UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
 Washington,
D.C. 20549
   FORM
10-KSB
  |X|
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
  ACT
OF 1934
  FOR
THE FISCAL YEAR ENDED JUNE 30, 2008
 
 OR
 
 £ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES
EXCHANGE ACT OF 1934
 FOR THE
TRANSITION PERIOD FROM _____ TO __________
  Commission File Number:000-52321
 
 Cellceutix
Corporation
 (Exact
name of registrant as specified in its charter)
 
 Nevada
              
              
              
              13-4303398(State
      or other jurisdiction
              
              
              
              (IRS
      Employerof
      incorporation)
              
              
              
              Identification
      No.)
 100
Cumming Center, Suite 151-B
 Beverly,
MA 01915
 (Address
of principal executive offices and zip code)
 (978)-633-3623
 (Registrant’s
telephone number, including area code)
 
 187
Ballardvale St, Suite A225, Wilmington, MA 01887
 (Former Name or Former Address, if
Changed Since Last Report)
 
  1
 
 FORM
10-KSB INDEX
    TABLE
      OF CONTENTSPagePART IItem 1. Description of Business
                
                3Item 2. Description of
    Properties
                
                26Item 3. Legal Proceedings
                
                26Item 4. Submission of Matters to a Vote of Security
      Holders
                
                26PART IIItem 5. Market For Registrant’s Common Equity and Related
      Stockholder Matters
                
                26Item 6. Management’s Discussion and Analysis or Plan of
      Operation
                
                27Item 7. Financial Statements
                
                31Item 8. Changes in and Disagreements With Accountants on
      Accounting and Financial Disclosure
                
                40Item 8A Controls and Procedures
                
                40Item 8B  Other
                
                40PART IIIItem 9. Directors, Executive Officers, Promoters and
      Control Persons and Corporate Governance:compliance with Section 16(A) of the Exchange
      Act
                
                40Item 10. Executive
    Compensation
                
                42Item 11. Security Ownership of Certain Beneficial Owners
      and Management and Related Stockholder Matters
                
                44Item 12. Certain Relationships and Related Transactions,
      and Director Independence
                
                46Item 13. Exhibits
                
                47Item 14. Principal Accountant Fees and
      Services
                
                48SignaturesCertifications
 
   2
 
   PART I
   ITEM 1. DESCRIPTION OF BUSINESS
 
 FORWARD-LOOKING
STATEMENTS
 
 This report contains forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, and Section 27A of the Securities Act of 1933. Any statements contained in
this report that are not statements of historical fact may be forward-looking
statements. When we use the words “intends,” “estimates,” “predicts,”
“potential,” “continues,” “anticipates,” “plans,” “expects,”
“believes,” “should,” “could,” “may,” “will” or the negative of these
terms or other comparable terminology, we are identifying forward-looking
statements. Forward-looking statements involve risks and uncertainties, which
may cause our actual results, performance or achievements to be materially
different from those expressed or implied by forward-looking statements.
 These factors include our; research and development activities,
distributor channel; compliance with regulatory impositions; and our capital
needs. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements.
  Except
as may be required by applicable law, we do not undertake or intend to update or
revise our forward-looking statements, and we assume no obligation to update any
forward-looking statements contained in this report as a result of new
information or future events or developments. Thus, you should not assume that
our silence over time means that actual events are bearing out as expressed or
implied in such forward-looking statements. You should carefully review and
consider the various disclosures we make in this report and our other reports
filed with the Securities and Exchange Commission that attempt to advise
interested parties of the risks, uncertainties and other factors that may affect
our business.
  For
further information about these and other risks, uncertainties and factors,
please review the disclosure included in this report under “Part I, Item 1,
Description of Business - Risk Factors.”
 
 GENERAL
  Acquisition
of Cellceutix Pharma, Inc.
  On
December 6, 2007, Cellceutix Corporation, formerly known as EconoShare, Inc.,
(the “Company” or the “Registrant”) acquired Cellceutix Pharma, Inc., a
privately owned Delaware corporation  pursuant to an Agreement and
Plan of Share Exchange (the “Exchange”).  Cellceutix Pharma, Inc, was
incorporated under the laws of the State of Delaware on June 20,
2007.  Its assets consisted of rights assigned to it for six early
stage pharmaceutical compounds by three different scientists. Upon consummation
of the Exchange, the Company adopted the business plan of Cellceutix Pharma,
Inc..
  Pursuant
to the terms of the Exchange, the Company  acquired Cellceutix Pharma,
Inc. in exchange for an aggregate of 82,000,000 newly issued shares of the
Company’s common stock, par value $0.0001 per share (the “Common Stock”),
resulting in an aggregate of 91,791,000 shares of the Company’s  common
stock issued and outstanding. As a result of the Exchange, Cellceutix Pharma,
Inc. became a wholly-owned subsidiary of the Company.  The
Company’s shares were issued to the Cellceutix Pharma, Inc. shareholders on
a pro rata basis, on the basis of 82 shares of Common Stock for each share of
Cellceutix Pharma common stock held by such Cellceutix Pharma shareholder at the
time of the Exchange.
 
 At the
effective time of the Acquisition, our board of directors was reconstituted by
the resignation of Mr. Hyman Schwartz and Jacob Werczbergerfrom their
role as directors, and the appointment of George W. Evans and Krishna Menon as
directors (both of whom were directors of Cellceutix Pharma immediately prior to
the Exchange). Our executive management team also was reconstituted following
the resignation of Hyman Schwartz as Company president, and new officers
were appointed in place of our former officers. See Item 9.
 
 The
former holders of Cellceutix Pharma Common Stock now beneficially own
approximately 89% of the outstanding shares of our Common Stock. Accordingly,
the Exchange represents a change in control. As of the date of this report,
there are 91,891,000 shares of Common Stock issued and
outstanding.   For financial accounting purposes, the acquisition
was a reverse acquisition of the Company by Cellceutix Pharma, Inc., under the
purchase method of accounting, and was treated as a recapitalization with
Cellceutix Pharma, Inc. as the acquirer. Upon consummation of the Exchange, the
Company adopted the business plan of Cellceutix Pharma, Inc.
  On
January 14, 2008, a majority of the shareholders of EconoShare, Inc. approved an
amendment to the Registrant’s articles of incorporation to change the name of
the Registrant to Cellceutix Corporation.  Upon the filing of a
Definitive Information Statement and effectiveness of the name change on
February 1, 2008, the Company applied to the National Association of Security
Dealers (NASD) to change its stock symbol on the Over the Counter Bulletin Board
which resulted in the Company’s stock symbol being changed to CTIX.
 
 3
  OVERVIEW
  EconoShare,
Inc. was incorporated on August 1, 2005   in the State of Nevada
and was organized for the purpose of developing a B2B (Business to Business)
website for an Asset Sharing market place and transaction system. As a result
of the Exchange with Cellceutix Pharma, Inc., we have adopted the business plan
of Cellceutix Pharma, and now we are an early stage developmental
biopharmaceutical company.  The Company has no customers, products or
revenues to date, and may never achieve revenues or profitable
operations.
  We have
acquired exclusive rights to six different pharmaceutical compound candidates
that are designed for treatment of diseases which may be either existing or may
be identified in the future.  The Company will initially spend most of
its efforts and resources on its anti-cancer compound, Kevetrin, for the
treatment of head and neck cancers.  This compound is furthest along
in in-vivo studies in small animals.  Based on the results, the
Company has decided to advance it along the regulatory and clinical
pathway.
  We
anticipate using our expertise to manage and perform what we believe are the
most critical aspects of the product development process which include the
design and oversight of clinical trials, the development and execution of
strategies for the protection and maintenance of intellectual property rights
and the interaction with regulatory authorities worldwide.
  We expect
to concentrate on product development and engage in a very limited way in
product discovery, avoiding the significant investment of time and financial
resources that is generally required before a compound is identified and brought
into clinical trials. In addition, we are currently engaged in pre-clinical
testing of one of our product candidates and intend to out-source clinical
trials, pre-clinical testing and the manufacture of clinical materials to third
parties.
  Our
current portfolio of product candidates in pre-clinical development includes two
anti-cancer agents targeting four different tumors, one candidate targeting
rheumatoid arthritis, another small molecule with potential for indications of
osteo-arthritis/asthma, and another small molecule with  a potential for
indications of neurological disorders for the treatment of Multiple Sclerosis,
Lou Gherig Disease, and/or Parkinson's Disease.
 
 On May 7,
2008 the Company issued Convertible Debentures, at 9% per annum, for a total
amount of $400,000.  The principle and related accrued interest are
due December 2009, and are secured by the Company’s assets.  The
Debentures and any accrued and unpaid interest are convertible into the
Company’s common stock, at the holder’s request, at a conversion price of
$1.50.
 
 The
Company has incurred significant operating losses since its inception resulting
in an accumulated deficit of $488,858 at June 30, 2008. For the year ended June
30, 2008 the Company had a net loss of $479,249. Such losses are expected to
continue for the foreseeable future and until such time, if ever, as the Company
is able to attain sales levels sufficient to support its
operations.
 
 The
accompanying financial statements on pages of this Form 10-KSB have been
prepared assuming that the Company will continue as a going concern that
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. Accordingly, they do not include any adjustments
relating to the realization of the carrying value of assets or the amounts and
classification of liabilities that might be necessary should the company be
unable to continue as a going concern. These factors raise substantial doubt
about the Company's ability to continue as a going concern.
 
 Glossary of
Terms  -definitions of certain technical terms used in this
report that are commonly used in the pharmaceutical and biotechnology
industries
  Adenocarcinoma:
A cancer that originates in glandular tissue
  AKT:  Also
known  as AKT1 or protein kinase B (PKB) is an important molecule in
mammalian cellular signaling.
  Alkylating
agent:  A compound that interferes with the cell's DNA and inhibits
cancer cell growth.
  Angiogenesis:
is a physiological process involving the growth of new blood vessels from
pre-existing vessels.
  Carcinomas:
A type of cancer that arises from the lining cells of the body, called
epithelial cells. Epithelial cells form the outer layer of the skin, and the
membranes lining the digestive tract, bladder and uterus, as well as the tubes
and ducts that run through the body's organs.
  Cisplatin:
is a platinum-based chemotherapydrug used to treat various types of
cancers.
  Cytotoxicity:
is the quality of being toxic to cells. Examples of toxic agents are a chemical
substance or an immune cell.
   4
  Epifluorescence
microscope - A fluorescence microscope uses a much higher intensity light to
illuminate the sample. This light excites fluorescence species in the sample,
which then emit light of a longer wavelength. A fluorescent microscope also
produces a magnified image of the sample, but the image is based on the second
light source -- the light emanating from the fluorescent species -- rather than
from the light originally used to illuminate, and excite, the
sample.
  Folate:  A
B-complex vitamin that is being studied as a cancer prevention
agent.
  Immunocytochemistry:   A
method of detecting cancer in tissues. Monoclonal antibodies are used to stain
the tissues and cells before examination under a microscope
  Immunolocalisation:  The
immunoresponse noticed locally
  In-vitro:
refers to the technique of performing a given experiment in a test tube, or,
generally, in a controlled environment outside a living organism.
  In-vivo: refers that which takes place inside an
organism. In science, in vivo refers to experimentation done in or on the living
tissue of a whole, living organism as opposed to a partial or dead one. Animal
testing and clinical trials are forms of in vivo research.
  Isotoxic:
Compounds that shows toxicity levels equally at given doses.
  LTB4;
Leukotriene B4 (LTB4) is a notable participant in inflammation and
chemotaxis.
  Lysates:
are a variety of cell and tissue used as positive controls for our
antibodies.
  p53, also
known as protein 53:  A tumor suppressor gene that is mutated in many
human cancers and results in the loss of a cell’s ability to check for DNA
damage
  Small molecule drug:  A
medicinal drug compound having a molecular weight of less than 1000 Daltons, and
typically between 300 and 700 Daltons.
  Western
Blot Analysis: A technique used to identify and locate proteins based on their
ability to bind to specific antibodies.
  Xenograft:
The cells of one species transplanted to another species.
 
  The
Company’s Pipeline Consists of the Following Compounds:
  
  Compound
              Disease
              Development
      StageKevetrin
              Head
      and Neck Cancers
              PreclinicalKM
      277
              Arthritis
              PreclinicalKM
      278
              Arthritis/Asthma
              PreclinicalKM
      133
              Psoriasis
              PreclinicalKM
      362
              Cancer
              Early
      R&DKM-3174
              (MS/ALS/Park)
              Early
      R&D
    5
 
 Compound:
Kevetrin
  Disease:
Head and Neck Cancers
  Our lead
product candidate, Kevetrin, was discovered by Dr. Krishna Menon, a Company
founder. The Company acquired exclusive rights to Kevetrin in August 2007. 
(SEE ITEM 12. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS)
  Kevetrin,
is initially being developed to treat head and neck cancers. There is a
potential for use of Kevetrin in multiple tumor types, however further research
can only begin when the Company has adequate capital resources.
  Kevetrin
is being developed as an intravenous (IV) infusion therapy (the giving of the
drug directly into the vein).
  Cancer is
the second leading cause of death in the United States according to the American
Cancer Society's 2006 Cancer Facts and Figures. The five-year survival rates for
patients with cancers that have spread from its original site are poor. These
poor survival rates reflect the limitations of current treatments and the
development of resistance to available treatments. In addition, current
treatments are often associated with severe toxic side
effects.
  The
following, taken from http://www.cancer.govprovides
informative information on Head and Neck Cancers.
  1.           What is cancer?
  Cancer is
a group of many related diseases that begin in cells, the body's basic unit of
life. Normally, cells grow and divide to form new cells in an orderly way. They
perform their functions for a while, and then they die. Sometimes, however,
cells do not die. Instead, they continue to divide and create new cells that the
body does not need. The extra cells form a mass of tissue, called a growth or
tumor. There are two types of tumors: benignand
malignant. Benign tumors are not cancer. They do not invade nearby tissue or
spread to other parts of the body. Malignant tumors are cancer. Their growth
invades normal structures near the tumor and spreads to other parts of the body.
Metastasisis the spread
of cancer beyond one location in the body.
  2.           What kinds of cancers are considered
cancers of the head and neck?
  Most head
and neck cancers begin in the cells that line the mucosal surfaces in the head
and neck area, e.g., mouth, nose, and throat. Mucosal surfaces are moist tissues
lining hollow organsand cavities
of the body open to the environment. Normal mucosal cells look like scales
(squamous) under the microscope, so head and neck cancers are often referred to
as squamous cell carcinomas. Some head and neck cancers begin in other types of
cells. For example, cancers that begin in glandular cells are called
adenocarcinomas.
  Cancers
of the head and neck are further identified by the area in which they
begin:
 ·
                Oral cavity. The oral
      cavity includes the lips, the front two-thirds of the tongue, the gingiva
      (gums), the buccal mucosa (lining inside the cheeks and lips), the
      floor (bottom) of the mouth under the tongue, the hard palate (bony
      top  of the mouth), and the small area behind the wisdom
      teeth.
  ·
                Salivary glands. The salivary
      glands produce saliva, the fluid that keeps mucosal surfaces in
      the mouth and throat moist. There are many salivary glands; the major ones
      are in the floor of the mouth, and near the
  jawbone.
  ·
                Paranasal sinuses and
      nasal cavity. The paranasal
      sinuses are small hollow spaces in the bones of the head surrounding the
      nose. The nasal cavity is the hollow space inside the
  nose.
  ·
                Pharynx. The pharynx is
      a hollow tube about 5 inches long that starts behind the nose and leads to
      the esophagus (the tube that goes to the stomach) and the
      trachea (the tube that goes to the lungs). The pharynx has three
      parts:
 
 ·
                Nasopharynx. The
      nasopharynx, the upper part of the pharynx, is behind the
      nose.
  ·
                Oropharynx. The
      oropharynx is the middle part of the pharynx. The oropharynx includes the
      soft palate (the back of the mouth), the base of the tongue, and the
      tonsils.
 
 ·
                Nasopharynx. The
      nasopharynx, the upper part of the pharynx, is behind the
      nose.
  ·
                Oropharynx. The
      oropharynx is the middle part of the pharynx. The oropharynx includes the
      soft palate(the
      back of the mouth), the base of the tongue, and the
    tonsils.
  ·
                Hypopharynx. The
      hypopharynx is the lower part of the
pharynx.
  ·
                Larynx. The larynx, also
      called the voicebox, is a short passageway formed by cartilagejust
      below the pharynx in the neck. The larynx contains the vocal cords. It
      also has a small piece of tissue, called the epiglottis, which moves to
      cover the larynx to prevent food from entering the air
      passages.
  ·
                Lymph nodesin the upper part of the
      neck. Sometimes, squamous cancer cells are found in the lymph nodes
      of the upper neck when there is no evidence of cancer in other parts of
      the head and neck. When this happens, the cancer is called metastaticsquamous
      neck cancer with unknown (occult)
primary.
 Cancers of the brain, eye, and thyroidas well as
those of the scalp, skin, muscles, and bones of the head and neck are not
usually grouped with cancers of the head and neck.
  3.   How common are head and neck
cancers?
  Head and
neck cancers account for approximately 3 to 5 percent of all cancers in the
United States. These cancers are more common in men and in people over age 50.
It is estimated that about 39,000 men and women in this country will develop
head and neck cancer in 2005. (The number of new cases of head and neck cancers
in the United States was 40,490 in 2006, accounting for about 3% of adult
malignancies. 11,170 patients died of their disease in 2006. Jemal A, Siegel R,
Ward E, Murray T, Xu J, Smigal C, Thun M. "Cancer statistics, 2006". CA Cancer J
Clin 56 (2): 106-30.
  4.    What causes head and neck
cancers?
  Tobacco
(including smokeless tobacco, sometimes called “chewing tobacco” or “snuff”) and
alcohol use are the most important risk factors for head and neck cancers,
particularly those of the oral cavity, oropharynx, hypopharynx, and larynx.
Eighty-five percent of head and neck cancers are linked to tobacco use. People
who use both tobacco and alcohol are at greater risk for developing these
cancers than people who use either tobacco or alcohol alone.
  Other
risk factors for cancers of the head and neck include the
following:
   ·
                Oral cavity. Sun exposure (lip);
      possibly human papillomavirus(HPV)
      infection.
 
 ·
                Salivary glands.
      Radiationto the
      head and neck. This exposure can come from diagnostic x-raysor from
      radiation therapyfor
      noncancerous conditions or cancer.
 
 ·
                Paranasal sinuses and nasal cavity.
      Certain industrial exposures, such as wood or nickel dust inhalation.
      Tobacco and alcohol use may play less of a role in this type of
      cancer.
  ·
                Nasopharynx. Asian,
      particularly Chinese, ancestry; Epstein-Barr virusinfection;
      occupational exposure to wood dust; and consumption of certain
      preservatives or salted foods.\
 
 ·
                Oropharynx. Poor
      oral hygiene; HPV infection and the use of mouthwash that has a high
      alcohol content are possible, but not proven, risk
  factors.
  ·
                Hypopharynx. Plummer-Vinson
      (also called Paterson-Kelly) syndrome, a rare disorderthat
      results from iron and other nutritional deficiencies. This syndrome is
      characterized by severe anemiaand
      leads to difficulty swallowing due to webs of tissue that grow across the
      upper part of the esophagus.
 
 ·
                Larynx. Exposure to
      airborne particles of asbestos, especially in the
    workplace.
 Kevetrin
Studies To Date
  Prior to
our acquisition of exclusive rights to Kevetrin, a small molecule now
proprietary to the Company, the molecule had been subjected to extensive initial
in-vitro and in-vivo studies. Kevetrin acts on multiple biological pathways as
an alkylating agent, AKT inhibitor and LTB4 inhibitor with anti-angiogenic
properties. Kevetrin has shown to have potent activityagainst
various cancer cell lines both in-vitro and in-vivo.  Since the compound
works through MMOA, “Multiple Mechanisms of Action”, a single compound can
attack the progress of cancer through multiple biological pathways, as well as
may have a positive impact on other diseases.  These “Multple Mechanisms of
Actions” may have a better potential to attack the cancer cells through multiple
pathways that affect the multiplication and formation of the cancer cells along
with interruption of the formation of new blood vessels that supply vital
nutrients to tumor cells and sustain the tumor growth.
   6
 
 Growth
Inhibition Assays
  The
cytotoxicity was determined by the MTT assay. Briefly, cells were seeded in
24-well tissue culture plates at 10,000-15,000 cells/well and incubated
overnight. The exponentially growing cells were then exposed to different drug
concentrations for three to four generation times. Cellular viability was
determined by exposing cells to the MTT tetrazolium salt for 4 h at 37°C, and
the formation of Formazan was measured at 560 nm by a microplate reader. The
concentration inhibiting cell growth by 50% compared with untreated controls was
determined from the curves plotting survival as a function of dose. All values
are average of at least three independent experiments each done in
duplicates.  The results showed that Kevetrin has potent cytotoxic
activity. Therefore, Kevetrin was selected for further development.
  Immunolocalisation
of p53
  To
determine the localization of p53, immunocytochemistry was carried out. Briefly,
HCT-116 cells were attached to glass slides overnight and exposed to isotoxic
concentrations of Kevetrin (300 ng/ml),  or Cisplatin (11 μg/ml) for 6 h.
After drug exposure, cells were fixed with 3.7% formaldehyde, permeabilized with
0.25% Triton X-100, and blocked with 1% BSA. Cells were then incubated for 1 h
with anti-p53 polyclonal antibodies (Sc-6243; Santa Cruz Biotechnology) followed
by secondary anti-rabbit FITC-conjugated antibodies (Amersham Life Sciences).
Coverslips were mounted in Vectashield (Vector Laboratories) and analyzed with
an epifluorescence microscope Axiovert 100M equipped with appropriate filters
and laser confocal scanning system LSM 510 by using a plan Apochromat x63
objective (Zeiss). ). P53 is a very important protein in the development of
colorectal cancers. This experiment demonstrated that Kevetrin has potent
activity in cancers that contain p53 proteins. This activity is another reason
that we selected Kevetrin for further development.
  Western
Blot Analysis
  Western
blot analysis was performed. Whole cell lysates were prepared from cells treated
with isotoxic concentrations of Kevetrin (300 ng/ml), or Cisplatin (11 μg/ml)
for 6 h. Proteins (50 μg/lane) were separated on a 4-12% polyacrylamide SDS gel and
transferred to PolyScreen membranes.  The presence of p53, p21, and
Я-actin was revealed by anti-p53 antibodies (Sc-6243; Santa Cruz Biotechnology),
anti-p21 antibodies (Sc-3976; Santa Cruz Biotechnology), and anti-actin
antibodies (Sc-1616; Santa Cruz Biotechnology), respectively, followed by
incubation with peroxidase-conjugated secondary antibodies (Jackson
ImmunoResearch) and detection by enhanced chemiluminescence (New England
Nuclear).  The proteins p53, p21 and B-actin are very important in the
development of cancers. Suppressing these proteins is vital in the treatment of
cancer, and the enhanced suppression of such proteins was shown in the
experiment. Therefore Kevetrin was selected for development.
  Influence
of Kevetrin on the Viability of Human Tumor Cell Lines
  The
influence of Kevetrin on the viability of 10 different types of human tumor
cells, including carcinomas of the lung, colon, breast, ovary, prostate,
sarcomas, gliomas, and leukemias, was determined after continuous exposure to
Kevetrin for three doubling times. The cytotoxicity differs>120-fold between
the different cell lines ranging from 6 ng/ml for Colo 205 colon carcinoma cells
to 640 ng/ml for U2-Os osteosarcoma cells. Generally, Kevetrin has potent
activity toward human tumor cells of epithelial origin. The cytotoxic effect of
Kevetrin was most pronounced toward non-small cell lung, colon and ovarian
carcinomas with IC50s ranging from 11 to 68 ng/ml.
  Influence
of Kevetrin on the viability of human tumor cell lines. Cellular viability was
measured using the MTT assay after continuous exposure to Kevetrin for three
doubling times. The indicated concentrations of Kevetrin correspond to the
average IC50s. Shaded columns, carcinoma cells; unshaded columns, sarcoma,
glioma cells.
  Time
Dependence of Kevetrin Cytotoxicity
  To
determine the influence of exposure time on the cytotoxic effects of Kevetrin,
DU-145, HCT-116, or HT-29 carcinoma cells were exposed to different
concentrations of Kevetrin for 5, 10, 20, 30, or 45 min or 1, 2, 6, 24, or 120
h. Clear time-dependent cytotoxic effects of Kevetrin were observed for all
three cell lines with longer exposure  times being associated with
increased cytotoxicity . The time dependence was particularly dramatic for
exposure times [See figure 1] 30-45 min. In contrast, extending the drug
exposure time beyond 24 h had no influence on the cytotoxicity.
   
 7
 
   
       Activity
Spectra for Kevetrin & Cisplatin
  Comparison
of the activity spectra of Cisplatin and Kevetrin toward 10 different types of
human tumor cells shows clear differences between the two drugs. The activity of
Kevetrin was more marked than that of Cisplatin toward lung, head and neck,
breast, ovary, colon, and hepatic cell lines. Interestingly, Kevetrin showed
activity toward all head and neck (n = 3), non-small cell lung (n = 3), ovary (n
= 6), colon (n = 5), and glioma (n = 2) cell lines tested in contrast to
Cisplatin, which generally exhibited a more heterogeneous response within a
given tumor cell type. The difference between Kevetrin and the Cisplatin was
particularly striking for the three head and neck cancer cell lines, where
Kevetrin showed activity toward all of the cell lines, whereas Cisplatin was
active toward one of the three cell lines. Surprisingly, Kevetrin has only very
limited activity toward leukemias, which is unusual for alkylating agents, and
different from what is observed for Cisplatin.
   8
 
 Figure
2
   
 
 
 The
influence of Kevetrin and Cisplatin on the viability of the indicated tumor cell
lines was measured using the MTT assay after continuous exposure to Kevetrin for
three doubling times. The indicated values are calculated as follows: log (IC50
individual cell line - IC50 average). Negative values indicate that the cell
line is more sensitive than the average, whereas positive values indicate that
the cell line is more resistant than the average. The average IC50s for all cell
lines tested were 4.9 x 10-7 M for Kevetrin and 2.1 x 10-6 M for
Cisplatin.
  
 Activity
toward Cisplatin-resistant Cells
  The
development of resistance to Cisplatin is associated with treatment failure and
disease progression in several tumor types, such as ovarian cancer. We therefore
compared the activities of Kevetrin toward two well-characterized,
Cisplatin-resistant ovarian carcinoma cell lines, of A2780. The results show
that A2780 resistant cell lines are not resistant to Kevetrin compared with the
7-fold resistance to Cisplatin.
  Influence
of p53 and p21 Status
  Increasing
evidence suggests that loss of p53 function is accompanied by increased
resistance to alkylating agents, such as Cisplatin. We have compared the
influence of Kevetrin toward parental HCT-116 human colon adenocarcinoma cells
and the HCT-116 p53 -/- subline, where the p53 gene has been deleted by
homogenous recombination. The results show that loss of p53 function has only
marginal effect on the cytotoxicity of Kevetrin.  In contrast, p53
deficiency is
   9
   associated
with [See figure 2] 4-fold resistance to Cisplatin compared with parental cells
expressing p53. p53 is a transcription factor that is expressed at low levels in
the absence of cellular stress, and its expression is induced by a variety of
stimuli, usually including DNA damage. Therefore, the independence of p53 status
with respect to Kevetrin-mediated cytotoxicity could be caused by lack of p53
induction. Alternatively, p53 might be induced by Kevetrin but not playing an
important role in Kevetrin-mediated cell death. To distinguish between these two
possibilities, HCT-116 cells were treated with an isotoxic dose of Cisplatin, or
Kevetrin followed by immunocytochemistry with a p53-directed antibody. The
results show that not only Cisplatin but Kevetrin also was able to induce the
accumulation of nuclear p53. The induction of p53 was further confirmed by
Western blot analysis. Among the many p53 target genes, the cyclin-dependent
kinase inhibitor p21cip-1/waf-1 is the most universally expressed in tumor cell
lines. Western blot analysis of p21 expression in cells treated with an isotoxic
dose of Kevetrin and Cisplatin shows that both these agents were able to induce
p21, thus suggesting that the drug-induced p53 is transcriptionally active. It
should be noted that untreated HCT-116 control cells express constitutive levels
of p21, which may explain the relatively modest induction of p21 after drug
treatment.
  Pooled
Analysis of Kevetrin Efficacy in Nude Mice with SCC-15 Head and Neck
Cancer
 
 Methods
 
 Three
experiments were conducted using the same protocol at Kard Scientific,
Wilmington, MA, Toxicone in Hyderabad, India and at the University of British
Columbia.  In each experiment there were four arms, control, Kevetrin
alone, radiation alone, and Kevetrin administered sequentially with
radiation.  Each arm included ten nude mice with Head and Neck cancer
SCC-15, a squamous cell carcinoma.  Tumor reduction was measured every
other day and calculated, until it reached 1500 mgms, starting from
approximately 100 mgms.  The results of the experiments were pooled and
means and standard deviations were calculated.  Statistical evaluations of
active arms compared to control were performed using the Student
T-test.
 
 Results
 
 In the
pooled analysis, the tumor Reduction in percentage compared to control
was:
 
 1.
                Radiation
      alone -36.8% (p<0.003)
 2.
                Kevetrin
      alone – 31.5%  (p<0.003)
 3.
                Kevetrin
      + Radiation – 73.7% (p<0.003).
 
 The
improvements in the active arms compared to controls were also statistically
significant in the individual experiments.
 
 
 Analysis
 
 In this
analysis, Kevetrin alone, radiation alone and Kevetrin administered sequentially
with radiation were effective in reducing tumor size.  There appeared to be
a synergistic effect with Kevetrin administered sequentially with
radiation.  Based on this analysis, Kevetrin appears to be a viable
candidate for development for the treatment of head and neck
cancer.
 
 Compound:KM
277
  Disease:
Arthritis
  In-vivo
studies on over 1000 animal subjects have been conducted to check for potential
efficacy of the compound in rheumatoid arthritis. These studies as well as
related in vitro assays have led the Company’s management to believe that the
compound has developmental potential for the treatment of the
disease.
  Compound:
KM 278
  Disease:
Arthritis/Asthma
  This
compound showed potential efficacy in both Osteo-arthritis animal models and
Asthma models in animals. The compounds were tested against standard treatment
for asthma and Osteo-arthritis. These studies have led the Company’s management
to believe that the compound has developmental potential for the treatment of
the diseases.
   10
  Compound:
KM-133
  Disease:
Psoriasis
  A small
molecule, acting on the principles of folate mechanism, is in very early stage
development and may have potential efficacy against
Psoriasis.
   Compound:
KM-3174
  Disease:
MS/ALS/Parkinsons
  Amyelination
(absence of the myelin sheath on a nerve), is a characteristic in most
neurological diseases such as Lou Gherig Disease, Parkinson’s Disease and
Multiple Sclerosis.   Initial studies suggest that this compound aids in
demyelination (the loss of nerve fiber "insulation" due to trauma or disease,
which reduces the ability of nerves to conduct impulses) along with
strengthening the functions of the nerves, spinal chord and the brain tissue.
These studies led the Company’s management to believe that the compound has
developmental potential for the treatment of these diseases.
  Compound:
KM-362
  Disease:
Cancer
  This is a
very early stage developmental compound in the treatment of cancer. After
additional in vitro and in vivo studies the Company will determine whether to
advance this compound for further development.
  
 INTELLECTUAL
PROPERTY
  The
Company has been assigned all right title and interest to the following six
pharmaceutical compounds: Kevetrin, KM 277, KM 278, KM 133 KM 362 and KM 3174,
by their inventors. The Company agreed to pay the inventors 5% of net sales of
the compounds in countries where composition of matter patents have been issued
and 3% of net sales in other countries. Kevetrin, KM 277, KM 278 and KM 362 were
acquired by the Company from Dr. Krishna Menon, ,the Company’s Director,
President, and  principal shareholder.  The Company intends to
file patent applications for each of these products as funds become
available.
   OUR
STRATEGY
  We are in
the business of developing innovative small molecule therapies to treat diseases
with significant medical need, particularly in the areas of cancer and
inflammatory disease.  Our strategy is to use our business and scientific
expertise to maximize the value of our pipeline.  We will do this by
focusing initially on our lead compound, Kevetrin, and advancing it as quickly
as possible along the regulatory pathway.  We will develop the highest
quality data and intellectual property to support Kevetrin.
  We
currently own all development and marketing rights to our products.  In
order to successfully develop and market our products, we may have to partner
with other companies.  Prospective partners my require that we grant them
significant development and/or commercialization rights in return for agreeing
to share the risk of development and/or commercialization.
  MANUFACTURING
  The
Company's compounds are still in preclinical development and at this time the
Company does not have, and does not intend to establish, manufacturing
facilities to produce its product candidates in the near or mid-term. The
Company has identified several possible contract manufacturers but has not
concluded an agreement for the manufacture of Kevetrin for future studies. 
(SEE ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS)
  GOVERNMENT
REGULATION
  Our
operations and activities are subject to extensive regulation by numerous
government authorities in the United States and other countries. In the United
States, drugs are subject to rigorous regulation by the United States Food and
Drug Administration (“FDA”). The Federal Food, Drug and Cosmetic Act and other
federal and state statutes and regulations govern the testing, manufacture,
safety, effectiveness, labeling, storage, record keeping, approval, advertising
and promotion of our products. As a result of these regulations, product
development and the product approval process is very expensive and time
consuming. The FDA must approve a drug before it can be sold in the United
States. The general process for FDA approval is as follows:
   11
  Preclinical
Testing
  Before we
can test a drug candidate in humans, we must study the drug in laboratory
experiments and in animals to generate data to support the drug's potential
safety and benefits. We submit this data to the FDA in an investigational new
drug application (IND) seeking their approval to test the compound in
humans.
  Clinical
Trials
  If the
FDA accepts the investigational new drug application, we study the drug in
human clinical trials to determine if the drug is safe and effective. These
clinical trials involve three separate phases that often overlap, can take many
years to compile and are very expensive. These three phases, which are
themselves subject to considerable regulation, are as
follows:
  Phase 1.
The drug is given to a small number of healthy human subjects or patients to
test for safety, dose tolerance, pharmacokinetics, metabolism, distribution and
excretion.
  Phase 2.
The drug is given to a limited patient population to determine the effect of the
drug in treating the disease, the best dose of the drug, and the possible side
effects and safety risks of the drug.
  Phase 3.
If a compound appears to be effective and safe in Phase 2 clinical trials, Phase
3 clinical trials are commenced to confirm those results. Phase 3 clinical
trials are long-term, involve a significantly larger population, are conducted
at numerous sites in different geographic regions and are carefully designed to
provide reliable and conclusive data regarding the safety and benefits of a
drug. It is not uncommon for a drug that appears promising in Phase 2 clinical
trials to fail in the more rigorous and reliable Phase 3 clinical
trials.
    FDA Approval
Process
  If we
believe that the data from the Phase 3 clinical trials show an adequate level of
safety and effectiveness, we will file a new drug application (NDA) with
the FDA seeking approval to sell the drug for a particular use. The FDA will
review the NDA and often will hold a public hearing where an independent
advisory committee of expert advisors asks additional questions regarding the
drug. This committee makes a recommendation to the FDA that is not binding on
the FDA but is generally followed. If the FDA agrees that the compound has met
the required level of safety and effectiveness for a particular use, it will
allow us to sell the drug in the United States for that use. It is not unusual,
however, for the FDA to reject an application because it believes that the drug
is not safe enough or effective enough or because it does not believe that the
data submitted is reliable or conclusive.
  At any
point in this process, the development of a drug could be stopped for a number
of reasons including safety concerns and lack of treatment benefit. We cannot be
certain that any clinical trials that we are currently conducting or any that we
conduct in the future, will be completed successfully or within any specified
time period. We may choose, or the FDA may require us, to delay or suspend our
clinical trials at any time if it appears that the patients are being exposed to
an unacceptable health risk or if the drug candidate does not appear to have
sufficient treatment benefit.
  The FDA
may also require us to complete additional testing, provide additional data or
information, improve our manufacturing processes, procedures or facilities or
may require extensive post-marketing testing and surveillance to monitor the
safety or benefits of our product candidates if it determines that our new drug
application does not contain adequate evidence of the safety and benefits of the
drug. In addition, even if the FDA approves a drug, it could limit the uses of
the drug. The FDA can withdraw approvals if it does not believe that we are
complying with regulatory standards or if problems are uncovered or occur after
approval.
  In
addition to obtaining FDA approval for each drug, we obtain FDA approval of the
manufacturing facilities for any drug we sell, including those of companies who
manufacture our drugs for us  and these facilities are subject to periodic
inspections by the FDA. The FDA must also approve foreign establishments that
manufacture products to be sold in the United States and these facilities are
subject to periodic regulatory inspection.
  Should
our products be approved for marketing, we would also be subject to various
other state and Federal laws concerning the marketing and reimbursement of our
products.
  Other
major countries or groups of countries, such as the European Union, Japan and
Canada, have similarly rigorous regulatory processes.  They may also
require studies not required by the FDA, which can add to the cost and risk of
development.  Products approved by the FDA might not be approved by these
countries.  After review by the health authorities, pricing and
reimbursement are also subject to separate approvals in many countries. 
After review by the health autorities, pricing and reimbursement are also
subject to separate approvals in many countries.
   12
  COMPETITION
  Competition
in the pharmaceutical and biotechnology industries is intense. The drugs that we
are developing will have to compete with existing therapies. In addition, a
large number of companies are pursuing the development of pharmaceuticals that
target the same diseases and conditions that we are targeting. Many
pharmaceutical or biotechnology companies have products on the market and are
actively engaged in the research and development of products that are
competitive with our potential products. Many of these companies and
institutions, either alone or together with their collaborative partners, have
substantially greater financial, manufacturing, sales, distribution and
technical resources and more experience in research and development, clinical
trials and regulatory matters, than we do. In addition, our competitors may
succeed in developing technologies and drugs that are more effective, better
tolerated or less costly than any which are being developed by us or which would
render our technology or potential drugs obsolete or noncompetitive.
  With
respect to Kevetrin our lead compound for head and neck cancers, drugs that
have regulatory approvals for this disease are  Erbitux (ImClone) and
Taxotere (Sanofi-Aventis). We are aware of the following compounds in clinical
studies for use in head and neck cancers; Advexin  (Introgen Therapeutics,
Inc.), Proxinium (Viventia Biotech Inc.), and Iressa (AstraZeneca).  In
addition a number of other companies may be pursuing drugs for head and neck
cancers.
  EMPLOYEES
  As of
June 30, 2008 the Company had three employees, George Evans,  Krishna
Menon, and Leo Ehrlich none of whom is working full-time for the
Company.   Messrs. Krishna Menon and George Evans executed
employment agreements with the Company on December 7, 2007 and will continue to
participate on a part-time basis.  The Company expects to conduct its
operations using contractors and consultants for the short term. The Company may
hire full-time employees to be engaged in administration, research and
development should the Company have adequate funds on hand.
   CORPORATE
INFORMATION
  The
Company's corporate headquarters are located at 100 Cumming Center, Suite 151-B
Beverly, MA 01915. The Company's telephone number is (978)
633-3623.
     13
  RISK
FACTORS
  Investing
in the Company's common stock involves a high degree of risk. Prospective
investors should carefully consider the risks described below, together with all
of the other information included or referred to in this Annual Report on Form
10-K, before purchasing shares of the Company's common stock. There are numerous
and varied risks, known and unknown, that may prevent the Company from achieving
its goals. The risks described below are not the only ones the Company will
face. If any of these risks actually occur, the Company's business, financial
condition or results of operation may be materially adversely affected. In such
case, the trading price of the Company's common stock could decline and
investors in the Company's common stock could lose all or part of their
investment.
   Risks Specific to
Us
  Our
company is a development stage company that has no products approved for
commercial sale, never generated any revenues and may never achieve revenues or
profitability.
  We are a
development stage biopharmaceutical company. Currently, we have no products
approved for commercial sale and, to date, we have not generated any revenues.
Our ability to generate revenue depends heavily on:
  •
                successful
      development and demonstration in pre-clinical trials that our 
      leading drug candidate, Kevetrin, may be studied in human clinical
      trials;•
                successful
      demonstration in human clinical trials that Kevetrin is safe and
      effective;•
                our
      ability to seek and obtain regulatory approvals, including with respect to
      the indications we are seeking;•
                the
      successful commercialization of our product candidates;
  and•
                market
      acceptance of our products.
  All of
our existing product candidates are in early stages of development. If we do not
successfully develop and commercialize these products, we will not achieve
revenues or profitability in the foreseeable future, if at all. If we are unable
to generate revenues or achieve profitability, we may be unable to continue our
operations.
  We are a
development stage company with a limited operating history, making it difficult
for you to evaluate our business and your investment.
  We are in
the development stage and our operations and the development of our proposed
products are subject to all of the risks inherent in the establishment of a new
business enterprise, including but not limited to:
  •the absence
of an operating history;
  •the lack of
commercialized products;
  •insufficient
capital;
  •expected
substantial and continual losses for the foreseeable future;
  •limited
experience in dealing with regulatory issues;
  •the lack of
manufacturing experience and limited marketing experience;
  •possible reliance on third
      parties for the development and commercialization of our proposed
      products;
  •a competitive environment
      characterized by numerous, well-established and well capitalized
      competitors; and
  •reliance on
key personnel.
  Because
we are subject to these risks, you may have a difficult time evaluating our
business and your investment in our company.
  Our
ability to become profitable depends primarily on the following factors:
    14
  ●our ability to
      develop drugs, obtain approval for such drugs, and if approved, to
      successfully commercialize our
  drugs;
  ●our R&D
efforts, including the timing and cost of clinical trials; and
  ●our ability to enter
      into favorable alliances with third-parties who can provide substantial
      capabilities in clinical development, regulatory affairs, sales, marketing
      and distribution.
  Even if
we successfully develop and market our drug candidates, we may not generate
sufficient or sustainable revenue to achieve or sustain
profitability.
 The
report of our independent registered public accounting firm includes a going
concern opinion, and we may not be profitable in the future, if
ever.
  As of
June 30, 2008 we have $351,860 cash available to support operations or our
business plan.  Our operating cash needs, cash consumption, and doubt
as to whether we will ever become profitable, are factors which raise
substantial doubt as to our ability to continue as a going concern.
Consequently, our independent registered public accounting firm has included a
going concern opinion in its report which is included elsewhere in this Form
10-KSB. It is uncertain at this time how the going concern opinion by our
independent registered public accounting firm will affect our ability to raise
capital. If we are unable to achieve revenues or obtain financing, then we may
not be able to commence revenue-generating operations or continue as an on-going
concern.
  We
will need to raise substantial additional capital in the future to fund our
operations and we may be unable to raise such funds when needed and on
acceptable terms.
  We
currently do not have resources to complete the development and
commercialization of any of our proposed products. We expect to incur costs of
approximately $5 million dollars in the upcoming twelve months to operate our
business in accordance with our business plans. We may not be able to secure
this amount of financing on acceptable terms. In the event that we cannot obtain
acceptable financing, we would be unable to complete preclinical development and
file an investigational new drug application with the FDA for our anti-cancer
drug, Kevetrin. This will delay:
  • research
and development programs;
  • preclinical
studies and clinical trials; material characterization studies, regulatory
processes;
  • establishment
of our own laboratory or a search for third party marketing partners to market
our products for us.
  The
amount of capital we may need will depend on many factors, including
the:
  • progress,
timing and scope of our research and development programs;
  • progress,
timing and scope of our preclinical studies and clinical trials;
  • time
and cost necessary to obtain regulatory approvals;
  • time
and cost necessary to establish our own marketing capabilities or to seek
marketing partners;
  • time
and cost necessary to respond to technological and market
developments;
  • changes
made or new developments in our existing collaborative, licensing
and
  • other
commercial relationships; and
  • new
collaborative, licensing and other commercial relationships that we may
establish.
  Our fixed
expenses, such as rent and other contractual commitments, may increase in the
future, as we may:
  • enter
into leases for new facilities and capital equipment;
  • enter
into additional licenses and collaborative agreements; and
    15
  • incur
additional expenses associated with being a public company.
  We
have limited experience in drug development and may not be able to successfully
develop any drugs.
  We have
limited experience in drug development and may not be able to successfully
develop any drugs. Our ability to achieve revenues and profitability in our
business will depend, among other things, on our ability to:
  • develop
products internally or obtain rights to them from others on favorable
terms;
  • complete
laboratory testing and human studies;
  • obtain
and maintain necessary intellectual property rights to our
products;
  • successfully
complete regulatory review to obtain requisite governmental agency
approvals
  • enter
into arrangements with third parties to manufacture our products on our behalf;
and
  • enter
into arrangements with third parties to provide sales and marketing
functions.
  Development
of pharmaceutical products is a time-consuming process, subject to a number of
factors, many of which are outside of our control. Consequently, we can provide
no assurance of the successful and timely development of new
drugs.
  Our drug
candidates are in early developmental stage. Further development and extensive
testing will be required to determine their technical feasibility and commercial
viability. Our success will depend on our ability to achieve scientific and
technological advances and to translate such advances into reliable,
commercially competitive drugs on a timely basis. Drugs that we may develop are
not likely to be commercially available for several years, if ever. The proposed
development schedules for our drug candidates may be affected by a variety of
factors, including technological difficulties, proprietary technology of others,
and changes in government regulation, many of which will not be within our
control. Any delay in the development, introduction or marketing of our drug
candidates could result either in such drugs being marketed at a time when their
cost and performance characteristics would not be competitive in the marketplace
or in the shortening of their commercial lives. In light of the long-term nature
of our projects, the unproven technology involved and the other factors
described elsewhere in “Risk Factors”, we may not be able to complete
successfully the development or marketing of any drugs.
  We may
fail to successfully develop and commercialize our drug candidates because they:
  • are
found to be unsafe or ineffective in clinical trials;
  • do
not receive necessary approval from the FDA or foreign regulatory
agencies;
  • fail
to conform to a changing standard of care for the diseases they seek to treat;
or
  • are
less effective or more expensive than current or alternative treatment methods.
  Drug
development failure can occur at any stage of clinical trials and as a result of
many factors and there can be no assurance that we or our collaborators will
reach our anticipated clinical targets. Even if we or our collaborators complete
our clinical trials, we do not know what the long-term effects of exposure to
our drug candidates will be. Furthermore, our drug candidates may be used in
combination with other treatments and there can be no assurance that such use
will not lead to unique safety issues. Failure to complete clinical trials or to
prove that our drug candidates are safe and effective would have a material
adverse effect on our ability to generate revenue and could require us to reduce
the scope of or discontinue our operations.
  We
must comply with significant and complex government regulations, compliance with
which may delay or prevent the commercialization of our drug
candidates.
  The
R&D, manufacture and marketing of drug candidates are subject to regulation,
primarily by the FDA in the United States and by comparable authorities in other
countries. These national agencies and other federal, state, local and foreign
entities regulate, among other things, R&D activities (including testing in
animals and in humans) and the testing, manufacturing, handling, labeling,
storage, record keeping, approval, advertising and promotion of the products
that we are developing. Noncompliance with applicable requirements can result in
various adverse consequences, including approval delays or refusals to approve
drug licenses or other applications, suspension or termination of clinical
investigations, revocation of approvals previously granted, fines, criminal
prosecution, recalls or seizures of products, injunctions against shipping drugs
and total or partial suspension of production and/or refusal to allow a company
to enter into governmental supply contracts.
   16
  The
process of obtaining FDA approval has historically been costly and time
consuming. Current FDA requirements for a new human drug or biological product
to be marketed in the United States include: (1) the successful conclusion of
pre-clinical laboratory and animal tests, if appropriate, to gain preliminary
information on the product's safety; (2) filing with the FDA of an IND
application to conduct human clinical trials for drugs or biologics; (3) the
successful completion of adequate and well-controlled human clinical
investigations to establish the safety and efficacy of the product for its
recommended use; and (4) filing by a company and acceptance and approval by the
FDA of a New Drug Application, or NDA, for a drug product or a biological
license application, or BLA, for a biological product to allow commercial
distribution of the drug or biologic. A delay in one or more of the procedural
steps outlined above could be harmful to us in terms of getting our drug
candidates through clinical testing and to market.
  The FDA
reviews the results of the clinical trials and may order the temporary or
permanent discontinuation of clinical trials at any time if it believes the drug
candidate exposes clinical subjects to an unacceptable health risk.
Investigational drugs used in clinical studies must be produced in compliance
with current good manufacturing practice, or GMP, rules pursuant to FDA
regulations.
  Sales
outside the United States of products that we develop will also be subject to
regulatory requirements governing human clinical trials and marketing for drugs
and biological products and devices. The requirements vary widely from country
to country, but typically the registration and approval process takes several
years and requires significant resources.
  We also
are subject to the following risks and obligations, related to the approval of
our products:
  • The
FDA or foreign regulators may interpret data from pre-clinical testing and
clinical trials in different ways than we interpret them.
  • If
regulatory approval of a product is granted, the approval may be limited to
specific indications or limited with respect to its distribution. In addition,
many foreign countries control pricing and coverage under their respective
national social security systems.
  • The
FDA or foreign regulators may not approve our manufacturing processes or
manufacturing facilities.
  • The
FDA or foreign regulators may change their approval policies or adopt new
regulations.
  • Even
if regulatory approval for any product is obtained, the marketing license will
be subject to continual review, and newly discovered or developed safety or
effectiveness data may result in suspension or revocation of the marketing
license.
  • If
regulatory approval of the product candidate is granted, the marketing of that
product would be subject to adverse event reporting requirements and a general
prohibition against promoting products for unapproved uses.
  • In
some foreign countries, we may be subject to official release requirements that
require each batch of the product we produce to be officially released by
regulatory authorities prior to its distribution by us.
  • We
will be subject to continual regulatory review and periodic inspection and
approval of manufacturing modifications, including compliance with current GMP
regulations.
 We can provide no
assurance that our drug candidates will obtain regulatory approval or that the
results of clinical studies will be favorable.
  The
work-plan we have developed for the next twelve months is planned to enable us
to file an Investigational New Drug (“IND”) application for Kevetrin, our
anti-cancer drug  in our 2008-2009 fiscal year. We need to be able to
undertake further studies in animal models to obtain necessary data regarding
the pharmaco-kinetic and pharmaco-dynamic profiles of our drug candidates. The
data will then be used to file an IND application, towards the goal of obtaining
FDA approval for testing the drugs in human patients.
  The
testing, marketing and manufacturing of any product for use in the United States
will require approval from the FDA. We cannot predict with any certainty the
amount of time necessary to obtain such FDA approval and whether any such
approval will ultimately be granted Preclinical and clinical trials may reveal
that one or more products are ineffective or unsafe, in which event further
development of such products could be seriously delayed or terminated. Moreover,
obtaining approval for certain products may require testing on human subjects of
substances whose effects on humans are not fully understood or documented.
Delays in obtaining FDA or any other necessary regulatory approvals of any
proposed drug and failure to receive such approvals would have an adverse effect
on the drug's potential commercial success and on our business, prospects,
financial condition and results of operations. In addition, it is possible that
a proposed drug may be found to be ineffective or unsafe due to conditions or
facts that arise after development has been completed and regulatory approvals
have been obtained. In this event, we may be required to withdraw such proposed
drug from the market. To the extent that our success will depend on any
regulatory approvals from government authorities outside of the United States
that perform roles similar to that of the FDA, uncertainties similar to those
stated above will also exist.
  Even
if we obtain regulatory approvals, our marketed drug candidates will be subject
to ongoing regulatory review. If we fail to comply with continuing U.S. and
foreign regulations, we could lose our approvals to market these drugs and our
business would be seriously harmed.
  Following
any initial regulatory approval of any drugs we may develop, we will also be
subject to continuing regulatory review, including the review of adverse
experiences and clinical results that are reported after our drug candidates are
made commercially available. This would include results from any post-marketing
tests or vigilance required as a condition of approval. The manufacturer and
manufacturing facilities we use to make any of our drug candidates will also be
subject to periodic review and inspection by the FDA. The discovery of any
previously unknown problems with the drug, manufacturer or facility may result
in restrictions on the drug or manufacturer or facility, including withdrawal of
the
   17
   drug from
the market. If we are required to withdraw all or more of our drugs from the
market, we may be unable to continue revenue generating operations. We do not
have, and currently do not intend to develop, the ability to manufacture
material for our clinical trials or on a commercial scale. Reliance on
third-party manufacturers entails risks to which we would not be subject if we
manufactured drugs ourselves, including reliance on the third-party manufacturer
for regulatory compliance. Our drug promotion and advertising is also subject to
regulatory requirements and continuing FDA review.
  We
have no experience in conducting or supervising clinical trials and must
outsource all clinical trials.
  We have
no experience in conducting or supervising clinical trials that must be
performed to obtain data to submit in concert with applications for approval by
the Food and Drug Administration ("FDA"). The regulatory process to obtain
approval for drugs for commercial sale involves numerous steps. Drugs are
subjected to clinical trials that allow development of case studies to examine
safety, efficacy, and other issues to ensure that sale of drugs meets the
requirements set forth by various governmental agencies, including the FDA. In
the event that our protocols do not meet standards set forth by the FDA, or that
our data is not sufficient to allow such trials to validate our drugs in the
face of such examination, we might not be able to meet the requirements that
allow our drugs to be approved for sale.
  Because
we have no experience in conducting or supervising clinical trials, we must
outsource our clinical trials to third parties. We have no control over their
compliance with procedures and protocols used to complete clinical trails in
accordance with standards required by the agencies that approve drugs for sale.
If these subcontractors fail to meet these standards, the validation of our
drugs would be adversely affected, causing a delay in our ability to meet
revenue-generating operations
  We are subject to
risks inherent in conducting clinical trials. The risk of non compliance with
FDA-approved good clinical practices by clinical investigators, clinical sites,
or data management services could delay or prevent us from developing or ever
commercializing our drug candidates.
  Agreements
with clinical investigators and medical institutions for clinical testing and
with other third parties for data management services place substantial
responsibilities on these parties, which could result in delays in, or
termination of, our clinical trials if these parties fail to perform as
expected. For example, if any of our clinical trial sites fail to comply with
FDA-approved good clinical practices, we may be unable to use the data gathered
at those sites. If these clinical investigators, medical institutions or other
third parties do not carry out their contractual duties or obligations or fail
to meet expected deadlines, or if the quality or accuracy of the clinical data
they obtain is compromised due to their failure to adhere to our clinical
protocols or for other reasons, our clinical trials may be extended, delayed or
terminated, and we may be unable to obtain regulatory approval for or
successfully commercialize our drug candidates.
  We or
regulators may suspend or terminate our clinical trials for a number of reasons.
We may voluntarily suspend or terminate our clinical trials if at any time we
believe that they present an unacceptable risk to the patients enrolled in our
clinical trials. In addition, regulatory agencies may order the temporary or
permanent discontinuation of our clinical trials at any time if they believe
that the clinical trials are not being conducted in accordance with applicable
regulatory requirements or that they present an unacceptable safety risk to the
patients enrolled in our clinical trials.  In addition, clinical trials may
have independent monitoring boards composed of experts in the field.  These
boards may also have the authority to suspend or terminate clinical
trials.
  Our
clinical trial operations will be subject to regulatory inspections at any time.
If regulatory inspectors conclude that we or our clinical trial sites are not in
compliance with applicable regulatory requirements for conducting clinical
trials, we may receive reports of observations or warning letters detailing
deficiencies, and we will be required to implement corrective actions. If
regulatory agencies deem our responses to be inadequate, or are dissatisfied
with the
   18
  corrective
actions that we or our clinical trial sites have implemented, our clinical
trials may be temporarily or permanently discontinued, we may be fined, we or
our investigators may be precluded from conducting any ongoing or any future
clinical trials, the government may refuse to approve our marketing applications
or allow us to manufacture or market our drug candidates or we may be criminally
prosecuted. If we are unable to complete clinical trials and have our products
approved due to our failure to comply with regulatory requirements, we will be
unable to commence revenue generating operations.
  The
Ccompany is exposed to product liability, clinical and preclinical liability
risks which could place a substantial financial burden upon the Company should
it be sued, because the Company does not currently have product liability
insurance.
  The
Company does not currently have products in clinical trials nor does it have
marketed products.  Should its products advance to the clinical trial or
marketing stage, however, it could be exposed to potential product liability and
other liability risks that are inherent in the testing, manufacturing and
marketing of pharmaceutical products. The Company cannot assure that such
potential claims will not be asserted against it.   In addition,
the use in the Company's clinical trials of pharmaceutical products that it may
develop and the subsequent sale of these products by the Company or its
potential collaborators may cause the Company to bear a portion of or all
product liability risks. A successful liability claim or series of claims
brought against the Company could have a material adverse effect on its
business, financial condition and results of operations.
  The
Company does not currently have product liability insurance or other liability
insurance relating to clinical trials or to the marketing of any products or
compounds. The Company cannot assure that it will be able to obtain or maintain
adequate product liability insurance on acceptable terms, if at all, or that
such insurance will provide adequate coverage against the Company's potential
liabilities. Furthermore, the Company's current and potential partners with whom
the Company has collaborative agreements with or its future licensees may not be
willing to indemnify the Company against these types of liabilities and may not
themselves be sufficiently insured or have a net worth sufficient to satisfy any
product liability claims. Claims or losses in excess of any product liability
insurance coverage that may be obtained by the Company could have a material
adverse effect on its business, financial condition and results
of operations.
  Confidentiality
agreements with employees and others may not adequately prevent disclosure of
trade secrets and other proprietary information. Disclosure of our trade secrets
or proprietary information could compromise any competitive advantage that we
have.
  We depend
upon confidentiality agreements with our officers, employees, consultants, and
subcontractors to maintain the proprietary nature of the technology. These
measures may not afford us sufficient or complete protection, and may not afford
an adequate remedy in the event of an unauthorized disclosure of confidential
information. In addition, others may independently develop technology similar to
ours, otherwise avoiding the confidentiality agreements, or produce patents that
would materially and adversely affect our business, prospects, financial
condition, and results of operations.
  We
may be unable to obtain or protect intellectual property rights relating to our
products, and we may be liable for infringing upon the intellectual property
rights of others.
  Our
ability to compete effectively will depend on our ability to maintain the
proprietary nature of our technologies and the proprietary technology of others
with which we have entered into licensing agreements. We expect to file a number
of patent applications in the coming years.  There can be no assurance that
any of these patent applications will ultimately result in the issuance of a
patent with respect to the technology owned by us or licensed to us. The patent
position of pharmaceutical or biotechnology companies, including ours, is
generally uncertain and involves complex legal and factual considerations. The
standards that the United States Patent and Trademark Office use to grant
patents are not always applied predictably or uniformly and can change. There is
also no uniform, worldwide policy regarding the subject matter and scope of
claims granted or allowable in pharmaceutical or biotechnology patents.
Accordingly, we do not know the degree of future protection for our proprietary
rights or the breadth of claims that will be allowed in any patents issued to us
or to others. Further, we rely on a combination of trade secrets, know-how,
technology and nondisclosure, and other contractual agreements and technical
measures to protect our rights in the technology. If any trade secret, know-how
or other technology not protected by a patent were to be disclosed to or
independently developed by a competitor, our business and financial condition
could be materially adversely affected.
  We do not
believe that any of the drug candidates we are currently developing infringe
upon the rights of any third parties nor are they infringed upon by third
parties; however, there can be no assurance that our technology will not be
found in the future to infringe upon the rights of others or be infringed upon
by others. In such a case, others may assert infringement claims against us, and
should we be found to infringe upon their patents, or otherwise impermissibly
utilize their intellectual property, we might be forced to pay damages,
potentially including treble damages, if we are found to have willfully
infringed on such parties' patent rights. In addition to any damages we might
have to pay, we may be required to obtain licenses from the holders of this
intellectual property, enter into royalty agreements, or redesign our drug
candidates so as not to utilize this intellectual property, each of which may
prove to be uneconomical or otherwise impossible. Conversely, we may not always
be able to successfully pursue our claims against others that infringe upon our
technology.    Thus, the proprietary nature of our technology or
technology licensed by us may not provide adequate protection against
competitors.
    19
  Moreover,
the cost to us of any litigation or other proceeding relating to our patents and
other intellectual property rights, even if resolved in our favor, could be
substantial, and the litigation would divert our management's efforts.
Uncertainties resulting from the initiation and continuation of any litigation
could limit our ability to continue our operations.
  We
have limited manufacturing experience
  The
Company has never manufactured products in the highly regulated environment of
pharmaceutical manufacturing. There are numerous regulations and requirements
that must be maintained to obtain licensure and permitting required to commence
manufacturing, as well as additional requirements to continue manufacturing
pharmaceutical products. We do not own or lease facilities currently that could
be used to manufacture any products that might be developed by the Company, nor
do we have the resources at this time to acquire or lease suitable
facilities.
  We
have no sales and marketing personnel.
  We are an
early stage development Company with limited resources. We do not currently have
any products available for sale, so have not secured sales and marketing staff
at this early stage of operations. We cannot generate sales without sales or
marketing staff and must rely on officers to provide any sales or marketing
services until such staff are secured, if ever.
  Even if we were
to successfully develop approvable drugs, we will not be able to sell these
drugs if we or our third party manufacturers fail to comply with manufacturing
regulations.
  If we
were to successfully develop approvable drugs, before we can begin selling these
drugs, we must obtain regulatory approval of our manufacturing facility and
process or the manufacturing facility and process of the third party or parties
with whom we may outsource our manufacturing activities. In addition, the
manufacture of our products must comply with the FDA's current Good
Manufacturing Practices regulations, commonly known as GMP regulations. The GMP
regulations govern quality control and documentation policies and procedures.
Our manufacturing facilities, if any in the future, and the manufacturing
facilities of our third party manufacturers will be continually subject to
inspection by the FDA and other state, local and foreign regulatory authorities,
before and after product approval. We cannot guarantee that we, or any potential
third party manufacturer of our products, will be able to comply with the GMP
regulations or other applicable manufacturing regulations.
  Our potential
collaborative relationships with third parties could cause us to expend
significant resources and incur substantial business risk with no assurance of
financial return.
  We may
have to rely substantially upon strategic collaborations for marketing and the
commercialization of our drug candidates and we may rely even more on strategic
collaborations for R&D of our other drug candidates. Our business will
depend on our ability to sell drugs to both government agencies and to the
general pharmaceutical market. We may have to sell our drugs through strategic
partnerships with pharmaceutical companies. If we are unable to establish or
manage such strategic collaborations on terms favorable to us in the future, our
revenue and drug development may be limited. To date, we have not entered into
any strategic collaborations with third parties capable of providing these
services. In addition, we have not yet marketed or sold any of our drug
candidates or entered into successful collaborations for these services in order
to ultimately commercialize our drug candidates.
  If we
determine to enter into R&D collaborations during the early phases of drug
development, our success will in part depend on the performance of our research
collaborators. We will not directly control the amount or timing of resources
devoted by our research collaborators to activities related to our drug
candidates. Our research collaborators may not commit sufficient resources to
our programs. If any research collaborator fails to commit sufficient resources,
our preclinical or clinical development programs related to this collaboration
could be delayed or terminated. Also, our collaborators may pursue existing or
other development-stage products or alternative technologies in preference to
those being developed in collaboration with us. Finally, if we fail to make
required milestone or royalty payments to our collaborators or to observe other
obligations in our agreements with them, our collaborators may have the right to
terminate those agreements.
  Establishing
strategic collaborations is difficult and time-consuming. Our discussion with
potential collaborators may not lead to the establishment of collaborations on
favorable terms, if at all. Potential collaborators may reject collaborations
based upon their assessment of our financial, regulatory or intellectual
property position. Even if we successfully establish new collaborations, these
relationships may never result in the successful development or
commercialization of our drug candidates or the generation of sales revenue. To
the extent that we enter into collaborative arrangements, our drug revenues are
likely to be lower than if we directly marketed and sold any drugs that we may
develop.
  Management
of our relationships with our collaborators will require:
  • significant
time and effort from our management team;
    20
  • coordination
of our marketing and R&D programs with the marketing and R&D priorities
of our collaborators; and
  • effective
allocation of our resources to multiple projects.
  We
may not be able to attract and retain highly skilled personnel.
  Our
ability to attract and retain highly skilled personnel is critical to our
operations and expansion. We face competition for these types of personnel from
other pharmaceutical companies and more established organizations, many of which
have significantly larger operations and greater financial, technical, human and
other resources than us. We may not be successful in attracting and retaining
qualified personnel on a timely basis, on competitive terms, or at all. If we
are not successful in attracting and retaining these personnel, our business,
prospects, financial condition and results of operations will be materially and
adversely affected.
  We
depend upon our senior management and their loss or unavailability could put us
at a competitive disadvantage.
  We
currently depend upon the efforts and abilities of our management team. The loss
or unavailability of the services of any of these individuals for any
significant period of time could have a material adverse effect on our business,
prospects, financial condition and results of operations. We have not obtained,
do not own, nor are we the beneficiary of key-person life
insurance.
  The
Company believes the following persons are critical to the success of the
Company as well as the terms of the employment agreements between them and the
Company:
 
 On December 7, 2007, the Company
entered into employment agreements with its two executive officers, George
Evans, Chief Executive Officer, and Krishna Menon, Chief Scientific Officer.
Both agreements provide for a three year term with minimum annual base salaries
of $200,000 in the first year, $300,000 in the second year and $400,000 in the
third year.  In addition, the agreements provide for bonuses according to
the following schedule:
  Upon
receiving IND: $250,000 if received within 10 months; $150,000 if received
within 12 months; $100,000 if received within 16 months; and no bonus if
received thereafter or not received.
 
 Completion
of Phase 1with clinical results that would have Kevetrin proceed to Phase 2/3:
$450,000 if received within 18 months; $350,000 if received within 24 months;
$150,000 if received within 28 months; and no bonus if received thereafter or
not received.
 
 Start
Phase 2/3: $500,000 if within 36 months; $350,000 if within 42 months; $150,000
if within 48 months; and no bonus if received thereafter or not
received.
  The bonus
obligations under the agreements do not commence until the Company receives a
financing commitment in an amount of at least $4,000,000.
  The
agreement with Mr. Evans also provides a grant of options to purchase a number
of shares of the Company's stock equal to one percent of the issued and
outstanding common stock following the first anniversary of the commencement of
the agreement, which is defined as the date the Company receives a financing
commitment in an amount of at least $4,000,000, at a purchase price of $0.15 per
share. Thereafter Mr. Evans shall be issued an additional grant of options
following the successive anniversaries of the commencement date of a number of
shares of common stock equal to one percent of the issued and outstanding common
stock at a purchase price equal to the average closing bid price of the common
stock on its primary exchange for the fifteen successive trading days
immediately prior to the date of the grant.
  There
are conflicts of interest among our officers, directors and
stockholders.
  Certain
of our executive officers and directors and their affiliates are engaged in
other activities and have interests in other entities on their own behalf or on
behalf of other persons. Neither we nor any of our stockholders will have any
rights in these ventures or their income or profits. In
particular:
  • Our
executive officers or directors or their affiliates may have an economic
interest in, or other business relationship with, partner companies that invest
in us or are engaged in competing drug development.
  •Our
executive officers or directors or their affiliates have interests in entities
that provide products or services to us. Presently, Kard Scientific, a company
controlled by Dr. Krishna Menon, President and Director, provides preclinical
and manufacturingservices to the
Company and leases space to the Company.
   21
    In any of
these cases:
  •Our executive
officers or directors may have a conflict between our current interests and
their personal financial and other interests in another business
venture.
  •Our executive
officers or directors may have conflicting fiduciary duties to us and the other
entity.
  •The terms of
transactions with the other entity may not be subject to arm's length
negotiations and therefore may be on terms less favorable to us than those that
could be procured through arm's length negotiations.
  While the
Company is not aware of any conflict that has arisen to date, Dr. Menon may have
conflicting fiduciary duties between the Company and Kard Scientific. Currently,
the Company does not have any policy in place to deal with such should such a
conflict arise.
  Risks
Related to the Biotechnology/Biopharmaceutical Industry
  The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition. We may be unable to
compete with enterprises equipped with more substantial resources than
us.
  The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition based primarily on
scientific and technological factors. These factors include the availability of
patent and other protection for technology and products, the ability to
commercialize technological developments and the ability to obtain government
approval for testing, manufacturing and marketing.
  We
compete with biopharmaceutical firms in the United States, Europe and elsewhere,
as well as a growing number of large pharmaceutical companies that are applying
biotechnology to their operations. Many biopharmaceutical companies have focused
their development efforts in the human therapeutics area, including cancer. Many
major pharmaceutical companies have developed or acquired internal biotechnology
capabilities or made commercial arrangements with other biopharmaceutical
companies. These companies, as well as academic institutions, government
agencies and private research organizations, also compete with us in recruiting
and retaining highly qualified scientific personnel and consultants. Our ability
to compete successfully with other companies in the pharmaceutical field will
also depend to a considerable degree on the continuing availability of capital
to us.
  We are
aware of numerous products under development or manufactured by competitors that
are used for the prevention or treatment of certain diseases we have targeted
for drug development. Various companies are developing biopharmaceutical
products that potentially directly compete with our drug candidates even though
their approach to such treatment is different.
  With
respect to Kevetrin, our lead compound for head and neck cancers,  the
drugs we are aware of that are in clinical studies for use in head and neck
cancers are Advexin  (Introgen Therapeutics, Inc.); Proxinium (Viventia
Biotech Inc.); and Iressa (AstraZeneca).  In addition a number of other
companies may be pursuing drugs for head and neck cancers. Drugs that have
already been approved for head and neck cancers are  Erbitux (ImClone) and
Taxotere (Sanofi-Aventis) .
  Our
competition will be determined in part by the potential indications for which
drugs are developed and ultimately approved by regulatory authorities.
Additionally, the timing of the market introduction of some of our potential
drugs or of competitors' products may be an important competitive factor.
Accordingly, the relative speed with which we can develop drugs, complete
pre-clinical testing, clinical trials, approval processes and supply commercial
quantities to market are important competitive factors. We expect that
competition among drugs approved for sale will be based on various factors,
including product efficacy, safety, reliability, availability, price and patent
protection.
  The
successful development of biopharmaceuticals is highly uncertain. A variety of
factors including, pre-clinical study results or regulatory approvals, could
cause us to abandon development of our drug candidates.
  Successful
development of biopharmaceuticals is highly uncertain and is dependent on
numerous factors, many of which are beyond our control. Products that appear
promising in the early phases of development may fail to reach the market for
several reasons including:
  • pre-clinical
study results that may show the product to be less effective than desired (e.g.,
the study failed to meet its primary objectives) or to have harmful or
problematic side effects;
  • failure to receive the necessary
regulatory approvals or a delay in receiving such approvals. Among other things,
such delays may be caused by slow enrollment in clinical studies, length of time
to achieve study endpoints, additional time requirements for data analysis or a
IND and later NDA, preparation, discussions with the FDA, an FDA request for
additional pre-clinical or clinical data or unexpected safety or manufacturing
issues;
   22
   • manufacturing
costs, pricing or reimbursement issues, or other factors that make the product
not economical; and
  • the
proprietary rights of others and their competing products and technologies that
may prevent the product from being commercialized.
  Success
in pre-clinical and early clinical studies does not ensure that large-scale
clinical studies will be successful. Clinical results are frequently susceptible
to varying interpretations that may delay, limit or prevent regulatory
approvals. The length of time necessary to complete clinical studies and to
submit an application for marketing approval for a final decision by a
regulatory authority varies significantly from one product to the next, and may
be difficult to predict.
  Risks
Related to the Securities Markets and Investments in Our Common
Stock
  Because our
common stock is quoted on the "OTCBB," your ability to sell your shares in the
secondary trading market may be limited.
  Our
common stock is currently quoted on the over-the-counter market on the OTC
Electronic Bulletin Board. Consequently, the liquidity of our common stock is
impaired, not only in the number of shares that are bought and sold, but also
through delays in the timing of transactions, and coverage by security analysts
and the news media, if any, of our company. As a result, prices for shares of
our common stock may be lower than might otherwise prevail if our common stock
was quoted and traded on Nasdaq or a national securities
exchange.
  Because
our shares are "penny stocks," you may have difficulty selling them in the
secondary trading market.
  Federal
regulations under the Securities Exchange Act of 1934 regulate the trading of
so-called "penny stocks," which are generally defined as any security not listed
on a national securities exchange or Nasdaq, priced at less than $5.00 per share
and offered by an issuer with limited net tangible assets and revenues. Since
our common stock currently is quoted on the "OTCBB" at less than $5.00 per
share, our shares are "penny stocks" and may not be traded unless a disclosure
schedule explaining the penny stock market and the risks associated therewith is
delivered to a potential purchaser prior to any trade.
  In
addition, because our common stock is not listed on Nasdaq or any national
securities exchange and currently is quoted at and trades at less than $5.00 per
share, trading in our common stock is subject to Rule 15g-9 under the Securities
Exchange Act. Under this rule, broker-dealers must take certain steps prior to
selling a "penny stock," which steps include:
  • obtaining
financial and investment information from the investor;
  • obtaining
a written suitability questionnaire and purchase agreement signed by the
investor; and
  • providing
the investor a written identification of the shares being offered and the
quantity of the shares.
  If these
penny stock rules are not followed by the broker-dealer, the investor has no
obligation to purchase the shares. The application of these comprehensive rules
will make it more difficult for broker-dealers to sell our common stock and our
shareholders, therefore, may have difficulty in selling their shares in the
secondary trading market.
  Our
stock price may be volatile and your investment in our common stock could suffer
a decline in value.
   As of
June 30, 2008, the last trade price of our common stock, as quoted on the OTC
Bulletin Board, was $0.57. The price may fluctuate significantly in response to
a number of factors, many of which are beyond our control. These factors
include:
   • progress
of our products through the regulatory process;
  • results
of preclinical studies and clinical trials;
  • announcements
of technological innovations or new products by us or our
competitors;
    23
  • government
regulatory action affecting our products or our competitors' products in both
the United States and foreign countries;
  • developments
or disputes concerning patent or proprietary rights;
  • general
market conditions for emerging growth and pharmaceutical companies;
  • economic
conditions in the United States or abroad;
  • actual
or anticipated fluctuations in our operating results;
  • broad
market fluctuations; and
  • changes
in financial estimates by securities analysts.
  A
registration of a significant amount of our outstanding restricted stock may
have a negative effect on the trading price of our stock.
  At June
30, 2008,shareholders of the Company had approximately 82,100,000 shares of
restricted stock, or 89% of the outstanding common stock. If we were to file a
registration statement including all of these shares, and the registration is
allowed by the SEC, these shares would be freely tradable upon the effectiveness
of the planned registration statement. If investors holding a significant number
of freely tradable shares decide to sell them in a short period of time
following the effectiveness of a registration statement, such sales could
contribute to significant downward pressure on the price of our
stock.
  Our directors and
executive officers own or control a sufficient number of shares of our common
stock to control our company, which could discourage or prevent a takeover, even
if an acquisition would be beneficial to our
shareholders.
  At June
30, 2008, our directors and executive officers own or control approximately 52%
of our outstanding voting power. Accordingly, these shareholders, individually
and as a group, may be able to influence the outcome of shareholder votes,
involving votes concerning the election of directors, the adoption or amendment
of provisions in our articles of incorporation and bylaws and the approval of
certain mergers or other similar transactions, such as sales of substantially
all of our assets. Such control by existing shareholders could have the effect
of delaying, deferring or preventing a change in control of our company.
  We do not intend
to pay any cash dividends in the foreseeable future and, therefore, any return
on your investment in our capital stock must come from increases in the fair
market value and trading price of the capital stock.
  We have
not paid any cash dividends on our common stock and do not intend to pay cash
dividends on our common stock in the foreseeable future. We intend to retain
future earnings, if any, for reinvestment in the development and expansion of
our business. Any credit agreements, which we may enter into with institutional
lenders, may restrict our ability to pay dividends. Whether we pay cash
dividends in the future will be at the discretion of our board of directors and
will be dependent upon our financial condition, results of operations, capital
requirements and any other factors that the board of directors decides is
relevant. Therefore, any return on your investment in our capital stock must
come from increases in the fair market value and trading price of the capital
stock.
  We
may issue additional equity shares to fund the Company's operational
requirements which would dilute your share ownership.
  The
Company's continued viability depends on its ability to raise capital. Changes
in economic, regulatory or competitive conditions may lead to cost increases.
Management may also determine that it is in the best interest of the Company to
develop new services or products. In any such case additional financing is
required for the Company to meet its operational requirements. There can be no
assurances that the Company will be able to obtain such financing on terms
acceptable to the Company and at times required by the Company, if at all. In
such event, the Company may be required to materially alter its business plan or
curtail all or a part of its operational plans as detailed further in
Management's Discussion and Analysis in this Form 10-KSB. While the Company
currently has no offers to sell it securities to obtain financing, sale or the
proposed sale of substantial amounts of our common stock in the public markets
may adversely affect the market price of our common stock and our stock price
may decline substantially. In the event that the Company is unable to raise or
borrow additional funds, the Company may be required to curtail significantly
its operational plans as further detailed in Requirements for Additional Capital
in the Management Discussion and Analysis of this Form 10-KSB.
  The
Company is authorized to issue up to 300,000,000 total shares of Common Stock
without additional approval by shareholders. As of June 30, 2008 we had
91,891,000 shares of common stock outstanding, and warrants, options and
debentures convertible into 4,148,577 shares of common stock
outstanding.
   24
  Because
our common stock is quoted only on the OTCBB, your ability to sell your shares
in the secondary trading market may be limited.
  Our
common stock is quoted only on the OTCBB. Consequently, the liquidity of our
common stock is impaired, not only in the number of shares that are bought and
sold, but also through delays in the timing of transactions, and coverage by
security analysts and the news media, if any, of our company. As a result,
prices for shares of our common stock may be different than might otherwise
prevail if our common stock was quoted or traded on a national securities
exchange such as the New York Stock Exchange.
  Large
amounts of our common stock will be eligible for resale under Rule 144.
  As of
June 30, 2008, approximately 82,100,000 of the 91,891,000 issued and outstanding
shares of the Company's common stock are restricted securities as defined under
Rule 144 of the Securities Act of 1933, as amended (the “Act”) and under certain
circumstances may be resold without registration pursuant to Rule 144.
  Approximately
34,200,000 shares of our restricted shares of common stock are held by
non-affiliates who may avail themselves of the public information requirements
and sell their shares in accordance with Rule 144. As a result, some or all of
these shares may be sold in accordance with Rule 144 potentially causing the
price of the Company's shares to decline.
  In
general, under Rule 144, a person (or persons whose shares are aggregated) who
has satisfied a six month holding period may, under certain circumstances, sell
within any three-month period a number of securities which does not exceed the
greater of 1% of the then outstanding shares of common stock or the average
weekly trading volume of the class during the four calendar weeks prior to such
sale. Rule 144 also permits, under certain circumstances, the sale of
securities, without any limitation, by a person who is not an Affiliate, as such
term is defined in Rule 144(a)(1), of the Company and who has satisfied a
one-year holding period. Any substantial sale of the Company's common stock
pursuant to Rule 144 may have an adverse effect on the market price of the
Company's shares. This filing will satisfy certain public information
requirements necessary for such shares to be sold under Rule 144.
  The
requirements of complying with the Sarbanes-Oxley act may strain our resources
and distract management
  We are
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002. The costs
associated with these requirements may place a strain on our systems and
resources. The Exchange Act requires that we file annual, quarterly and current
reports with respect to our business and financial condition. The Sarbanes-Oxley
Act requires that we maintain effective disclosure controls and procedures and
internal controls over financial reporting. Historically, as a private company
we have maintained a small accounting staff, but in order to maintain and
improve the effectiveness of our disclosure controls and procedures and internal
control over financial reporting, significant additional resources and
management oversight will be required. This includes, among other things,
retaining independent public accountants. This effort may divert management's
attention from other business concerns, which could have a material adverse
effect on our business, financial condition, results of operations and cash
flows. In addition, we may need to hire additional accounting and financial
persons with appropriate public company experience and technical accounting
knowledge, and we cannot assure you that we will be able to do so in a timely
fashion.
  25
   ITEM 2. DESCRIPTION OF PROPERTY
  Our principal offices arelocated at100 Cumming Center, Suite 151-B,
Beverly, MA 01915,
pendinga new lease
agreement.On
December 7, 2007, the Company began renting 200 square feet of office space from
Kard Scientific at its former facility in Wilminton, MA , on a month to month
basis for $900 per month.  In September 2008, when Kard moved to its
present location in Beverly, MA., the Company moved along with
them  The Company's telephone number is (978)
633-3623.
  We
subcontract the laboratory research and development work to Kard Scientific
which occupies 10,000 square foot in the same building and approximately 5,000
square feet of laboratory space in another building. Management believes that
the property arrangement satisfies the Company’s current needs and is sufficient
for the Company to monitor the developmental progress at its
subcontractors.
 
 ITEM 3. LEGAL PROCEEDINGS
  There are
no legal proceedings against the Company to the best of the Company’s knowledge
as of the date hereof and to the Company’s knowledge, no action, suit or
proceeding has been threatened against the Company.
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
 
 On
January 14, 2008, a majority of our holders of common stock, par value $0.0001
per share (the “Common Stock”) voted in favor of amending the Company’s Articles
of Incorporation to change the name of the Company to “Cellceutix Corporation”
and to increase the Company’s authorized capital stock to 310,000,000, shares of
which 300,000,000 shares will be Common Stock, $0.0001 par value, and 10,000,000
shares will be Preferred Stock, $0.0001 par value.
  PART
II
  ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
 
 On
January 14, 2008 shareholders approved an amendment to the articles of
incorporation to change the name of the Company to Cellceutix
Corporation.  Upon the filing on February 1, 2008 of a Definitive
Information Statement, and effectiveness of the name change, the Company applied
to the National Association of Security Dealers to change its stock symbol from
“ECSR”.    This resulted in the issuance of the Company’s
new stock symbol of “CTIX”.
 
 The
Company’s Common Stock is quoted on the Over The Counter Bulletin Board. The
table below sets forth the high and low prices for the Company’s Common Stock.
Quotations reflect inter-dealer prices, without retail mark-up, mark-down
commission, and may not represent actual transactions. Since the Company's
common stock trades sporadically, there is not an established active public
market for its common stock. No assurance can be given that an active market
will exist for the Company's common stock and the Company does not expect to
declare dividends in the foreseeable future since the Company intends to utilize
its earnings, if any, to finance its future growth, including possible
acquisitions.


Quarter
      Ended
              
              Low
      Price
              
              
              High
      PriceJune
      30, 2008
              
              $
              .57
              
              
              $
              1.01March
      31, 2008
              
              $
              1.90
              
              
              $
              1.90December
      11 to  December 31, 2007 (1)
              
              No
      Trading  Occurred
 
 (1)
Effective date of reverse merger, December 11, 2007





Number of
Shareholders.





As of
June 30, 2008, a total of 91,891,000 the Company’s common stock (shares) are
outstanding and held by approximately 100 shareholders of record. Of this
amount, 9,791,000 shares are unrestricted. 34,202,118 shares are restricted
securities held by non-affiliates, and the remaining 47,897,882 shares are
restricted securities held by affiliates. These shares may only be sold in
accordance with Rule 144. As of June 30, 2008, there were 2,964,000 warrants and
917,910 stock options to purchase the Company’s Common Stock
outstanding.  The Company also has $400,000 of convertible debentures,
which, upon conversion would result in an additional 266,667 shares of the
Company’s common stock outstanding.





Dividends.





The
Company has not paid any cash dividends since its inception. The Company
currently intends to retain any earnings for use in its business, and therefore
does not anticipate paying dividends in the foreseeable future.




LONG-TERM
INCENTIVE PLANS AWARDS IN LAST FISCAL YEAR





None









26




Recent
Sales of Unregistered Securities.





Since
inception of the Company in August 2005, we have sold unregistered securities to
the following shareholders.




On August 3, 2005 we issued 9,000,000 Common Stock to Hyman Schwartz,
Former President, Former Chief Executive Officer, and 50,000 shares to our
Secretary in exchange for the payment of $0.0001 par value for an
aggregate of $905.  In connection with the issuance of these
shares, we relied upon the exemption from
the registration provisions of the Act contained in
Section 4(2) thereof.




From
August 2005 until September 27, 2006 we sold 741,000 shares of Common Stock
to investors as part of the Series A Units. The Units consisted of Common
Stock and Common Stock Purchase Warrants. The Units itself will
not be tradable and are not being registered. We are registering the
components of the Units which
include Common Stock and Common Shares underlying the
Common Stock Purchase Warrants. Each Unit was sold to investors at $0.05 per
Unit and consisted of one
(1) Share of Common Stock $.0001 par value and
four series of Warrants. In conjunction with the sale of
these Units, we issued 741,000 shares of Common Stock and Warrants to
purchase 2,964,000 shares of Common Stock underlying four
(4) Series of Warrants.




On
December 6, 2007, in accordance with the Share Exchange Agreement with
Cellceutix Pharma, Inc., we issued 82,000,000 newly issued shares of Common
Stock to the shareholders of Cellceutix Pharma.




On
December 7, 2007, we entered into an employment agreement with George Evans
which provides a grant of options to purchase a number of shares of our common
stock equal to one percent of the issued and outstanding common stock following
the first anniversary of the commencement of the agreement, at a purchase
price of $0.15 per share. Thereafter Mr. Evans shall be issued an additional
grant of options following the successive anniversaries of the commencement date
of a number of shares of common stock equal to one percent of the issued and
outstanding common stock at a purchase price equal to the average closing bid
price of the common stock on its primary exchange for the fifteen successive
trading days immediately prior to the date of the grant.




On April
15, 2008 the Company signed an agreement with a consultant to provide public
relations and strategic communications advice and services for one year
beginning April 28, 2008. Pursuant to the agreement, 100,000 shares of common
stock were issued. In addition the agreement grants the consultant incentive
compensation which could result in the issuance of up to 350,000 shares of the
Company’s common stock.  To date no incentive compensation shares were
earned by the consultant.





On May 7,
2008 the Company issued Convertible Debentures, at 9% per annum, for a total
amount of $400,000.  The principle and related accrued interest are
due December 2009, and are secured by the Company’s assets.  The
Debentures and any accrued and unpaid interest are convertible into the
Company’s common stock, at the holder’s request, at a conversion price of
$1.50.




Except as
noted above, the sales of the securities identified above were made pursuant to
privately negotiated transactions that did not involve a public offering of
securities and, accordingly, we believe that these transactions were exempt from
the registration requirements of the Securities Act pursuant to Section 4(2)
thereof and rules promulgated there under. Each of the above-referenced
investors in our stock represented to us in connection with their investment
that they were “accredited investors” (as defined by Rule 501 under the
Securities Act) and were acquiring the shares for investment and not
distribution, that they could bear the risks of the investment and could hold
the securities for an indefinite period of time. The investors received written
disclosures that the securities had not been registered under the Securities Act
and that any resale must be made pursuant to a registration or an available
exemption from such registration. All of the foregoing securities are deemed
restricted securities for purposes of the Securities Act.







ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN
OF OPERATION




The
following discussion and plan of operations should read in conjunction with the
financial statements and the notes to those statements included in this Form
10-KSB. This discussion includes forward-looking statements that involve risk
and uncertainties. As a result of many factors, such as those set forth under
“Risk Factors,” actual results may differ materially from those anticipated in
these forward-looking statements.




Acquisition
and Reorganization




On December
6, 2007, the Acquisition of Cellceutix Pharma, Inc. was completed, and the
business of Cellceutix Pharma, Inc. was adopted as our business. As such, the
following Management Discussion is focused on the current and historical
operations of Cellceutix Pharma, Inc. and excludes the prior operations of
EconoShare.











27


Management’s
Plan of Operation




As a
result of the Exchange with Cellceutix Pharma, Inc., we are an early stage
developmental biopharmaceutical company. We have no product sales to date
and we will not receive any product revenue until we receive approval from the
FDA or equivalent foreign regulatory bodies to begin selling our pharmaceutical
candidates. Developing pharmaceutical products, however, is a lengthy and very
expensive process. Assuming we do not encounter any unforeseen safety issues
during the course of developing our product candidates, we do not expect to
complete the development of a product candidate for several years, if
ever.




In August
and October 2007, we acquired exclusive rights to a total of six pharmaceutical
compound candidates that are designed for treatment of diseases which may be
either existing or diseases identified in the future.  The Company will
initially spend most of its efforts and resources on its anti-cancer compound,
Kevetrin, for the treatment of head and neck cancers.   This compound
is furthest along in in-vivo studies in small animals.  Based on the
results, the Company has decided to advance it along the regulatory and clinical
pathway. We anticipate using our expertise to manage and perform what we believe
are the most critical aspects of the product development process which include
the design and oversight of clinical trials, the development and execution of
strategies for the protection and maintenance of intellectual property rights
and the interaction with regulatory authorities internationally. We expect to
concentrate on product development and engage in a very limited way in product
discovery, avoiding the significant investment of time and financial resources
that is generally required before a compound is identified and brought into
clinical trials. In addition, we are currently engaged in pre-clinical testing
of one of our product candidates and intend to out-source clinical trials,
pre-clinical testing and the manufacture of clinical materials to third parties.




We are
now engaged in organizational activities and sourcing compounds and
materials.  We have not obtained any funding for our drug development
business plan, nor have we generated any revenues, nor do we not expect to
generate revenues in the near future. We may not be successful in developing our
drugs and start selling our products when planned, or that we will become
profitable in the future. We have incurred net losses in each fiscal period
since inception of our operations.




Liquidity
and Capital Resources





As of
June 30, 2008 the Company had a cash balance of $351,860.   The
Company will need to raise substantial funds in order to execute its product
development plan.   Based upon our expected rate of expenditures, we
currently do not have sufficient cash reserves to meet all of our anticipated
obligations through our fiscal year end of June 30, 2009.  The Company
will seek to raise capital through an offering of our common stock or other
securities of the Company. However, there can be no assurance that we will be
successful in securing the capital we require or that we may obtain financing on
terms that are favorable to us.





Requirement
for Additional Capital




Research
and Development Costs.  The Company has not yet engaged in any
research and development activities. We currently do not have funds to meet our
planned drug development for the next twelve months and we may not be able to
obtain the necessary financing. Assuming that we are successful in raising
additional financing, we plan to incur the following expenses over the next
 twelve months:




1
            Research
      and Development of $3,500,000: Includes planned costs for Kevetrin of
      $3,000,000 for additional in-vivo and in-vitro studies  which should
      result with the data required to file an investigational new drug
      application with the  FDA; and $500,000 in preclinical development
      costs for our other compounds.2
            Corporate
      overhead of $750,000: This amount includes budgeted office salaries,
      legal, accounting and other costs expected to be incurred.3
            Capital
      costs of $250,000: This is the estimated cost for equipment and laboratory
      improvements.4
            Staffing
      costs of $500,000: The Company expects to incur these costs for the filing
      of  an investigational new drug application with the  FDA. This
      is the estimated cost of hiring additional scientific staff and consulting
      firms to assist with FDA compliance, material characterization,
      pharmaco-kinetic, pharmaco-dynamic and toxicology
  studies.




The
Company will be unable to proceed with its planned drug development, meet its
administrative expense requirements, capital costs, or staffing costs without
obtaining additional financing of approximately $5,000,000 to meet its budget.
The Company does not have any arrangements at this time for equity or other
financings. If we are unable to obtain additional financing, our business plan
will be significantly delayed.




Time
Schedules, Milestones and Development Costs




In the
event that funding can be achieved, we shall endeavor to achieve completion of
the following event within the next twelve months:








28




Project
            Drug
      Development of KevetrinTM for Head and Neck CancersCurrent
      status
            Kevetrin
      is currently in preclinical studies.  Kevetrin acts on multiple
      targets as an alkylating agent, and AKT inhibitor, an LTB4 inhibitor as
      well as an anti-angiogenic agent.  Our experiments suggest that it is
      a potent anti-cancer agent.  The compound showed little toxicity in
      animals.  We are planning to conduct further studies concerning the
      potential safety of the compound in order to request permission from FDA
      to begin clinical studies.Nature,
      timing and estimated costs
            We
      expect to submit the compound for an IND submission by the end of October
      2009 as a drug candidate for the indication of cancer. The Company has
      budgeted approximately $4,200,000 for the material development, production
      and testing of this drug during this period. The Company will need to
      obtain financing in order to incur and pay these costs. Should management
      determine the results to be satisfactory, we will need to obtain
      additional financing to perform a Phase I clinical study with the approval
      of the FDA which we have presently budgeted at
      $15,000,000.Risks
      and uncertainties associated with completing development on schedule, and
      the consequences to operations, financial position and liquidity if not
      completed timely
            The
      outcome of clinical testing can not be known at this time, and this poses
      substantial risk and uncertainty as to whether or when if ever, this drug
      will become marketable.







The
Company intends to commit limited resources towards the development of compounds
other than Kevetrin during the next twelve months.




The
Company has limited experience with pharmaceutical drug development. As such
these budget estimates may not be accurate. In addition, the actual work to be
performed is not known at this time, other than a broad outline, as is normal
with any scientific work. As further work is performed, additional work may
become necessary or change in plans or workload may occur. Such changes may have
an adverse impact on our estimated budget. Such changes may also have an adverse
impact on our projected timeline of drug development.




The
Company believes it can contract the manufacturing of the compounds at sites
certified by the FDA in order for the Company to produce experimental materials
that can be sent to outside scientists for pharmaco-kinetic, pharmaco-dynamic
and toxicology studies. These three sets of studies must be completed prior to
the Company filing an IND with the FDA to begin the human safety and efficacy
trials (Phase I , II and III ).




The
work-plan we have developed for the next twelve months is expected to enable us
to file an investigational new drug application in our 2008 fiscal year. 
If we find that we have underestimated the time duration of our studies, or we
have to undertake additional studies, due to various reasons within or outside
of our control, this will  grossly and adversely impact both our timelines
and our financing needs.




Management
intends to use capital and debt financing, as required, to fund the Company's
operations. There can be no assurance that the Company will be able to obtain
the additional capital resources necessary to fund its anticipated obligations
for the next twelve months.




The
Company is considered to be a development stage company and will continue in the
development stage until generating revenues from the sales of its products or
services. As a result, the report of the independent registered public
accounting firm on our financial statements as of June 30, 2008, contains an
explanatory paragraph regarding a substantial doubt about our ability to
continue as a going concern.




Off Balance Sheet
Arrangements




There
were no off-balance sheet arrangements as of June 30, 2008.









29







CRITICAL
ACCOUNTING POLICIES AND ESTIMATES







The
preparation of the financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ materially from
those estimates.




We
believe that there are several accounting policies that are critical to
understanding our historical and future performance, as these policies affect
the reported amounts of revenue and the more significant areas involving
management’s judgments and estimates. These significant accounting policies
relate to research and development costs,  valuation of long-lived
assets and income taxes. These policies, and the related procedures, are
described in detail below.





RESEARCH
& DEVELOPMENT COSTS.  Direct research and development activities
consist primarily of new product development, continuing engineering for
existing products, regulatory and clinical trial costs. Costs related to
research and development efforts on existing or potential products are expensed
as incurred.  Allocated SG&A costs associated with R&D
activities have not been included in the R&D expenses; in addition, the
costs associated with building and protecting our Intellectual Property are
currently included in our SG&A and not counted as direct research and
development costs.





IMPAIRMENT
OF LONG-LIVED ASSETS, In accordance with SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), our long-lived assets
to be held and used in the business are reviewed for impairment. When impairment
is noted, assets are evaluated for impairment at the lowest level for which
there is identifiable cash flows. If the sum of expected undiscounted future
cash flows is less than the carrying amount of the asset, a loss is recognized
based on the amount by which the carrying value exceeds the fair value of the
asset. Fair value is determined primarily using the anticipated cash flows
discounted at a rate commensurate with the risk involved. Losses on assets to be
disposed of are determined in a similar manner, except that the fair values are
reduced for disposal costs. Considerable management judgment and assumptions are
necessary to identify indicators of impairment and to estimate discounted future
cash flows. Accordingly, actual results could vary significantly from such
estimates.  At June 30, 2008, the Company did not assign a value to
its intangible assets, as they will continue to require additional development
and it has yet to be determined the underlying value of the assets.





INCOME
TAXES. Deferred income tax assets and liabilities arise from temporary
differences associated with differences between the financial statements and tax
basis of assets and liabilities, as measured by the enacted tax rates, which are
expected to be in effect when these differences reverse.  Deferred tax
assets and liabilities are classified as current or non-current, depending upon
the classification of the asset or liabilities to which they
relate.  Deferred tax assets and liabilities not related to an asset
or liability are classified as current or non-current depending on the periods
in which the temporary differences are expected to reverse.  Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.




CONTINGENCIES.
In the ordinary course of business, we have entered into various contractual
relationships with strategic corporate partners, customers, distributors,
research laboratories and universities, licensors, licensees, suppliers, vendors
and other parties. As such, we could be subject to litigation, claims or
assessments arising from any or all of these relationships. We account for
contingencies such as these in accordance with Statement of Financial Accounting
Standards No. 5, "Accounting for Contingencies" ("SFAS 5"). SFAS 5 requires us
to record an estimated loss contingency when information available prior to
issuance of our financial statements indicates that it is probable that an asset
has been impaired or a liability has been incurred at the date of the financial
statements and the amount of the loss can be reasonably estimated. Accounting
for contingencies arising from contractual or legal proceedings requires that we
use our best judgment when estimating an accrual related to such contingencies.
As additional information becomes known, our accrual for a loss contingency
could fluctuate, thereby creating variability in our results of operations from
period to period. Likewise, an actual loss arising from a loss contingency which
significantly exceeds the amount accrued for in our financial statements could
have a material adverse impact on our operating results for the period in which
such actual loss becomes known.





ACCOUNTING
FOR STOCK BASED COMPENSATION.  In December 2004, the FASB issued SFAS
No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”), which replaces SFAS
No. 123; Accounting for Stock-Based Compensation, (“SFAS 123”) and supersedes
APB Opinion No. 25, Accounting for Stock Issued to Employees, (“APB 25”). SFAS
123R requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the financial statements based on
their fair values. Under SFAS 123R, the Company is required to measure the cost
of employee services received in exchange for stock options and similar awards
based on the grant-date fair value of the award and recognize this cost in the
income statement over the period during which an employee is required to provide
service in exchange for the award. The pro forma disclosures previously
permitted under SFAS 123 are no longer an alternative to financial statement
recognition. The Company adopted SFAS 123R on June 20, 2007 using the modified
prospective method, which did not require the recognition of any non-cash
charges, as there were no unvested stock options on that date.





The fair
value concepts were not changed significantly in FAS 123R; however, in adopting
FAS 123R, companies must choose among alternative valuation models and
amortization assumptions. After assessing alternative valuation models and
amortization assumptions, the Company will continue using the Black-Scholes
valuation model and has elected to use the ratable method to amortize
compensation expense over the vesting period of the grant.








30








ITEM 7. FINANCIAL STATEMENTS


REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Board of
Directors and Stockholders
 Cellceutix
Corporation
  
 We have
audited the accompanying balance sheet of Cellceutix Corporation (a development
stage company) as of June 30, 2008, and the related statements of operations,
stockholders’ equity (deficit),  and cash flows for the year ended June 30,
2008, the period from June 20, 2007 (date of inception) through June 30, 2007,
 and the cumulative period from June 20, 2007 (date of inception) through
June 30, 2008. 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 audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and 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 Cellceutix Corporation as of June
30, 2008, and the results of its operations,  and its cash flows for the
year ended June 30, 2008, the period from June 20, 2007 (date of inception)
through June 30, 2007 and the cumulative period from June 20, 2007 (date of
inception) through June 30, 2008,  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 2 to the financial
statements, the Company has no revenues, has suffered significant operating
losses,  and is dependent upon its stockholders to provide sufficient
working capital to meet its obligations and sustain its operations. These
circumstances raise substantial doubt about the Company’s ability to continue as
a going concern. Management’s plans regarding those matters are also described
in Note 2. The accompanying financial statements do not contain any adjustments
that might result from the outcome of these uncertainties.
 
 /s/ Holtz
Rubenstein Reminick LLP
 
 Melville,
New York
 September
17, 2008






Cellceutix
Corporation


(A
Development Stage Enterprise)





Balance
Sheet





June 30,
2008










AssetsCurrent
      assets:Cash
            
            $
            351,860Prepaid
      expenses
            
            
            97,917Total
      current assets
            
            
            449,777Total
      assets
            
            $
            449,777Liabilities
      and Stockholders' DeficitCurrent
      liabilities:Accounts payable
            
            $
            13,730Accrued expenses
            
            
            20,349Accrued salaries and payroll taxes
            
            
            345,378Due to Officer
            
            
            32,310Total
      current liabilities
            
            
            411,767Long
      Term Liabilities:Convertible debentures
            
            
            400,000Total
      liabilities
            
            
            811,767Commitments
      and contingenciesStockholders'
      deficit:Preferred stock; $.0001 par value; 10,000,000 sharesauthorized; 0 shares issued and outstanding
            
            
            -Common stock; $.0001 par value; 300,000,000 sharesauthorized; 91,891,000 shares issued and
outstanding
            
            
            9,189Additional paid-in capital
            
            
            148,623Deficit accumulated during development stage
            
            
            (519,802
            )Total
      stockholders' deficit
            
            
            (361,990
            )Total
      liabilities and stockholders' deficit
            
            $
            449,777














The accompanying notes are an
integral part of these financial statements.










31





Cellceutix
Corporation
 (A
Development Stage Enterprise)
 
 Statements
of Operations
 
 
 For
      the Year Ended June 30, 2008
              
              
              For
      the period from June 20, 2007 (Date of Inception through June 30,
      2007
              
              
              For
      the cumulative period from June 20, 2007 (Date of Inception) through June
      30, 2008Revenues
              
              $
              -
              
              
              $
              -
              
              
              $
              -Operating
      expenses:General
      and administrative
                expenses
              
              
              31,099
              
              
              
              530
              
              
              
              31,629Payroll
      and payroll tax expense
              
              
              345,378
              
              
              
              -
              
              
              
              345,378Professional
      fees
              
              
              90,183
              
              
              
              -
              
              
              
              90,183Stock
      compensation expense
              
              
              43,533
              
              
              
              -
              
              
              
              43,533Total
      operating expenses
              
              
              510,193
              
              
              
              530
              
              
              
              510,723Loss
      before provision for income taxes
              
              
              (510,193
              )
              
              
              (530
              )
              
              
              (510,723
              )Provision
      for income taxes
              
              
              -
              
              
              
              -
              
              
              
              -Net
      loss
              
              $
              (510,193
              )
              
              $
              (530
              )
              
              $
              (510,723
              )Basic
      and diluted loss per share
              
              $
              (0.01
              )
              
              $
              (0.00
              )Weighted
      average number of common shares used in basic and fully diluted per share
      calculations
              
              
              52,366,221
              
              
              
              1,000,000
 
 
 
 
 
 
 
 The accompanying notes are an
integral part of these financial statements.




Cellceutix
Corporation


(A
Development Stage Enterprise)





Statement
of Changes in Stockholders’ Deficit





For the
cumulative


Period
June 20, 2007 (Date of Inception)


through
June 30, 2008











Per
      Share
              Amount
            Common
      Stock
            
            
            Additional
      Paid
            
            
            Deficit
              Accumulated
              During
              DevelopmentNumber
      of Shares
            
            
            Par
      Value $.0001
            
            
            In
      Capital
            
            
            Stage
            
            
            TotalShares
      issued June 20, 2007 (Inception) at
            $0.0001
            
            1,000,000
            
            
            $
            100
            
            
            $
            -
            
            
            $
            -
            
            
            $
            100Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (530
            )
            
            
            (530
            )Balance,
      June 30, 2007
            
            
            1,000,000
            
            
            
            100
            
            
            
            -
            
            
            
            (530
            )
            
            
            (430
            )Share
      exchange with Cellceutix Pharma, Inc. December 6, 2007
            
            
            (1,000,000
            )
            
            
            (100
            )
            
            
            -
            
            
            
            100
            
            
            
            -Share
      exchange in reverse merger with Cellceutix Pharma, Inc. December 6,
      2007
            
            
            82,000,000
            
            
            
            8,200
            
            
            
            -
            
            
            
            (8,200
            )
            
            
            -Shares
      exchanged in a reverse acquisition
              of
      Cellceutix Pharma, December 6, 2007
            
            
            9,791,000
            
            
            
            979
            
            
            
            -
            
            
            
            (979
            )
            
            
            -Issuance
      of stock options
            
            
            -
            
            
            
            -
            
            
            
            43,533
            
            
            
            -
            
            
            
            43,533Forgiveness
      of debt from a
              stockholder
            
            
            -
            
            
            
            -
            
            
            
            50
            
            
            
            -
            
            
            
            50Capital
      contribution from stockholder
            
            
            -
            
            
            
            -
            
            
            
            50
            
            
            
            -
            
            
            
            50Shares
      issued for services, April 28, 2008 at
            $1.05
            
            100,000
            
            
            
            10
            
            
            
            104,990
            
            
            
            -
            
            
            
            105,000Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (510,193
            )
            
            
            (510,193
            )Balance,
      June 30, 2008
            
            
            91,891,000
            
            
            $
            9,189
            
            
            $
            148,623
            
            
            $
            (519,802
            )
            
            $
            (361,990
            )







The
accompanying notes are an integral part of these financial
statements.








33





Cellceutix
Corporation


(A
Development Stage Enterprise)





Statements
of Cash Flows






For
      the Year Ended June 30, 2008
              
              
              For
      the Period June 20, 2007 (Date of Inception) through June 30,
      2007
              
              For
      the Cumulative Period June 20, 2007 (Date of Inception)
      through
                June
      30, 2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
              
              $
              (510,193)
              
              $
              (530)
              
              $
              (510,723)Adjustments
      to reconcile net loss to net cash used in operating
      activities:Stock
      based compensation
              
              
              43,533
              
              
              —
              
              
              43,533Stock
      Issued for Services
              
              
              17,500
              
              
              —
              
              
              17,500Changes
      in operating assets and liabilities:Prepaid
      expenses
              
              
              (10,417)
              
              
              —
              
              
              (10,417)Accounts
      payable
              
              
              13,350
              
              
              430
              
              
              13,780Accrued
      expenses
              
              
              20,349
              
              
              —
              
              
              20,349Accrued
      salaries and payroll taxes
              
              
              345,378
              
              
              —
              
              
              345,378Net
      cash used in operating activities
              
              
              (80,500)
              
              
              (100)
              
              
              (80,600)CASH
      FLOWS FROM FINANCING ACTIVITIES:Capital
      contribution from stockholder
              
              
              50
              
              
              —
              
              
              50Sale
      of common stock
              
              
              —
              
              
              100
              
              
              100Loan
      From Officer
              
              
              32,310
              
              
              —
              
              
              32,310Proceeds
      from convertible debentures
              
              
              400,000
              
              
              —
              
              
              400,000Net
      cash provided by financing activities
              
              
              432,360
              
              
              100
              
              
              432,460NET
      INCREASE IN CASH AND CASH EQUIVALENTS
              
              
              351,860
              
              
              —
              
              
              351,860CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
              
              
              —
              
              
              —
              
              
              —CASH
      AND CASH EQUIVALENTS, END OF PERIOD
              
              $
              351,860
              
              $
              —
              
              $
              351,860












SUPPLEMENTAL
DISCLOSURE OF NON-CASH FLOW FINANCING ACTIVITIES:


Common
      stock issued for acquisition
            
            $
            9,079
            
            
            9,079
            
            $
            9,079Forgiveness
      of debt
            
            $
            50
            
            
            —
            
            $
            50100,000
      shares of commons stock issued for services
            
            $
            105,000
            
            
            —
            
            $
            105,000





The
accompanying notes are an integral part of these financial
statements.









34







Cellceutix
Corporation


(A
Development Stage Enterprise)





Notes to
Financial Statements





June
30, 2008








1.         Background
Information





EconoShare,
Inc. was incorporated on August 1, 2005 in the State of Nevada and was organized
for the purpose of developing a B2B (Business to Business) website for an Asset
Sharing market place and transaction system.





On
December 6, 2007, EconoShare, Inc. (the “Company”) acquired Cellceutix Pharma,
Inc., a privately owned Delaware corporation (“Cellceutix Pharma”), pursuant to
an Agreement and Plan of Share Exchange (the “Exchange”), with Cellceutix
Pharma  becoming a wholly-owned subsidiary of EconoShare,
Inc.  Cellceutix Pharma, Inc. was incorporated under the laws of the
State of Delaware on June 20, 2007.  Its assets consisted of rights
assigned to it for six early stage pharmaceutical compounds by three different
scientists. Upon consummation of the Exchange, EconoShare adopted the business
plan of Cellceutix Pharma, Inc.





Pursuant
to the terms of the Exchange, EconoShare, Inc. acquired Cellceutix Pharma, Inc.
in exchange for an aggregate of 82,000,000 newly issued shares of the Company’s
common stock, par value $0.0001 per share (the “Common Stock”), resulting in an
aggregate of 91,791,000 shares (the “Exchange of Shares”) of EconoShare, Inc.
Common Stock issued and outstanding. As a result of the Exchange, Cellceutix
Pharma, Inc. became a wholly-owned subsidiary of EconoShare, Inc.  The
Exchange Shares were issued to the Cellceutix Pharma, Inc. shareholders on a pro
rata basis, on the basis of 82 shares of Common Stock for each share of
Cellceutix Pharma common stock held by such Cellceutix Pharma shareholder at the
time of the Exchange.





The
former holders of Cellceutix Pharma Common Stock now beneficially own
approximately 89% of the outstanding shares of our Common Stock. Accordingly,
the Exchange represented a change in control. As of the date of this report,
there are 91,891,000 shares of Common Stock issued and
outstanding.  For financial accounting purposes, the acquisition was a
reverse acquisition of EconoShare, Inc. by Cellceutix Pharma, Inc., under the
purchase method of accounting, and was accounted for as a recapitalization as of
June 20, 2007 with Cellceutix Pharma, Inc. as the accounting
acquirer.





On
January 14, 2008, a majority of the shareholders of EconoShare, Inc. approved an
amendment to the Registrant’s articles of incorporation to change the name of
the Registrant to Cellceutix Corporation.  Upon the filing of a
Definitive Information Statement and effectiveness of the name change the
Company applied to the National Association of Security Dealers to change its
stock symbol on the Over the Counter Bulletin Board, resulting in the Company’s
new stock symbol of “CTIX”. The Company is considered a development stage
company at this time.





2.         Going
Concern





The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. For the period since June 20, 2007 (date of
inception) through June 30, 2008, the Company has generated no revenue and has
incurred cumulative losses of $510,723.  As of June 30, 2008, the
Company has not emerged from the development stage. In view of these matters,
the ability of the Company to continue as a going concern is dependent upon the
Company’s ability to generate additional financing. Since inception, the Company
has financed its activities principally from the use of equity securities to pay
for services. The Company intends on financing its future development activities
and its working capital needs largely from the sale of equity securities, until
such time that funds provided by operations are sufficient to fund working
capital requirements. There can be no assurance that the Company will be
successful at achieving its financing goals at reasonably commercial terms, if
at all.





These
factors raise substantial doubt about the Company's ability to continue as a
going concern. The accompanying financial statements do not include any
adjustments relating to the recoverability of the recorded assets or the
classification of liabilities that may be necessary should the Company be unable
to continue as a going concern.





3.         Significant
Accounting Policies





The
significant accounting policies followed are:





Cash
and Cash Equivalents





Cash and
cash equivalents consist of cash and short-term highly liquid investments
purchased with original or remaining maturities of three months or less. There
were no cash equivalents at June 30, 2008.









35






Concentrations
of Credit Risk





All cash
is maintained with a major financial institution in the United
States.  Deposits with this bank may exceed the amount of insurance
provided on such deposits.  Generally, these deposits may be redeemed
upon demand and, therefore, bear minimal risk.





Financial
Instruments





The
Company’s financial instruments include cash, accounts payable and accrued
liabilities.  The carrying amounts of these financial instruments
approximate their fair value, due to the short-term nature of these items and
due to the use of market rates of interest.





Use
of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.





Research
and Development





Expenditures
for research, development, and engineering of products are expensed as
incurred.  For the periods ended June 30, 2008 and 2007, and since
inception, the Company did not incur any research and development
costs.





Long-Lived
Assets





The
Company follows SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." SFAS No. 144 addresses the financial accounting and
reporting for the impairment of long-lived assets, excluding goodwill and
intangible assets, not subject to amortization, to be held and used or disposed
of.  In accordance with SFAS No. 144, the carrying values of
long-lived assets are periodically reviewed by the Company and impairments would
be recognized if the expected future operating non-discounted cash flows derived
from an asset were less than its carrying value and if the carrying value is
more than the fair value of the asset. At June 30, 2008, the Company did not
assign a value to its intangible assets, as they will continue to require
additional development and it has yet to be determined the underlying value of
the assets.





Income
Taxes





Deferred
income tax assets and liabilities arise from temporary differences associated
with differences between the financial statements and tax basis of assets and
liabilities, as measured by the enacted tax rates, which are expected to be in
effect when these differences reverse.  Deferred tax assets and
liabilities are classified as current or non-current, depending upon the
classification of the asset or liabilities to which they
relate.  Deferred tax assets and liabilities not related to an asset
or liability are classified as current or non-current depending on the periods
in which the temporary differences are expected to reverse.  Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.







The
Company has generated net losses since inception and accordingly has not
recorded a provision for income taxes. The deferred tax assets were primarily
comprised of federal and state tax net operating loss, or NOL, carryforwards.
Due to uncertainties surrounding the Company’s ability to generate future
taxable income to realize these tax assets, a full valuation allowance has been
established to offset the deferred tax assets. Additionally, the future
utilization of the NOL carryforwards to offset future taxable income may be
subject to an annual limitation as a result of ownership changes that may have
occurred previously or that could occur in the future. The Company has not yet
determined whether such an ownership change has occurred. If necessary, the
deferred tax assets will be reduced by any carryforwards that expire prior to
utilization as a result of such limitations, with a corresponding reduction of
the valuation allowance.





Basic
Earnings (Loss) per Share





Basic
Earnings (Loss) per Share is calculated in accordance with SFAS No. 128,
“Earnings per Share,” by dividing income or loss attributable to common
stockholders by weighted average common stock outstanding.  Diluted
earnings per share is calculated in accordance with SFAS No. 128 by adjusting
weighted average common shares outstanding by assuming conversion of all
potentially dilutive shares.  In periods where a net loss is recorded,
no effect is given to potentially dilutive securities, since the effect would be
antidilutive.  Total stock options and warrants not included in the
calculation of common shares outstanding (including both exercisable and
nonexercisable) and convertible debentures, for the periods ended June 30, 2008
and 2007 were 4,148,577 and 2,964,000, respectively.





Common
stock equivalents for the all periods presented were anti-dilutive due to the
net losses sustained by the Company during these periods.







36






Accounting
for Stock Based Compensation





In
December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment
(“SFAS 123R”), which replaces SFAS No. 123; Accounting for Stock-Based
Compensation, (“SFAS 123”) and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees, (“APB 25”). SFAS 123R requires all share-based
payments to employees, including grants of employee stock options, to be
recognized in the financial statements based on their fair values. Under SFAS
123R, the Company is required to measure the cost of employee services received
in exchange for stock options and similar awards based on the grant-date fair
value of the award and recognize this cost in the income statement over the
period during which an employee is required to provide service in exchange for
the award. The pro forma disclosures previously permitted under SFAS 123 are no
longer an alternative to financial statement recognition. The Company adopted
SFAS 123R on June 20, 2007 using the modified prospective method, which did not
require the recognition of any non-cash charges, as there were no unvested stock
options on that date.





The fair
value concepts were not changed significantly in FAS 123R; however, in adopting
FAS 123R, companies must choose among alternative valuation models and
amortization assumptions. After assessing alternative valuation models and
amortization assumptions, the Company will continue using the Black-Scholes
valuation model and has elected to use the ratable method to amortize
compensation expense over the vesting period of the grant.





The fair
value of each option for the year ended June 30, 2008, was estimated on the date
of grant using the Black Scholes model that uses assumptions noted in the
following table. Expected volatility is based on the monthly trading of a
similar Company’s underlying common stock (as the Company does not have an
adequate trading history for an accurate calculation) and other
factors.





Expected
      term (in years)
            
            
            3Expected
      stock price volatility
            
            
            86.4
            %Risk-free
      interest rate
            
            
            3.15
            %Expected
      dividend yield
            
            
            0
            %Estimated
      fair value per option granted
            
            $
            0.05








Recent Accounting
Pronouncements





In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. This statement does not require any new fair value
measurements, but provides guidance on how to measure fair value by providing a
fair value hierarchy used to classify the source of the information. SFAS No.
157 is effective for fiscal years beginning after November 15, 2007, and all
interim periods within those fiscal years. In February 2008, the FASB released
FASB Staff Position (FSP FAS 157-2 – Effective Date of FASB Statement No. 157)
which delays the effective date of SFAS No. 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually), to
fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years. The Company is planning to adopt SFAS No. 157 effective July 1,
2008 but does not expect it to have an impact on the financial position and
results of operations.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159
permits entities to choose to measure, on an item-by-item basis, specified
financial instruments and certain other items at fair
value.  Unrealized gains and losses on items for which the fair value
option has been elected are required to be reported in earnings at each
reporting date.  SFAS No. 159 is effective for fiscal years beginning
after November 15, 2007, the provisions of which are required to be applied
prospectively.  The Company is planning to adopt SFAS No. 159
effective July 1, 2008 but does not expect it to have an impact on the financial
position and results of operations.





In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007),
Business Combinations, which replaces SFAS No 141. The statement retains the
purchase method of accounting for acquisitions, but requires a number of
changes, including changes in the way assets and liabilities are recognized in
the purchase accounting. It also changes the recognition of assets acquired and
liabilities assumed arising from contingencies, requires the capitalization of
in-process research and development at fair value, and requires the expensing of
acquisition-related costs as incurred. SFAS No. 141R is effective for business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.





In
December 2007, the FASB issued SFAS No. 160.  “Noncontrolling
Interests in Consolidated Financial Statements-and Amendment of ARB No.
51.”  SFAS 160 establishes accounting and reporting standards
pertaining to ownership interests in subsidiaries held by parties other than the
parent, the amount of net income attributable to the parent and to the
noncontrolling interest, changes in a parent’s ownership interest, and the
valuation of any retained noncontrolling equity investment when a subsidiary is
deconsolidated.  This statement also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners.  SFAS 160 is
effective for fiscal years beginning on or after December 15,
2008.  The adoption of SFAS 160 is not currently expected to have a
material effect on the Company’s financial position, results of operations, or
cash flows.







37




In March
2008, the Financial Accounting Standards Board (FASB) issued FASB Statement No.
161, Disclosures about Derivative Instruments and Hedging Activities. The new
standard is intended to improve financial reporting about derivative instruments
and hedging activities by requiring enhanced disclosures to enable investors to
better understand their effects on an entity’s financial position, financial
performance, and cash flows. It is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. The company is currently evaluating the impact of
adopting SFAS. No. 161 on its financial statements.





Other
recent accounting pronouncements issued by the FASB (including its EITF), the
AICPA, and the SEC did not or are not believed by management to have a material
impact on the Company’s present or future financial statements.





4.           Commitments
and Contingencies





On April
15, 2008 the Company signed an agreement with a consultant to provide public
relations and strategic communications advice and services for one year
beginning April 28, 2008. The agreement provides for the payment of an annual
fee of $125,000, payable in equal quarterly installments of $31,250, and 100,000
shares of the Company’s common stock. In addition the agreement grants the
consultant incentive compensation which could result in the issuance of up to
350,000 shares of the Company’s common stock.  As of June 30, 2008,
the Company has paid the first quarterly installment of $31,250 and 100,000
shares in the Company’s common stock.





Pharmaceutical
Compounds





On August
2, 2007, the Company was assigned all right, title, and interest to three
pharmaceutical compounds; Kevetrin, KM 277 and KM 278, by their inventors. On
October 17, 2007, the Company was assigned all right, title, and interest to an
additional three pharmaceutical compounds; KM 133 KM 362 and KM 3174. In
exchange for these compounds, the Company agreed to pay the inventors 5% of net
sales of the compounds in countries where composition of matter patents have
been issued and 3% of net sales in other countries. Kevetrin, KM 277, KM 278 and
KM 362 were acquired from our principal stockholder, President and Director, Dr.
Krishna Menon.  The Company intends to file patent applications for
each of these six compounds as funds become available.





The
Company must continue the research and development of these Compounds and has
therefore, assigned no value to these Compounds.





Employment
Agreements





On
December 7, 2007, the Company entered into employment agreements with its two
executive officers, George Evans, Chief Executive Officer, and Krishna Menon,
Chief Scientific Officer. Both agreements provide for a three year term with
minimum annual base salaries of $200,000 in the first year, $300,000 in the
second year and $400,000 in the third year.  In addition, the
agreements provide for bonuses according to the following schedule:





Upon
receiving IND: $250,000 if received within 10 months


$150,000
if received within 12 months


$100,000
if received within 16 months





Completion
of Phase 1with clinical results that would have Kevitrin proceed to Phase
2/3:


$450,000
if received within 18 months


$350,000
if received within 24 months


$150,000
if received within 28 months





Start
Phase 2/3:


$500,000
if within 36 months


$350,000
if within 42 months


$150,000
if within 48 months





The bonus
obligations do not commence until the Company receives a financing commitment in
an amount of at least $4,000,000.





The
agreement with Mr. Evans also provides a grant of options to purchase 917,910
shares of the Company's stock with an exercise price of $0.15 per share and fair
value of $43,533.  The agreement calls for the issuance of 1% of the
common shares outstanding at each subsequent anniversary year.








38




5.           Related
Party Transactions





Office
Lease





Dr.
Menon, the Company’s principal shareholder, President, and Director, also serves
as the Chief Operating Officer and Director of Kard Scientific (“KARD”). On
December 7, 2007, EconoShare, Inc. began renting office space from KARD, on a
month to month basis for $900 per month.





Clinical
Studies





As of
September 28, 2007 the Company engaged KARD to conduct specified pre-clinical
studies necessary for the Company to prepare an Investigational New Drug
Application (“IND”) submission to the US Food and Drug Administration
(“FDA”).  The Company does not have an exclusive arrangement with
KARD.  All work performed by KARD must have prior approval by the
executive officers of the Company, and we retain all intellectual property
resulting from the services by KARD. Key provisions of the agreement with KARD
include:  Pharmacokinetic and pharmacodynamic studies of Kevetrin
using standard protocols and bioavailability of Kevetrin to the body and to
tumor tissue, at a cost of $400,000; Pre-IND meeting at no additional charge;
Toxicity studies as required for an IND filing, at a cost of $1.5
million.





The
agreed terms of payment are 50% of the (above) amounts at the outset of the
study or other service, and the balance at the completion of the study or other
service. To date we have not incurred any services or charges by
KARD.




6.           Due
To Officer:





As of
June 30, 2008, Leo Ehrlich, Chief Financial Officer loaned the Company $32,310
for the purposes of operational expenditures.  The loan is not
interest bearing and is not collateralized. The Company expects to repay this
loan during the 2009 fiscal year.





7.           Stock
Options and Warrants :




Stock
Options
 
 The
following table summarizes all stock option activity for options granted during
the periods ended June 30, 2008 and 2007:
  
 Number
                  of
                  Options
                
                
                Weighted
                  Average
                  Exercise
                  Price
                
                
                Weighted
                  Average
                  Remaining
                  Contractual
                  Life
                  (Years)
                
                
                Aggregate
                  Intrinsic
                  ValueOutstanding
      at June 20, 2007 (Date of Inception)
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                $
                -Outstanding
      at June 30, 2007
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                
                -Granted
                
                
                917,910
                
                
                $
                0.15
                
                
                
                -
                
                
                
                -Outstanding
      at June 30, 2008
                
                
                917,910
                
                
                $
                0.15
                
                
                
                2.44
                
                
                $
                385,522Exercisable
      at June 30, 2008
                
                
                917,910
                
                
                $
                0.15
 As of
June 30, 2008, there was $43,533 of compensation cost related to option awards
granted and no unamortized compensation cost.





As of
June 30, 2008 and 2007, there were 2,964,000 warrants issued and outstanding
with an exercise price of $0.81.   The warrants  expire in
September 2010.





8.           Convertible
Debenture





On May 7,
2008, the Company issued Convertible Debentures, at 9% per annum, for a total
amount of $400,000.  The principle and related accrued interest are
due December 2009, and are secured by the Company’s assets.  The
Debentures and any accrued and unpaid interest are convertible into the
Company’s common stock, at the holder’s request, at a conversion price of
$1.50.








39


ITEM 8.  CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
 
 The
Company is not aware, and has not been advised by its auditors, of any
disagreement on any matter of accounting principles or practices, financial
statement disclosures, or auditing scope or procedure.
 
 
 ITEM 8A. CONTROLS AND PROCEDURES.
 
 Evaluation of Disclosure Controls and
Procedures . Under the supervision and with the participation of our
management, including our principal executive officer and the principal
financial officer, we have evaluated the effectiveness of the design and
operation of the Company's “disclosure controls and procedures,” as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), as of the end of the period covered by
this annual report (the “Evaluation Date”).
 
 Based on
that evaluation, our principal executive officer and our principal financial
officer have concluded that our disclosure controls and procedures were not
effective because of certain deficiencies involving internal controls which
constituted a material weakness as discussed below. The material weakness
identified did not result in the restatement of any previously reported
financial statements or any other related financial disclosures, nor does
management believe that it had any effect on the accuracy of our financial
statements for the current reporting period.
 
 Management’s Annual Report on
Internal Control over Financial Reporting. Our management is responsible
for establishing and maintaining “internal control over financial reporting,” as
such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Because of its inherent limitations, a
system of internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can
provide only a reasonable assurance of achieving their control
objectives.
 
 Under the
supervision and with the participation of our management, including our
principal executive officer and the principal financial officer, we have
evaluated the effectiveness of our internal control over financial reporting
using the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on
its evaluation, our principal executive officer and our principal financial
officer have concluded that there is a material weakness in our internal control
over financial reporting. A material weakness is a deficiency, or a combination
of control deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of our annual or
interim financial statements will not be prevented or detected on a timely
basis.
 
 The
material weakness relates to the monitoring and review of work performed by our
limited accounting staff in the preparation of financial statements, footnotes
and financial data provided to our independent registered public accounting firm
in connection with the annual audit. More specifically, the material weakness in
our internal control over financial reporting is due to the fact
that:
 
 • The
Company lacks proper segregation of duties. We believe that the lack of proper
segregation of duties is due to our limited resources.
 
 • The
Company does not have a comprehensive and formalized accounting and procedures
manual.
 
 Management
has concluded that until we have sufficient financial resources to supplement
our accounting personnel, this material weakness will continue.
 
 This
annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our independent
registered public accounting firm pursuant to temporary rules of the SEC that
permit us to provide only management’s report in this annual
report.
 
 This
report shall not be deemed to be filed for purposes of Section 18 of the
Exchange Act, or otherwise subject to the liabilities of that section, and is
not incorporated by reference into any filing of the Company, whether made
before or after the date hereof, regardless of any general incorporation
language in such filing.


Changes
in Internal Control Over Financial Reporting




No change
in the Company’s internal control over financial reporting occurred during the
quarter ended June 30, 2008, that materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial
reporting.








ITEM 8B. OTHER
INFORMATION.




None





PART
III


ITEM
      9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
      CONTROL PERSONS AND CORPORATE GOVERNANCE;COMPLIANCE WITH SECTION
      16(a) OF THE EXCHANGE ACT.




The
following table sets forth information regarding the members of the Company’s
board of directors and its executive officers. All of the Company’s executive
officers and directors were appointed on December 6, 2007, the effective date of
the Acquisition. All directors hold office until the first annual meeting of the
stockholders of the Company and until the election and qualification of their
successors or their earlier removal or retirement.




Officers
are elected annually by the board of directors and serve at the discretion of
the board.







40







Name
      (1)
            Age
            TitleGeorge
      W. Evans
            53
            Chief
      Executive Officer; Chairman of the Board of DirectorsKrishna
      Menon
            61
            President;
      Chief Scientific Officer, DirectorLeo
      Ehrlich
            49
            Chief
      Financial Officer; DirectorHyman
      Schwartz
            57
            Former
      President and Director  (resigned on December 6,
      2007)Jacob
      Werczberger
            35
            Former
      Secretary and Director  (resigned on December 6,
      2007)







(1)  
Each of the persons performs services for the Company on a part-time
basis.






George W. Evans JD, MBA served
as CEO of Cellceutix Pharma since inception in June 2007. Following the
acquisition, he was appointed CEO and Chairman of the board of directors of the
Company. Prior to joining Cellceutix Pharma, Mr. Evans worked for Pfizer Inc.
from 1980 to 2006. Mr. Evans has more than 25 years experience in the
Pharmaceutical industry. He worked in a number of positions for Pfizer Inc,
ending his career there as General Counsel for Pfizer's worldwide prescription
drug unit, and a member of the unit's leadership team. Mr. Evans was a member of
the Editorial Advisory Board Of the Food and Drud Law Journal and the Finance
Committee of the Food and Drug Law Institute and a member of the Board of the
New York City Bar Fund. Mr. Evans is currently a member of the Advisory Board of
Founders College, a liberal arts institution whose mission is to provide an
educational experience based on a carefully integrated core of great ideas. He
is a graduate of Williams College and Columbia University’s Law and Business
schools.




Krishna Menon RCM, PhD, VMD
served as President of Cellceutix Pharma since inception in June
2007.  Following the acquisition, he was appointed President and a
director. Dr. Menon, simultaneously therewith, also serves as the Chief
Operating Officer at  Kard Scientific, Inc.  Dr. Menon is
also the inventor of Kevetrin, our lead compound.  Since June 2005,
Dr. Menon is also  the Chief Regulatory Officer (a non- executive
officer position) at Nanoviricides, Inc. Dr. Menon has more than 35 years in
drug development for academia and industry. Originally trained as a veterinary
surgeon, Menon began his career as Chief Government Veterinarian for a major
Parish in Jamaica. He segued to a three-year stint as Director of Agriculture
for the Cayman Islands, in the British Caribbean and, in 1982, moved to the Dana
Farber Cancer Research Institute, where he worked under the direction of Nobel
Laureate Dr. Tom Frye. Two years later, he earned his PhD in Pharmacology from
Harvard University. Menon's PhD work focused on anti-folate therapy of various
cancers.  Menon was Research Scientist at Dana Farber from 1985 to
1990 and Senior Research Scientist, In Vivo Research (Cancer), at Bayer
Pharmaceuticals (Miles Laboratories) from 1991 to 1993. After a year operating
his own veterinary oncology and drug development consultancy practice, Menon was
tapped Group Leader, Cancer In Vivo Research and Clinical Development, for Eli
Lilly (1995-2001), where he played a key role in lead selection and pre-clinical
development of Gemzar and Alimta which in 2006 had over 2.1 billion dollars
($2,100,000,000) in sales, and co-developed another seven compounds currently in
late-stage clinical development. In 1999, Lilly honored Menon as “Employee of
the Year.” Lilly's is one of the few “Employee of the Year” awards not bestowed
annually but, rather, on only special occasions. (See ITEM 7. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS)




Leo Ehrlich, CPA,  served
as Chief Financial Officer (CFO) of Cellceutix Pharma since inception in June
2007.  Following the acquisition, he was appointed CFO and a director.
 From October 8, 1999 to the present time, Mr. Ehrlich has been a director
at StatSure Diagnostic Systems, Inc. and has held different executive officer
positions at that company including CEO, President, and his current title of
CFO.Mr.
Ehrlich was also CFO and a director of NanoViricides, Inc. from June 1, 2005
until May 2007.  Mr. Ehrlich is a Certified Public Accountant and
received his BBA from Bernard Baruch College of the City University of New
York.







Hyman Schwartz, resigned
on December 6, 2007.  He had been employed at Econoshare as
President, Chief Operations Officer, Treasurer, and Chairman of the Board
of Directors since August 1, 2005.  Mr. Schwartz is also the president
of The Hyett Group Ltd. since 1996.  Through
divisions,  the  Hyett Group Ltd. provides various business
services to its clients,  including software design, mergers
& acquisitions, business
consulting and  operates  a  business  concept  lab.  Mr. Schwartz
received his degree in accounting from La Salle University in
1975.   From August 1999 until
January 2004, Hyman Schwartz was a director of New Medium
Enterprises, Inc. a publicly traded company.






41




Jacob  Werczberger,
resigned on December 6, 2007.  He had been employed at EconoShare Inc.
as Corporate Secretary since August 15, 2005.  Mr. Werczberger is
also employed at Valley Supplies Ltd. in  the capacity of
Director of Operations since June 2003.   From November
1997 until June 2003, Jacob Werczberger was employed at S& K trading
International in the  capacity of General Manager. In June 2003,
Valley Supplies Ltd. merged with S &K Trading International.  Mr.
Werczberger attended Yeshiva Torah Veyirah and graduated high school.  Mr.
Werczberger has no prior experience in public company
administration.






AUDIT COMMITTEE. The Company
intends to establish an audit committee, which will consist of independent
directors. The audit committee's duties would be to recommend to the Company's
board of directors the engagement of independent auditors to audit the Company's
financial statements and to review its accounting and auditing principles. The
audit committee would review the scope, timing and fees for the annual audit and
the results of audit examinations performed by the internal auditors and
independent public accountants, including their recommendations to improve the
system of accounting and internal controls. The audit committee would at all
times be composed exclusively of directors who are, in the opinion of the
Company's board of  directors, free from any relationship which would
interfere with the exercise of independent judgment as a committee member and
who possess an understanding of financial statements and generally accepted
accounting principles.




COMPENSATION COMMITTEE. Our
board of directors does not have a standing compensation committee responsible
for determining executive and director compensation.  Instead, the entire
board of directors fulfills this function, and each member of the Board
participates in the determination.  Given the small size of the Company and
its Board and the Company's limited resources, locating, obtaining and retaining
additional independent directors is extremely difficult.  In the absence of
independent directors, the Board does not believe that creating a separate
compensation committee would result in any improvement in the compensation
determination process.  Accordingly, the board of directors has concluded
that the Company and its stockholders would be best served by having the entire
board of directors act in place of a compensation committee.  When acting
in this capacity, the Board does not have a charter.




In
considering and determining executive and director compensation, our board of
directors reviews compensation that is paid by other similar public companies to
its officers and takes that into consideration in determining the compensation
to be paid to the Company’s officers.  The board of directors also
determines and approves any non-cash compensation to any employee. The Company
does not engage any compensation consultants to assist in determining or
recommending the compensation to the Company’s officers or employees.




CODE
OF ETHICS




We have
adopted a code of ethics meeting the requirements of Section 406 of the
Sarbanes-Oxley Act of 2002. We believe our code of ethics is reasonably designed
to deter wrongdoing and promote honest and ethical conduct; provide full, fair,
accurate, timely and understandable disclosure in public reports; comply with
applicable laws; ensure prompt internal reporting of violations; and provide
accountability for adherence to the provisions of the code of ethic. Our code of
ethics is filed as an exhibit to this Form 10-KSB.




COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT




Our
executive officers and directors and persons who own beneficially more than ten
percent of our equity securities are required under Section 16(a) of the
Securities Exchange Act of 1934 to file reports of ownership and changes in
their ownership of our securities with the Securities and Exchange Commission.
They must also furnish copies of these reports to us. Based solely on a review
of the copies of reports furnished to us and written representations that no
other reports were required, we believe that for fiscal year 2008 our executive
officers, directors and 10% beneficial owners complied with all applicable
Section 16(a) filing requirements, except that Form 4  was filed
late.







ITEM 10.  EXECUTIVE COMPENSATION




Summary
Compensation Table






The
following table sets forth all of the compensation awarded to, earned by or paid
to (i) each individual serving as our principal executive officer during our
last completed fiscal year; and (ii) each other individual that served as an
executive officer at the conclusion of the fiscal year ended June 30, 2008
and who received in excess of $100,000 in the form of salary and bonus during
such fiscal year (collectively, the Named Executives).




Name
      and
                  Principal
      Position
                
                Year
                
                Salary
                
                Bonus
                
                
                Option
      Awards
                
                Non-Equity
      Incentive Plan Compensation
                
                All
      Other Compensation
                
                TotalGeorge
      W. Evans (1)(2) Chief Executive Officer, Chairman of the
      Board
                
                
                2008
                  2007
                
                $
                  $
                116,667
                  0
                
                $
                  $
                0
                  0
                
                
                $
                  $
                43,533
                  0
                
                
                0
                  0
                
                $
                  $
                0
                  0
                
                $
                  $
                160,200
                  0Krishna
      Menon (1) President, Chief Scientific Officer,
    Director
                
                
                2008
                  2007
                
                $
                  $
                116,667
                  0
                
                $
                  $
                0
                  0
                
                
                $
                  $
                0
                  0
                
                
                0
                  0
                
                $
                  $
                0
                  0
                
                $
                  $
                116,667
                  0Hyman  Schwartz
      (3) Former President
                
                
                2007
                
                $
                0
                
                $
                0
                
                
                $
                0
                
                
                0
                
                $
                0
                
                $
                0Jacob  Werczberger
      (3) Former Secretary
                
                
                2007
                
                $
                0
                
                $
                0
                
                
                $
                0
                
                
                0
                
                $
                0
                
                $
                0Leo
      Ehrlich, Director Chief Financial Officer
                
                
                2008
                  2007
                
                $
                  $
                87,500
                  0
                
                $
                  $
                0
                  0
                
                
                $
                  $
                0
                  0
                
                
                0
                  0
                
                $
                  $
                0
                  0
                
                $
                  $
                87,500
                  0
   42









(1)  Eligible
for bonuses upon the successful achievement of agreed upon corporate and
individual performance based milestones after the Company receives a financing
commitment in amount of at least $4,000,000,   upon achieving the
following milestones: FDA IND $250,000 if received within 10 months $150,000 if
received within 12 months  $100,000 if received within 16 months
Completion of Phase 1with clinical results that would have Kevetrin proceed to
Phase 2/3: $450,000 if received within 18 months $350,000 if received within 24
months $150,000 if received within 28 months; start Phase
2/3:  $500,000 if within 36 months $350,000 if within 42 months
$150,000 if within 48 months




(2)  Mr.
Evans’ employment agreement provides a grant of options to purchase a number of
shares of the Company's stock equal to one percent of the issued and outstanding
common stock following the first anniversary of the commencement date of the
agreement, at a purchase price of $0.15 per share.. Mr. Evans shall thereafter
be issued an additional grant of options to purchase a number of shares of
common stock equal to one percent of the issued and outstanding common stock at
a purchase price equal to the average closing bid price of the common stock on
its primary exchange for the fifteen successive trading days immediately prior
to the date of the grant.




(3) Hyman
Schwartz and Jacob Werczberger served as President and Secretary, respectively,
of EconoShare, Inc.  until December 6, 2007, when they resigned and
were replaced by Mr. Evans, Dr. Menon,  and Mr. Ehrlich in connection
with the Acquisition. During this time, Mr. Schwartz and
Mr. Werczberger did not receive any compensation.





Compensation
Policy. Our Company’s executive compensation plan is based on attracting and
retaining qualified professionals who possess the skills and leadership
necessary to enable our Company to achieve earnings and profitability growth to
satisfy our stockholders. We must, therefore, create incentives for these
executives to achieve both Company and individual performance objectives through
the use of performance-based compensation programs. No one component is
considered by itself, but all forms of the compensation package are considered
in total. Wherever possible, objective measurements will be utilized to quantify
performance, but many subjective factors still come into play when determining
performance.




Compensation
Components. As an early-stage development company, the main elements of our
compensation package consist of base salary, stock options and
bonus.




Base
Salary. As we continue to grow and financial conditions improve, these base
salaries, bonuses and incentive compensation will be reviewed for possible
adjustments. Base salary adjustments will be based on both individual and
Company performance and will include both objective and subjective criteria
specific to each executive’s role and responsibility with the
Company.













COMPENSATION
OF DIRECTORS




At this
time, directors receive no remuneration for their services as directors of the
Company, nor does the Company reimburse directors for expenses incurred in their
service to the Board of Directors. The Company does not expect to pay any fees
to its directors for the 2008 fiscal year.




EMPLOYMENT
AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS




On
December 7, 2007, the Company entered into employment agreements with two
executive officers, George Evans, Chief Executive Officer, and Krishna Menon,
President. Both agreements provide for a three year term with minimum annual
base salaries of $200,000 in the first year, $300,000 in the second year and
$400,000 in the third year.  In addition, the agreements provide for
bonuses according to the following schedule:




Upon
receiving IND: $250,000 if received within 10 months; $150,000 if received
within 12 months; $100,000 if received within 16 months; and no bonus if
received thereafter or not received.




Completion
of Phase 1with clinical results that would have Kevitrin proceed to Phase 2/3:
$450,000 if received within 18 months; $350,000 if received within 24 months;
$150,000 if received within 28 months; and no bonus if received thereafter or
not received.




Start
Phase 2/3: $500,000 if within 36 months; $350,000 if within 42 months; $150,000
if within 48 months; and no bonus if received thereafter or not
received.




The
agreement with Mr. Evans also provides a grant of options to purchase a number
of shares of the Company's stock equal to one percent of the issued and
outstanding common stock following the first anniversary of the commencement of
the agreement, at a purchase price of $0.15 per share.. Thereafter Mr. Evans
shall be issued an additional grant of options following the successive
anniversaries of the commencement date of a number of shares of common stock
equal to one percent of the issued and outstanding common stock at a purchase
price equal to the average closing bid price of the common stock on its primary
exchange for the fifteen successive trading days immediately prior to the date
of the grant.




The
bonus obligations of the Company under the agreements do not commence until
the Company receives a financing commitment in an amount of at least
$4,000,000.




COMPENSATION OF
SCIENTIFIC ADVISORY BOARD




The
Company has established a Scientific Advisory Board consisting of:




Emil Frei III, MD Dr. Frei is
one of the world’s leading oncologists, a pioneer of chemotherapy and a leader
in medical research, clinical practice and education. His distinguished career
includes 40 years in top leadership positions such as Chief of Medicine at
National Cancer Institute, Associate Scientific Director at M. D. Anderson, and
Director and Physician-in-Chief at the Dana-Farber Cancer Institute. He
continues as Physician-in-Chief, Emeritus, at Dana-Farber.




Har Gobind Khorana, PhD Dr.
Khorana is a Nobel Laureate and has won many other awards and honors for his
achievements. He was elected a member of the National Academy of Sciences,
Washington as well as a Fellow of the American Association for the Advancement
of Science. In 1971 he became a foreign member of USSR Academy of Sciences and
in 1974 an Honorary Fellow of the Indian Chemical Society. Dr. Khorana’s work is
an important scientific landmark of the twentieth century.




At this
time, members of the Scientific Advisory Board receive no remuneration for their
services, nor does the Company reimburse members of the Scientific Advisory
Board for expenses incurred in their service.  The Company is considering
providing compensation for the members of the Scientific Advisory Board, but has
made no decisions as of this time.





ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS




The
following table summarizes certain information regarding the beneficial
ownership (as such term is defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of outstanding EconoShare Common Stock as of December 11, 2007
(after giving effect to the Exchange) by (i) each person known by us to be the
beneficial owner of more than 5% of the outstanding Cellceutix Common Stock,
(ii) each of our directors, (iii) each of our named executive officers (as
defined in Item 402(a)(3) of Regulation S-B under the Securities Act), and (iv)
all executive officers and directors as a group. Except as indicated in the
footnotes below, the security and stockholders listed below possess sole voting
and investment power with respect to their shares.





















Name
      and Address of Beneficial Owner
            
            Amount
      and Nature of Beneficial Owner (1)
            
            
            Percent
      of Class (2)Krishna
      Menon C/O Cellceutix
              100
      Cumming Ctr.,  Suite 151-B
              Beverley,
      MA 01915
            
            
            32,048,286
            
            
            
            34.9
            %George
      W. Evans (3) C/O Cellceutix
              100
      Cumming Ctr.,  Suite 151-B
              Beverley, MA 01915
            
            
            4,602,312
            
            
            
            5.0
            %Leo
      Ehrlich (4) C/O Cellceutix
              100
      Cumming Ctr.,  Suite 151-B
              Beverley, MA 01915
            
            
            11,247,284
            
            
            
            12.2
            %All
      Directors and Executive
              Officers
      as a Group (3 persons) (5)
            
            
            47,897,882
            
            
            
            52.1
            %







(1)
"Beneficial Owner" means having or sharing, directly or indirectly (i) voting
power, which includes the power to vote or to direct the voting, or (ii)
investment power, which includes the power to dispose or to direct the
disposition, of shares of the common stock of an issuer. The definition of
beneficial ownership includes shares, underlying options or warrants to purchase
common stock, or other securities convertible into common stock, that currently
are exercisable or convertible or that will become exercisable or convertible
within 60 days. Unless otherwise indicated, the beneficial owner has sole voting
and investment power.






(2) For
each shareholder, the calculation of percentage of beneficial ownership is based
upon 91,970,000 shares of Common Stock outstanding as of December 11, 2007, and
shares of Common Stock subject to options, warrants and/or conversion rights
held by the shareholder that are currently exercisable or exercisable within 60
days, which are deemed to be outstanding and to be beneficially owned by the
shareholder holding such options, warrants, or conversion rights. The percentage
ownership of any shareholder is determined by assuming that the shareholder has
exercised all options, warrants and conversion rights to obtain additional
securities and that no other shareholder has exercised such rights.




(3) George W. Evans, Chief Executive
Officer and Chairman. Includes 2,766,496 shares of EconoShare’s common stock
held by Mr. Evans and includes 1,835,816 shares of EconoShare’s common stock
held by the children of George W. Evans.





(4) Leo
Ehrlich, Chief Financial Officer and Director. Includes 7,745,002 shares of
EconoShare’s common stock held by Mr. Ehrlich and includes 3,502,282 shares of
EconoShare’s common stock held by the wife and children of Leo
Ehrlich.





(5)
Includes 6,088,070 shares of Common Stock indirectly owned by certain of the
Executive Officers and Directors as a group but excludes vested options to
acquire approximately 919,700 additional shares of Common Stock by Executive
Officers and Directors, as a group.















ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE.




Dr.
Krishna Menon




On August
2, 2007 and October 17, 2007, Cellceutix Pharma entered into Compound Assignment
Agreements, with Dr. Krishna Menon, our largest shareholder, covering Kevetrin,
KM 277, KM 278 and KM 362.  The Company agreed to pay Dr. Menon 5% of net
sales of the compounds in countries where a composition of matter patent is
issued and 3% of net sales in other countries.




These
transactions have identical terms to transactions we entered into with other
inventors who are unrelated third parties.




KARD
Scientific, Inc.




Dr.
Menon, the Company’s principal shareholder, President and Director also
serves as the COO and Director of Kard Scientific. On December 7, 2007,
Cellceutix Pharma began renting 200 square feet of office space from Kard
Scientific, on a month to month basis for $900 per month.  In
September of 2007, the Company engaged Kard Scientific to conduct specified
pre-clinical studies necessary for the Company to prepare an IND submission to
the FDA.  We do not have an exclusive arrangement with
KARD.  All work performed by Kard must have prior approval of the
executive officers of the Company; and we retain all intellectual property
resulting from the services by KARD. To date we have not incurred any charges by
KARD.




Currently,
we have no independent directors on our Board of Directors, and therefore have
no formal procedures in effect for reviewing and pre-approving any transactions
between us, our directors, officers and other affiliates. We will use our best
efforts to insure that all transactions are on terms at least as favorable to
the Company as we would negotiate with unrelated third parties.





Director
Independence




Our
common stock trades on the OTC Bulletin Board. As such, we are not currently
subject to corporate governance standards of listed companies, which require,
among other things, that the majority of the board of directors be
independent.




Since we
are not currently subject to corporate governance standards relating to the
independence of our directors, we choose to define an “independent” director in
accordance with the NASDAQ Global Market's requirements for independent
directors (NASDAQ Marketplace Rule 4200). We do not currently have an
independent director under the above definition. We do not list that definition
on our Internet website.










46




ITEM
13. EXHIBITS


(A) EXHIBITS INCLUDED
HEREIN:







Exhibit
              
              Description2.1
              
              Agreement and Plan of Share
      Exchange, by and among EconoShare, Inc., Cellceutix Pharma, Inc., and the
      Shareholders of Cellceutix Pharma, Inc. dated as of December 6, 2007.
      1
              
              
              (1
              )3.1
              
              Articles
      of Incorporation of Cellceutix Pharma, Inc.2
              
              
              (1
              )3.2
              
              By-laws
      of Cellceutix Pharma, Inc.2
              
              
              (1
              )10.1
              
              Employment
      Agreement between EconoShare, Inc. and George W. Evans dated December 7,
      2007.
              
              
              (1
              )10.2
              
              Employment
      Agreement between EconoShare, Inc. and Krishna Menon dated December 7,
      2007.
              
              
              (1
              )10.3
              
              Assignment
      Agreement between Cellceutix Pharma, Inc. and. Krishna Menon dated August
      2, 2007
              
              
              (1
              )10.4
              
              Assignment
      Agreement between Cellceutix Pharma, Inc. and Krishna Menon dated August
      2, 2007
              
              
              (1
              )10.5
              
              Assignment
      Agreement between Cellceutix Pharma, Inc. and Krishna Menon dated August
      2, 2007
              
              
              (1
              )10.6
              
              Assignment
      Agreement between Cellceutix Pharma, Inc. and Geetha Kamburath dated
      August 21, 2007
              
              
              (1
              )10.7
              
              Assignment
      Agreement between Cellceutix Pharma, Inc. and Krishna Menon dated October
      17, 2007
              
              
              (1
              )10.8
              
              Assignment
      Agreement between Cellceutix Pharma, Inc. and Adam Harris dated October
      17, 2007
              
              
              (1
              )10.9
              
              Confidential
      Disclosure Agreement between Kard Scientific, Inc. and Cellceutix Pharma,
      Inc. dated September 28, 2007.
              
              
              (1
              )10.10
              
              Laboratory
      Services Agreement Kard Scientific, Inc. and Cellceutix Pharma, Inc. dated
      September 28, 2007.
              
              
              (1
              )10.11
              
              Cellceutix
      Lease with Kard Scientific, Inc.
              
              
              (1
              )10.1.1
              
              Security
      Agreement, dated as of May 7, 2008 between Cellceutix Corp. and Putnam
      Partners, White Star LLC, and Dahlia Nordlicht
              
              
              (2
              )10.2.2
              
              Converible
      Promissory Note dated as of May 7, 2008  between Cellceutix Corp. and
      Putnam Partners, White Star LLC, and Dahlia Nordlicht
              
              
              (2
              )10.3.4
              
              Guaranty in favor of Putnam Partners,  White Star LLC, and Dahlia
      dated as of May 7, 2008
              
              
              (2
              )10.15
              
              Code
      of Ethics
              
              
              *31
              
              Certifications
      Required under Section 302 of the Sarbanes Oxley Act of
2002
              
              
              *32
              
              Certifications
      Required under Section 906 of the Sarbanes Oxley Act of 
    2002
              
              
              *
 
   An
asterisk (*)   indicates the exhibit is identified in this
report.
 (1)
Incorporated by reference to the Company’s registration statement on Form 8-K,
filed with the Securities Commission on December 11, 2007
  
 47
   ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND
SERVICES
  INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
 
 Effective
at the time of the Acquisition, the Company dismissed N. Blumenfrucht, CPA
PC as its independent accountants ("Blumenfrucht ") and engaged the
auditing firm of Holtz Rubenstein Reminick LLP (“HRR”), as its independent
registered public accountants. N. Blumenfrucht, CPA PC had previously been
engaged as the principal accountant to audit the Company's financial statements
from the Company's inception in August, 2005, until the time of the Exchange.
The Company believes that it is in its best interest to have HRR continue to
work with the Company, and the Company therefore retained HRR as its new
independent registered accounting firm, effective as of December 11, 2007.
The firm of Holtz Rubenstein Reminick LLP  is located at 1430
Broadway, New York, New York.  The reports of N. Blumenfrucht, CPA PC
on the Company's financial statements for the year ended June 30, 2007, were
qualified as to the Company's ability to continue as a going
concern.
  The
decision to change accountants was approved by the Company's board of directors
on December 11, 2007 and on such date HRR was engaged as the Company's new
independent registered public accountants. Since Cellceutix’s inception in June
2007 and through our fiscal year end of October 31, 2007, the Company did not
consult HRR regarding either: (i) the application of accounting principles to a
specified transaction, completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements, or (ii) any matter that
was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of
Regulation S-B or a reportable event as described in Item 304(a)(1)(v) of
Regulation S-B.
  During
the Company's most recent fiscal year, there were no disagreements with N.
Blumenfrucht, CPA PC on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if not
resolved to the satisfaction of N. Blumenfrucht, CPA PC, would have caused it to
make reference to the matter in connection with its reports. There were no
"reportable events" as that term is described in Item 304(a)(1)(v) of Regulation
S-B.
  Audit
Fees. During the years ended June 30, 2008 and 2007, the aggregate fees billed
by the Company's auditors, for services rendered for the audit of our annual
financial statements and the review of the financial statements included in our
quarterly reports on Form 10-QSB and for services provided in connection with
the statutory and regulatory filings or engagements for those fiscal years was
$23,500 and $0, respectively.
  Audit-Related
Fees. During years ended June 30, 2008 and 2007, our auditors did not receive
any fees for any audit-related services other than as set forth in paragraph (a)
above.
  Tax Fees.
Our auditors did not provide tax compliance or tax planning advice during the
years ended June 30, 2008 and 2007.
  All Other
Fees. There were no fees billed for services rendered by Holtz Rubenstein
Reminick LLP for 2008 and 2007, other than the services described
above.
 
    48
  SIGNATURES
  Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
  Dated:
September 24, 2008
 
  CELLCEUTIX
CORPORATION
 
 /s/
George W. Evans
 --------------------------------------
 George W.
Evans
 Chairman
of the Board and
 Chief
Executive Officer
 
 /s/ Leo
Ehrlich
 --------------------------------------
 Leo
Ehrlich
 Chief
Financial Officer and Secretary
  
 
 
  Pursuant
to the requirements of the Securities Exchange Act of 1934, this Annual Report
on Form 10-KSB has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on September 22,
2008.
  /s/
Krishna Menon
  President
and Director
  Krishna
Menon