ -------------------
OPERATING EXPENSES
Bad debt expense - 6,368
General and administrative 15,699 3,521
Professional fees 9,031 -
------------------ -------------------
Total Operating Expenses 24,730 9,889
------------------ -------------------
LOSS FROM OPERATIONS (18,354) (4,326)
------------------ -------------------
OTHER INCOME (EXPENSES)
Interest expense (7,824) (8,745)
------------------ -------------------
Total Other Income (Expenses) (7,824) (8,745)
------------------ -------------------
NET LOSS BEFORE INCOME TAXES (26,178) (13,071)
PROVISION FOR INCOME TAXES - -
------------------ -------------------
NET LOSS $ (26,178) $ (13,071)
================== ===================
BASIC NET LOSS PER SHARE $ (0.01) $ (0.03)
================== ===================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 1,947,688 447,688
================== ===================
The accompanying notes are an integral part of these financial statements
F/S-17
CANCER THERAPEUTICS, INC.
Statements of Stockholders' Deficit
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
----------------- ---------------- ----------------- ------------
Balance, May 31, 2003 447,688 $ 448 $ 2,014,072 $(2,549,273)
Common stock issued for cash at
$0.375 per share, May 2004 200,000 200 74,800 -
Common stock issued for services at
$0.05 per share, May 2004 1,300,000 1,300 63,700 -
Net loss for the year ended
May 31, 2004 - - - (177,448)
------------- -------------- --------------- ---------------
Balance, May 31, 2004 1,947,688 1,948 2,152,572 (2,726,721)
Net loss for the three months ended
August 31, 2004 (unaudited) - - - (26,178)
----------------- ---------------- --------------- --------------
Balance, August 31, 2004 (unaudited) 1,947,688 1,948 $ 2,152,572 $ (2,752,899)
================= ================ =============== ==============
The accompanying notes are an integral part of these financial statements
F/S-18
CANCER THERAPEUTICS, INC.
Statements of Cash Flows
(Unaudited)
August 31,
-------------------------------------
2004 2003
---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (26,178) $ (13,071)
Adjustments to reconcile net loss to
net cash used by operating activities:
Change in operating assets and liabilities:
Increase in accounts payable and accrued expenses 7,637 4,279
Decrease in due to related parties (2,394) (1,056)
---------------- -----------------
Net Cash Used by Operating Activities (20,935) (9,848)
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES - -
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of note payable - related party 7,900 9,162
---------------- -----------------
Net Cash Provided by Financing Activities 7,900 9,162
---------------- -----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (13,035) (686)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 77,997 2,441
---------------- -----------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 64,962 $ 1,755
================ =================
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ - $ -
Cash paid for income taxes - -
The accompanying notes are an integral part of these financial statements
F/S-19
CANCER THERAPEUTICS, INC.
Notes to the Financial Statements
August 31, 2004 and 2003
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.
The Company was originally formed as Cancer Therapeutics,
Incorporated, under the laws of the State of Tennessee on May 1,
1991. The Company determined that its business purpose would be
better served if it reincorporated into the State of Delaware
(Note 12).
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.
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.
F/S-22
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
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
August 31, 2004, the allowance for doubtful accounts was $-0-.
Bad debt expense was $-0- and $6,368 for the three months ended
August 31, 2004 and 2003, respectively.
f. Basic Net Loss per Share of Common Stock
In accordance with Financial Accounting Standards No. 128,
"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.
g. Recent Accounting Pronouncements
In April 2002, the Financial Accounting Standards Board issued
Statement No. 145 ("SFAS 145"), "Rescission of FASB
Statements Nos. 4, 44, and 64 and Amendment of FASB Statement
No. 13." SFAS 145 addresses the presentation for losses
on early retirements of debt in the statement of operations.
The Company has adopted SFAS 145 and will not present
losses on early retirements of debt as an extraordinary item.
In June 2002, the Financial Accounting Standards Board issued
Statement No. 146 ("SFAS 146"), "Accounting for Costs Associated
with Exit or Disposal Activities." The provisions of SFAS 146
become effective for exit or disposal activities commenced
subsequent to December 31, 2002. The adoption of SFAS 146 had no
impact on the Company's financial position, results of operations
or cash flows.
In November 2002, the Financial Accounting Standards Board issued
FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." This interpretation
elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations
under certain guarantees that it has issued. It also clarifies
(for guarantees issued after January 1, 2003) that a guarantor is
required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligations undertaken in
issuing the guarantee. At August 31, 2004, the Company does
not have any outstanding guarantees and accordingly does not
expect the adoption of FIN 45 to have any impact on their
financial position, results of operations or cash flows.
h. Income Taxes
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards Board (SFAS) No.
109, "Accounting for Income Taxes." Under this
F/S-21
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
method, deferred income taxes are determined based on the
difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the year in
which differences are expected to reverse. In accordance with the
provisions of SFAS No. 109, a valuation allowance would be
established to reduce deferred tax assets if it were more likely
than not that all or some portion, of such deferred tax assets
would not be realized. A full allowance against deferred tax
assets was provided as of May 31, 2004.
At August 31, 2004, the Company had net operating loss
carryforwards of approximately $2,700,000 that may be offset
against future taxable income through 2024. No tax benefits have
been reported in the financial statements, because the potential
tax benefits of the net operating loss carry forwards 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.
i. Checks Written in Excess of Cash in Bank
Under the Company's cash management system, checks issued but not
presented to banks frequently result in overdraft balances for
accounting purposes. Additionally, at times banks may temporarily
lend funds to the Company by paying out more funds than are in the
Company's account. These overdrafts are included as a current
liability in the balance sheets.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company has been dependent upon certain individuals, officers,
stockholders and other related parties to provide 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 August 31, 2004, the Company had related party
payables of $61,682. These amounts are payable to the Company's
president and are without terms.
NOTE 4 - ACCRUED EXPENSES
The Company's accounts payable and accrued expenses balance
includes accrued interest of $86,586 as of August 31, 2004. This
interest primarily relates to notes payable.
F/S-22
NOTE 5 - EQUITY TRANSACTIONS
The Company has 10,000,000 shares of $0.001 par value preferred
stock authorized. As of August 31, 2004, no rights or preferences
have been designated and no preferred shares have been issued.
During the year ended May 31, 2004, the Company issued 1,300,000
shares of common stock to an attorney for services. The shares
were valued at the market price of the services on the date the
shares were authorized for issuance of $0.05 per share.
During the year ended May 31, 2004, the Company issued 200,000
shares of common stock to a company in exchange for cash of
$75,000 or $0.375 per share. Pursuant to the stock purchase
agreement, and in addition to the common shares purchased, the
company also received warrants for the purchase of 1,300,000
shares of common stock at an aggregate exercise price of $25,000
or approximately $0.019 per share. The warrants become exercisable
on January 1, 2005 and expire on May 27, 2007.
NOTE 6 - FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 (SFAS 107),
"Disclosures about Fair Value of Financial Instruments" requires
disclosure of the fair value of financial instruments held by the
Company. SFAS 107 defines the fair value of a financial instrument
as the amount at which the instrument could be exchanged in a
current transaction between willing parties. The following methods
and assumptions were used to estimate fair value:
The carrying amount of cash equivalents, accounts payable and
accrued expenses approximate fair value due to their short-term
nature.
NOTE 7 - NOTES PAYABLE - RELATED PARTIES
The Company has notes payable due to related parties consisting of
the following:
August 31, May 31,
2004 2004
------------------ ------------------
(unaudited)
Convertible note payable to a company, 8% interest,
due May 1, 2004, unsecured, in default $ 110,000 $ 110,000
Notes payable to an individual, 6% interest,
due on demand, unsecured 237,844 229,944
Note payable to an individual, 9% interest,
due on demand, unsecured 25,000 25,000
------------------ ------------------
Total Notes Payable 372,844 364,944
Less: Current Portion (372,844) (364,944)
------------------- ------------------
Long-Term Notes Payable $ - $ -
==================== =================
The convertible note payable indicated above is convertible, at
the holders option, into shares of preferred stock at a rate equal
to that of other purchasers of preferred stock.
F/S-23
NOTE 7 - NOTES PAYABLE - RELATED PARTIES (Continued)
The note is currently in default. No preferred shares have been
authorized or issued as of the date of these financial statements.
NOTE 8 - NOTES PAYABLE
The Company has notes payable consisting of the following:
August 31, May 31,
2004 2004
------------------ ------------------
(unaudited)
Note payable to a bank, 4.5% interest, due
August 1, 2003, secured by all tangible and
intangible assets of the Company, in default $ 50,000 $ 50,000
------------------ ------------------
Total Notes Payable 50,000 50,000
Less: Current Portion (50,000) (50,000)
------------------ -------------------
Long-Term Notes Payable $ - $ -
================== ===================
NOTE 9 - CONTINGENCIES
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 operations. Presently, such effect, if any, cannot
be determined.
The Company has been utilizing the offices of another, unrelated,
entity. The Company has not been billed for nor has it paid rent
for several years and believes that the rent is being donated as
the building would otherwise be empty. It is estimated that the
fair market value of this office space is approximately $900 per
month. It is possible that the entity which owns the building may
request monthly rental payments or even payment in arrears for the
past occupancy. No amount has been accrued in the financial
statements for this contingency.
F/S-24
NOTE 10 - COMMON STOCK WARRANTS
The following schedules summarize the changes during the period
and the warrants issued and outstanding at August 31, 2004:
August 31, 2004
-------------
Outstanding, May 31, 2004 1,300,000
Issued -
----------------
Outstanding, August 31, 2004 1,300,000
================
Weighted average exercise price of warrants
outstanding as of August 31, 2004 $0.019
======
Outstanding Exercisable
----------------------------------------- ----------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 8/31/04 Life (in Yrs.) Price at 8/31/04 Price
--------------- ------------- --------------- ---------- -------------- ------------
$ 0.019 1,300,000 2.70 $ 0.019 - N/A
========== ===== ======= ========== =======
NOTE 11 - GOING CONCERN CONSIDERATIONS
The accompanying financial statements have been prepared using
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 $2,700,000 from inception of the Company
through August 31, 2004. The Company's stockholders' deficit at
August 31, 2004 was $598,379 and its current liabilities exceeded
its current assets by the same amount. These factors combined,
raise substantial doubt about the Company's ability to continue as
a going concern. Management'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.
As a part of this plan, management is currently seeking to
transform into a publicly traded entity. Management believes that
its business model has significant potential as long as extra
working capital is received through operations and/or business
development.
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
profitable operations. The accompanying financial statements do
not include any
F/S-25
NOTE 11 - GOING CONCERN CONSIDERATIONS (Continued)
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 12 - SUBSEQUENT EVENTS
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, Inc. (Tennessee) for a total of 1,947,688 common
shares of Cancer Therapeutics, Inc. (Delaware) issued upon
incorporation. All references to shares issued and outstanding in
the financial statements have been retroactively restated to
reflect the effects of this change in capital structure.
During September 2004 the Company issued an additional 2,150,000
shares of its common stock to various companies and individuals
for services rendered and amounts owed to these companies and
individuals.
F/S-26
No dealer, salesperson or other person has been 4,097,688 Shares
authorized to give any information or to make any
representations other than those contained in this
prospectus and, if given or made, such information or
representations must not be relied upon as having been CANCER THERAPEUTICS, INC.
authorized by us. This prospectus does not constitute
an offer to sell or the solicitation of an offer to
buy any security other than the shares of common stock
to which this prospectus relates, or any offer in any
jurisdiction in which the person making such offer or Common Stock
solicitation is not qualified to do so, or to any
person to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this prospectus
nor any sale made hereunder shall, under any
circumstances, create any implication that there has
been no change in the affairs of the business of ___________________
Cancer Therapeutics or that the information contained
herein is correct as of any time subsequent to the
date hereof. PROSPECTUS
-------------------
TABLE OF CONTENTS Page
PROSPECTUS SUMMARY...................................1
RISK FACTORS.........................................3
SECURITIES AND EXCHANGE
COMMISSION'S PUBLIC REFERENCE.......................7
THE OFFERING.........................................7
DILUTION.............................................8
USE OF PROCEEDS......................................8
DETERMINATION OF OFFERING PRICE......................8
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION.....................8
BUSINESS............................................10
DESCRIPTION OF PROPERTY.............................16 October , 2004
DIRECTORS, EXECUTIVE OFFICERS AND
CONTROL PERSONS....................................17
EXECUTIVE COMPENSATION..............................18
CERTAIN RELATIONSHIPS AND RELATED...................19
TRANSACTIONS........................................19
DIVIDEND POLICY.....................................19
MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS........................20
SELLING SECURITY HOLDERS............................21
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT...................26
DESCRIPTION OF SECURITIES...........................27
PLAN OF DISTRIBUTION................................28
INTEREST OF NAMED EXPERTS AND COUNSEL...............29
LEGAL PROCEEDINGS...................................29
DISCLOSURE OF COMMISSION POSITION...................30
ORGANIZATION WITHIN THE LAST FIVE YEARS.............31
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS........................................31
REPORTS TO SECURITY HOLDERS.........................32
FINANCIAL STATEMENTS................................33
1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the Delaware General Corporation Law allows a
corporation to eliminate or limit the personal liability of a director to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty except for:(i) any breach of the duty of loyalty to the corporation or its
stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) declaration of
unlawful dividends or unlawful stock repurchases or redemptions; (iv) any
transaction from which the director derived an improper benefit; or (v) any act
or omission occurring prior to the date any such provision eliminating or
limiting such liability became effective.
Section 145(a) of the Delaware General Corporation Law provides that a
corporation may indemnify an officer or director who is or is threatened to be
made a party to a proceeding (other than an action by or in the right of the
corporation) by reason of the fact that such officer or director is or was (i)
serving as an officer, director, employee, or agent of the corporation, or (ii)
served at the request of such corporation as an officer, director, employee, or
agent of another corporation or other enterprise or entity. Such indemnification
may only be made if the officer's or director's conduct was in good faith and in
a manner such person reasonably believed to be in or not opposed to the
corporation's best interests, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful.
Section 145(c) of the Delaware General Corporation Law provides that a
corporation shall indemnify an officer or director for his reasonable expenses
in connection with the defense of any proceeding if the officer or director has
been successful, on the merits or otherwise. Section 145(e) provides that a
corporation may advance expenses to an officer or director who is made a party
to a criminal or civil proceeding before a final disposition is made, if the
corporation receives an undertaking by or on behalf of such officer or director
to repay any amounts advanced if it is determined that such officer or director
was not entitled to indemnification. Section 145(j) provides that the
indemnification provisions of Section 145 continue for a person who has ceased
to be an officer or director, and inures to the benefit of the heirs, executors,
and administrators of such person. Section 145(g) provides that a corporation
may purchase and maintain insurance on behalf of officers or directors, among
others, against liabilities imposed upon them by reason of actions in their
capacities as such, and whether or not the corporation would have the power to
indemnify them against such liability under Section 145.
Certificate of Incorporation
Article VI of our Certificate of Incorporation provides that the
liability of directors to Cancer Therapeutics or its stockholders is eliminated
to the fullest extent permitted under the Delaware General Corporation Law, as
described in the preceding paragraphs.
Bylaws
Article VI, Section 6.1(a) of our Bylaws provides that an officer or
director who was or is made party to, or is threatened to be made a party to, or
is involved in any proceeding by reason of the fact that he or she is or was an
officer or director, or is or was serving at the request of Cancer Therapeutics
as a director, officer, employee, or agent of another corporation, or as its
representative in another enterprise shall be indemnified and held harmless to
2
the fullest extent permitted and subject to the standards of conduct,
procedures, and other requirements under Delaware law. Article, VI, Section
6.1(a) further provides that Cancer Therapeutics may purchase and maintain
insurance on behalf of an officer or director against any liability arising out
of their status as such, whether or not the corporation would have the power to
indemnify such officer or director.
Article VI, Section 6.1(b) of our Bylaws provides that the right of an
officer or director to indemnification shall continue beyond termination and
such right inures to the benefit of the heirs and personal representatives of
such officer or director.
Article VI, Section 6.1(d) of our Bylaws provides that Cancer
Therapeutics shall, from time to time, reimburse or advance to an officer or
director the funds necessary for payment of expenses incurred in connection with
defending any proceeding for which he or she is indemnified by Cancer
Therapeutics, in advance of the final disposition of such proceeding, provided
that, if then required by the Delaware General Corporation Law, such
advancements may only be paid upon the receipt by the corporation of an
undertaking by or on behalf of such officer or director to repay any such amount
so advanced if it is ultimately determined by a final and unappealable judicial
decision that the officer or director is not entitled to be indemnified for such
expenses.
3
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, payable by us in
connection with the sale of the securities being registered. All amounts are
estimates except for the fees payable to the Commission.
SEC Registration Fee.................................. $ 51.92
Printing and engraving expenses....................... 1,000.00
Legal fees and expenses............................... 90,000.00(1)
Accounting fees and expenses.......................... 14,000.00
Blue Sky filing fees.................................. Nil
Transfer Agent fees and expenses...................... 2,500.00
Miscellaneous......................................... 1,000.00
------------------
Total........................... $108,551.92
------------------
(1) Represents cash paid, as well as the number of shares of common stock
received by our securities counsel, multiplied by the offering price on the
cover of this prospectus.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On May 10, 2004, we issued 1,300,000 shares of our common stock in
connection with the engagement of our corporate counsel, an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933. No solicitation was made and no underwriting
discounts were given or paid in connection with this transaction. We believe
that this transaction was exempt from the registration provisions of the
Securities Act pursuant to Sections 3(a)(11) and 4(2) of such Act.
On May 28, 2004, we issued and sold 200,000 shares of our common stock,
together with a warrant to acquire 1,300,000 shares of our common stock at an
aggregate purchase price of $25,000, to an accredited investor in exchange for
$75,000 in cash proceeds. No solicitation was made and no underwriting discounts
were given or paid in connection with this transaction. We believe that this
transaction was exempt from the registration provisions of the Securities Act
pursuant to Sections 3(a)11 and 4(2) of such Act.
On September 10, 2004, we issued 400,000 shares of our common stock in
satisfaction of amounts owed to our securities counsel in connection with an
engagement dated July 20, 2004. Our securities counsel is an "accredited
investor" as such term is defined in Rule 501 to Regulation D promulgated under
the Securities Act of 1933. No solicitation was made and no underwriting
discounts were given or paid in connection with this transaction. We believe
that this transaction was exempt from the registration provisions of the
Securities Act pursuant to Sections 3(a)(11) and 4(2) of such Act.
On September 10, 2004, we issued 1,000,000 shares of our common stock in
satisfaction of amounts owed to our Chief Financial Officer in connection with
an engagement dated May 15, 2004. Our Chief Financial Officer is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933. No solicitation was made and no underwriting
discounts were given or paid in connection with this transaction. We believe
that this transaction was exempt from the registration provisions of the
Securities Act pursuant to Sections 3(a)(11) and 4(2) of such Act.
On September 15, 2004, we issued 400,000 shares of our common stock
pursuant to the conversion of a promissory note issued by Cancer Therapeutics in
2001 to an accredited investor. No solicitation was made and no underwriting
4
discounts were given or paid in connection with this transaction. We believe
that this transaction was exempt from the registration provisions of the
Securities Act of 1933 pursuant to Sections 3(a)(11) and 4(2) of such Act.
On September 20, 2004, we issued 200,000 shares of our common stock in
satisfaction of amounts owed to an accredited investor for healthcare advisory
services rendered to Cancer Therapeutics pursuant an advisory agreement dated
January 8, 2001. No solicitation was made and no underwriting discounts were
given or paid in connection with this transaction. We believe that this
transaction was exempt from the registration provisions of the Securities Act
pursuant to Sections 3(a)(11) and 4(2) of such Act.
On September 20, 2004, we issued 150,000 shares of our common stock in
connection with the execution of a financial advisory agreement with Industrial
Management & Equity Limited., which is owned and controlled by Lyndon Gaborit, a
citizen and resident of the United Kingdom. The securities were issued to LG
Investment Trust, a trust formed for the benefit of immediate family members of
Mr. Gaborit. No solicitation was made and no underwriting discounts were given
or paid in connection with this transaction. We believe that this transaction
was exempt from the registration provisions of the Securities Act pursuant to
Section 4(2) of such Act and Rule 903 promulgated under the Act.
5
ITEM 27.
EXHIBITS
The following exhibits are filed as part of this Registration Statement
Exhibit
Number Title of Document
3.1 Certificate of Incorporation of Cancer Therapeutics, Inc., a
Delaware corporation.
3.2 Bylaws of Cancer Therapeutics, Inc., a Delaware corporation.
4.1 Form of Common Stock Certificate.
5.1 Opinion of Kenneth I. Denos, P.C., Attorney at Law (including consent).
10.1 Warrant Issued to Healthcare Enterprise Group, Inc.
10.2 Engagement Agreement between the Registrant and John Thomas, Esq.
10.3 Accounting Services Agreement between the Registrant and Chene C. Gardner
10.4 Engagement Agreement between the Registrant and Kenneth I. Denos, P.C.
10.5 Advisory Agreement Between the Registrant and Industrial Management & Equity Limited
23.1 Consent of Bouwhuis, Morrill and Company, LLC.
23.2 Consent of Kenneth I. Denos, P.C. (Filed as part of Exhibit 5.1).
- -------------
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers, and
controlling persons of the registrant pursuant to any provisions or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by a controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
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in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a new form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of
Thomasville, state of Georgia, on October 22, 2004.
CANCER THERAPEUTICS, INC.
By: /s/ Robert Oldham
-----------------------------------------
Robert Oldham
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title Date
------------ ------ -------
President, Chief Executive October 22, 2004
/s/ Robert Oldham Officer, and Director
- ---------------------- (Principal Executive Officer)
Robert Oldham
/s/ Michael Low Director October 22, 2004
- ----------------------
Michael Low
Chief Financial Officer and October 22, 2004
/s/ Chene Gardner Director (Principal Financial
- --------------------------------------- Officer)
Chene Gardner
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