UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from _____________to _____________
Commission file number: 0-26807
CYTOGENIX, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 76-0484097
------ ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3100 Wilcrest, Suite140, Houston, Texas 77042
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (713) 789-0070
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes No X
--- ---
The number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of September 30, 2005, 119,162,970 shares of the issuer's common
stock was outstanding.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. - Financial Statements
Balance Sheets as of September 30, 2005 (Unaudited) and
December 31, 2004 3
Statements of Operations for the nine months ended
September 30, 2005 (Unaudited) and 2004 4
Statements of Cash Flows for the nine months ended
September 30, 2005 (Unaudited) and 2004 5
Notes to Financial Statements (unaudited) 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
ITEM 3. Quantitative and Qualitative disclosures About Market Risk 11
ITEM 4. Controls and Procedures 11
PART II OTHER INFORMATION 12
ITEM 1. Legal Proceedings 12
ITEM 2. Changes in Securities 12
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 6. Exhibits 14
SIGNATURES 15
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CYTOGENIX, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
September 30, December 31,
2005 2004
------------- -------------
(Unaudited)
ASSETS
- ------
CURRENT ASSETS:
Cash $ 685,449 $ 453,235
Prepaid expenses 8,046 --
------------- -------------
Total current assets 693,495 453,235
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Property and equipment:
Research Fixtures & Equipment 104,635 114,514
Office Furniture & Fixtures 57,759 56,461
Office Equipment 57,518 45,733
Leasehold Improvements 3,164 --
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223,076 216,708
Less - accumulated depreciation (162,761) (151,649)
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60,315 65,059
Deposits 6,399 6,399
Long-term Investment - Restricted 116,913 --
------------- -------------
Total assets $ 877,122 $ 524,693
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 215,068 $ 237,833
Accrued expenses 401,533 801,920
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Total current liabilities 616,601 1,039,753
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value; 300,000,000 shares authorized,
119,162,970 and 109,204,339 shares issued and outstanding
at September 30, 2005 and December 31, 2004, respectively 119,163 109,204
Additional paid-in capital 22,639,884 19,530,637
Treasury stock (629,972) (629,972)
Deficit accumulated during the development stage (21,868,554) (19,524,929)
------------------------------
Total stockholders' equity (deficit) 260,521 (515,060)
------------------------------
Total liabilities and stockholders' equity (deficit) $ 877,122 $ 524,693
==============================
The accompanying notes are an integral part of these financial statements.
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CYTOGENIX, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 AND PERIOD
FROM FEBRUARY 10, 1995 (INCEPTION) THROUGH SEPTEMBER 30, 2005
(Unaudited)
Inception
Three Months Nine Months Through
September 30, September 30, September 30,
2005 2004 2005 2004 2005
------------- ------------- ------------- ------------- -------------
REVENUES $ -- $ -- $ -- $ -- $ 82,575
Cost of Revenues -- -- -- -- 264,891
------------- ------------- ------------- ------------- -------------
GROSS MARGIN -- -- -- -- (182,316)
COSTS AND EXPENSES:
Research and development 402,208 223,193 1,075,869 545,993 7,157,742
General and administrative 367,963 232,306 957,438 704,404 12,382,897
Consulting expense 290,000 20,180 290,000 50,576 1,518,481
Depreciation and amortization 6,088 9,325 21,363 28,446 265,565
Impairment expense -- -- -- -- 345,588
Equity in losses of joint venture -- -- -- -- 10,000
------------- ------------- ------------- ------------- -------------
LOSS FROM OPERATIONS (1,066,259) (485,004) (2,344,670) (1,329,419) (21,862,589)
OTHER INCOME:
Gain on sale of security -- -- -- -- 881
Interest Income 993 -- 1,413 40 1,694
Loss on disposal of property -- -- (368) -- (10,173)
Dividend income -- -- -- -- 1,633
------------- ------------- ------------- ------------- -------------
NET LOSS $ (1,065,266) $ (485,004) $ (2,343,625) $ (1,329,379) $ (21,868,554)
============= ============= ============= ============= =============
Net loss per share:
Basic and diluted $ (0.01) $ (0.00) $ (0.02) $ (0.01)
============= ============= ============= =============
Weighed average shares outstanding:
Basic and diluted 116,034,303 101,590,591 112,843,190 100,212,094
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements.
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CYTOGENIX, INC.
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statement of Cash Flows
NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 AND PERIOD
FROM FEBRUARY 10, 1995 (INCEPTION) THROUGH SEPTEMBER 30, 2005
(UNAUDTIED)
Inception Through
September 30,
2005 2004 2005
------------ ------------ ------------
OPERATING ACTIVITIES:
Net loss $ (2,343,625) $ (1,329,379) $(21,868,554)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 21,363 28,446 262,190
Impairment expense -- -- 345,588
Stock issued for services 301,000 193,592 7,443,478
Stock option expense -- -- 2,062,191
Loss on disposal of property & equipment 368 -- 10,173
Equity in losses of joint venture -- -- 10,000
Changes in operating assets and liabilities:
Prepaid expenses (8,046) -- (8,046)
Deposits -- -- (6,399)
Accounts payable & accrued expenses 118,974 (109,615) 1,421,820
------------ ------------ ------------
Net cash used in operating activities (1,909,966) (1,216,956) (10,327,559)
------------ ------------ ------------
INVESTING ACTIVITIES:
Purchase of property and equipment (16,987) (11,179) (303,266)
Issue note receivable -- -- (25,100)
Investment in long-term CD (116,913) (116,913)
Investment in joint venture -- -- (10,000)
------------ ------------ ------------
Net cash used in investing activities (133,900) (11,179) (455,279)
------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from notes payable -- -- 250,000
Payments on notes payable -- -- (250,000)
Treasury shares sold -- -- 1,290,568
Purchase of treasury shares -- -- (60,000)
Buyback of Stock Warrants -- (571) (571)
Sale of common stock, net fundraising 2,276,080 776,051 9,288,790
Sale of common stock for exercised warrants -- 348,000 797,000
Contributions to capital -- -- 152,500
------------ ------------ ------------
Net cash provided by financing activities 2,276,080 1,123,480 11,468,287
------------ ------------ ------------
NET CHANGE IN CASH 232,214 (104,655) 685,449
CASH, beginning of period 453,235 236,962 --
------------ ------------ ------------
CASH, end of period $ 685,449 $ 132,307 $ 685,449
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ -- $ -- $ --
============ ============ ============
Income taxes paid $ -- $ -- $ --
============ ============ ============
NONCASH TRANSACTIONS:
Common stock issued for debt $ 542,126 $ -- $ 805,219
Received treasury stock for note receivable -- -- 25,100
Common stock issued for patent -- -- 375,000
The accompanying notes are an integral part of these financial statements.
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CYTOGENIX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDTIED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of CytoGenix, Inc.
("CytoGenix") have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the
Securities and Exchange Commission ("SEC"), and should be read in conjunction
with the audited financial statements and notes thereto contained in CytoGenix's
latest annual report filed with the SEC on Form 10KSB. In the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of
operations for the interim periods presented have been reflected herein. The
results of operations for interim periods are not necessarily indicative of the
results to be expected for the full year. Notes to the financial statements
which would substantially duplicate the disclosure contained in the audited
financial statements for fiscal year ending December 31, 2004, as reported in
the 10KSB, have been omitted.
NOTE 2 - Reclassifications
Certain amounts in the 2004 and 2005 financial statements have been reclassified
to conform with the September 30, 2005 financial statement presentation.
NOTE 3 - COMMON STOCK
In the nine months ending September 30, 2005, CytoGenix issued a total of
300,452 shares of common stock for services valued at $301,000.
In the nine months ending September 30, 2005 $2,276,080 was collected for
8,366,878 shares of common stock as part of a private placement.
NOTE 4 - Long-Term Investment - Restricted
CytoGenix filed a Declaratory Judgment action in March, 2004, to obtain a
finding of nonliability with respect to two license agreements, one for shrimp,
and one for horses, originally issued in 1998 to William B. Waldroff. Waldroff
and Applied Veterinary Genomics, Inc. ("AVGI"), a party in interest as a
sublicensee of Waldroff's, in Willam B. Waldroff and Applied Veterinary
Genomics, Inc. vs. Cytogenix, Inc. counterclaimed for damages, attorneys fees,
unrelated torts, and a permanent injunction to honor the purported licenses. A
jury trial was held in February, 2005. Both Waldroff and AVGI also sued three
directors of CytoGenix for interfering with the licenses. The jury did not
assess any damages against any of the directors or against CytoGenix. The court
has preliminarily entered a judgment ordering CytoGenix to perform according to
the licenses, and for attorneys fees in an amount of $115,500. Pending appeal
Cytogenix has established a long-term CD in the amount of $115,500 to comply
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with the judicial ruling. Accrued Interest for the nine months ending September
30, 2005 is $1,413.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
IN ACCORDANCE WITH THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995, THE COMPANY NOTES THAT CERTAIN
STATEMENTS IN THIS FORM 10-Q WHICH ARE FORWARD-LOOKING AND WHICH PROVIDE OTHER
THAN HISTORICAL INFORMATION, INVOLVE RISKS AND UNCERTAINTIES THAT MAY IMPACT THE
COMPANY'S RESULTS OF OPERATIONS. THESE FORWARD-LOOKING STATEMENTS INCLUDE, AMONG
OTHERS, STATEMENTS CONCERNING THE COMPANY'S GENERAL BUSINESS STRATEGIES,
FINANCING DECISIONS, AND EXPECTATIONS FOR FUNDING CAPITAL EXPENDITURES AND
OPERATIONS IN THE FUTURE. WHEN USED HEREIN, THE WORDS "BELIEVE," "PLAN,"
"CONTINUE," "HOPE," "ESTIMATE," "PROJECT," "INTEND," "EXPECT," AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. ALTHOUGH
THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, NO STATEMENTS CONTAINED IN THIS
FORM 10-Q SHOULD BE RELIED UPON AS PREDICTIONS OF FUTURE EVENTS. SUCH STATEMENTS
ARE NECESSARILY DEPENDENT ON ASSUMPTIONS, DATA OR METHODS THAT MAY BE INCORRECT
OR IMPRECISE AND MAY BE INCAPABLE OF BEING REALIZED. THE RISKS AND UNCERTAINTIES
INHERENT IN THESE FORWARD-LOOKING STATEMENTS COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE EXPRESSED IN OR IMPLIED BY THESE STATEMENTS.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, WHICH SPEAK ONLY AS OF THE DATE
HEREOF. THE INFORMATION CONTAINED IN THIS FORM 10-Q/A IS BELIEVED BY THE COMPANY
TO BE ACCURATE AS OF THE DATE HEREOF. CHANGES MAY OCCUR AFTER THAT DATE, AND THE
COMPANY WILL NOT UPDATE THAT INFORMATION EXCEPT AS REQUIRED BY LAW IN THE NORMAL
COURSE OF ITS PUBLIC DISCLOSURE PRACTICES.
IMPORTANT RISK FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE EXPECTATIONS REFLECTED IN ANY FORWARD-LOOKING STATEMENT
HEREIN INCLUDE AMONG OTHER THINGS: (1) THE ABILITY OF THE COMPANY TO QUICKLY
PENETRATE THE MARKET WITH ITS CURRENT THERAPEUTIC PRODUCTS AGAINST LARGER,
WELL-FINANCED COMPETITORS WITHIN THE MARKETPLACE; (2) THE ABILITY OF THE COMPANY
TO GENERATE REVENUES IS SUBSTANTIALLY DEPENDENT UPON CONTINUED RESEARCH AND
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DEVELOPMENT FOR, AND FDA APPROVAL OF, THERAPEUTIC PRODUCTS; (3) THE ABILITY OF
THE COMPANY TO ATTRACT AND RETAIN KEY OFFICERS, KNOWLEDGEABLE SALES AND
MARKETING PERSONNEL AND HIGHLY TRAINED TECHNICAL PERSONNEL; (4) THE ABILITY OF
THE COMPANY TO OBTAIN ADDITIONAL FINANCING FROM PUBLIC AND PRIVATE EQUITY
MARKETS TO FUND OPERATIONS AND FUTURE GROWTH; AND (5) THE ABILITY OF THE COMPANY
TO GENERATE REVENUES TO COVER OPERATING LOSSES AND POSITION THE COMPANY TO
ACHIEVE POSITIVE CASH FLOW.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2005 Compared to Three Months Ended September
30, 2004
For the three months ended September 30, 2005, we reported a net loss
of $1.065 million, or $0.00 per share, on no revenue as compared with a net loss
of $485,004, or $0.00 per share, on no revenue for the three months ended
September 30, 2004.
Research and Development Expenses. Research and development expenses
increased to $402,208 for the third quarter of 2005 as compared to $223,193
compared to the same period in 2004 due to the hiring of additional R&D
employees and increased research activity. Approximately $98,000 of the increase
is a result of the increased staff and the remaining difference of $82,000
results from the increased activity cost of antibacterial and DNA vaccine
research.
General and Administrative Expenses. General and administrative
expenses increased to $367,963 for the third quarter of 2005 compared to
$232,306 for the same period in 2004 primarily due to increase in legal fees and
board of director fees. The legal fees increase of $58,000 is due primarily to
increased patent attorney fees and litigation fees for the legal proceeding
described in Part II, Item 1 below. The remaining increase is related to the
increased fees of the Board of Directors.
Consulting Expenses. Consulting expenses increased from $290,000 for
the third quarter of 2005 compared to $20,180 for the same period in 2004
primarily because of a one year consulting contract where Cytogenix engaged a
firm to consult on various business matters.
Depreciation and Amortization Expenses. Depreciation and amortization
expenses decreased to $6,088 for the third quarter of 2005 compared to $9,325
for the same period in 2004 primarily due to office furnishings purchased in
previous years becoming fully depreciated in 2005.
Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30,
2004
For the nine months ended September 30, 2005, we reported a net loss of
$2,343,625, or less than $0.02 per share, on no revenue as compared with a net
loss of $1,329,379, or less than $0.01 per share, on no revenue for the nine
months ended September 30, 2004.
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Research and Development Expenses. Research and development expenses
increased to $1,075,869 for the nine months ending September 30, 2005 compared
to $545,993 for the same period in 2004 primarily due to hiring of additional
R&D employees and increased research activity. Approximately $256,000 of the
increase is a result of the increased staff and the remaining difference of
274,000 results from the increased activity cost of antibacterial and DNA
vaccine research.
General and Administrative Expenses. General and administrative
expenses increased to $957,438 for the nine months ending September 30, 2005
compared to $704,404 for the same period in 2004. The increase of $253,034
primarily due to an increase in legal fees. The legal fees increase of $199,000
is due primarily to increased patent attorney fees and litigation fees for the
legal proceeding described in Part II, Item 1 below.
Consulting Expenses. The increase in consulting expense from $290,000
for the nine months ending September 30, 2005 compared to $50,276 for the same
period in 2004 is primarily attributed to a one year consulting contract where
Cytogenix engaged a firm to consult on various business matters.
Depreciation and Amortization Expenses. Depreciation and amortization
expenses decreased to $21,363 for the nine months ending September 30, 2005
compared to $28,446 for the same period in 2004 primarily due to office
furnishings purchased in previous years becoming fully depreciated in 2005.
LIQUIDITY AND CAPITAL RESOURCES
The Company has budgeted approximately $4,100,000 for operations in
fiscal year 2005, of which approximately $1,300,000 has been allocated for
general and administrative costs and $1,800,000 for research and development and
$1,000,000 for plant facilities. We will rely on equity financing to satisfy its
working capital requirements, and has as of September 30, 2005 $685,449 of cash
on hand for fiscal year 2005. Of the $1,800,000 budgeted for research and
development expenses, the Company anticipates $1,600,000 will be utilized for
pre-clinical development.
There are currently over 800 U.S. patents for Antisense molecules with
therapeutic potential, each of which is a prospective licensee for the Company.
The Company anticipates entering into licenses for revenues upon successful
completion of phase I/II FDA clinical studies of its pre-clinical product
candidates.
The Company's ability to continue operations through December 31, 2005
depends on its success in obtaining equity financing in an amount sufficient to
support its operations through that date. There is substantial doubt that the
Company will be able to generate sufficient revenues or be able to raise
adequate capital to remain a going concern through December 31, 2005. Based on
historical yearly financial requirements, operating capital of approximately
$4.1 million will be needed for each of the calendar years 2005 and 2006.
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The Company expects its sources of revenue for the next several years
to consist primarily of payments under future product development joint ventures
and of licensing agreements as well as possible royalties. The process of
developing the Company's products will require significant additional research
and development, preclinical testing and clinical trials, as well as regulatory
approvals. These activities, together with the Company's general and
administrative expenses, are expected to result in operating losses for at least
two more years. The Company will not receive product revenue from therapeutic
products unless it completes clinical trials and successfully commercializes or
arranges for the commercialization of one or more products, the accomplishment
of which no assurance can be given.
CytoGenix has begun animal testing of its first DNA drug product
candidate. The topical cream to be evaluated will have applications against
genital herpes (HSV-2) and labial herpes or cold sores (HSV-1). The HSV virus is
known to be highly evolved and its genome contains instructions for several
phases of viral activity including infection, replication, production, and
latency. CytoGenix proprietary gene regulation technology is being applied to
inhibit key genes that control one or more of these functions, which are
critical for the Herpes virus survival in the body.
During the past few months, the Company has continued to refine its
course of developing applications for its core technology. Most significant is
the pre-clinical program for an anti-viral HSV topical preparation. We have
teamed-up with a group of leading herpes and STD investigators at a large
academic medical center to conduct a comprehensive cell and animal study program
designed to yield safety and efficacy data in preparation for an IND submission
planned for December 2005 and subsequent human trials.
The Genomics field has expanded the number of potential drug targets to
several thousand. The CytoGenix proprietary gene down-regulation system is a
powerful tool in confirming gene target function. In July 2002, we inaugurated a
service geared towards assisting pharmaceutical and biotech companies improve
drug discovery efficiency. In addition to our work on in-house targets, we are
conducting a pilot studies for several companies. For a fixed fee, we will
knockdown a gene in a cell system. This will confirm the gene's relevance to the
disease of interest. Those genes found to be highly disease-related become
targets for new drug or molecular therapies.
CytoGenix is confident about the Company's technology's ability to
inhibit these genes. This six to nine month program includes extensive
toxicology and efficacy studies in various model animals.
The Company is subject to risks common to biopharmaceutical companies,
including risks inherent in its research and development efforts and clinical
trials, reliance on collaborative partners, enforcement of patent and
proprietary rights, the need for future capital, potential competition and
uncertainty in obtaining required regulatory approval. In order for a product to
be commercialized, it will be necessary for the Company and its collaborators to
conduct pre-clinical tests and clinical trials, demonstrate efficacy and safety
of the Company's product candidates, obtain regulatory clearances and enter into
distribution and marketing arrangements either directly or through sublicenses.
From the Company's inception through the date of this document, the major role
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of management has been to obtain sufficient funding for required research,
monitoring research progress and developing and licensing intellectual property.
The Company expects to incur losses for the foreseeable future due to
the ongoing activities of the Company to develop new products through research
and development and to develop joint ventures and licensing agreements with
third parties. The Company expects its existing operations to continue to result
in negative cash flow and working capital deficiencies that will require the
Company to continue to obtain additional capital. There can be no assurance that
the necessary financing will be available to the Company or, if available, that
the same will be on terms satisfactory or favorable to it. It is possible that
additional equity financing will be highly dilutive to existing shareholders.
The Company is currently operating at a loss and expects to continue to
depend on cash generated from the sale of debt and equity securities to fund its
operating deficit. There can be no assurance that the Company will be able to
generate sufficient revenues to meet its operating cash and growth needs or that
any equity or debt funding will be available or at terms acceptable to the
Company in the future to enable it to continue operating in its current form.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company holds no financial instruments that are sensitive to changes in
interest rates. As of September 30, 2005, we held no investments other than
amounts held in our cash operations accounts. We are not subject to any other
material market risks.
ITEM 4. CONTROLS AND PROCEDURES
CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of our disclosure controls and procedures, as such term
is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of
1934, as amended, or the Exchange Act, as of the end of the period covered by
this report. Based on this evaluation, our principal executive officer and
principal financial officer concluded that our disclosure controls and
procedures were effective as of September 30, 2005.
CHANGES IN INTERNAL CONTROLS
There has been no change in our internal control over financial reporting
during the nine months ended September 30, 2005 that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
PHANUEL PURSUITS, LLC V. CYTOGENIX, INC.
Phanuel Pursuits, LLC had entered into Option Agreements pursuant to obtaining
licenses to commercialize the Company's anti-herpes product in China and India.
Phanuel withdrew from the China option. Phanuel owes unpaid sums due under the
remaining Option Agreement, including a specific payment due to purchase the
Company's data they would need for submission to the Indian authorities. Phanuel
filed suit October 8, 2004 alleging the Company withheld that data and therefore
breached the agreement. The Company believes the suit is completely without
merit.
WILLIAM B. WALDROFF AND APPLIED VETERINARY GENOMICS, INC. V. CYTOGENIX, INC.
CytoGenix filed a Declaratory Judgment action in March, 2004, to obtain a
finding of nonliability with respect to two license agreements, one for shrimp,
and one for horses, originally issued in 1998 to William B. Waldroff. Waldroff
and Applied Veterinary Genomics, Inc. ("AVGI"), a party in interest as a
sublicensee of Waldroff's, counterclaimed for damages, attorneys fees, unrelated
torts, and a permanent injunction to honor the purported licenses. A jury trial
was held in February, 2005. Both Waldroff and AVGI also sued three directors of
CytoGenix for interfering with the licenses. The jury did not assess any damages
against any of the directors or against CytoGenix. The court has preliminarily
entered a judgment ordering CytoGenix to perform according to the licenses, and
for attorney's fees in the amount of $110,000. Post judgment motions will be
filed in the trial court.
ITEM 2. CHANGES IN SECURITIES
The Company issued 500,000 shares of common stock to Stonebridge
Holding LLC for services provided in the third quarter pursuant to the exemption
from registration provided by Section 4(2) of the Securities Act of 1933 for
transactions not involving a public offering.
The Company issued 5,226,000 shares of common stock for an aggregate
cash price of $1,306,500 (or $0.25per share) in a private placement to
accredited investors pursuant to the exemption from registration provided by
Section 3(b) of the Securities Act of 1933 and Rule 504 thereunder. The
consideration for these shares was received during the third quarter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On July 14, 2005, the Company held the 2005 annual meeting of the shareholders
for purposes of the following:
(1) ELECTION OF DIRECTORS. To elect two directors to hold office until the 2008
Annual Meeting of Shareholders or until their successors are elected and
qualified;
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(2) RATIFICATION AND APPROVAL OF THE APPOINTMENT OF INDEPENDENT AUDITORS. To
ratify and approve the appointment of Lopez, Blevins, Bork & Associates, LLP. as
the independent auditors for the Company for the fiscal year ending December 31,
2005.
(3) APPROVAL OF THE 2005 STOCK OPTION PLAN. The approval of the 2005 Stock
Option Plan of the Company.
A majority of the shares entitled to vote, present in person or represented by
proxy, constituted a quorum at the Annual Meeting. For the approval of Proposal
No.1 (the election of directors), the two candidates receiving the greatest
number of affirmative votes were elected. The affirmative vote of a majority of
the shares present in person or represented by proxy at the Annual Meeting was
required to ratify and approve Proposal No. 2 (appointment of independent
auditors) and Proposal No. 3 (approval of the 2005 Stock Option Plan).
On June 14, 2005, the record date for the annual shareholder meeting held on
July 14, 2005, there were 113,259,470 shares of the Company's common stock
issued and outstanding. All outstanding shares were entitled to vote on the
three proposals. On July 14, 2005, a quorum was reached totaling 96,180,016
shares voted.
The results of the voting on the above matters presented to the shareholders
were as follows:
(1) ELECTION OF DIRECTORS. The three directors submitted to the shareholders for
approval were elected as follows:
Frank Vazquez: 95,815,360 shares voting for, 364,656 shares withheld.
Cy A. Stein, M.D., Ph.D.: 95,831,960 shares voting for, 348,056 shares withheld.
(2) RATIFICATION AND APPROVAL OF THE APPOINTMENT OF INDEPENDENT AUDITORS. The
appointment of Lopez, Blevins, Bork & Associates, LLP as the independent
auditors for the Company for the fiscal year ending December 31, 2005 was
approved by the shareholders, with 95,984,456 shares voting for, 160,460 shares
voting against and with 35,100 shares abstaining.
(3) APPROVAL OF THE 2005 STOCK OPTION PLAN. The 2005 Stock Option Plan of the
Company was approved by the shareholders, with 63,543,885 shares voting for,
4,111,802 shares voting against and with 454,150 shares abstaining.
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ITEM 6. EXHIBITS.
Exhibit Number Description
3.1* Articles of Incorporation of Cryogenic Solutions, Inc.
3.2* Certificate of Amendment dated November 1, 1995 of Articles
of Incorporation of Cryogenic Solutions, Inc.
3.3* Certificate of Amendment dated January 13, 2000 of Articles
of Incorporation of CytoGenix, Inc.
3.4 Certificate of Amendment dated April 6, 2004 of Articles of
Incorporation of CytoGenix, Inc. (incorporated by reference
to Exhibit 3.5 to the Company's annual report of Form 10-KSB
for the year ended December 31, 2004)
3.5 Certificate of Amendment dated March 7, 2001 of Articles of
Incorporation of CytoGenix, Inc. (incorporated by reference
to Annex II of the definitive proxy statement on Schedule
14A filed with the Securities and Exchange Commission on
December 23, 2003)
3.6* Bylaws of Cryogenic Solutions, Inc.
3.7 Amendments to Bylaws of CytoGenix, Inc. (incorporated by
reference to Annex I of the definitive proxy statement
on Schedule 14A filed with Ahe Securities and Exchange
Commission on December 23, 2003)
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer
32.1 Section 1350 Certification of Chief Executive Officer
32.2 Section 1350 Certification of Chief Financial Officer
* Incorporated by reference to the corresponding Exhibit in the Form 10-SB of
the Company filed on January 31, 2001.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CYTOGENIX, INC.
Date: November 14, 2005 By: /s/ Malcolm Skolnick
---------------------
MALCOLM SKOLNICK
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
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Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lawrence Wunderlich, Chief Financial Officer certify that:
1. I have reviewed this quarterly report on Form 10-Q of CytoGenix, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2005
/s/ Lawrence Wunderlich
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LAWRENCE WUNDERLICH
CHIEF FINANCIAL OFFICER
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Malcolm Skolnick, President and Chief Executive Officer certify that:
1. I have reviewed this quarterly report on Form 10-Q of CytoGenix, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2005
/s/ Malcolm Skolnick
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MALCOLM SKOLNICK
PRESIDENT & CEO
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CytoGenix, Inc. (the
"Company") on Form 1O-Q/A for the period ending June 30, 2005 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Malcolm
H. Skolnick, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ Malcolm H. Skolnick
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MALCOLM H. SKOLNICK
CHIEF EXECUTIVE OFFICER
November 14, 2005
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CytoGenix, Inc. (the "Company") on
Form 1O-Q/A for the period ending June 30, 2005 as filed with the Securities and
Exchange Commission on the date hereof' (the "Report"), I, Lawrence Wunderlich,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350,
as adopted pursuant to ss. 906 of the Sarbanes- Oxley Act of 2002, that to the
best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/Lawrence Wunderlich
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LAWRENCE WUNDERLICH
CHIEF FINANCIAL OFFICER
November 14, 2005