Registration No. 333-119915
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No. 2
to
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
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(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 any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. o
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. o
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. o
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. o
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. o
CALCULATION OF REGISTRATION FEE
- ------------------------ --------------------- ----------------------- ---------------------- ----------------------
Title of Securities Amount Proposed Maximum Proposed Maximum Amount of
to be to be Offering Price Aggregate Registration
Registered Registered Per Share(1) Offering Price Fee
- ------------------------ --------------------- ----------------------- ---------------------- ----------------------
Common Stock 1,000,000 $0.50 $500,000 $58.85
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(1) Estimated solely for purposes of computing the registration fee pursuant to
Rule 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.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED FEBRUARY 17, 2005
1,000,000 Shares
CANCER THERAPEUTICS, INC.
____________________
Common Stock
__________________
We are offering, on a "best efforts, minimum-maximum" basis, up to
1,000,000 shares of Cancer Therapeutics, Inc. common stock, to the public at a
price of $0.50 per share. 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.
_________________
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.
________________________________________________________________________________
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.
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Discounts and
Price to Public(1) Commissions Proceeds to us (2)
- ------------------------------------------- ------------------- ------------------- --------------------------------
Per Share................................. $0.50 $0.00 $0.50
- ------------------------------------------- ------------------- ------------------- --------------------------------
Total Minimum............................. $100,000 $0.00 $100,000
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Total Maximum............................. $500,000 $0.00 $500,000
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(1) The offering price is payable in cash to Cancer Therapeutics upon
subscription. We will manage the offering and the shares offered hereby will be
sold by our officers and directors, without any discounts or other commissions.
(2) We will deposit the proceeds of this offering into an escrow account with
our attorneys, Kenneth I. Denos, P.C. If we do not receive subscriptions for a
minimum of $100,000 within 120 days from the date of this prospectus (unless
extended by us for up to 30 additional days), all proceeds will be promptly
refunded to subscribers without interest thereon or deduction therefrom. If you
subscribe for shares in this offering, you will have no right to return or use
of your funds during the offering period, which may last up to 150 days.
The information in this prospectus is not complete and may be changed. We
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.
TABLE OF CONTENTS
PAGE
NUMBER
______
PROSPECTUS SUMMARY.............................................................1
RISK FACTORS...................................................................3
SECURITIES AND EXCHANGE COMMISSION'S PUBLIC REFERENCE..........................6
USE OF PROCEEDS................................................................6
DILUTION.......................................................................7
DETERMINATION OF OFFERING PRICE................................................8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION....................8
BUSINESS......................................................................12
DESCRIPTION OF PROPERTY.......................................................20
DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS............................21
EXECUTIVE COMPENSATION........................................................22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................23
DIVIDEND POLICY...............................................................24
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................25
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...................................................31
FINANCIAL STATEMENTS.......................................................F/S-1
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."
"Biotherapy" is the use of the body's immune system, either directly or
indirectly, to fight cancer or to lessen side effects that may be caused by some
cancer treatments. 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 cancer treatment
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
website and the information contained therein, however, does not constitute a
part of this prospectus.
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 offering of up to 1,000,000 shares of our common
stock. We are offering to sell these shares to the public for $0.50 per share.
We will manage the offering and the shares will be offered and sold by our
officers and directors. The proceeds of this offering will be escrowed by our
attorneys pending completion or termination of this offering. The offering will
terminate 120 days from the date hereof (or 150 days if extended by us for an
additional 30 days), and funds held in escrow will be promptly returned to
subscribers, without interest or deduction, unless the offering is completed on
or before the date upon receipt of subscription for at least the minimum
offering amount of $100,000. Please see the "Plan of Distribution" section on
page 29 of this prospectus for a detailed explanation of how our shares of
common stock are intended to 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. We are authorized to issue up to 100,000,000
shares of common stock and 10,000,000 shares of preferred stock. Upon completion
of this offering, if the maximum number of shares available for sale in are
sold, there will be 5,097,688 shares issued and outstanding. We have not issued
any shares of preferred stock. We are authorized to issue shares of preferred
stock in one or more series with such rights and preferences as our board of
directors may decide. Our
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board of directors has not designated any such series and no shares of preferred
stock are presently issued and outstanding.
Going Concern
As detailed in our audited financial statements for the year ended May 31,
2004, and including our unaudited financial statements for the three month
period ended August 31, 2004, we have an accumulated deficit of $2,752,899. We
have negative working capital, negative cash flows from operations, minimal
revenues and recurring operating losses.
Use of Proceeds
After making deductions for offering expenses, we intend to use the
proceeds of this offering for marketing, business development, operating
expenses, and interest payments to a creditor of Cancer Therapeutics. The
amounts we allocate to each of these categories is dependent upon whether we
raise the minimum or the maximum amount contemplated in this offering. We have
provided details concerning the allocation of proceeds under "Use of Proceeds"
on page 7 of this prospectus.
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, as well as the quarters ended August 31, 2004, 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 10 of this
prospectus.
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For the six months For the year ended For the year ended
ended November 30, May 31, 2004 May 31, 2003
2004
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Revenue $9,848 $36,104 $36,468
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Net Loss for the Period ($294,855) ($177,448) ($280,762)
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Loss Per Share - basic and diluted ($0.01) (1) ($0.38) (1) ($0.63) (1)
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Working Capital (Deficit) ($473,406) ($572,201) ($534,753)
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Total Assets $-25,996 $77,997 $ -
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Total Number of Issued Shares of Common -4,097,688 (1) 1,947,688 (1) 447,688 (1)
Stock
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Accumulated Deficit ($3,080,426) ($2,726,721) ($2,549,273)
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Total Stockholders' Deficit ($473,406) ($572,201) ($534,753)
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(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 Consistently Operated at a Loss. Cancer Therapeutics was organized
in 1991 and has consistently operated at a loss, and we cannot assure you that
we will be able to operate Cancer Therapeutics profitably. In the event we are
unsuccessful at operating our business profitably, we cannot assure you that
Cancer Therapeutics could successfully become involved in any other business
venture due to the fact that our personnel are trained only in biotherapy and
not in other services. We presently have no plans, commitment, or arrangements
with respect to any other potential business venture.
We have no Operating Capital, and We Must Raise Additional Capital to
Remain in Business. We presently have no operating capital and are dependent
upon future fundraising efforts to provide the minimum capital necessary to
continue our business. Such fundraising efforts may include the sale of
additional shares of Cancer Therapeutics such as is contemplated in this
offering or will involve commercial borrowing. Although we believe that our
status as a publicly-traded company will enhance our ability to raise additional
capital, our financial condition is dire and we are currently operating with no
or very little working capital, several loan obligations, and a lien against our
assets by the Internal Revenue Service. 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. Even
if we raise the maximum amount of fundraising, we will still need to raise
additional capital to operate our company. Presently, our current offering is
our sole source of potential funding and we have no commitments or arrangements
from commercial lenders or other sources.
We are Totally Dependent Upon our Chief Executive who has Business and Time
Conflicts. We are totally dependent upon the knowledge, skills, and experience
of Robert K. Oldham, M.D. our President, CEO, Medical Director and Chairman. As
compared to many other 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 would force us to discontinue our business. 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 Therapeutics. We cannot assure you that such
conflicts will be resolved favorably to Cancer Therapeutics.
Insurance and Other Third Party Reimbursement for our Services is Limited.
With respect to the services we offer, insurance reimbursement or other
third-party reimbursement is only available with respect to certain patient
types. Moreover, our services are not covered or reimbursed under the Medicare
program. Consequently, most patients will be required to pay for such services,
wholly or in part, with their own funds. We cannot assure you that significant
insurance reimbursement or other third-party reimbursement for our services will
be available in the future. Without this reimbursement, we will not be able to
offer our services to many patients and physicians.
Our Services are Subject to FDA Regulation. Prior to being licensed for
sale in other states besides Georgia, our services 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
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to obtain are not clear at this point. Obtaining FDA and corresponding foreign
approvals for technology, processes, or products we have developed is 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 prohibit or render impractical our business plan and
disable us from providing two of the three services we presently offer. If we
are unable to get FDA approval, our business will not be able to expand into
other states.
Our Operating Costs Will Most Likely Increase. Our income could be
seriously affected by rising operating expenses such as: research and
development; electricity; insurance and administrative costs, security, patent
registration expenses, building repairs and maintenance, and regulatory
compliance. If we cannot control operating costs or adequately cover them, our
cash flow will deteriorate and we will have to raise capital or discontinue our
business.
We Do 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
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.
No Underwriter is Participating in this Offering. Because we have not
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
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
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.
We Have Never Issued a Dividend and Don't Anticipate any Dividends in the
Future. Cancer Therapeutics has never issued a dividend and we do not anticipate
paying dividends on our common stock in the foreseeable future. Furthermore, we
may also be restricted from paying dividends in the future pursuant to
subsequent financing arrangements or pursuant to Delaware law.
You Could be Diluted from the Issuance of Additional Common and Preferred
Stock. Cancer Therapeutics is authorized to issue up to 100,000,000 shares of
common stock and 10,000,000 shares of preferred stock. To the extent of such
authorization, our board of directors will have the ability, without seeking
shareholder approval, to issue additional shares of common stock in the future
for such consideration as the board may consider sufficient. The issuance of
additional common stock in the future may reduce your proportionate ownership
and voting power.
It is Likely That You Will be Diluted by the Exercise of Warrants. Cancer
Therapeutics has 4,097,688 shares of common stock outstanding held by 139
shareholders of record, and warrants outstanding to purchase
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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.
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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.
USE OF PROCEEDS
The net proceeds to Cancer Therapeutics from the sale of the 1,000,000
shares offered hereby will vary depending upon the total number of shares sold.
The following table sets forth gross and net proceeds, and our present estimate
of the allocation and prioritization of net proceeds expected to be received by
us from this offering. As shown in the table, if less than the maximum amount is
raised, we will give priority to debt interest service and payment to our
auditors and attorneys assisting us with this registration statement.
Minimum Mid-Range Maximum
Offering Offering Offering
________ _________ ________
Gross Proceeds $ 100,000 $ 250,000 $ 500,000
Legal and Auditing Fees(1) $68,558.85 $68,558.85 $68,558.85
==========
Net Offering Proceeds $ 31,441.15 $ 181,441.15 $ 431,441.15
============
Marketing (2) $ 8,000 $ 35,000 $ 69,000
Business Development (3) $ 2,000 $25,000 $ 53,000
Operating Expenses (4) $ 15,934.90 $ 115,934.90 $ 303,934.90
Debt Interest Service(5) $ 5,506.25 $ 5,506.25 $ 5,506.25
----------- ---------- ----------
TOTAL $ 100,000 $250,000 $ 500,000
========= =========
(1) We have already paid our securities counsel and auditors $25,000 and
$16,371.71, respectively, out of cash reserves. We have already issued
our securities counsel 400,000 shares of our common stock, the cost of
which has not been deducted from the offering proceeds. Our first
priority is to pay for our legal and auditing fees out of our gross
proceeds from the offering.
(2) We intend to use this portion of net proceeds to create and publish new
marketing material to distribute to physicians and potential patients who
want to learn more about our services. Our fourth priority is to pay for
marketing out of our net offering proceeds.
(3) We plan on using this portion of net proceeds to try to form strategic
partnerships with other clinics that perform cancer treatment. Our fifth
priority is to pay for business development out of our net offering
proceeds.
(4) We intend to use this portion of the net proceeds to cover rent and other
operating expenses and provide working capital for the operation of our
business. If the maximum amount is raised, we intend to hire additional
personnel. Our third priority is to pay for operating expenses out of our
net offering proceeds.
(5) We have negotiated a renewal of a bank note payable to Commercial Bank in
Thomasville, Georgia that became due on August 1, 2003. The interest rate
on the bank note is 4.5%. We have paid $5,200 out of cash reserves to pay
for all of the interest owing on the bank note thru December 31, 2004. We
initially borrowed $50,000 from the bank to update our lab equipment and
to use for operating expenses. Our second priority is to pay for the debt
interest service out of our net offering proceeds.
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DILUTION
Comparison of Offering Price to Prior Issuances of Shares
Compared to the offering price of $0.50 per share, the following officers,
directors, promoters and affiliated persons received shares from Cancer
Therapeutics during the past five years in the manner described below. Our
estimates of the value of the shares issued for services are based upon our
perceived value of the services provided and bear no relationship to assets,
shareholder's equity, or any other criteria of value.
o We issued 1,300,000 shares of our common stock in connection with
the engagement of our corporate legal counsel on May 10, 2004. We
estimated the value of the services provided to be worth $65,000,
or $0.05 per share.
o We issued 200,000 shares of our common stock for $0.375 per share
to Healthcare Enterprise Group, Inc. in exchange for $75,000
cash, on May 28, 2004. In connection with this transaction, we
also issued Healthcare Enterprise Group, Inc. a warrant to
acquire 1,300,000 additional shares at an exercise price of
$0.0192 per share. Assuming that the warrant is exercised, the
average cost of the shares acquired by Healthcare Enterprise
Group, Inc. is $0.067 per share.
o We issued 400,000 shares of our common stock in connection with
the engagement of our securities counsel on July 20, 2004. We
estimated the value of the services provided to be worth $90,000.
Of the $90,000 in services, we agreed to pay $50,000 in cash and
$40,000 in shares which we valued at $0.10 per share.
o We issued 400,000 shares of our common stock to our Chief
Executive Officer in connection with the conversion of a
promissory note on September 15, 2004 for $125,000 in loans made
by him to Cancer Therapeutics in 2001. The value of our shares
for purposes of this conversion was $0.313 per share.
o We issued 1,000,000 shares of our common stock in conversion of
$50,000 owed to our Chief Financial Officer on September 20,
2004. The value of our shares for purposes of this conversion was
$0.05 per share.
o We issued 200,000 shares of our common stock on September 20,
2004 in settlement of deferred consulting fees for healthcare
advisory services provided in 2001. We estimated the value of
these services to be worth $75,000, or $0.375 per share.
o We issued 150,000 shares of our common stock on September 20,
2004 in connection with the engagement of a United Kingdom-based
advisory firm. We estimated the value of these services to be
worth $37,500, or $0.25 per share.
Net Tangible Book Value
Dilution is the difference between the public offering price of $0.50 per
share for our common stock, and the net tangible book value per share of our
common stock immediately after its purchase. Our net tangible book value per
share is calculated by subtracting the our total liabilities from our total
assets less any intangible assets, and then dividing by the number of shares
then outstanding.
The net tangible book value of Cancer Therapeutics prior to the offering,
based upon our August 31, 2004 financial statements, was ($598,379), or ($0.146)
per common share. Prior to selling any shares in this Offering, we have
4,097,688 shares outstanding.
If we are able to sell the maximum number of shares in this offering, we
will have 5,097,688 shares outstanding. Our estimated post-offering net tangible
book value, which gives effect to receipt of the estimated net proceeds from the
offering and issuance of the additional shares of common stock in the offering,
but does not take into consideration any other changes in the net tangible book
value of Cancer Therapeutics, will be ($166,938), or
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approximately ($0.033) per share. This would result in complete dilution to all
investors in this offering at the public offering price of $0.50 per share,
immediately after their investment.
If a mid-range number of 500,000 shares are sold, we will have 4,597,688
shares outstanding upon completion of the offering. The post-offering pro forma
net tangible book value of Cancer Therapeutics would be ($416,938), or
approximately ($0.091) per share. This would also result in complete dilution to
all investors in this offering at the public offering price of $0.50 per share,
immediately after their investment
If only the minimum number of shares are sold, we will have 4,297,688
shares outstanding upon completion of the offering. The post-offering pro forma
net tangible book value of Cancer Therapeutics would be ($566,938), or
approximately ($0.132) per share. This would also result in complete dilution to
all investors in this offering at the public offering price of $0.50 per share,
immediately after their investment.
The following table sets forth the estimated net tangible book value per
share after the offering and the dilution to persons purchasing shares based on
the foregoing minimum and maximum offering assumptions (negative numbers are
expressed in parentheses).
Minimum Mid-Range Maximum
_______ _________ _______
Public offering price per share $0.50 $0.50 $0.50
Net tangible book value per share prior to offering ($0.146) ($0.146) ($0.146)
Increase per share attributable to new investors $0.014 $0.055 $0.113
Post-offering net tangible book value per share ($0.132) ($0.091) ($0.033)
Dilution to new investors in this offering $0.50 $0.50 $0.50
DETERMINATION OF OFFERING PRICE
Because the shares of Cancer Therapeutics common stock are not traded on
any exchange or quotation medium, we have made an estimate of the offering price
at which we will initially offer our shares, but such offering price bears no
relationship to assets, shareholders equity, or any other recognized criteria of
value.
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
We are a research-stage business that endeavors to become 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. Our website and the
information contained therein, however, does not constitute a part of this
prospectus.
8
The treatment of cancer is a significant portion of the healthcare economy.
According to the American Cancer Society's Cancer Statistics 2004, cancer
continues to be the second leading cause of death in the U.S., claiming almost
554,000 lives during 1991 (one in four deaths) In addition, incidence rates have
showed overall increases from 1975 to 2000, where now 1.4 million Americans will
be diagnosed with cancer this year. It is estimated that 1 of 2 males and 1 of 3
females in the U.S. will develop cancer during their lifetimes. Although
survival rates continue to climb (from 50% in 1975 to a current 63%), the
overall death rate from Cancer has remained relatively flat since the 1950s (as
cited by the American Cancer Society website at www.cancer.org "2004 Data and
Statistics," which is available to the public on the internet for no charge).
As such, with increasing survival, coupled with higher incidence, the
number of cancer survivors has concurrently increased - according to the
National Cancer Institute, as of January 2001, it is estimated that there are
9.8 million cancer survivors in the US, representing approximately 3.5% of the
population ( as cited by the National Institute of Cancer website at www.cancer
control.cancer.gov, which is available to the public for no charge).
The increasing number of cancer patients and survivors support the business
model of Cancer Therapeutics. Over the past two decades, the acceptance of
biotherapy treatment among oncologists and cancer patients has increased (as
explained by Klaus Schindhelm, Ex Vivo Cell Therapy, May 1999) (This book is
available to the public in a medical library for no charge).
The Company earns its revenue from providing clinical services to cancer
patients in the following areas:
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. Typical charge is around
$1,250. 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.
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.
The target market for our services is composed of two different groups:
o 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
o Individuals with cancers incurable through ordinary therapies
(candidates for our cryopreservation, patient-specific vaccines, and
autologous T-cell therapy services).
One of our biggest challenges is educating physicians and patients of the
benefits of biotherapy. Many people understand the need for tumor storage for
later use, but it has been a smaller group of patients and physicians that use
our vaccine and T-cell therapy services.
The requirement for FDA approval decreases our ability to sell our services
across state lines. As a result, we are only able to service patients if they
come to our location in Thomasville, Georgia.
We also experience the risk that the FDA will suspend our ability to use
these "Investigational New Drugs" as experimental treatments. If we were
prohibited from offering vaccine and T-cell therapy then we would lose two of
the three products we offer, and would therefore only be able to offer tumor
storage in our cryobank.
Results of Operations
Following is our discussion of the relevant items affecting results of
operations for the years ended May 31, 2004 and 2003 and the six months ended
November 30, 2004 and 2003.
9
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. For the six months ended November 30, 2004,
net revenues were $9,848 compared to $12,054 in net revenues during the six
months ended November 30, 2003. No major change in revenues was expected and we
anticipate this level of revenues for the foreseeable future. Revenues received
consist mainly of fees from cryos, which are the storage and maintenance of
malignancy tumors. Additional revenues were generated from the T-cell program
and hospital support.
Bad Debt Expense. Bad debt expense for the fiscal year ended May 31, 2004
was $0, compared to $39,506 during the twelve months ended May 31, 2003. For the
six months ended November 30, 2004 and 2003, there was no bad debt expense. .
Bad debts expense encompasses various accounts receivable that have been deemed
uncollectible by management. During the fiscal year ended May 31, 2004, 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; contract
labor; occupancy and office expenses; travel and other miscellaneous office and
administrative expenses. General and administrative expenses for the fiscal year
ended May 31, 2004 was $123,229, a 51% decrease from $252,837 during the twelve
months ended May 31, 2003. For the six months ended November 30, 2004, general
and administrative expenses were $191,437 compared to $7,200 during the six
months ended November 30, 2003. The decrease during the fiscal year ended May
31, 2004 was primarily due to the efforts of management in keeping costs to a
minimum. During the fiscal year ended May 31, 2003 the company was ramping up
operations and incurred approximately $53,400 in lab supplies expense. Other
large expenses incurred during this period include payments made to individuals
for services rendered in the amount of $142,478 which has been recorded as
contract labor. 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.
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, an increase from $0 during the twelve months ended May 31,
2003. For the six months ended November 30, 2004, professional fees were $98,031
compared to $0 during the six months ended November 30, 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. No professional fees were incurred during the year ended
May 31, 2003 and the six months ended November 30, 2003 because the accounting
was done in house and no issues required outside legal or accounting services.
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. For the six months ended November 30, 2004,
net other expenses were $15,235 compared to $4,304 during the six months ended
November 30, 2003. Expenses incurred in this category were comprised primarily
of interest expense associated with promissory notes issued by the Company.
Off-Balance Sheet Arrangements.
Cancer Therapeutics is not subject to any off-balance sheet arrangements.
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. These project-based contract personnel are temporary engagements used
to assist us with laboratory experiments and research. When we have needed
assistance with the processing of tumors for our cryobank, we have utilized
additional personnel to assist with our record keeping and storage procedures.
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 revenues. As of May 31,
2004, and November 30, 2004 our primary source of liquidity
10
consisted of $77,997 and $25,996, respectively in cash and cash equivalents.
Cancer Therapeutics has sustained significant net losses which have resulted in
an accumulated deficit at May 31, 2004 and August 31, 2004, of $2,785,571, and
$3,080,426, respectively. Our losses raise doubts about our ability to continue
the business of Cancer Therapeutics as a going concern. Our current financial
condition is dire. We have defaulted on several loans, and are currently in
settlement with the Internal Revenue Service for unpaid taxes. Consequently, we
anticipate that we will require additional cash inflows from increased revenues
or sales of debt or equity capital to maintain operations and/or finance
substantial business initiatives that may arise. We anticipate another net loss
for the year ending May 31, 2005, and with the expected cash requirements for
the coming months, without additional cash inflows from an increase in revenues
and from the sale of shares pursuant to this offering, we have substantial doubt
as to our ability to continue to operate. We believe our present capital
resources are insufficient for ongoing operation. We cannot assure you that we
will be able to raise sufficient funds to further develop and market our
services. Our lack of funds will materially affect Cancer Therapeutics, and may
cause us to cease operations. Consequently, you could incur a loss of your
entire investment in Cancer Therapeutics.
11
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 of the then-issued
shares of Cancer Therapeutics) on June 8, 2000. The shareholders of Immune
Complex Corporation were issued shares of Cancer Therapeutics Incorporated on a
pro rata basis.
As a predecessor to Cancer Therapeutics, Immune Complex Corporation was
incorporated in 1994, and was formed to develop vaccines for diseases including,
malaria, influenza and hepatitis B. During the years that Cancer Therapeutics
operated as a subsidiary of Immune Complex Corporation, the management of Cancer
Therapeutics remained constant, with Robert K. Oldham acting as Chief Executive
Officer. Immune Complex Corporation added Robert K. Oldham as a member of its
board of directors, effective September 15, 1998. Mr. Oldham resigned from his
position with Immune Complex Corporation effective June 8, 2000.
THE BUSINESS OF CANCER THERAPEUTICS
Mission and Vision
Our mission is to commercialize innovative biotherapyapproaches for the
treatment of cancer that will enhance the quality and length of life for cancer
patients. "Biotherapy" is the use of the body's immune system, either directly
or indirectly, to fight cancer or to lessen side effects that may be caused by
some cancer treatments. 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 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 cancer treatment 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. Our website and the
information contained therein, however, does not constitute a part of this
prospectus.
Overview
We are a research-stage business that endeavors to become a 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 develop 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 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." Klaus Schindhelm &
Robert Nordon, Ex Vivo Cell Therapy p.55 (1999) (available to the public for
purchase, and available to be viewed at a medical library for no charge).
Biotherapy seeks to treat this life-altering disease by using the body's own
natural defense system and is used to as a complementary treatment 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 is currently reimbursed through private insurance).
The Business Model and Value Proposition
We provide limited 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
12
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. Robert K. Oldham, Fundamentally Different, Cancer Biotherapy &
Radiopharmaceuticals Vol. 14 No. 6 pp. 57-59 (1999) (available in medical
libraries to the public for no charge). We believe that biotherapy offers an
opportunity for truly 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. See Walter
M. Lewko, Peggy B. Hall & Robert K. Oldham, Cancer Biotherapy &
Radiopharmaceuticals Growth of Tumor-Derived Activated T Cells for the Treatment
of Advanced Cancer, Vol. 15 No. 4 pp. 60-69 (2000)(available to the public in
medical libraries for no charge). The technologies we employ emphasize the
enhancement of the body's natural defense system. T-cells regulate the immune
response and the expansion and infusion of activated T-cells can both activate
and expand the patient's immune cells. This allows the body to create a stronger
defense against cancer and its effects. Regulatory T-cells when reinfused into
the body can change the way the immune system works and add to the defense
system of the body See Walter M. Lewko, Peggy B. Hall & Robert K. Oldham, Cancer
Biotherapy & Radiopharmaceuticals Growth of Tumor-Derived Activated T Cells for
the Treatment of Advanced Cancer, Vol. 15 No. 4 pp. 60-69 (2000)(available to
the public in medical libraries for no charge); See also Robert K. Oldham, M.D
Principles of Cancer Biotherapy 4th Edition, (2004) (available to the public in
medical libraries for no additional charge).
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. Our Cryobank service is a marketed service we provide to our
patients. Cryobank is not a developmental stage service, but is a tumor
storage service that has continually been effective in preserving tumors.
Our Cryobank service creates the largest percentage of revenue for Cancer
Therapeutics and is typically the principal service that patients seek from
us. Upon providing this service to patients, we are able to tell them of
the potential benefits of our other services including the Tumor Derived
Activated Cells treatment and the vaccines described herein.
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. See Walter M. Lewko, Peggy B. Hall & Robert K. Oldham, Cancer
Biotherapy & Radiopharmaceuticals Growth of Tumor-Derived Activated T Cells
for the Treatment of Advanced Cancer, Vol. 15 No. 4 pp. 60-69
(2000)(available to the public in medical libraries for no charge). We are
in the developmental stage of advancing this service. We provide this
service to patients on a contractual basis for a small fee, premised on the
fact that this treatment is principally for research purposes. We
anticipate that we will be in a developmental stage for at least five (5)
more years. We anticipate that the following lifecycle will take place in
the developmental process of Tumor Derived Activated Cells for biotherapy:
Treatments using
13
single, moderate doses of Tumor Derived Activated Cells and Tumor
Infiltrating Lymphocytes cells derived from the patient's tumor:
o Treatments using single, moderate doses of Tumor Derived
Activated Cells and Tumor Infiltrating Lymphocytes cells derived
from the patient's tumor;
o 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;
o Protocols exploring cell dose, schedule, and selection in
cellular therapy;
o 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
o Treatments that combine activated cell therapies with other
agents and compounds to enhance overall efficacy.
We anticipate that the following time frame for the lifecycle for the
developmental process of Tumor Derived Activated cells:
o Tumor biopsy specimen received via overnight carrier and into the
cryobank;
o Within 4 to 6 weeks cells can be cultured and expanded to
demonstrate the feasibility of producing an autologous T-cell
preparation;
o The autologous vaccine can be cryopreserved (frozen) and used any
time in the coming several years when a patient might have a need
for these cells;
o With the activated T-cells, they could be grown (cultured)
repetitively and administered at 2-3 week intervals as they are
grown in the laboratory. Our standard protocol includes four
infusions of these cells giving a life cycle of 6 to 15 weeks for
the culture expansion and administration of T-cells;
o The T-cells life cycle can be arrested and cryopreserved at any
stage. These cells have been removed from our cryobank as long as
10 years later and are still alive and active in cancer
treatment;
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. We are in the developmental
stage of advancing this process. We anticipate that we will be in a
developmental stage for at least another five (5) years. We provide this
service to patients on a contractual basis for a small fee, premised on the
fact that this treatment is for research purposes.
Patient-specific vaccines have been available as a research process.
Under FDA review, the process is currently on "clinical hold" which means
that the vaccine cannot be shipped across state lines until the FDA lifts
its clinical hold guidance. However, patients may come to our associated
clinics in Georgia and receive these vaccines under Georgia state law,
which allows for the administration of experimental vaccines not yet
approved by the FDA.
Proprietary Processes
We have proprietary processes or methods of growing and activating cells.
The proprietary nature of these rest in the techniques developed by Walter
Lewko, Ph.D. and Robert K. Oldham, M.D., our principal scientists
14
over the past twenty-three years. Our principal scientists have published many
articles and a textbook revealing their techniques and the results of their
research. We have been able to develop protocols and procedures at our
laboratory that allow for optimal conditions for successful storage in our
cryobank, t-cell harvesting and vaccine growth. Our procedures and processes
have only come from many years of practice. We are able to foster conditions
within the laboratory that allows for more successful t-cell harvesting, vaccine
growth and cryobank storage of tumors. We have not been able to apply for
certain process patents because of a lack of capital, but our principal
scientists have specialized knowledge concerning the culture and activation of
T-cells and the preparation of vaccines. This proprietary expertise is described
within our written standard operating procedures and our research database.
Outlook
Because many patients seeking new therapy modalities have little hope of
survival, it is not surprising that these 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, and certain types of
skin cancer and advanced kidney cancer cannot be eliminated through traditional
methods. See Robert K. Oldham, M.D Principles of Cancer Biotherapy 4th Edition,
pp.1-15 (2004)(available to the public in medical libraries for no charge).
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 (as cited by the Cancer Resource Center
at www.choosehope.com) (available to the public for no charge on the internet
for no charge):
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.
15
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 is an
alternative 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 9.8 million cancer survivors were diagnosed over 20
years ago (as cited by the National Institute of Cancer website at
www.cancer control.cancer.gov) (available for no charge on the internet).
In addition, over 1.36 million new cancer cases develop each year, and the
incidence of the disease continues to grow at three percent to four percent
per year. (as cited by the American Cancer Society website at
www.cancer.org "2004 Data and Statistics") (available for no charge on the
internet). 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 treatment is
only 63 percent. About 563,700 Americans are expected to die of cancer
every year, more than 1,500 people per day (as cited by the American Cancer
Society website at www.cancer.org "2004 Data and Statistics" (available for
no charge on the internet).. Cancer is the second leading cause of death in
the United States, occurring in one out of every four deaths. (as cited by
the American Cancer Society website at www.cancer.org) (available for no
charge on the internet). According to experts, the incidence of cancer is
likely to grow in the future in response to two significant trends:
o 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. (as cited by the American Cancer Society
website at www.cancer.org) (available for no charge on the
internet).
o Exposure of the public to cancer causing agents and factors - In
all actuality, lifestyle choices are the cause of most cancers.
Tobacco and diet (and/or lack of exercise) accounts for 60
percent of cancer related deaths. (as cited by the American
Cancer Society website at www.cancer.org) (available for no
charge on the internet).
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 may contribute to the need
for continued cancer research and development of innovative cancer
therapies as well as a possible increase in the sales and manufacturing of
new cancer products. The increasing prevalence of cancer and the growth in
the cell therapy market may offer a great opportunity for immunotherapeutic
approaches to the treatment of cancer.
The Target Market
The target market for our services is composed of two different groups:
o 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
o Individuals with cancers incurable through ordinary therapies
(candidates for our cryopreservation, patient-specific vaccines,
and autologous T-cell therapy services).
16
Annual Target Market
Of the 1.36 million new cancer patients per year, approximately 63 percent
are cured by current procedures. (as cited by the American Cancer Society
website at www.cancer.org "2004 Data and Statistics") (available for no charge
on the internet). We estimate that 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 we estimate to
be 300,000 patients per year.
The second group of patients is derived from the 46 percent of the 1.36
million new cancer patients with incurable cancers, 70 percent of which are
estimated to choose to access therapeutic opportunities. Many of these patients
may 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
We communicate with cancer specialists and with patients in search of new
forms of therapy. As cancer specialists see the need to store tumor tissue for
future use to benefit their patients, they have used our cryobank for tumor
storage. Patients searching the internet or discussing therapeutic options with
other patients or physicians often contact us and use our cryobank service. We
have in the past and plan to continue to network opportunities to offer our
other services to the users of our cryobank.
If incidence rates and the number of cancer deaths continue to increase
then more individuals may seekbiotherapy treatment to compliment 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 Georgia. 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. This increased marketing effort
should alert more cancer specialists to the potential benefits of biotherapy.
Biotherapy is relatively new to the healthcare marketplace. One of our obstacles
to growth is to educate cancer specialists to the potential benefits their
patients may receive from our services. 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. We believe our
location is strategic because most of the clinics we service, as well as our
laboratory, are located in Thomasville, Georgia, which allows us to operate
under Georgia state law, SB 742. This law allows us to provide experimental
treatments that have yet to receive full FDA approval. In addition, Dr. Oldham
has relationships with physicians in the southeast United States that use our
services. 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
17
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 plan to reach
patients nationwide by marketing through print, television and internet. A
portion of the proceeds of this offering is intended to be used for this
purpose. We have been limited by lack of capital for nationwide marketing in the
past. We believe that increased advertising will increase the amount of
physicians and patients using our services.
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 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 cell-based
therapeutic products that attempt to harness the power of the immune system
to treat cancer, infectious disease and autoimmune disease. Xcyte's website
is located at www.xcyte.com and available to the public for no charge.
Patient-Specific Vaccine Competitors:
Antigenics, Inc. New York - Antigenics, Inc. is a public biotechnology
company that is developing patient-specific (autologous) cancer vaccines by
extracting selected "heat shock" proteins from cell surface of patient's
own tumor tissue. More information about Antigenics, Inc. can be found on
their website at www.antigenics.com and available to the public for no
charge.
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 they claim helps trigger immune responses. More information
about AVAX Technologies Inc. can be found on their website at
http://www.sierrahotelproductions.com/avax and available to the public for
no charge.
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 information about Intracel
Corporation can be found on their website at www.intracel.com and available
to the public for no charge.
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. More information
about Cryoma Laboratories, Inc. may be found on their website at
www.cryoma.com and available to the public for no charge.
We received information about our competitors from their websites.
18
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.
It is difficult to estimate the costs and time frames associated with
achieving FDA approval for INDs 2792, 6533 and 8725. IND 2792 is the closest to
approval since there are many companies and clinics utilizing cellular therapy
with activated T-cells. There are at least two possible scenarios :
o The FDA could change its regulations to classify cellular
therapies as the practice of medicine, similar to autologous bone
marrow transplantation, then these cellular therapies could
become available and more heavily utilized soon. The main
hindrance to cellular therapy is the long, difficult and
expensive process for achieving registration with the FDA for a
biologic product.
o If the FDA continues to regulate cellular therapies as if it is a
new biologic product, it may take several years to gain approval
for activated T-cells under this IND.
With regard to the autologous vaccine therapy, we estimate that it may take
5-10 years to receive approval under IND 6533 and/or 8725. However, if we elect
to proceed with vaccine therapy under Georgia state law (SB742) vaccine therapy
could be available in the state of Georgia to individuals that wish to access it
through the recommendation of their physician on an almost immediate basis.
Failure to receive FDA approval will have a substantially detrimental
effect upon our ability to grow and create additional revenue. We believe that,
without FDA approval, Cancer Therapeutics will be unable to grow successfully
and achieve economies of scale insofar as our operating costs are concerned.
Consequently, we might have to discontinue our business. In the event that FDA
approval is never granted, we will only be able to service patients who come to
Georgia for treatment under state law SB742.
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 on a regular basis 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
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.
19
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 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.
DESCRIPTION OF OPERATIONS
Robert Oldham, M.D. and Walter Lewko Ph.D. serve as the primary operators
of the core business of Cancer Therapeutics. Dr. Oldham handles all of the
patient consulting and therapies. Mr. Lewko is responsible for operating the
cryobank and is responsible for the processing of incoming tumors and cultures.
Both Dr. Oldham and Mr. Lewko participate in the research and development of
vaccines and t-cell treatment.
New requests from patients and cancer specialists are processed by Mr.
Lewko. Patients have traveled from all over the United States to consult with
Dr. Oldham, to use our cryobank and receive our vaccine and T-cell services.
Most of our patients, however are based in and around southeast Georgia. Cancer
specialists use the cryobank, t-cell and vaccine services provided by Cancer
Therapeutics and administer to their own patients.
Our bookkeeping, financial reports, and related services are provided by
Chene Gardner, our Chief Financial Officer on a day-to-day basis.
20
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 the
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. From June 2002 to December, 2002, Dr. Oldham was a scientific
consultant to Xcyte Therapies, Inc., a biotechnology company which
commercializes cancer therapeutic products. Until recently, from April, 2002
thru October, 2004, Dr. Oldham served as a scientific consultant to Cell Genesys
Inc., (Foster City, California) a company that develops and commercializes
biological therapies for cancer. Dr. Oldham currently serves as a scientific
consultant to NycoMed-Amersham, a British health care company, and as Consulting
Medical Director of CBA Pharma, (Lexington, Kentucky), a company that develops
and distributes biopharmaceutical products. He also 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. Dr. Oldham spends approximately 35 business hours per
month working for Cancer Therapeutics.
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. Mr. Low spends approximately 5 hours per month in his position and
director and corporate secretary for Cancer Therapeutics.
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. Mr.
Gardner spends approximately 20 business hours per month in his position as
Chief Financial Officer and director of Cancer Therapeutics.
21
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
association with Cancer Therapeutics, from 1986 to 1989, Mr. Lewko was the
Section Head of Tumor Cell Biology at Biotherapeutics, Inc., a cancer therapy
company developing cellular treatments for cancer. Mr. Lewko was responsible for
growth of tumor cell lines fortherapeutic 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.
John D. Thomas, J.D., age 32, is general legal counsel for Cancer
Therapeutics. Mr. Thomas was retained by Cancer Therapeutics in May, 2004, and
is responsible for all general legal matters of Cancer Therapeutics. Prior to
his association with Cancer Therapeutics, Mr. Thomas practiced general corporate
law for various small clients as a sole practitioner from June, 2003 until the
present. Mr. Thomas practiced law as a litigator for the Law Offices of Kirk A.
Cullimore from September, 2002 until April, 2003. Mr. Thomas was general counsel
for LIFE International LLC, an international corporate services firm
specializing in estate planning and international corporate law, from September,
2000 until September, 2002. Mr. Thomas practiced general corporate law as a sole
practitioner from November, 1999 until September, 2000. Mr. Thomas holds a Juris
Doctor degree from Texas Tech University School of Law and is licensed to
practice law in Texas and Utah. Mr. Thomas 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, and John D. Thomas, our Corporate Counsel. No other executive
officers of Cancer Therapeutics received more than $100,000 in total salary and
bonus during these periods. Although Cancer Therapeutics may, in the future,
adopt a stock option plan or a stock bonus plan, no such plans exist. 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.
22
Summary Compensation Table
Long-Term
Compensation
____________
Annual Compensation Awards Payouts
___________________ ______ _______
Other Annual Securities
Name and Restricted Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation 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
John D. Thomas(1) 2004 $ 0 $ 0 $130,000 $ 0 0 0 $ 0
Corporate Counsel 2003 0 0 0 0 0 0 0
2002 0 0 0 0 0 0 0
(1) On May 10, 2004, we issued 1,300,000 shares of our common stock to
John D. Thomas J.D., as compensation for various corporate and
commercial legal services provided during the spring and summer of
2004. The value of the shares at the date of issuance was $0.10 per
share or $130,000.
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.
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. Assuming the warrant is exercised, the average purchase price
of the shares acquired was $0.067 per share.
On September 10, 2004, we issued 400,000 shares of our common stock in
satisfaction of $50,000 owed to Kenneth I. Denos, P.C., a professional
corporation, in connection with an engagement dated July 20, 2004. The value of
our shares for purposes of satisfying this obligation was $0.125 per share.
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 $50,000 owed to our Chief Financial Officer in connection with
an engagement for accounting services dated May 15, 2004. The value of our
shares for purposes of satisfying this obligation was $0.10 per share. The value
of the shares at the
23
date of issuance was $0.10 per share or $100,000. This satisfied the original
obligation of $50,000 and caused an additional expense of $50,000 to be
incurred.
On September 15, 2004, we issued 400,000 shares of our common stock
pursuant to the conversion of a promissory note for $125,000 issued by Cancer
Therapeutics in 2001 to Robert K. Oldham, M.D., our Chief Executive Officer. The
value of our shares for purposes of this conversion was $0.313 per share. After
the conversion of this promissory note, notes payable to related parties was
reduced from $364,944 to $239,944. There are no obligations in default of these
notes payable to related parties. We are currently in negotiations to extend the
terms of these notes payable.
On September 20, 2004, we issued 200,000 shares of our common stock in
satisfaction of $75,000 owed to Healthcare Enterprise Group, Inc. for healthcare
advisory services rendered to Cancer Therapeutics pursuant an advisory agreement
dated January 8, 2001. The value of our shares for purposes of this debt
conversion was $0.375 per share. 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. As
part of the engagement, Industrial Management & Equity Limited undertakes to
assist Cancer Therapeutics in expanding its business in Europe, including advice
regarding joint ventures, agreements, or business combination transactions with
other European companies as approved by our management. We estimate that the
value of the services provided by Industrial Management & Equity Limited was
$37,500 or $0.25 per share. Mr. Gaborit is a member of the board of directors of
Healthcare Enterprise Group, Inc., a principal shareholder of Cancer
Therapeutics. Although we continue to seek opportunities for our business in
North America and Europe, we have had no contact, discussions, proposals,
arrangements, or understandings with any other business regarding the
possibility of an acquisition or merger.
Cancer Therapeutics owes $110,000 in the form of an unsecured promissory
note due to Immune Complex Corporation, a company which our CEO, Robert K.
Oldham is a minority shareholder. The note carries an interest rate of 8% and
was due May 1, 2004.
We have issued an unsecured promissory note payable to our CEO, Robert K.
Oldham. As of May 31, 2004, the balance owing was $229,944 with an interest rate
of 6% per year.
We have issued an unsecured promissory note payable to William Blaylock, a
significant shareholder and past member of our board of directors. As of May 31,
2004, the balance owing Mr. Blaylock was $25,000 with an interest rate of 9% per
year.
The transactions described above were, in each case, independently
negotiated and approved by a majority of our disinterested directors. The
valuations of our shares in each issuance during 2004 were determined by our
board of directors, taking into account the perceived tangible and intangible
benefits of the services provided, debt forgiven, and association with Cancer
Therapeutics, including the fact that Cancer Therapeutics was, at the time of
issuance, a privately-held company with minimal revenues, assets, and
significant negative shareholder equity. We recorded the expenses related to the
issuance of shares for services during the periods incurred.
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.
24
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.
Cancer Therapeutics has 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:
o 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.
o 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.
o Kenneth I. Denos, P.C. On September 10, 2004, we agreed to convert a
preexisting obligation to pay $100,000 to our securities counsel into
400,000 shares of our common stock and $50,000 in cash.
o 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.
o 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
25
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.
Shares Beneficially Owned Prior to Shares Beneficially Owned Following
Offering Maximum Offering
________ ________________
Directors, Executive Officers and
5% Stockholders Number Percent of Class(1) Number Percent of Class(1)
_______________ ______ ___________________ ______ ___________________
Robert K. Oldham, M.D. (2) 428,211 10.45% 428,211 8.40%
Michael K. Low(3) 1,700,000 31.49% 1,700,000 26.57%
Healthcare Enterprise Group, Inc. 1,700,000 26.57%
(4) 1,700,000 31.49%
Chene Gardner(5) 1,000,000 24.40% 1,000,000 19.62%
David L. Ross(6) 1,300,000 24.08% 1,300,000 25.50%
Kenneth I. Denos(7) 2,100,000 38.91% 2,100,000 32.82%
Kenneth I. Denos, P.C. (8) 400,000 9.76% 400,000 7.85%
Lyndon Gaborit(9) 1,850,000 34.27% 1,850,000 28.92%
--------- ------ --------- ------
All Officers and Directors as a
Group (3 Persons) 3,128,211 57.95% 3,128,211 48.90%
(1) For each shareholder, the calculation of percentage of beneficial ownership
prior to this offering is based upon 4,097,688 shares of common stock
outstanding and shares of common stock subject to options, warrants and/or
conversion rights held by the shareholder that are currently exercisable or
exercisable within 60 days, which are deemed to be outstanding and to be
beneficially owned by the shareholder holding such options, warrants, or
conversion rights. The calculation of percentage ownership following this
offering is based upon 5,097,688 share of common stock outstanding, and shares
of common stock subject to options, warrants and/or conversion rights held by
the shareholder that are currently exercisable or exercisable within 60 days,
which are deemed to be outstanding and to be beneficially owned by the
shareholder holding such options, warrants, or conversion rights. The percentage
ownership of any shareholder is determined by assuming that the shareholder did
not purchase any shares in this offering and has exercised all options, warrants
and conversion rights to obtain additional securities and that no other
shareholder has exercised such rights. 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. Also includes 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. Also includes 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. Healthcare Enterprise Group, Inc. is a wholly-owned subsidiary of
Healthcare Enterprise Group PLC, a corporation traded on the Alternative
Investment Market of the London Stock Exchange. Under the ownership attribution
rules of the Alternative Investment Market, Michael Low and Stuart Bruck are the
only two persons holding more than ten percent of the shares of Healthcare
Enterprise Group PLC. Mr. Low and Mr. Bruck each hold 20.31% and 21.92%,
respectively, of the shares of Healthcare Enterprise Group PLC.
(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.
26
(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. Also includes
1,300,000 shares of common stock issuable upon exercise of warrants held by
Healthcare Enterprise Group that are not currently exercisable but will 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. Also includes 1,300,000 shares of common stock issuable upon exercise
of warrants held by Healthcare Enterprise Group that are not currently
exercisable but will become exercisable within 60 days.
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
27
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, 2920 North Green Valley Parkway,
Building 5, Suite 527, Henderson, Nevada 89014, telephone (702) 212-8797.
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
We are offering up to 1,000,000 shares of our Common Stock to the public on
a "best efforts, 200,000 shares minimum, 1,000,000 shares maximum" basis, at a
price of $0.50 per share. We will manage the offering without an underwriter.
The shares will be offered and sold by our officers and directors, Robert K.
Oldham, Michael Low and Chene Gardner, who will receive no sales commissions or
other compensation in connection with the offering, except for reimbursement of
reasonable expenses actually incurred on behalf of Cancer Therapeutics in
connection with such activities. None of our officers and directors nor any
other associated person of Cancer Therapeutics is an associated person of a
broker or dealer or subject to any statutory disqualification as defined in
Section 3(a)(39) of the Securities Act, nor will any such person be compensated
in connection with his participation in the offering, which participation will
be limited to distributing this prospectus or other written communication (the
content of which is approved by an officer or director of Cancer Therapeutics),
by mail or other means that does not involve oral solicitation, responding to
inquiries of prospective purchasers with information contained herein and
performing ministerial and clerical work involved in effecting sales
transactions.
If we fail to receive subscriptions for a minimum of 200,000 Shares within
120 days from the date of this prospectus (or 150 days if extended), we will
terminate the offering and will promptly refund any subscription payments within
5 days to subscribers, without any deduction or any interest. If we receive
subscriptions for at least the minimum amount specified in this offering, we
will not return funds to investors and we may continue the offering until such
periods expire or we have received subscriptions for all 1,000,000 shares,
whichever occurs first.
All subscription payments should be made payable to Kenneth I. Denos, P.C.
Trust Account as escrow agent for Cancer Therapeutics. We will mail or otherwise
forward all subscription payments received, by noon of the next business day
following receipt, to Kenneth I. Denos, P.C. at 11585 South State St. Suite 102,
Draper, Utah 84020 for deposit into the escrow account being maintained by
Kenneth I Denos, P.C. as escrow agent for Cancer Therapeutics, pending receipt
of subscriptions for at least a minimum of 200,000 shares or expiration of the
offering period, whichever occurs first. Subscription payments will only be
disbursed from the escrow account to Cancer Therapeutics if at least 200,000
shares are sold, of if not sold, for the purpose of refunding subscription
payments to the subscribers. If you subscribe for shares, you will have no right
to return or use of your funds during the offering period, which may last up to
150 days.
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. We will pay cash expenses from our cash balance and from related
party loans. Our cash balance as of November 30, 2004, was $26,359.
28
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.
John D. Thomas, J.D., an attorney practicing law in Utah, was engaged as
general counsel for Cancer Therapeutics on May 10, 2004, for various corporate
and commercial legal services provided during the spring and summer of 2004 in
exchange for 1,300,000 shares of our common stock.
The financial statements of Cancer Therapeutics included in this
registration statement have been audited by Bouwhuis, Morrill & Company, 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 December 27, 2004, the total amount owing to
the IRS, including penalties and interest, is $31,200.82. 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
Under Delaware General Corporation Law, we are allowed to eliminate or
limit the personal liability of our directors to Cancer Therapeutics or to our
shareholders for monetary damages for breach of fiduciary duty except for: (i)
any breach of the duty of loyalty to Cancer Therapeutics or to our 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 any
such 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.
Delaware General Corporation Law also allows us to indemnify our officers
or directors who are or are threatened to be made a party to a proceeding (other
than an action by or in the right of Cancer Therapeutics by reason of the fact
that such officer or director is or was serving as an officer, director,
employee, or agent of Cancer Therapeutics. We may only provide indemnification
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 Cancer Therapeutic's best
interests, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. The Delaware General
Corporation Law provides that Cancer Therapeutics shall indemnify any of our
officers or directors for their reasonable expenses in connection with the
defense of any proceeding if the officer or director has been successful, on the
merits or otherwise. We are also permitted to advance expenses to any of our
officers or directors who are made a party to a criminal or civil proceeding
before a final disposition is made, if we receive an undertaking by or on behalf
of such officer or director to repay any amounts advanced if a court of
competent jurisdiction determines that such officer or director was not entitled
to indemnification.
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.
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.
30
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.
ORGANIZATION WITHIN THE LAST FIVE YEARS
Not Applicable.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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.
31
FINANCIAL STATEMENTS
CANCER THERAPEUTICS, INCORPORATED
Financial Statements for the Years
Ended May 31, 2004 and 2003
and Report of Independent Registered
Public Accounting Firm
F/S-1
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
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.
Bouwhuis, Morrill & Company, LLC
Layton, Utah
October 17, 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 (Note3) 57,926
Notes payable (Note 8) 50,000
Notes payable - related parties (Note 7) 364,944
------------------
Total Current Liabilities 644,048
------------------
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 2,217,572
Accumulated deficit (2,785,571)
------------------
Total Stockholders' Deficit (566,051)
------------------
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 - 39,506
General and administrative 123,229 252,837
Professional fees 115,000 -
------------------ -------------------
Total Operating Expenses 238,229 292,343
------------------ -------------------
LOSS FROM OPERATIONS (202,125) (255,875)
------------------ -------------------
OTHER INCOME (EXPENSES)
Interest expense (34,173) (24,887)
------------------ -------------------
Total Other Income (Expenses) (34,173) (24,887)
------------------ -------------------
NET LOSS BEFORE INCOME TAXES (236,298) (280,762)
PROVISION FOR INCOME TAXES - -
------------------ -------------------
NET LOSS $ (236,298) $ (280,762)
================== ===================
BASIC NET INCOME (LOSS) PER SHARE $ (0.50) $ (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 447,688 448 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
$0.10 per share, May 2004 1,300,000 1,300 128,700 -
Net loss for the year ended
May 31, 2004 - - - (236,298)
------------ ----------------- ------------------------ -------------------------
Balance, May 31,2004 1,947,688 $ 1,948 $ 2,217,572 $ (2,785,571)
============ ================= ======================== =========================
The accompanying notes are an integral part of these financial statements
F/S-6
CANCER THERAPEUTICS, INCORPORATED
Statements of Cash Flows
May 31,
--------------------------------------------
2004 2003
----------------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (236,298) $ (280,762)
Adjustments to reconcile net loss to
net cash used by operating activities:
Common stock issued for services 130,000 -
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 4,476 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 PERIOD - 9,085
----------------------- -----------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 77,997 $ -
======================= =================
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ - $ -
Cash paid for income taxes $ - -
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for services $ 130,000 -
The accompanying notes are an integral part of these financial statements
F/S-7
CANCER THERAPEUTICS, INCORPORATED
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
CANCER THERAPEUTICS, INCORPORATED
Notes to the Financial Statements
May 31, 2004 and 2003
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 $0 and
$39,506 for the years ended 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
CANCER THERAPEUTICS INCORPORATED
Notes to the Financial Statements
May 31, 2004 and 2003
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 $2,800,000 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 $57,926.. These amounts are
payable to the Company's president and are without terms.
F/S-10
CANCER THERAPEUTICS, INCORPORATED
Notes to the Financial Statements
May 31, 2004 and 2003
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 $0.10 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.
F/S-11
CANCER THERAPEUTICS INCORPORATED
Notes to the Financial Statements
May 31, 2004 and 2003
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. For notes in default, the Company
is currently in negotiations to extend the terms. There has been no
action regarding foreclosure by the note holders.
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 $ -
===============
The Company has negotiated with the bank to extend the loan until
June 2005. There has been no action regarding foreclosure by the
bank.
F/S-12
CANCER THERAPEUTICS INCORPORATED
Notes to the Financial Statements
May 31, 2004 and 2003
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.
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
CANCER THERAPEUTICS, INCORPORATED
Notes to the Financial Statements
May 31, 2004 and 2003
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
$2,800,000 from inception of the Company through May 31, 2004. The
Company's stockholders' deficit at May 31, 2004 was $566,051 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, INCORPORATED
Notes to the Financial Statements
May 31, 2004 and 2003
Unaudited Financial Statements for the Six Months
Ended November 30, 2004 and 2003
F/S-15
CANCER THERAPEUTICS, INC.
Balance Sheets
ASSETS
______
November 30, May 31,
2004 2004
_________________ __________________
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 25,996 $ 77,997
------------------ ------------------
Total Current Assets 25,996 77,997
------------------ ------------------
TOTAL ASSETS $ 25,996 $ 77,997
================== ==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses (Note 4) $ 136,246 171,178
Due to related parties (Note3) 73,212 57,926
Notes payable (Note 8) 50,000 50,000
Notes payable - related parties (Note 7) 239,944 364,944
------------------ ------------------
Total Current Liabilities 499,402 644,048
------------------ ------------------
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value; 100,000,000 shares
authorized, 4,097,688 and 1,947,688 shares issued
and outstanding, respectively 4,098 1,948
Additional paid-in capital 2,602,922 2,217,572
Accumulated deficit (3,080,426) (2,785,571)
------------------ ------------------
Total Stockholders' Deficit (473,406) (566,051)
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 25,996 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 Six Months Ended
November 30,
-----------------------------------------
2004 2003
------------------ -------------------
NET REVENUES $ 9,848 $ 12,054
------------------ -------------------
OPERATING EXPENSES
General and administrative 191,437 7,200
Professional fees 98,031 -
------------------ -------------------
Total Operating Expenses 289,468 7,200
------------------ -------------------
INCOME (LOSS) FROM OPERATIONS (279,620) 4,854
------------------ -------------------
OTHER INCOME (EXPENSES)
Interest expense (15,235) (4,304)
------------------ -------------------
Total Other Income (Expenses) (15,235) (4,304)
------------------ -------------------
NET INCOME (LOSS) BEFORE INCOME TAXES (294,855) 550
PROVISION FOR INCOME TAXES - -
------------------ -------------------
NET INCOME (LOSS) $ (294,855) $ 550
================== ===================
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
$0.10 per share, May 2004 1,300,000 1,300 128,700 -
Net loss for the year ended
May 31, 2004 - - - (236,298)
----------------- ---------------- --------------- ------------------
Balance, May 31,2004 1,947,688 1,948 $ 2,217,572 $ (2,785,571)
Common stock issued for services at $0.125 per
share, September 2004 400,000 400 49,600 -
Common stock issued for accounts payable at
$0.10 per share, September 2004 1,000,000 1,000 99,000 -
Common stock issued for notes payable at $0.313
per share, September 2004 400,000 400 124,600 -
Common stock issued for services at $0.375 per
share, September 2004 200,000 200 74,800 -
Common stock issued for services at $0.25 per
share, September 2004 150,000 150 37,350 -
Net loss for the six months ended
November 30, 2004 - - - (294,855)
----------------- ---------------- --------------- ------------------
Balance, November 30,2004 4,097,688 4,098 $ 2,602,922 $ (3,080,426)
================= ================ =============== ==================
The accompanying notes are an integral part of these financial statements
F/S-18
CANCER THERAPEUTICS, INCORPORATED
Statements of Cash Flows
For the Six Months
Ended
November 30,
------------------------
2004
------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (294,855)
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 15,068
Common stock issued for services 212,500
Increase in due to related parties 15,286
------------------------
Net Cash Used by Operating Activities (52,001)
------------------------
CASH FLOWS FROM INVESTING ACTIVITIES -
------------------------
CASH FLOWS FROM FINANCING ACTIVITIES -
------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (52,001)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 77,997
------------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 25,996
========================
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 5,506
Cash paid for income taxes $ -
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for services $ 212,500
Common stock issued for accounts payable $ 50,000
Common stock issued for notes payable - related parties $ 125,000
The accompanying notes are an integral part of these financial statements
F/S-19
CANCER THERAPEUTICS, INCORPORATED
Notes to the Financial Statements
November 30, 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-20
CANCER THERAPEUTICS, INCORPORATED
Notes to the Financial Statements
November 30, 2004 and 2003
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 November 30, 2004 and
2003, the allowance for doubtful accounts was $-0-. Bad debt expense
was $-0- for the six months ended November 30, 2004 and 2003,.
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 and
2003, 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
CANCER THERAPEUTICS, INCORPORATED
Notes to the Financial Statements
November 30, 2004 and 2003
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
and 2003.
At November 30, 2004, the Company had net operating loss carryforwards
of approximately $2,800,000 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 November 30,
2004, the Company had related party payables of $73,212. 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 $93,661 as of November 30, 2004. This interest
primarily relates to notes payable.
F/S-22
CANCER THERAPEUTICS, INCORPORATED
Notes to the Financial Statements
November 30, 2004 and 2003
NOTE 5 - EQUITY TRANSACTIONS
The Company has 10,000,000 shares of $0.001 par value preferred stock
authorized. As of November 30, 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 exercise price
of approximately $0.0038 per share. The warrants 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 receivable and
accounts payable 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:
November 3, May 31,
2004 2004
------------------ ------------------
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 104,944 202,782
Note payable to an individual, 9% interest,
due on demand, unsecured 25,000 25,000
------------------ ------------------
Total Notes Payable 239,944 337,782
Less: Current Portion (239,944) (337,782)
------------------ ------------------
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
CANCER THERAPEUTICS, INCORPORATED
Notes to the Financial Statements
November 30, 2004 and 2003
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. For
notes in default, the Company is currently in negotiations to extend
the terms. There has been no action regarding foreclosure by the note
holders.
NOTE 8 - NOTES PAYABLE
The Company has notes payable consisting of the following:
November 30, May 31,
2004 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 $ 50,000
------------------ ------------------
Total Notes Payable 50,000 50,000
Less: Current Portion (50,000) (50,000)
------------------ ------------------
Long-Term Notes Payable $ - $ -
================== ==================
The Company has negotiated with the bank to extend the loan until June
2005. There has been no action regarding foreclosure by the bank.
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
CANCER THERAPEUTICS, INCORPORATED
Notes to the Financial Statements
November 30, 2004 and 2003
NOTE 10 - COMMON STOCK WARRANTS
During 2004 the Company issued 6,500,000 warrants. 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
_______________ ___________ ______________ __________ _____________ _____________
$ 0.004 1,300,000 2.95 $ 0.019 1,300,000 $ 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
$2,800,000 from inception of the Company through November 30, 2004.
The Company's stockholders' deficit at November 30, 2004 was $473,406
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
CANCER THERAPEUTICS, INCORPORATED
Notes to the Financial Statements
November 30, 2004 and 2003
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.
F/S-26
- -------------------------------------------------------- -------------------------------------------------------
No dealer, salesperson or other person has been 1,000,000 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.......................6
DILUTION.............................................6
USE OF PROCEEDS......................................7
DETERMINATION OF OFFERING PRICE......................8
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION.....................8
BUSINESS............................................12
DESCRIPTION OF PROPERTY.............................20
DIRECTORS, EXECUTIVE OFFICERS AND
CONTROL PERSONS....................................21
EXECUTIVE COMPENSATION..............................22
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS........................................23
DIVIDEND POLICY.....................................24
MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS........................25
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.........................31
FINANCIAL STATEMENTS.............................F/S-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
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.
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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.
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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.................................. $ 58.85
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........................... $108,558.85
------------------
(1) Represents cash paid, as well as the number of shares of common stock
received by our securities counsel, multiplied by $0.10 per share,
which is the value per share estimated at the time of engagement.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
For the three year period ending April 30, 2004, we did not issue any
securities of Cancer Therapeutics.
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
discounts were given or paid in connection with this transaction. We believe
that this transaction
34
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.
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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
10.6 Form of Subscription Agreement between Cancer Therapeutics and Investors
10.7 Escrow Agreement
10.8 Summary of Oral Agreement between the Registrant and Robert K. Oldham
10.9 Summary of Oral Agreement between the Registrant and Walter Lewko
10.10 Appointment Letter for Michael K. Low
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.
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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
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.
POWER OF ATTORNEY
Each person whose signature appears below hereby designates and appoints
Chene Gardner, as his attorney-in-fact (the "Attorney-in-Fact") with full power
to act alone, and to execute in the name and on behalf of each such person,
individually in each capacity stated below, one or more amendments (including
post-effective amendments) to this Registration Statement, which amendments may
make such changes in this Registration Statement as the Attorney-in-Fact, deems
appropriate, including any post-effective amendments, as well as any related
registration statement (or amendment thereto) filed in reliance upon Rule 462(b)
under the Securities Act of 1933, and to file each such amendment to this
Registration Statement, together with all exhibits thereto and any and all
documents in connection therewith with the U.S. Securities and Exchange
Commission, hereby granting unto said Attorney-in-Fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said Attorney-in-Fact and agents, or either of
them, may lawfully do or cause to be done by virtue hereof.
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 February 17,2004.
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 February 17, 2005
/s/ Robert Oldham Officer, and Director
_______________________ (Principal Executive Officer)
Robert Oldham
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February 17, 2005
/s/ Michael Low Director
_______________________
Michael Low
February 17, 2005
/s/ Chene Gardner Chief Financial Officer and
________________________ Director (Prindipal Financial
Chene Gardner and Accounting Officer)
38