UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 
 |X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
 
 ACT OF 1934
 
 
 FOR THE FISCAL YEAR ENDED JUNE 30, 2010
 
 OR
 £ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM _____ TO __________
 Commission File Number: 000-52321
 
 Cellceutix Corporation
 (Exact name of registrant as specified in its charter)
 
 Nevada



30-0565645(State or other jurisdiction



(IRS Employerof incorporation)



Identification No.)
 
 100 Cummings 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)
 
 SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT: COMMON STOCK, PAR VALUE $0.0001 PER SHARE
 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes |_| No X
 
 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
 Yes |_| No X
 
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes |X| No |_|
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                     Yes  No |X|.
 
 
 Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K |.
 
 
 Yes  No |X|.
 
 
 Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of "accelerated filer and large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 
 Large accelerated filer 
Accelerated filer Non-accelerated filer 
Smaller reporting company |X|.
 
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES   NO|X|.
 
 Issuer's revenues for its most recent fiscal year were $0.00
 
 The aggregate market value of voting stock held by non-affiliates of the Registrant at June 30, 2010 was $23,782,474 computed by reference to the last traded sale price as reported on the Over the Counter market on such date.
 
 The number of shares outstanding of the Registrant's common stock as of September 30, 2010 was 91,964,500 shares.
  CELLCEUTIX CORPORATION
 FORM 10-K INDEX
 
 
 PAGE NOPART IITEM 1
BUSINESS
2ITEM 1A
RISK FACTORS
13ITEM 2
DESCRIPTION OF PROPERTIES
20ITEM 3
LEGAL PROCEEDINGS
21ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
21PART IIITEM 5
MARKET FOR REGISTRANT'S COMMON EQUITY AND  RELATED STOCKHOLDER MATTERS
21ITEM 6
SELECTED FINANCIAL DATA
22ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
22ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
24ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
25ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
35ITEM 9A(T)
CONTROLS AND PROCEDURES
35ITEM 9B
OTHER INFORMATION
35PART IIIITEM 10
DIRECTORS , EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
36ITEM 11
EXECUTIVE COMPENSATION
37ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
39ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
39ITEM 14
PRINCIPAL ACCOUNTANT FEES AND SERVICES
40PART IVITEM 15
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
40SIGNATURES

CERTIFICATIONS
41
 
   
 1
 
 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 1A, 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.
 
 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”).  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, Inc. common stock held by such Cellceutix Pharma, Inc. shareholder at the time of the Exchange.  This resulted in the former holders of Cellceutix Pharma, Inc. Common Stock, upon Exchange, owning approximately 89% of the outstanding shares of the Company’s Common Stock. Accordingly, the Exchange represented a change in control.  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 legal 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.
 
 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, Inc. 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 eight (8) different pharmaceutical compound candidates that are designed for treatment of diseases which exist, or may exist in the future.  The Company will initially spend most of its efforts and resources on its anti-cancer compound, KevetrinTM, for the treatment of certain cancers.  This compound is furthest along in in-vivo studies in animals.  In January, 2010, the Company had a “pre-IND” meeting with the U. S. Food and Drug Administration (FDA).  The purpose of the meeting was to obtain comments from the FDA on the protocols for the toxicity and pharmacology studies that are required for IND filing.  The FDA provided comments on the protocols, which were adopted by the Company.  The Company is nearing completion of  the necessary studies in order to file an IND requesting permission to begin human trials.
 
 We anticipate using our expertise to manage and perform what we believe are the most critical aspects of the product development process which includes: (i) the design and oversight of non-clinical and clinical trials; (ii) the development and execution of strategies for the protection and maintenance of intellectual property rights; and (ii) the interaction with regulatory authorities worldwide.
 
   2
 We expect to concentrate on product development and engage in a  limited way in product discovery, avoiding the significant investment of time and financial resources that is generally required before a new compound is identified and brought into clinical trials. In addition, we are currently engaged in pre-clinical testing of two 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: (i) two (2) anti-cancer agents targeting multiple tumors; (ii) one (1) candidate targeting psoriasis; (iii) one (1) candidate targeting rheumatoid arthritis; (iv) one (1) candidate with potential for indications of osteo-arthritis/asthma; (v) one (1) candidate with a potential for indications of neurological disorders for the treatment of Multiple Sclerosis, Lou Gehrig Disease, and/or Parkinson's Disease; (vi) a small molecule with potential for development to treat hypertensive emergency;   and (vii) one (1) candidate being developed for autism.
 
 On May 7, 2008, the Company issued Convertible Debentures, at 9% per annum, for a total amount of $400,000.  The principal and related accrued interest were due December 2009, and secured by the Company’s assets.  The Debentures and any accrued and unpaid interest were convertible into the Company’s common stock, at the holder’s request, at a conversion price of $1.50 per share.
 
 During January, 2010, the Company extended and amended the original Convertible Debenture agreements by extending the original maturity date to December 31, 2010.  The conversion price of the principal and any unpaid interest was changed to $0.50 per share.  The Company and debenture holders also agreed to convert accrued interest of $60,000 through December 31, 2009 into additional principal.
 
 The Company has incurred significant operating losses since its inception resulting in an accumulated deficit of $5,438,533 at June 30, 2010.  For the year ended June 30, 2010, the Company had a net loss of $3,433,400.  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.  These factors raise substantial doubt about the Company's ability to continue as a going concern.
 
 The accompanying financial statements of this Form 10-K have been prepared assuming that the Company will continue as a going concern which assumes the Company will be able to continue to realize assets and satisfy 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.
 
 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.
 
 Alkylation 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 chemotherapy drug used to treat various types of cancers.
 
 Cytotoxicity: is the quality of being toxic to cells.
 
 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.
 
  3
  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 show 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 1,000 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
Cancer
PreclinicalKM 391
Autism
PreclinicalKM 277
Arthritis
PreclinicalKM 278
Arthritis/Asthma
PreclinicalKM 133
Psoriasis
PreclinicalKM 362
MS/ALS/Parkinsons
Early R&DKM-3174
Cancer
Early R&DKM-732
Hypertensive emergency
Early R&D
 
 Compound: Kevetrin
 
 Disease: Cancer
 
 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 13. Certain Relationships and Related Transactions)
 
 Kevetrin is initially being developed to treat certain cancers. There is a potential for use of Kevetrin in multiple tumor types. The Company has conducted pre-clinical studies in lung cancer, head and neck cancer, colon cancer, breast cancer and prostate cancer.  Several of these studies have involved cell lines that are resistant to standard drugs.
 
 Kevetrin is being developed as an intravenous (IV) infusion therapy (the giving of the drug directly into the vein).
 
 Information about these cancers is available at http://www.cancer.gov
 
 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 has shown to have potent activity against various cancer cell lines both in-vitro and in-vivo.  Summary results are presented below:
 
 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 μg/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 μg/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.
   4
 
 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 against 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.
 
 Time Dependence of Kevetrin Cytotoxicity
 
 To determine the influence of exposure time on the cytotoxic effects of Kevetrin, DU-145, HCT-116, and HT-29 carcinoma cells were exposed to different concentrations of Kevetrin for 5, 10, 20, 30, or 45 minutes or 1, 2, 6, 24, or 120 hours. 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 minutes. In contrast, extending the drug exposure time beyond 24 hours had no influence on the cytotoxicity.
 
 See Figure 1-Time Dependence of Kevetrin Cytotoxicity
 
 Activity Spectra for Kevetrin & Cisplatin
 
 Comparison of the activity spectra of Cisplatin and Kevetrin toward 10 different types of human tumor cells demonstrates 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. Kevetrin showed activity toward all of the cell lines, whereas Cisplatin was active toward only 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.
 
 See Figure 2-Activity Spectra for Kevetrin & Cisplatin
 
 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 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.
 
 Toxicology Studies
 
 
 On October 22, 2009, the Company signed an agreement with Toxikon Corporation to conduct preclinical studies required for an Investigational New Drug (IND) filing for its cancer drug Kevetrin(TM). The studies covered by the agreement, which comprise three safety pharmacology studies and two toxicity studies, are designed to confirm that Kevetrin meets FDA safety requirements for studies in humans.  The safety pharmacology studies were completed in June, 2010 and the Company believes that the data from these studies support the use of Kevetrin in human trials.  The toxicity studies have not yet been completed but the results are expected soon.
 
 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 1,500 mg, starting from approximately 100 mg.  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’s t-test.
 
 
 5
 
 
 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.
 
 Kevetrin Efficacy in NCI-H1975 Lung Cancer Cell Line
 
 Summary
 
 Kevetrin is effective in mouse models of human lung cancer:NCI-H1975
 Kevetrin (200 mg/kg IP x 3 doses)
 ●142% to 156% tumor growth delay compared to controls
 ●44% to 107% tumor growth delay compared to paclitaxel (22 mg/kg IV x 4 doses)
 ●No decrease in animal weight
 
 Details
 
 Nude mice were implanted with NCI-H1975, a multi-drug resistant human lung non-small cell lung carcinoma (NSCLC) cell line, subcutaneously in the right flank.  Once tumors reached, on average, ~120 to 200 mm3 , the mice were grouped according to similar tumor size ranges. Mice were treated intraperitoneally with 200 mg/kg Kevetrin every other day for 3 doses.  For comparison, another group of mice were treated with 22 mg/kg paclitaxel IV every other day for 4 doses.  Another group of mice remained untreated to serve as controls. Tumors were measured three times per week.  During treatments, mice were observed daily for any adverse affects and mouse body weights were measured.
 
 The results of the initial experiment, presented as median tumor volumes over time, are shown in:
 
 Figure 3
 
 (NCI-H1975 tumor volumes in nude mice treated with either 200 mg/kg Kevetrin IP qod or 22 mg/kg paclitaxel IV qod).
 
 The growth of NCI-H1975 human lung adenocarcinoma tumors was significantly delayed (p<0.01) following treatment with Kevetrin compared to controls, whereas paclitaxel had little efficacy in these tumors compared to controls.  Tumor growth delay with Kevetrin was also significantly greater than with paclitaxel (p<0.01).  On measurements of tumor volume at day 28, Kevetrin was significantly more effective than controls or paclitaxel (p<0.01).
 
 The results of the repeat experiment are shown in:
 
 Figure 4
 
 (NCI-H1975 tumor volumes in nude mice treated with either 200 mg/kg Kevetrin IP qod or 22 mg/kg Taxol IV qod).
 
 In this experiment, the growth of NCI-H1975 human lung adenocarcinoma tumors was significantly delayed (p<0.01) following treatment with Kevetrin compared to controls, whereas paclitaxel had only moderate efficacy in these tumors producing a tumor growth delay of compared to controls. Tumor growth delay with Kevetrin was also significantly greater than with paclitaxel (p<0.01).  On measurements of tumor volume at day 25, Kevetrin was significantly more effective than controls or paclitaxel (p<0.01).   A significant therapeutic index was achieved since no weight loss occurred during treatment with Kevetrin.
 
 These results demonstrate that Kevetrin, but not paclitaxel, has potent anti-tumor activity against a human lung adenocarcinoma xenograft tumor model, NCI-H1975, at a dose and schedule that is well-tolerated as indicated by no weight loss during treatment. These studies support the development of Kevetrin in lung carcinoma indications, particularly in cases where tumors have become resistant to standard chemotherapy.
 
 Kevetrin Efficacy in A-549 Lung Cancer Cell Line
 
 Summary
 
 Kevetrin is effective in mouse models of human lung cancer:A549
 Kevetrin (200 mg/kg IP x 3 doses)
 ●33% to 111%  tumor growth delay compared to controls
 ●33% to 100% tumor growth delay compared to paclitaxel (22 mg/kg IV x 4 doses)
 ●Only 3%  to 4% decrease in animal weight
 
  6
   Details
 
 Kevetrin was shown to be effective in animal model experiments (mice) with of human lung cancer cell lines.  Nude mice were implanted with A-549, a multi-drug resistant human lung non-small cell lung carcinoma (NSCLC) cell line, subcutaneously in the right flank.  Once tumors reached, on average, ~120 mm3 , the mice were grouped according to similar tumor size ranges. Mice were treated intraperitoneally with 200 mg/kg Kevetrin every other day for 3 doses.  For comparison, another group of mice were treated with 22 mg/kg paclitaxel IV every other day for 4 doses.  Another group of mice remained untreated to serve as controls. Tumors were measured three times per week.  During treatments, mice were observed daily for any adverse affects and mouse body weights were measured.
 
 The results of the initial experiment, presented as median tumor volumes over time, are shown in:
 
 Figure 5
 
 (A549 tumor volumes in nude mice treated with either 200 mg/kg Kevetrin IP qod  or 22 mg/kg paclitaxel IV qod).
 
 The growth of A549 human lung adenocarcinoma tumors was significantly delayed (p < 0. 01) following treatment with Kevetrin, whereas paclitaxel had little efficacy in these tumors producing a no tumor growth delay.
 
 The results of the repeat experiment are shown in:
 
 Figure 6
 
 (A549 tumor volumes in nude mice treated with either 200 mg/kg Kevetrin IP qod or 22 mg/kg Taxol IV qod).
 
 In this experiment, the growth of A549 human lung adenocarcinoma tumors was significantly delayed (p < 0. 01) following treatment with Kevetrin, whereas paclitaxel had little efficacy in these tumors producing a tumor growth delay of only 11%.  A significant therapeutic index was achieved since during treatment, Kevetrin resulted in only a 3% to 4%, but transient, decrease in average animal weight.
 
 These results demonstrate that Kevetrin, but not paclitaxel, has potent anti-tumor activity against a human lung adenocarcinoma xenograft tumor model, A549, at a dose and schedule that is well-tolerated as indicated by a small transient weight loss during treatment. These studies support the development of Kevetrin in lung carcinoma indications, particularly in cases where tumors have become resistant to standard chemotherapy.
 
 Acute Toxicity Studies
 
 The Company has completed two acute toxicity studies, one in mice and one in rats.
 
 In the acute toxicity mouse study, animals were sorted into 4 groups of twenty animals, each comprised of ten male and ten female mice.  One group served as the controls and the other three groups were administered a single dose of 150 mg/kg, 200 mg/kg or 300mg/kg of Kevetrin.  Animals were observed for 15 days.  Data was periodically collected measuring food consumption, body weight and various blood chemistry parameters.  At the conclusion of the 15 day trial, post-mortem examinations were made of all the mice. In this study there were no significant indications of toxicity at expected therapeutic doses in the mice that had been dosed with Kevetrin.
 
 In the acute toxicity rat study, animals were sorted into 4 groups of ten animals, each comprised of five male and five female rats.  One group served as the controls and the other three groups were administered a single dose of 160 mg/kg, 200 mg/kg or 240 mg/kg of Kevetrin.  Animals were followed for 15 days.  Data was periodically collected measuring food consumption, body weight and blood chemistry parameters.  At the conclusion of the 15 day trial, post-mortem examinations were made  of all the rats.  In this study there were no significant indications of toxicity at expected therapeutic doses in the rats that had been dosed with Kevetrin.
 
 FIGURES
 
 
 
 Figure 1:  Time dependence for cytotoxicity.  A) HT-29, B) HCT-116, C) DU-145 carcinoma cellswere exposed to different concentrations of Kevetrin for 5,10, 20, 30, or 45 min or 1, 2, 6, 24, or 120 h. Cellular viability, as measured using the MTT assay, expressed as IC50 was plotted verses time of Kevetrin exposure.
 
 
 
 7
 
 
 Kevetrin
 
 Cisplatin
 
 
 
 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 (IC50individual cell line - IC50average). 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 10-7M for Kevetrin and 2.1 x 10-6M for cisplatin.
 
 Figure 3.  Median NCI-H1975 tumor volumes in nude mice treated with either 200 mg/kg Kevetrin IP qod on days 7-11 or 22 mg/kg paclitaxel IV qod on day 7-13 after tumor implantation.
 
 
 
 Figure 4.  Median NCI-H1975 tumor volumes in nude mice treated with either 200 mg/kg Kevetrin IP qod on days 7-11 or 22 mg/kg Taxol IV qod on day 7-13 after tumor implantation.
 
 
 
 
 
 8
 
 
 
 Figure 5.  Median A549 tumor volumes in nude mice treated with either 200 mg/kg Kevetrin IP qod on days 7-11 or 22 mg/kg paclitaxel IV qod on day 7-13 after tumor implantation.
 
 
 
 
 
 Figure 6.  Median A549 tumor volumes in nude mice treated with either 200 mg/kg Kevetrin IP qod on days 7-11 or 22 mg/kg Taxol IV qod on day 7-13 after tumor implantation.
 
 
 Figure 7.Pharmacokinetics profile of Kevetrin .  Time vs. concentration curve of plasma from mice treated with 50 mg/kg of Kevetrin
 
 Dose Escalation Study
 
 In order to determine dose response Kevetrin was studied at 50mg/kg, 100 mg/kg and 200 mg/kg in the A549 lung cancer tumor xenograft model. In addition, a second cycle of the highest dose was administered.  Tumor growth delay increased with dose and was significantly greater than controls at the higher two doses.  Administration of a second cycle of therapy resulted in significantly greater tumor growth delay with no indication of resistance.
 
 A summary of the study is presented below.
 
 
 9
 
 
 Kevetrin, given intraperitoneally every other day for 3 doses to mice bearing established A549 tumors, delayed median tumor growth by  1, 6, and 21 days relative to controls, at doses of 50, 100, and 200 mg/kg, respectively (p<0.06 for 100 and 200 mg/kg, see Figure below). 200 mg/kg of Kevetrin given in 2 cycles 10 days later, delayed tumor growth by 35 days, significantly greater  than a single cycle (p<0.06), suggesting minimal development of drug resistance during the second cycle.
 
 
 
 Compound: KM 391
 
 Disease: Autism
 
 KM-391 is a small molecule being developed for autism.  The Company acquired the rights to KM-391 in December 2009.  The Company has completed three animal studies with KM -391.
 
 Study #1
 
  Neonatal serotonin depletion and reduced plasticity of the brain are salient features observed in Autism.  To experimentally induce these changes, 5,7-dihydroxytyptamine (5,7-DHT) was injected into the forebrain bundle on the day of birth of Wistar rat pups.  Litter mates were injected with saline with progeny matched mice serving as controls.
  5,7-DHT treated control rats significantly reduced their exploration in response to spatial rearrangement and object novelty, suggesting increased anxiety in response to change. A decrease in brain plasticity was observed, as well as a significant decrease in serotonergic (5-HT) innervation in the cortex and hippocampus; however, not in the subcortical forebrain. These changes and abnormalities are similar to our understanding of brain disorders presenting with cortical morphogenetic abnormalities and altered serotonin neurotransmission, as in Autism.
  For the study, 100 μl of 5,7-DHT were injected 4 hours after birth.  The animals were observed hourly for a few days until survival was established. Pair matching was done taking into consideration litter mating. Each group consisted of 10 male and 10 female rats with pair matching.  KM-391 was given orally at 2.5 or 5 mg/kg; for comparison, fluoxetine was given at 5 mg/kg; and the 4th group served as 5,7-DHT-treated controls. The compounds were administered orally up to 90 days. The animals were scored for behavioral patterns, plasticity and serotonin levels.  Behavioral scoring was done by standard behavioral test scoring, plasticity was calculated by surgical scoring, and serotonin levels were obtained by immunohistochemistry.
 Conclusions
  Treatment with KM-391 for 90 days resulted in:
 ·
Correction of abnormal behavior (p<0.05 vs. controls and fluoxetine)
 ·
Increased plasticity of brain ~ 85% by Day 100
 ·
Increase in brain serotonin levels to normal levels of paired twins (p<0.05 vs. controls and fluoxetine)
 
 
 Study #2
 
 
 Neonatal serotonin depletion and reduced plasticity of the brain are salient features observed in Autism.  It has been shown that injection of  5,7-dihydroxytyptamine (5,7-DHT) into the forebrain bundle  of Wistar rat pups on the day of birth will induce these changes.  It has also been shown that oxytocin / vasopressin has a beneficial impact on repetitive behavior symptoms of autism, such as, touching, self-injury (Hollander 2003 Neuropharm 28:193), social behavior (Andari 2010 PNAS 107:4389), and emotion recognition (Guastella 2010 Biol Psychiatry 67:692).  In this experiment, 5,7-DHT was injected into test animals, that induces  certain conditions of autistic behavior, and an oxytocin antagonist was given to exacerbate these behavioral changes often observed in patients.
  For the study, 5,7-DHT were injected 4 hours after birth.  The animals were observed hourly for a few days until survival was established. Pair matching was done taking into consideration litter mating. Each group consisted of 5 male and 5 female rats with pair matching.  To exacerbate behavioral changes, atosiban, an oxytocin antagonist, was administered to the pups by slow intravenous push.  Then, KM-391 was given orally at 10 mg/kg. Two groups were given placebo in place of atosiban. Behavior was monitored for up to 8 hours after dosing. Standard behavioral test scoring was performed for: repetitive behavior, self-induced injury, sensitivity to touch, positioning correction, group dynamics, and curiosity.  This procedure was repeated with the same animals on days 5 and 10.
  Conclusions
 The administration of an oxytocin antagonist alone consistently and significantly enhanced the autism-related behaviors. When KM-391 was given along with the oxytocin antagonist, there was a significant reduction in all 6 autism-related behaviors: repetitive behavior, self-induced injury, sensitivity to touch, positioning correction, group dynamics, and curiosity, within 1 to 2 hours. These results support the testing of KM-391 as a possible therapeutic agent in the treatment of autistic behavior in patients.
 
 Study #3
 
 Neonatal serotonin depletion in the brain is an established observation observed in Autism.  It has been shown that injection of 5,7-dihydroxytyptamine (5,7-DHT) into the forebrain bundle of Wistar rat pups on the day of birth will induce this depletion. In this experiment, serotonin levels were measured in three different regions of the brain in rats: cerebral cortex, hippocampus, or caudate nucleus, following either 5,7-DHT injection alone (induced autism), 5,7-DHT injection followed by 10 mg/kg KM-391 BID, or placebo treated controls.
  For the study, two groups of rats were injected with 5,7-DHT 4 hours after birth.  The animals were observed hourly for a few days until survival was established. Pair matching was done taking into consideration litter mating. Each group consisted of 5 male and 5 female rats with pair matching.  A third group consisted of pups without 5,7-DHT injection.  In one group KM-391 was given orally at 10 mg/kg BID for 40 days after 5,7-DHT injection. Two other groups were given placebo in place of KM-391.  48 days later, rats were sacrificed and brains were removed. Brains were sectioned, homogenized, and assayed for serotonin by ELISA.
  Conclusions
 The administration of KM-391 significantly (p<0.01) increased serotonin levels in all 3 regions of the brain: cerebral cortex, hippocampus, and caudate nucleus, from very low levels as observed with 5,7-DHT-induced autism to normal levels as observed in placebo treated control without the 5,7-DHT.These results further support the testing of KM-391 as a possible therapeutic agent in the treatment of autism in patients.
 
 Compound: KM 277
 Arthritis
   10
 
 In-vivo studies on over 1,000 animal subjects have been conducted to check for potential efficacy of KM 277 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
 
 KM 278 showed potential efficacy in both Osteoarthritis animal models and Asthma animal models.  KM 278 was tested against standard treatment for asthma and Osteoarthritis. These studies have led the Company’s management to believe that the compound has developmental potential for the treatment of asthma and Osteoarthritis.
 
 Compound: KM-133
 
 Disease: Psoriasis
 
 KM-133, a small molecule compound, acting on the principles of folate mechanism, is in development for Psoriasis.   After a series of chemical optimization exercises, the Company has completed an animal study in a xenograft model of psoriasis.  The results of the study are described below:
 
 KM-133 was studied in mice that were irradiated then engrafted with human psoriatic tissue.  Groups of ten mice were treated orally for 14 days with either 10 mg/kg KM-133 once/day, 10 mg/kg KM-133 twice/day, 7.5 mg/kg methotrexate once/day or acted as controls.  The mice were followed for 180 days.  Endpoints were skin appearance, histological observations, and blood levels of PRINS, IL-20 and 12-R lipoxygenase. For these parameters, KM-133 was compared to controls and methotrexate.  CD4+ and CD8+ lymphocyte counts were also measured and compared to efalizumab.
 
 KM-133 significantly reduced all psoriatic endpoints measured relative to controls (p<0.01).  The higher dose of KM-133 reduced psoriatic endpoints more than methotrexate (p<0.01).  In addition, there was no recurrence of psoriasis in animals treated with KM-133, whereas psoriasis recurred after an average of 61 days in animals treated with methotrexate.  Immunosuppression in animals treated with KM-133 was less severe than in those treated with efalizumab.
 
 In July 2010, the Company contracted with Destum Partners to find a development partner for KM-133.
 
 Compound: KM-362
 
 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-3174
 
 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.
 
 Compound: KM-732
 
 Disease: Hypertensive Emergency
 
 This is a very early-stage developmental compound with potential for the treatment of hypertensive emergency.  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 eight pharmaceutical compounds: Kevetrin, KM 277, KM 278, KM 133 KM 362, KM 3174, KM 732, and KM-391 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.    With respect to KM 732, the Company has agreed to pay an individual a fixed payment if the compound is approved for sale in the U.S.
 
 On May 20, 2009, the Company filed a U.S. patent application covering pharmaceutical formulations of Kevetrin and many novel compounds having similar structures to Kevetrin that may have potential as drug development candidates. The application also covers the use of Kevetrin and the other related compounds in various areas, including cancers.  In May, 2010 the Company filed foreign patent applications and a further United States application covering similar subject matter.  The foreign applications cover Patent Cooperation Treaty (PCT) countries as well as key non-PCT countries.
 
 The Company intends to file patent applications for the other compounds 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 broadest 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 may require that we grant them significant development and/or commercialization rights in return for agreeing to share the risk of development and/or commercialization.
    11
 
 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. In June 2009, the Company signed an agreement with Girindus America, Inc., for the manufacture of Kevetrin active pharmaceutical ingredient.  In March 2010, the Company signed a manufacturing agreement with Formatech Inc. for the aseptic filling of Kevetrin.  The Company may continue to use the services of Kard, Inc. to manufacture small quantities of compounds for animal and in-vitro studies.   (See Item 13. Certain Relationships and Related Transactions; and Director Independence)
 
 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 a very expensive and time consuming process. The FDA must approve a drug before it can be sold in the United States. The general process for FDA approval of a drug is as follows:
 
 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.  Presently all our compounds would be classified in the category of preclinical testing.
 
 Clinical Trials
 
 If the FDA accepts the IND, 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 human subjects (patients) to test for safety, dose tolerance, pharmacokinetics, metabolism, distribution and excretion.  In most disease states phase 1 studies are performed in healthy volunteers.  In cancer, Phase 1 studies are performed in cancer patients.
 
 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 of patients, 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, which 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 the Company 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: (i) complete additional testing; (ii) provide additional data or information; (iii), improve our manufacturing processes, procedures or facilities; and (iv) 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 a company is complying with regulatory standards or if problems are uncovered or occur after approval.
 
 In addition to obtaining FDA approval for each drug, we must obtain FDA approval of the manufacturing facilities for any drug we sell, including those of companies who manufacture our drugs for us. 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 cost 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 cost reimbursement are also subject to separate approvals in many of these 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 cancer, there are many drugs approved to treat various cancers and many more in the publicly disclosed development pipeline.  Our success depends on our ability to identify tumor types where Kevetrin has an advantage over existing therapies and those in the publicly disclosed development pipeline.
 
 EMPLOYEES
 
 As of June 30, 2010 the Company had three (3) employees, Mr. George Evans, Dr. Krishna Menon, and Mr. Leo Ehrlich.   Messrs. Krishna Menon and George Evans executed employment agreements with the Company on December 7, 2007.  The Company expects to conduct its operations using contractors and consultants for the short term. The Company may hire additional full-time employees to be engaged in administration, research and development should the Company have adequate funds.
 
 CORPORATE INFORMATION
 
 The Company's corporate headquarters are located at 100 Cummings Center, Suite 151-B, Beverly, MA, 01915. The Company's telephone number is (978) 633-3623.
 
 ITEM 1A.    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, has 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;
 
   13
   • 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:
 
 ● 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.
 
 If the Company is unable to repay the balance of the debentures, the holders of the debentures may initiate foreclosure proceedings against the assets of the Company.
 
 On May 7, 2008, the Company issued Convertible Debentures, at 9% per annum, for a total amount of $400,000.  The principal and related accrued interest were due December 2009, and secured by the Company’s assets.  The Debentures and any accrued and unpaid interest were convertible into the Company’s common stock, at the holder’s request, at a conversion price of $1.50 per share.
 
 During January, 2010, the Company extended and amended the original Convertible Debenture agreements by  extending the original maturity date to December 31, 2010.  The conversion price of the principal and any unpaid interest was changed to $0.50 per share.  The Company and debenture holders also agreed to convert accrued interest of $60,000 through December 31, 2009 into additional principal.
 
 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, 2010 we have $3,994 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-K. 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 on terms and conditions acceptable to the Company, 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 five million nine hundred fifty thousand dollars ($5,950,000) in the upcoming twelve (12) months to operate our business in accordance with our business plans and budgets. We may not be able to secure this amount of financing on terms and conditions acceptable to the Company. In the event that we cannot obtain acceptable financing, we would be unable to complete preclinical development and file an IND 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 require 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.
   14
 
 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
 
 • 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 (pre-clinical) 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 of our drug candidates.
 
 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.
 
 The process of obtaining FDA approval for a drug 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: (i) the successful conclusion of pre-clinical laboratory and animal tests, if appropriate, to gain preliminary information on the product's safety; (ii) filing with the FDA of an IND application to conduct human clinical trials for drugs or biologics; (iii) 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 (iv) filing by a company and acceptance and approval by the FDA of a New Drug Application (“NDA”), for a drug product or a biological license application (“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 the Company in terms of getting our drug candidates through clinical testing and to market.
 
  15
  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 (“cGMP”) rules pursuant to FDA regulations.
 
 Sales outside the United States of products that we develop will also be subject to additional 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 of our product is obtained, the corresponding 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 cGMP 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 (12) months should enable us to file an Investigational New Drug (“IND”) application for Kevetrin, our anti-cancer drug in our 2010-2011 fiscal year. We have completed the necessary safety pharmacology  and are nearing completion of the required toxicity studies to support an IND application, which requests permission from the FDA to test the drug 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 drugs, 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 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 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 trials 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 engage in 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.
    16
 
 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 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 Company 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 compounds and the proprietary compounds  of others with which we have entered into licensing agreements. We have filed one patent application and expect to file a number of additional 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 proprietary compounds 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 proprietary compounds. If any trade secret, know-how or other proprietary information and/or compounds 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 proprietary compounds 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 proprietary compounds.    Thus, the proprietary nature of our technology or technology licensed by us may not provide adequate protection against competitors.
 
 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.
   17
 
 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 cGMP manufacturing facility and process or the cGMP manufacturing facility and process of the third party or parties with whom we may outsource our manufacturing activities. The cGMP 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 cGMP 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;
 
 • 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  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, Mr. George Evans, Chief Executive Officer, and Dr. 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.  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 manufacturing services to the Company and leases space to the Company.
 
 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.
 
 
 18
 
 
 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 on terms and conditions acceptable 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 cancer, there are many drugs approved to treat various cancers and many more in the publicly disclosed pipeline.  Our success depends on our ability to identify tumor types where Kevetrin has an advantage over existing therapies and those in the publicly disclosed pipeline.
 
 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;
 
 • 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 "PINKSHEETS," 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 pinksheet market. 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 "PINKSHEETS" 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, 2010, the last trade price of our common stock, as quoted on the OTC Bulletin Board and PINKSHEETS, was $0.54.  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;
 
 • 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.
    19
 
 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, 2010, shareholders of the Company had approximately 49,700,000 shares of restricted stock, or 54% 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, 2010, 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-K. 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-K.
 
 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, 2010 we had 91,939,500 shares of common stock outstanding, and warrants and options convertible to 7,239,430 shares of common stock outstanding.
 
 Because our common stock is quoted only on the PINKSHEETS, your ability to sell your shares in the secondary trading market may be limited.
 
 
 Our common stock is quoted only on the PINKSHEETS. 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, 2010, approximately 49,712,000 of the 91,939,500 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 1,800,000 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 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.
 
 ITEM 2. DESCRIPTION OF PROPERTY
 
 Our principal offices are located at 100 Cummings Center, Suite 151-B, Beverly, MA 01915.  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 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.  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 incurred charges from KARD of $972,802.
 
 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.
 
 
 20
 
 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
 
 None,
 
 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 was quoted on the Over the Counter Bulletin Board (OTCBB) through August 2010.  In September 2010, the firm (market maker) making a market  in CTIX common stock  on the OTCBB, withdrew due to a lack of trading volume in our common stock.  This resulted in the Company’s common stock  being delisted from the OTCBB.  Currently trading in the Company’s common stock  are transacted on the PINKSHEET market. 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 price
 
 June 30, 2010
$0.28
$0.55March 31, 2010
$0.29
$0.47December 31, 2009
$0.30
$0.65September 30, 2009
$0.23
$1.00June 30, 2009
$0.20
$1.00March 31, 2009
$0.20
$0.20December 31, 2008
$0.15
$0.30September 30, 2008
$0.38
$0.92
 
 Number of Shareholders
 
 As of June 30, 2010, a total of 91,939,500 of the Company’s common stock (shares) are outstanding and held by approximately 70 shareholders of record. Of this amount, 42,227,906 shares are unrestricted, 1,813,712 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, 2010, there were 2,964,000 warrants and 3,355,430 stock options to purchase 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 Plan Awards In Last Fiscal Year
 
 On April 5, 2009 the Board of Directors of the Company adopted the 2009 Stock Option Plan (“the Plan”).  The Plan permits the grant of 2,000,000 shares of both Incentive Stock Options (“ISOs”), intended to qualify under section 422 of the Code, and Non-Qualified Stock Options.
 
 During the year ended June 30, 2010, the Company did not issue any options from the 2009 Stock Option Plan.
 
 Recent Cancellation of Unregistered Securities
 
 On June 1, 2010, the Company entered into a three month agreement with a company for consulting services.  In exchange for these services, the Company paid $30,000 and granted the company 75,000 shares of common stock.  In September 2010, the agreement was terminated due to non-performance and the 75,000 shares were returned to the company for cancellation.
 
 Recent Sales of Unregistered Securities
 
 On July 6, 2009, the Company entered into a one year agreement with a Consultant to serve as a scientific advisor and to participate as a member of the Company’s Scientific Advisory Board.  In exchange for these services, the Company has granted the Consultant 25,000 shares of common stock valued at $10,750.  At June 30, 2010, the value of the common stock has been fully amortized to professional fees expense. On July 6, 2010, this agreement was extended for an additional year in exchange for 25,000 additional shares of common stock.
 
 
 On January 1, 2010, the Company entered into a one year agreement with an individual for consulting services.  In exchange for these services, the Company granted the Consultant 50,000 options to purchase common stock.  The options were valued using the Black-Scholes option model for $14,186.  As of June 30, 2010, the Company recorded $7,093 in prepaid expenses related to this agreement and expensed $7,093.
 
 On February 5, 2010 the Company entered into an agreement with a medical dermatologist for consulting services.  In exchange for these services, the Company granted the Consultant 3,500 shares of common stock valued at $1,050.
 
 On May 6, 2010, the Company entered into a two year agreement with an individual for consulting services.  In exchange for these services, the Company granted the Consultant 200,000 options to purchase common stock.  The options were valued using the Black-Scholes option model for $52,257.  As of June 30, 2010, the Company recorded $47,902 in prepaid expenses related to this agreement and expensed $4,355.
 
 On June 1, 2010, the Company entered into a three month agreement with a company for consulting services.  In exchange for these services, the Company paid $30,000 and granted the company shares of common stock valued at $33,750.  As of June 30, 2010, the Company recorded $42,500 in prepaid expenses related to this agreement and expensed $21,250. In September 2010, the agreement was terminated due to non-performance and the 75,000 shares were returned to the company for cancellation.
 
 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.
 
 
 21
 
 
 ITEM 6.    SELECTED FINANCIAL DATA
 
 Not applicable for smaller reporting companies.
 
 ITEM 7. MANAGEMENT'S DISCUSSION AND FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 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-K. 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, Inc.
 
 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 (6) pharmaceutical compound candidates that are designed for treatment of diseases which may be either existing or diseases identified in the future.  In July, 2009 we acquired the rights to an additional compound and in December, 2009 we acquired the rights to an eighth compound.  The Company will initially spend most of its efforts and resources on its anti-cancer compound, Kevetrin, for the treatment of certain cancers.   Kevetrin is furthest along in in-vivo studies in small animals.  Based on the experimental studies results to date, the Company has decided to advance Kevetrin 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: (i) the design and oversight of clinical trials; (ii) the development and execution of strategies for the protection and maintenance of intellectual property rights; and (iii) the interaction with regulatory authorities internationally. We expect to concentrate on product development and engage in a 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 have currently outsourced the cGMP manufacturing of Kevetrin to third parties (Girindus America, Inc.).
 
 We are now engaged in organizational activities, sourcing compounds, synthesis of experimental quantities, and the outsourcing of cGMP manufacturing of Kevetrin.  We have not obtained sufficient 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.
 
 In July, 2010, the Company engaged Destum Partners to find a development partner for KM-133, the Company’s compound for psoriasis.
 
 Liquidity and Capital Resources
 
 As of June 30, 2010 the Company had a cash balance of $3,994.  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, 2010.  The Company may 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 and conditions that are acceptable to the Company.
 
 During the year ended June 30, 2010, Mr. Ehrlich, an officer of the Company, converted previous amounts provided in cash to the Company of $32,310 into a loan (the “Ehrlich Promissory Note A”).   The Ehrlich Promissory Note A was an unsecured, 6% per annum simple interest bearing, demand note.  During the same period, Mr. Ehrlich provided an additional $85,000 in cash in the form of a loan to the Company (the “Ehrlich Promissory Note B”).  The Ehrlich Promissory Note B was an unsecured, 6% per annum simple interest bearing, demand note.
 
 During the year ended June 30, 2010, Mr. Ehrlich, loaned the Company a total of $972,907. A condition for this loan was that the Ehrlich Promissory Note A and Ehrlich Promissory Note B be replaced with a new note, Ehrlich Promissory Note C.The Ehrlich Promissory Note C combines the balance of Ehrlich Promissory Note A, plus the additional loan amount of $972,907 for a total principal balance of $1,005,217.  The Ehrlich Promissory Note C is an unsecured demand note that bears 9% simple interest per annum.  The note requires that the interest rate on the amounts due on Ehrlich Promissory Notes A and B be changed retroactively, beginning October 1, 2009, to 9%.  As of June 30, 2010, the Company has recorded interest of $30,985 in accrued expenses.  In August 2010, Mr. Ehrlich has determined that the maximum amount of monies that will be loaned to the Company is $1.75 million.
 
 Subsequent to the date of the Balance Sheet, Mr. Ehrlich, an officer of the Company, loaned the Company an additional $520,000.  This amount was added to the balance of Ehrlich Promissory Note C.
 
 
 22
 
 
 Requirement for Additional Capital
 
 Research and Development Costs.  The Company has engaged in limited research and development activities. We currently do not have sufficient funds to meet our planned drug development for the next twelve (12) months and we may not be able to obtain the necessary financing on terms and conditions acceptable to the Company. Assuming that we are successful in raising additional financing, we plan to incur the following expenses over the next twelve (12) months:
 
 1
Research and Development of $2,000,000: Includes planned costs for Kevetrin of $1,000,000 for completion of in-vivo, in-vitro, pharmaco-kinetic, pharmaco-dynamic, toxicology studies, cGMP materials, and formulation costs; and $1,000,000 in preclinical development costs for our other compounds.2
Clinical trials – We have budgeted $2,500,000 for our Phase 1 trials (assumes success of Company’s IND filing for Kevetrin).3
Corporate overhead of $1,250,000: Budgeted office salaries, legal, accounting and other costs expected to be incurred.4
Capital costs of $200,000: Estimated cost for equipment and laboratory improvements.
 
 The Company will be unable to proceed with its full planned drug development program (s), meet its administrative expense requirements, capital costs, or staffing costs without obtaining additional financing of approximately  $5,950,000 (as per current management’s budgets). The Company does not have any arrangements at this time for equity or other financings towards meeting this financing requirement. If we are unable to obtain additional financing on terms and conditions acceptable to the Company, our business plan will be significantly delayed.
 
 Time Schedules, Milestones and Development Costs
 
 In the event that sufficient funding can be obtained, we shall endeavor to achieve completion of the following event within the next twelve months:
 
 Project
Drug Development of KevetrinTM for CancerCurrent status
Kevetrin is currently in preclinical studies.  Our experiments to date suggest that it is a potent anti-cancer agent.  The compound was well tolerated and showed little toxicity in various animal studies.  We are nearing completion of the safety studies necessary to file an IND, requesting permission to begin human trials.Nature, timing and estimated costs
We expect to submit the compound for an IND submission in 2010 as a drug candidate for the treatment of certain cancers. The Company has budgeted approximately $1,000,000 for the material development, production and testing of this drug during this period. Should management determine the results to be satisfactory, we will proceed to  a Phase I clinical study with the approval of the FDA which we have presently budgeted at  $3,000,000,  of which we expect  $2,500,000 to be incurred over the next 12 months.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 cannot be known at this time, and this poses substantial risk and uncertainty as to whether or when if ever, Kevetrin will become marketable.
 
 
 The Company intends to commit limited resources towards the development of compounds other than Kevetrin during the next twelve (12) 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 contracted the manufacturing of Kevetrin active pharmaceutical ingredient (API) for safety pharmacology, toxicity and phase 1 clinical trials in June 2009, with Girindus America, Inc.The synthesis work has been completed and the material delivered to the Company with additional stability testing ongoing.  The Company has contracted the manufacture of the Intra-venous dosage form to be used in the phase 1 study with Formatech, Inc.
 
 The Company believes it can contract the manufacturing of its other 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 of its other compounds (Phase I, II and III).
 
 The work-plan we have developed for the next twelve (12) months is expected to enable us to file the IND in our next 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 may significantly impact our development timelines and/or 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 on terms and conditions acceptable to the Company to fund its anticipated obligations for the next twelve (12) 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, 2010, 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, 2010.
 
 
 23
 
 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 inventory, valuation of long-lived assets and income taxes. These policies, and the related procedures, are described in detail below.
 
 Research and Development
 
 Expenditures for research, development, and engineering of products are expensed as incurred.  For the periods ended June 30, 2010 and 2009, and since inception, the Company incurred $2,000,996, $390,587 and $2,391,583 of research and development costs, respectively.
 
 Intangible Assets – Patents
 
 Costs incurred to file patent applications are capitalized when the Company believes that there is a high likelihood that the patent will issue and there will be future economic benefit associated with the patent.  These costs will be amortized on a straight-line basis over a 17 year life from the date of patent filing.  All costs associated with abandoned patent applications are expensed.  In addition, the Company will review the carrying value of patents for indicators of impairment on a periodic basis and if it determines that the carrying value is impaired, it values the patent at fair value.  As of June 30, 2010, the Company has expensed the costs associated with obtaining patents as the Company has not yet developed products which have gained market acceptance.  For the years ended June 30, 2010 and 2009 and from inception to June 30, 2010, the Company has charged to operations $17,899, $19,443 and $37,342, respectively.
 
 Long-Lived Assets
 
 Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company uses market quotes, if available or an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable. At June 30, 2010, 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 could occur in the future.  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.
 
  The Company adopted the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10), on January 1, 2007. The Company has not recognized a liability as a result of the implementation of ASC 740-10. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there is no unrecognized benefit since the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
 
 Accounting for Stock Based Compensation
 
 The Company accounts for all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. 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 Company will use 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 Company accounts for equity instruments issued to nonemployees by valuing them using the Black-Scholes valuation model. The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest.
 
 ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 Not applicable.
   24
 
 
 ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 
 Report of Independent Registered Public Accounting Firm
 
 Board of Directors
 and Stockholders
 Cellceutix Corporation
 Beverly, Massachusetts
 
 We have audited the accompanying consolidated balance sheets of Cellceutix Corporation (a development stage enterprise) as of June 30, 2010 and 2009, and the related consolidated statements of operations, stockholders' (deficit) and cash flows for the two years then ended and the cumulative period from June 20, 2007 (date of inception) through June 30, 2010. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
 We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as, evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the  financial position of Cellceutix Corporation (a development stage enterprise) as of June 30, 2010 and 2009, and the results of its operations and its cash flows for the two years then ended and the cumulative period from June 20, 2007 (date of inception) through June 30, 2010, in conformity with accounting principles generally accepted in the United States of America.
 
 The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated 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 consolidated financial statements do not contain any adjustments that might result from the outcome of these uncertainties.
 
 /s/ Holtz Rubenstein Reminick LLP
 New York, New York
 October 8, 2009
 New York, New York
 October 12, 2010
 
 
 
 25
 
 
 
 
 Cellceutix Corporation
 (A Development Stage Enterprise)
 
 Balance Sheets
 June 30, 2010


June 30, 2009AssetsCurrent assets:Cash

$
3,994


$
140,380Prepaid expenses


97,826



14,853Total current assets


101,820



155,233Total assets

$
101,820


$
155,233Liabilities and Stockholders' DeficitCurrent liabilities:Accounts payable, including related party payables of $900,870 and $327,179, respectively

$
1,187,434


$
340,013Accrued expenses, including related party accruals of $68,885 and $17,100, respectively


89,302



59,100Accrued salaries and payroll taxes


2,157,485



1,116,869Note payable to officer


1,005,217



32,310Convertible debentures


460,000



400,000Total current liabilities


4,899,438



1,948,292Total liabilities


4,899,438



1,948,292Commitments 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 shares authorized; 91,939,500 and 91,836,000shares issued and outstanding, respectively


9,194



9,184Additional paid in capital


631,721



202,890Deficit accumulated during development stage


(5,438,533
)


(2,005,133
)Total stockholders’ deficit


(4,797,618
)


(1,793,059)Total liabilities and stockholders' deficit

$
101,820


$
155,233
 
  
 The accompanying notes are an integral part of these financial statements.
    
 
 26
  
 
 
 Cellceutix Corporation
 (A Development Stage Enterprise)
 
 Statements of Operations
 
 
 For the Year Ended June 30, 2010


For the year ended June 30, 2009


For the cumulative period from June 20, 2007 (Date of Inception) through June 30, 2010Revenues

$
-


$
-


$
-Operating expenses:General and administrative

expenses


128,216



47,459



201,304Officers’ payroll and payroll tax expense


975,948



894,773



2,259,632Research and development


2,000,996



390,587



2,391,583Professional fees


241,006



98,713



429,902Patent expense


17,899



19,443



37,342Total operating expenses


3,364,065



1,450,975



5,319,763Loss from operations


(3,364,065
)


(1,450,975
)


(5,319,763
)Interest expense – net


(69,335)



(34,356
)


(109,691)Net loss before provision for income taxes


(3,433,400
)


(1,485,331
)


(5,429,454)Provision for income taxes


-



-



-Net loss

$
(3,433,400
)

$
(1,485,331
)

$
(5,429,454
)Basic and diluted loss per share

$
(0.04
)

$
(0.02
)Weighted average number of common shares used in basic and fully diluted per share calculations


91,862,596



91,842,452
 
 The accompanying notes are an integral part of these financial statements.
 
 
 
 
 
 27
 
 
 
  
 
 
 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, 2010
 
 Common Stock


Additional Paid


Deficit

Accumulated

During

DevelopmentShares


Par Value $0.0001


In Capital


Stage


TotalShares issued June 20, 2007 (Inception)


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 a 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
)Cancellation of shares issued for services, December 31, 2008


(100,000)



(10)



(104,990)



—



(105,000)Issuance of stock options


—



—



142,162



—



142,162Shares issued for services, June 11, 2009 at $0.38


20,000



2



7,598



—



7,600Shares issued for services, June 30, 2009 at $0.38


25,000



3



9,497



—



9,500Net loss


—



—



—



(1,485,331
)


(1,485,331
)Balance, June 30, 2009


91,836,000



9,184



202,890



(2,005,133
)


(1,793,059
)Shares issued for services, July 6, 2009 at $0.43


25,000



2



10,748



—-



10,750Shares issued for services, February 5, 2010 at $0.30


3,500



—



1,050



—



1,050Issuance of stock options


—



—



383,291



—



383,291Shares issued for services, June 1, 2010 at $0.45


75,000



8



33,742



—



33,750Net loss


—



—



—



(3,433,400
)


(3,433,400
)Balance, June 30, 2010


91,939,500


$
9,194


$
631,721


$
(5,438,533
)

$
(4,797,618
)
 
 
 
 
 The accompanying notes are an integral part of these financial statements.
    28
 
 
 
 
 Cellceutix Corporation
 (A Development Stage Enterprise)
 
 For the Year Ended June 30, 2010


For the Year Ended

June 30, 2009

For the Cumulative Period June 20, 2007 (Date of Inception) through

June 30, 2010CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(3,433,400
)

$(1,485,331
)
$
(5,429,454
)Adjustments to reconcile net loss to net cash used in operating activities:Stock based compensation


316,848


142,162


502,543Issuance of common stock for services


11,800


7,600


19,400Cancellation of stock issued for services


—


(17,500
)

(17,500)Amortization of prepaid expenses


22,698


—


40,198Changes in operating assets and liabilities:Prepaid expenses


(5,478
)

5,064


(10,831
)Accounts payable


847,421


326,283


1,187,484Accrued expenses


90,202


38,751


149,302Accrued officers’ salaries and payroll taxes


1,040,616


771,491


2,157,485Net cash used in operating activities


(1,109,293
)

(211,480
)

(1,401,373
)CASH FLOWS FROM FINANCING ACTIVITIES:Capital contribution from stockholder


—


—


50Sale of common stock


—


—


100Loan from officer


972,907


—


1,005,217Proceeds from convertible debentures


—


—


400,000Net cash provided by financing activities


972,907


—


1,405,367NET (DECREASE) INCREASE IN CASH AND CASH

EQUIVALENTS


(136,386)


(211,480
)

3,994CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


140,380


351,860


—CASH AND CASH EQUIVALENTS, END OF PERIOD

$
3,994


$140,380

$
3,994
 
 SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW FINANCING ACTIVITIES:
 Common stock issued for acquisition

$
—


$
—


$
9,079Forgiveness of debt

$
—


$
—


$
5025,000 shares of common stock issued for future services

$
—


$
7,600


$
7,600Reclassification of accrued interest to convertible debentures

$
60,000


$
—


$
60,00075,000 shares of common stock issued for future services

$
33,750


$
—


$
33,750Issuance of 1,288,610 options for services

$
359,081



—


$
359,081100,000 shares of common stock issued for services

$
—


$
—


$
105,000Cancellation of 100,000 shares of common stock for services

$
—


$
(105,000
)

$
(105,000
)
 
 The accompanying notes are an integral part of these financial statements.
 
 
 29
 
 
 Cellceutix Corporation
 (A Development Stage Enterprise)
 
 Notes to Financial Statements
 
 June 30, 2010
 
 
 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, 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.
 
 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”).  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, Inc. common stock held by such Cellceutix Pharma, Inc. shareholder at the time of the Exchange.  This resulted in the former holders of Cellceutix Pharma, Inc. Common Stock, upon Exchange, owning approximately 89% of the outstanding shares of the Company’s Common Stock. Accordingly, the Exchange represented a change in control.  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 legal 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.
 
 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, 2010, the Company has had a cumulative net loss of $5,429,454, no revenues and a working capital deficit of $4,797,618 at June 30, 2010.  As of June 30, 2010, 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, debt issuance and loans from an officer to pay for its operations. The Company intends on financing its future development activities and its working capital needs largely from the issuance of debt and 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.
 
 The recent economic downturn and market instability has made the business climate more volatile and more costly.  If the current equity and credit markets deteriorate further or do not improve, it may make necessary debt or equity financing more difficult, more costly and more dilutive.  Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on the Company’s growth strategy, financial performance and stock price and could require the delay of new product development and clinical trial plans.  Currently, the Company has not made any arrangements for equity or any other type of financing.
 
 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:
 
 Principles of Consolidation
 
 The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All material intercompany balances and transactions have been eliminated in consolidation.
 
 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, 2010 and 2009.
 
 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.
 
 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, 2010 and 2009, and since inception, the Company incurred $2,000,996, $390,587 and $2,391,583 of research and development costs, respectively.
 
 Intangible Assets – Patents
 
 Costs incurred to file patent applications are capitalized when the Company believes that there is a high likelihood that the patent will issue and there will be future economic benefit associated with the patent.  These costs will be amortized on a straight-line basis over a 17 year life from the date of patent filing.  All costs associated with abandoned patent applications are expensed.  In addition, the Company will review the carrying value of patents for indicators of impairment on a periodic basis and if it determines that the carrying value is impaired, it values the patent at fair value.  As of June 30, 2010, the Company has expensed the costs associated with obtaining patents as the Company has not yet developed products which have gained market acceptance.  For the years ended June 30, 2010 and 2009 and from inception to June 30, 2010, the Company has charged to operations $17,899, $19,443 and $37,342, respectively.
 
 Long-Lived Assets
 
 Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company uses market quotes, if available or an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable. At June 30, 2010, 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 could occur in the future.  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.
 
  The Company adopted the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10), on July 1, 2007. The Company has not recognized a liability as a result of the implementation of ASC 740-10. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there is no unrecognized benefit since the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
    30
 
 Basic Earnings (Loss) per Share
 
 Basic and diluted earnings per share are computed based on the weighted-average common shares and common share equivalents outstanding during the period. Common share equivalents consist of stock options, warrants and convertible notes payable. Common share equivalents of 7,239,430 and 5,297,487 were excluded from the computation of diluted earnings per share for the years ended June 30, 2010 and 2009, respectively, because their effect is anti-dilutive.
 
 Accounting for Stock Based Compensation
 
 The Company accounts for all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. 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 Company will use 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, 2010 and 2009 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.
 
 2010


2009Expected term (in years)


3



3Expected stock price volatility


105.7% - 119.7
%


108.4% - 114.9
%Risk-free interest rate


1.00%– 2.69
%


1.27%– 1.93
%Expected dividend yield


0
%


0
%Estimated fair value per option granted


0.20 - 0.38



0.13 - 0.36
 
 The Company accounts for equity instruments issued to nonemployees by valuing them using the Black-Scholes valuation model.
 
 The components of stock based compensation recognized in the Company’s Statement of Operations for the years ended June 30, 2010 and 2009 and since inception are as follows:
 
 For the year ended June 30, 2010


For the year ended June 30, 2009


For the cumulative period from June 20, 2007 (Date of Inception) through June 30, 2010Officers’ payroll and payroll tax expense

$
257,834


$
123,282


$
424,649Professional fees


93,513



7,037



100,550Patent expense


-



19,443



19,443$
351,347


$
149,762


$
544,642
 
 
 
 Recent Accounting Pronouncements
 
 In October 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance for revenue recognition with multiple deliverables.  This new guidance impacts the determination of when the individual deliverables, included in a multiple-element arrangement may be treated as separate units of accounting.  Additionally, it modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration.  This new guidance is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, however early adoption is permitted.  The adoption of this guidance will not have a material effect on the financial statements.
 
 In January 2010, the FASB issued new guidance which improves disclosures about fair value measurements.  The new standard is effective for interim and annual periods beginning after December 15, 2009, except for certain disclosures regarding Level 3 measurements, which are effective for fiscal years beginning after December 15, 2010.  The Company is evaluating the impact of this guidance on its financial statements and does not expect this new guidance to have a material effect on the financial statements.
 
 In February 2010, the FASB issued updated guidance to address certain implementation issues related to an entity’s requirements to perform and disclose subsequent events.  This update requires SEC filers to evaluate subsequent events through the date the financial statements were issued and exempts SEC filers from disclosing the date through which subsequent events have been evaluated.  The updated guidance was effective upon issuance, and did not have a material impact on the Company’s financial statements.
 
 Other recent accounting pronouncements issued by FASB (including 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
 
 Consulting Agreements
 
 On October 22, 2009, the Company signed an agreement with Toxikon Corporation to conduct preclinical studies required for an Investigational New Drug (IND) filing for its cancer drug Kevetrin(TM) for total payments of approximately $576,000. The studies covered by the agreement are designed to confirm that Kevetrin meets FDA safety requirements for studies in humans.   For the year ended June 30, 2010, the Company has paid $224,268 and expensed approximately $466,400 related to these studies.
 
 On March 13, 2010, the Company signed a manufacturing agreement with Formatech Inc. for the aseptic filling of Kevetrin. Aseptic filled vials of Kevetrin are required by the FDA for use in human clinical studies.    As of June 30, 2010, the remaining balance of Formatech work to be performed per the agreement is approximately $105,000.
   31
 
 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. The Company was assigned all right, title, and interest to an additional three pharmaceutical compounds on October 17, 2007, KM 133 KM 362 and KM 3174. In July 2009, the Company was assigned all right, title, and interest to KM 732.  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 President and director, Dr. Krishna Menon.  The Company filed a patent application for Kevetrin and intends to file patent applications for each of the other six compounds as funds become available.
 
 In December 2009, the Company was assigned all right, title and interest to a new compound, KM-391, which it intends to develop for the treatment of autism.  In exchange for this compound, the Company agreed to pay the inventors $10,000 plus 4.5% of net sales the compound in countries where a composition of matter patent has been issued and 3% of net sales in other countries.
 
 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
 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 do not commence until the Company receives a financing commitment in an amount of at least $4,000,000.
 
 The agreement calls for the issuance of options to purchase up to 1% of the common shares outstanding at each subsequent anniversary year during the employment term.  The agreement with Mr. Evans also provides a grant of options to purchase 918,610, 918,910 and 917,910 shares of the Company's stock with exercise prices of $0.35, $0.20 and $0.15 per share and fair values of $257,834, $123,282 and $43,533 for the years ended June 30, 2010, 2009 and 2008, respectively.
 
 As of June 30, 2010, the Company has recorded accrued officers’ salaries and payroll taxes are as follows:
 
 George Evans

$
733,333Krishna Menon


733,333Leo Ehrich


537,500Accrued Payroll Taxes


153,319$
2,157,485
 
 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, the Company began renting office space from KARD, on a month to month basis for $900 per month.  At June 30, 2010 and 2009, payables of $27,900 and $17,100 to KARD were included in accrued expenses, respectively. For the years ended June 30, 2010 and 2009 and the period June 20, 2007 (date of inception) through June 30, 2010, the Company has included $10,800, $10,800 and $27,900 in general and administrative expenses, respectively.
 
 Clinical Studies
 
 As of September 28, 2007 the Company engaged KARD to conduct specified pre-clinical studies necessary for the Company to prepare an IND submission to the 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 the Company retains all intellectual property resulting from the services by KARD. For the years ended June 30, 2010 and 2009 and the period June 20, 2007 (date of inception) through June 30, 2010, the Company incurred $972,802, $390,587 and $1,363,389 of research and development expenses conducted by KARD, respectively.  At June 30, 2010, the Company has included a total of $896,901 in accounts payable to Kard.
 
 
 32
 
 
 6.           Due To Officer
 
 During the year ended June 30, 2010, Mr. Ehrlich, an officer of the Company, converted previous amounts provided in cash to the Company of $32,310 into a loan (the “Ehrlich Promissory Note A”).   The Ehrlich Promissory Note A was an unsecured, 6% per annum simple interest bearing, demand note.  During the same period, Mr. Ehrlich provided an additional $85,000 in cash in the form of a loan to the Company (the “Ehrlich Promissory Note B”).  The Ehrlich Promissory Note B was an unsecured, 6% per annum simple interest bearing, demand note.
 
 During the year ended June 30, 2010, Mr. Ehrlich, loaned the Company a total of $972,907. A condition for this loan was that the Ehrlich Promissory Note A and Ehrlich Promissory Note B be replaced with a new note, Ehrlich Promissory Note C.The Ehrlich Promissory Note C combines the balance of Ehrlich Promissory Note A, plus the additional loan amount of $972,907 for a total principal balance of $1,005,217.  The Ehrlich Promissory Note C is an unsecured demand note that bears 9% simple interest per annum.  The note requires that the interest rate on the amounts due on Ehrlich Promissory Notes A and B be changed retroactively, beginning October 1, 2009, to 9%.  As of June 30, 2010, the Company has recorded interest of $30,985 in accrued expenses.  In August 2010, Mr. Ehrlich has determined that the maximum amount of monies that will be loaned to the Company is $1.75 million.
 
 Subsequent to the date of the Balance Sheet, Mr. Ehrlich, an officer of the Company, loaned the Company an additional $520,000. This amount was added to the balance of Ehrlich Promissory Note C.
 
 7.           Stock Options and Warrants
 
 On April 5, 2009 the Board of Directors of the Registrant adopted the 2009 Stock Option Plan ("the Plan"). The Plan permits the grant of 2,000,000 shares of both Incentive Stock Options ("ISOs"), intended to qualify under section 422 of the Code, and Non-Qualified Stock Options.
 
 Stock Options
 
 The following table summarizes all stock option activity:
 
 
 Number of Options

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life (Years)


Aggregate Intrinsic ValueOutstanding at June 30, 2008


917,910

$
0.15

2.44


—Granted


1,148,910

$
0.19

2.51


—Outstanding at June 30, 2009


2,066,820

$
0.17

2.04


—Granted


1,288,610


0.39

2.52


—Exercised


—


—

—


—Forfeited/expired


—


—

—


—Outstanding at June 30, 2010


3,355,430

$
0.25

1.61

$
986,950Exercisable at June 30, 2010


3,082,097

$
0.23

1.50

$
940,550
 
 The Company recognized $328,297, $142,162 and $513,992 of compensation costs related to option awards granted during the years ended June 30, 2010 and 2009 and the period from inception to June 30, 2010, respectively, and there is $65,313 of unamortized compensation cost expected to be recognized through June 30, 2011.
 
 As of June 30, 2010, there were 2,964,000 warrants issued and outstanding with a weighted average exercise price of $0.81.  The warrants were to expire in September 2010, however in September, the Company approved the extension of these warrants to December 31, 2013.  There were no new warrants issued during the years ended June 30, 2010 and 2009.
 
 The following table summarizes information about stock options outstanding and exercisable at June 30, 2010.
 
 Options Outstanding


Options ExercisableWeighted


Weighted





WeightedAverage


Average





AverageExercise

Number


Remaining


Exercise


Number


ExercisePrice

of Shares


Life (Years)


Price


of Shares


Price$
0.14


80,000



1.67


$
0.14



80,000


$
0.140.15


927,910



.45



0.15



927,910



0.150.18


100,000



1.85



0.18



100,000



0.180.20


918,910



1.44



0.20



918,910



0.200.26


10,000



2.17



0.26



8,333



0.260.32


10,000



2.51



0.32



5,000



0.320.33


100,000



2.85



0.33



8,333



0.330.34


10,000



2.67



0.34



3,333



0.340.35


20,000



2.38



0.35



11,667



0.350.37


30,000



2.10



0.37



25,833



0.370.38


130,000



2.77



0.38



28,333



0.380.40


978,610



2.44



0.40



950,277



0.400.41


10,000



2.09



0.41



9,168



0.410.42


20,000



2.76



0.42



5,000



0.420.47


10,000



3.00



0.47







0.473,355,430











3,082,097
 
 
 33
 
 
 The following table represents our non vested share-based payment activity:
 
 Weighted AverageNumber of


Grant DateOptions


Fair ValueNonvested options – June 30, 2008


—


—Granted


1,148,910

$
0.19Vested


(1,019,743
)
$
0.19Nonvested options – June 30, 2009


129,167

$
0.19-Granted


1,288,610

$

0.36Vested


(1,144,444
)


0.34Forfeited


-Nonvested options – June 30, 2010


273,333

$

0.37
 
 On January 1, 2010, the Company entered into a one year agreement with an individual for consulting services.  In exchange for these services, the Company granted the Consultant 50,000 options to purchase common stock.  The options were valued using the Black-Scholes option model for $14,186.  As of June 30, 2010, the Company recorded $7,093 in prepaid expenses related to this agreement and expensed $7,093.
 
 On February 5, 2010 the Company entered into an agreement with a medical dermatologist for consulting services.  In exchange for these services, the Company granted the Consultant 3,500 shares of common stock valued at $1,050.
 
 On April 1, 2009, the Company entered into an agreement, subsequently amended, with a Consultant to assist the Company's Chief Scientific Officer to organize, manage and display data from animal studies as well as information relating to Active Pharmaceutical Ingredients and formulations of the Company's products through November 2010. The Consultant was compensated at the rate of $4,000 per month payable on the last day of each month. In addition, at the end of each month of services provided, the Consultant is granted options to purchase 10,000 shares of Company's common stock.  As of June 30, 2010, the Consultant has been awarded a total of 150,000 options to purchase common stock valued at $42,311 to be vested over one year.  For the year ended June 30, 2010, the Company has expensed $24,301 to professional fees expense, related to these options.  Effective September 1, 2010, the Company has extended the current agreement and beginning in August 2010, the monthly fee was increased to $5,000.  The remainder of the agreement remains unchanged.
 
 On May 6, 2010, the Company entered into a two year agreement with an individual for consulting services.  In exchange for these services, the Company granted the Consultant 200,000 options to purchase common stock.  The options were valued using the Black-Scholes option model for $52,257.  As of June 30, 2010, the Company recorded $47,902 in prepaid expenses related to this agreement and expensed $4,355.
 
 On June 1, 2010, the Company entered into a three month agreement with a company for consulting services.  In exchange for these services, the Company paid $30,000 and granted the company 75,000 shares of common stock valued at $33,750.  As of June 30, 2010, the Company recorded $42,500 in prepaid expenses related to this agreement and expensed $21,250. In September 2010, the agreement was terminated due to non-performance and the 75,000 shares were returned to the company for cancellation.
 
 On July 6, 2009, the Company entered into a one year agreement with a Consultant to serve as a scientific advisor and to participate as a member of the Company’s Scientific Advisory Board.  In exchange for these services, the Company has granted the Consultant 25,000 shares of common stock valued at $10,750.  At June 30, 2010, the value of the common stock has been fully amortized to professional fees expense. On July 6, 2010, this agreement was extended for an additional year in exchange for 25,000 additional shares of common stock.
 
 8.           Convertible Debenture
 
 On May 7, 2008, the Company issued Convertible Debentures, at 9% per annum, for a total amount of $400,000.  The principal and related accrued interest were due December 2009, and secured by the Company’s assets.  The Debentures and any accrued and unpaid interest were convertible into the Company’s common stock, at the holder’s request, at a conversion price of $1.50.
 
 During January, 2010, the Company extended and amended the original Convertible Debenture agreements by extending the original maturity date to December 31, 2010.  The conversion price of the principal and any unpaid interest was changed to $0.50 per share.  The Company and debenture holders also agreed to convert accrued interest of $60,000 through December 31, 2009 into additional principal.  At June 30, 2010  $30,385 is accrued as interest expense.
 
 9.         Income Taxes
 
 Deferred income tax assets and liabilities are recognized for the expected future tax consequences of events that have been reflected in the financial statements. Deferred tax assets and liabilities are determined based on the differences between the book values and the tax bases of particular assets and liabilities and the tax effects of net operating loss and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized as income or expense in the period that included the enactment date.
 
 The Company has incurred operating losses since its inception and, therefore, no tax liabilities have been incurred for the periods presented. The amount of unused tax losses available to carry forward and apply against taxable income in future years totaled approximately $4,215,000 at June 30, 2010. The loss carry forwards expire beginning in 2028. Internal Revenue Code Sec. 382 places limitations on the utilization of net operating losses.  Due to the potential limitation and the Company’s historical losses, the Company has placed a full valuation allowance.  The valuation allowance increased by $1,198,400 at June 30, 2010 and $633,300 at June 30, 2009.
   34
 
 The income tax provision benefit differs from the amount of tax determined by applying the Federal statutory rate as follows:
 
 
 Years Ended


June 20, 2007throughJune 30, 2010


June 30, 2009


June 30, 2010Income tax benefit as statutory rate

$
(34%
)

$
(34%
)

$
(34%
)State income taxes, net


(4%
)


(4%
)


(4%
)Valuation allowance


38%



38%



38%$
-


$
-


$
-
 
  There was no current or deferred provision or benefit for income taxes for the year ended June 30, 2010 and 2009 and for the period from June 20, 2007 (Date of Inception) through June 30, 2010.  The components of deferred tax assets as of June 30, 2010 and 2009 are as follows:
  June 30, 2010


June 30, 2009Deferred tax (liability) asset:Accrued payroll

$
811,900


$
390,400Net operating loss carryforward


1,195,600



418,7002,007,500



809,100Valuation allowance


(2,007,500
)


(809,100
)Total deferred taxes

$
-


$
-
 
 10.         Subsequent Events
 
 On July 6, 2010, the Company entered into two one year agreements with two Consultants to serve as a scientific advisors and to participate as members of the Company’s Scientific Advisory Board.  In exchange for these services, the Company has granted the Consultants 25,000 shares of common stock each.  The common stock is valued at a total of $27,500.
 
 The Company’s Common Stock was quoted on the Over the Counter Bulletin Board (OTCBB) through August 2010.  In September 2010, the firm (market maker) making a market  in CTIX common stock  on the OTCBB withdrew due to a lack of trading volume in the Company’s common stock.  This resulted in the Company’s common stock  being delisted from the OTCBB.  Trading in the Company’s common stock  presently are transacted on the PINKSHEET market.
 
 Effective September 10, 2010, the Company approved the extension of the Series A, B, C and D warrants from the current expiration of September 10, 2010 to December 13, 2013.  As of June 30, 2010, there are 2,964,000 warrants outstanding.
 
 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
 There have been no changes in or disagreements with the Company's accountants on accounting and financial disclosure.
 
 
 ITEM 9A(T). CONTROLS AND PROCEDURES.
 
 Evaluation of disclosure controls and procedures.
 
 The Company’s Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the fiscal period ending June 30, 2009 covered by this Annual Report on Form 10-K.  Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. This conclusion by the Company’s Chief Executive Officer and Chief Financial Officer does not relate to reporting periods after June 30, 2009.
 
   35
 Management’s Report on Internal Control Over Financial Reporting
 
 Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the Company.  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 accounting principles generally accepted in the United States of America.
 
 The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
 
 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
 
 Management, under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework inInternal Control—Integrated Framework  issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of June 30, 2009 under the criteria set forth in theInternal Control—Integrated Framework .
 
 A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.  Management has determined that material weaknesses exist due to the lack of segregation of duties, i.e. all of the accounting tasks are performed by a single individual.  Currently, the Company’s management reviews all transactions.  Until the Company raises additional capital, it cannot remediate this weakness.
 
 This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.
 
 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, 2009, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 ITEM 9B. OTHER INFORMATION.
 
 None
 
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS 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.
 
 Name
Age
TitleGeorge W. Evans
56
Chief Executive Officer; Chairman of the Board of DirectorsKrishna Menon
62
President; Chief Scientific Officer, DirectorLeo Ehrlich
52
Chief Financial Officer; Director
 
 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 Drug 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. 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 Kerala 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 to be 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 2008 had approximately $2.9 billion dollars in sales, and co-developed another seven compounds currently in late-stage clinical development. In 1999, Eli Lilly honored Menon with the “President's Recognition Award”. (See Item 13. Certain Relationships and Related Transactions; and Director Independence)
 
 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 December 31, 2008, Mr. Ehrlich had been a director at StatSure Diagnostic Systems, Inc. and has held different executive officer positions at that company including CEO, President, and 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.
   36
 
 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-K.
 
 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 a Form 4 was filed late.
 
 ITEM 11. 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, 2010 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)(3)(4) Chief Executive Officer, Chairman of the Board


2010

2009

2008

$

$

$
358,333

258,333

116,667

$

$

$
0

0

0


$

$

$
257,834

123,282

43,533


0

0

0

$

$

$
0

0

0

$

$

$
616,167

381,615

160,200Dr. Krishna Menon(3)(5)(6) President, Chief Scientific Officer, Director


2010

2009

2008

$

$

$
358,333

258,333

116,667

$

$

$
0

0

0


$

$

$
0

0

0


0

0

0

$

$

$
0

0

$

$

$
358,333

258,333

116,667Leo Ehrlich,(7)(8) Chief Financial Officer,, Director


2010

2009

2008

$

$

$
250,000

200,000

87,500

$

$

$
0

0

0


$

$

$
0

0

0


0

0

0

$

$

$
0

0

0

$

$

$
250,000

200,000

87,500
 
 
 (1)
Mr. Evans has served as Chief Executive Officer and Chairman of the Board of the Company from June 2007 until present.
 
 
 (2)
Represents the amount of Mr. Evans’ base salary paid by the Company.  Mr. Evans’ total base salary for 2008 was $200,000 for the period of December 7, 2007 through December 7, 2008, and $300,000 for the period of December 7, 2008 through December 7, 2009 and $400,000 for the period December 7, 2009 through June 30, 2010. Of these salaries, $733,333 was deemed earned by Mr. Evans through June 30, 2010 and has been deferred and remains unpaid as of June 30, 2010.
 
 (3)
Officer is 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.
 
 (4)
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.
 
 (5)
Dr. Menon has served as President, Chief Scientific Officer and a Director of the Company from June 2007 until present.
 
 (6)
Represents the amount of Dr. Menon’s base salary paid by the Company.  Dr. Menon’s total base salary for 2008 was $200,000 for the period of December 7, 2007 through December 7, 2008, and $300,000 for the period of December 7, 2008 through December 7, 2009 and $400,000 for the period December 7, 2009 through June 30, 2010.  Of these amounts, $733,333 was deemed earned by Dr. Menon through June 30, 2010 and has been deferred and remains unpaid as of June 30, 2010.
 
 (7)
Mr. Ehrlich has served as Chief Financial Officer and a Director of the Company from June 2007 until present.
 
 (8)
Represents the amount of Mr. Ehrlich’s base salary paid by the Company.  Mr. Ehrlich’s total base salary for 2008 was $150,000 for the period of December 7, 2007 through December 7, 2008, and $250,000 for the period of December 7, 2008 through December 7, 2009 and $250,000 for the period December 7, 2009 through June 30, 2010.  Of these amounts, 537,500 was deemed earned by Mr. Ehrlich through June 30, 2010 and has been deferred and remains unpaid as of August amortization expense June 30, 2010.
 
 
 37
 
 
 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 single component is considered by itself, rather all components of the compensation package are considered in aggregate. Wherever possible, objective measurements will be utilized to quantify performance, however, 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 its 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 2011 fiscal year.
 
 EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
 
 On December 7, 2007, the Company entered into employment agreements with two (2) executive officers, George Evans, Chief Executive Officer, and Dr. 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 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 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.
 
 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.
 
 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.
 
 Samuel Danishefsy, PhD. Dr. Danishefsky is the incumbent of a Eugene W. Kettering Chair and a member of the Molecular Pharmacology and Chemistry Program in the Sloan-Kettering Institute (SKI). He is also a professor of chemistry at Columbia University.
 
 Dr. Danishefsky earned his BS degree from Yeshiva University, his PhD degree from Harvard University, and conducted postdoctoral research at Columbia with Gilbert Stork. In 1996, Drs. Danishefsky and Stork shared the Wolf Prize. Dr. Danishefsky has previously won the American Chemical Society Award for Creative Work in Chemical Synthesis, the Cope Medal, and the Tetrahedron Prize, among others, as well as membership in the National Academy of Sciences. He joined Memorial Sloan-Kettering Cancer Center in 1991 after serving on the faculties of both the University of Pittsburgh and Yale University.
 
 Members of the Scientific Advisory Board have each received 25,000 shares of the Company's common stock per year as remuneration for their services.  The Company has also agreed to reimburse members of the Scientific Advisory Board for expenses incurred in their service to the Company.
   38
 
 ITEM 12. 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)Dr. Krishna Menon C/O Cellceutix

100 Cumming Ctr., Suite 151-B

Beverley, MA 01915
31,048,286
33.77%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
12,247,284
13.32%All Directors and Executive

Officers as a Group (3 persons) (5)
47,897,882
52.09%
 
 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 91,939,500 shares of Common Stock outstanding as of June 30, 2010, 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 Cellceutix common stock held by Mr. Evans and includes 1,835,816 shares of Cellceutix’s common stock held by the children of George W. Evans.
 
 4.
Leo Ehrlich, Chief Financial Officer and Director.  Includes 8,745,002 shares of Cellceutix common stock held by Mr. Ehrlich and includes 3,502,282 shares of Cellceutix’s common stock held by the wife and child of Leo Ehrlich.
 
 5.
Includes 5,338,098 shares of Common Stock indirectly owned by certain of the Executive Officers and Directors as a group but excludes vested options to acquire approximately 2,755,430 additional shares of Common Stock by Executive Officers and Directors, as a group.
 
 ITEM 13.  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.  On June 23, 2009, the Company entered into a Compound Assignment Agreement with Dr. Menon covering KM-732.  In each Agreement, 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 incurred charges from KARD of $548,743.
 
 Mr. Leo Ehrlich
 
 During the year ended June 30, 2010, Mr. Ehrlich, an officer of the Company, converted previous amounts provided in cash to the Company of $32,310 into a loan (the “Ehrlich Promissory Note A”).   The Ehrlich Promissory Note A was an unsecured, 6% per annum simple interest bearing, demand note.  During the same period, Mr. Ehrlich provided an additional $85,000 in cash in the form of a loan to the Company (the “Ehrlich Promissory Note B”).  The Ehrlich Promissory Note B was an unsecured, 6% per annum simple interest bearing, demand note.
 
 During the year ended June 30, 2010, Mr. Ehrlich, loaned the Company a total of $972,907. A condition for this loan was that the Ehrlich Promissory Note A and Ehrlich Promissory Note B be replaced with a new note, Ehrlich Promissory Note C.The Ehrlich Promissory Note C combines the balance of Ehrlich Promissory Note A, plus the additional loan amount of $972,907 for a total principal balance of $1,005,217.  The Ehrlich Promissory Note C is an unsecured demand note that bears 9% simple interest per annum.  The note requires that the interest rate on the amounts due on Ehrlich Promissory Notes A and B be changed retroactively, beginning October 1, 2009, to 9%.  As of June 30, 2010, the Company has recorded interest of $30,985 in accrued expenses.  In August 2010, Mr. Ehrlich has determined that the maximum amount of monies that will be loaned to the Company is $1.75 million.
 
 Subsequent to the date of the Balance Sheet, Mr. Ehrlich, an officer of the Company, loaned the Company an additional $520,000. This amount was added to the balance of Ehrlich Promissory Note C.
 
 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 PINKSHEETS. 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.
    39
 
 ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
 
 Audit Fees. During the years ended June 30, 2010 and 2009, the aggregate fees billed by the Company's auditors, Holtz Rubinstein Reminick LLP, 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-Q and for services provided in connection with the statutory and regulatory filings or engagements for those fiscal years was $53,770 and $35,000, respectively.
 
 Audit-Related Fees. During years ended June 30, 2010 and 2009, our auditors, Holtz Rubinstein Reminick LLP, did not receive any fees for any audit-related services other than as set forth in paragraph (a) above.
 
 Tax Fees. Our auditors, Holtz Rubinstein Reminick LLP, did not provide tax compliance or tax planning advice during the years ended June 30, 2010 and 2009.
 
 All Other Fees. There were no fees billed for services rendered by Holtz Rubenstein Reminick LLP for 2010 and 2009, other than the services described above.
 
 PART IV
 
 ITEM 15. EXHIBITS
 
 
 (A) EXHIBITS INCLUDED HEREIN:
 
 
 EXHIBIT NO. DESCRIPTION
 
 
 
 
 
 2.1        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)
 
 
 3.1         Articles of Incorporation of Cellceutix Pharma, Inc. (1)
 
 
 3.2          By-laws of Cellceutix Pharma, Inc. (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. dated December 7, 2007(1)
 
 
 10.12      Assignment Agreement between Cellceutix Pharma, Inc. and Krishna Menon dated June 23, 2009(1)
 
 
 10.1.1     Security Agreement, dated as of May 7, 2008, between Cellceutix Corp. and Putnam Partners, White Star  LLC, and Dahlia Nordlicht, filed with the Company’s Form 10-KSB with the Securities Commission on September 24, 2008
 
 
 10.2.2    Convertible  Promissory Note dated as of May 7, 2008, between Cellceutix Corp. and Putnam Partners,  White Star LLC, and Dahlia Nordlicht, filed with the Company’s Form 10-KSB with the Securities Commission on September 24, 2008
 
 
 10.3.4    Guaranty in favor of Putnam Partners, White Star LLC, and Dahlia Nordlicht dated as of May 7, 2008, filed with the Company’s Form 10-KSB with the Securities Commission on September 24, 2008
 
 
 10.13     Agreement with Paul Ginsburg, Attorney filed on Form 8-K with the Securities Commission on April 6, 2009
 
 
 10.14     Consulting Agreement with Sylvia Holden, Consultant filed on Form 8-K with the Securities Commission on April 6, 2009
 
 
 10.15     Cellceutix Corporation  2009 Stock Option Plan filed on Form 8-K with the Securities Commission on April 6, 2009
 
 
 10.16      Consulting Agreement with   James DeAngelis filed on Form 8-K with the Securities Commission on May 21, 2009
 
 
 10.17                      Agreement between Cellceutix Pharma, Inc. and Girindus America  dated June 22, 2009
 
 10.18                      Agreement between Cellceutix Corporation and Toxikon Corporation dated October 22, 2009
 
 14.15     Code of Ethics (2)
 
 
 
 
 31. 1         Chairman of the Board and Chief Executive Officer Certifications required under Section 302 of the
 Sarbanes Oxley Act of 2002*
 
 31.2          Chief Financial Officer 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
 
 
 
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 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: October 12, 2010
 
 
 CELLCEUTIX CORPORATION
 
 
 /s/ George W. Evans
 Dated:  October, 12, 2010
 
 
 George W. Evans
 Chairman of the Board and
 Chief Executive Officer
 
 
 /s/ Leo Ehrlich
 Dated:  October, 12, 2010
  Leo Ehrlich
 Chief Financial Officer and Secretary
 
 Dated:  October, 12, 2010
 
 Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on October 12, 2010.
 
 
 /s/ Krishna Menon
 Dated:  October, 12, 2010
  President and Director
 
 Krishna Menon
 
 
 
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