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mso-pagination: widow-orphan; mso-layout-grid-align: auto; text-autospace: ideograph-other;" class="msonormal"><font style="font-family: times new roman,times;" size="2">$</font></p> </td> <td style="width: 56.8pt; border: none; border-bottom: solid windowtext 1.0pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0in 1.4pt 0in 1.4pt; height: 13.2pt;" valign="bottom" width="76" nowrap="nowrap"> <p align="right" style="text-align: right; mso-pagination: widow-orphan; mso-layout-grid-align: auto; text-autospace: ideograph-other;" class="msonormal"><font style="font-family: times new roman,times;" size="2">62,974,000</font></p> </td> </tr> </table> <p class="msonormal"><font style="font-family: times new roman,times;" size="2">The Company recognized approximately $44,000 and $18,000 of stock based compensation costs related to stock and stock options awards for the three months ended March 31, 2013 and 2012; approximately $258,000 and $1,175,000 for the nine months ended March 31, 2013 and 2012, and approximately $6,948,000 for the period from inception to March 31, 2013, respectively, and there is approximately $84,000 of unamortized compensation cost expected to be recognized through March 31, 2014.&#160;&#160;</font></p> <p style="mso-pagination: widow-orphan; mso-layout-grid-align: auto; text-autospace: ideograph-other;" class="msonormal"><font style="font-family: times new roman,times;" size="2"><b style="mso-bidi-font-weight: normal;">Stock Warrants</b></font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On March 5, 2013 the Company issued 370,500 Class A common shares par value $.0001 to each of two warrant holders upon exercise of Common Stock Purchase Warrants exercisable at $0.25 per share. The Company received an aggregate of $185,250. The issuance was exempt from registration under Section 4(2) of the Securities Act.</font></p> <p class="msonormal"><font style="font-family: times new roman,times;" size="2">As of March 31, 2013 and June 30, 2012, there were 5,571,084 and 5,719,754 warrants issued and outstanding with a weighted average exercise price of $0.92 and $0.87, respectively.&#160;&#160;Of these warrants, approximately 2,223,000 warrants were to expire in September 2010, however in September 2010; the Company approved the extension of these warrants to December 31, 2013.&#160;As of March 31, 2013 and June 30, 2012, the average remaining contractual life of the outstanding warrants was 1.68 years and 2.02 years, respectively and the aggregate intrinsic value was $4,627,000 and $474,000, respectively.</font></p> <p style="mso-pagination: widow-orphan; mso-layout-grid-align: auto; text-autospace: ideograph-other;" class="msonormal"><font style="font-family: times new roman,times;" size="2"><b>10.&#160;&#160;&#160;&#160;&#160;&#160; Equity Transactions</b></font></p> <div style="mso-pagination: widow-orphan; mso-layout-grid-align: auto; text-autospace: ideograph-other;" class="msonormal"><font style="font-family: times new roman,times;" size="2"><u>Aspire Agreement</u></font></div> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On December 6, 2012, the Company entered into a Class A Common Stock Purchase Agreement with Aspire Capital Fund,&#160;LLC, which provides that upon meeting the terms of the agreement, Aspire Capital is committed to purchase up to an aggregate of $10,000,000 of our shares of Class A Common Stock over the approximately 36-month term of the Purchase Agreement. In consideration for entering into the Purchase Agreement, the Company issued to Aspire Capital 336,625 shares of our Class A Common Stock as a commitment fee and sold to Aspire Capital 112,208 shares of Class A Common Stock for $100,000. The commitment fee will be amortized as the funding is received. The unamortized portion is carried on the balance sheet as deferred offering costs.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">Concurrently with entering into the Purchase Agreement, the Company agreed to file one or more registration statements as permissible and necessary under the Securities Act of 1933, as amended, or the Securities Act, for the sale of shares of our Class A Common Stock that have been and may be issued to Aspire Capital under the Purchase Agreement. On January 22, 2012, the Company filed a Form S-3 registration statement and the registration statement was declared effective by the SEC on February 14, 2013. Thereafter, on every and any business day selected by the Company, the Company shall have the right to direct Aspire Capital Fund to purchase (each such purchase, a &#8220;Regular Purchase&#8221;), up to 100,000 shares on each and any business day chosen by the Company; however, in any event, the amount of a Regular Purchase will not exceed $500,000 per business day. The purchase price for Regular Purchases (the &#8220;Regular Purchase Price&#8221;), shall be equal to the lesser of: (i) the lowest sale price of the shares on the purchase date, or (ii) the average of the three (3) lowest closing sale prices of the shares during the twelve (12) business days prior to the purchase date. The Regular Purchase Price will be known at the time of notice and before any shares are sold to Aspire Capital Fund.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">In addition to the Regular Purchases, with one day&#8217;s prior written notice, the Company shall also have the right to require the ACF Investor to purchase up to an additional 20% of the trading volume of the shares for the next business day at a purchase price (the &#8220;VWAP Purchase Price&#8221;), equal to the lesser of: (i) the closing sale price of the shares on the purchase date, or (ii) ninety-five percent (95%) of the next business day&#8217;s volume weighted average price (each such purchase, a &#8220;VWAP Purchase&#8221;). The Company shall have the right, in its sole discretion, to determine a maximum number of shares and set a minimum market price threshold for each VWAP Purchase. The Company can only require a VWAP Purchase if (a) the closing sale price for the Company Class A common shares on the notice day for the VWAP Purchase is higher than $0.50, and (b) the Company has also submitted a Regular Purchase on the notice date for the VWAP Purchase. There are no limits on the number of VWAP Purchases that the Company may require.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">Aspire Capital Fund has no right to require any sales by the Company, but is obligated to make purchases from the Company as the Company directs it in accordance with the Purchase Agreement. The Company can also accelerate the amount of Class A Common Stock to be purchased under certain circumstances. There are no limitations on use of proceeds, financial or business covenants, restrictions on future funding, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">The Company is never under any obligation to sell shares to Aspire Capital Fund. Aspire Capital Fund has no rights to require the Company to sell shares.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">During the quarter ended March 31, 2013, the Company sold an additional 1,000,000 shares generating gross proceeds of $1,516,320.</font></p> <p style="background: white;"><font style="font-family: times new roman,times;" size="2">As of March 31, 2013, the Company had completed sales to Aspire totaling 1,112,208 shares of common stock generating gross proceeds of approximately $1,616,000.</font></p> <p class="msonormal"><font style="font-family: times new roman,times;" size="2"><u>Series A Convertible Preferred Shares Subscription Agreement</u></font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On May 8, 2012, the Company entered into a subscription agreement for Series A Convertible Preferred shares with an accredited investor for an aggregate of $1,000,000.&#160;&#160;The subscription agreement provides for installment funding Amounts, at Cellceutix&#8217;s discretion, to take place every thirty days after initial closing date &#160;for an amount of the lesser of&#160;&#160;(i) $75,000 or&#160; (ii) twenty five&#160; (25%) per cent of the dollar value of the total volume traded during the preceding 22 trading days.&#160; &#160;The Series A Preferred Shares are convertible into common stock at the lesser of 85% of the closing bid price on the date of prior to each closing, or 85% of the lowest bid price for the fifteen (15) days prior to conversion.&#160; At no time may a holder of shares of Series A Preferred Stock convert shares of the Series A Preferred Stock if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder at such time, the number of shares of Common Stock which would result in such holder beneficially owning more than 9.99% of all of the Common Stock outstanding. Additionally,&#160;for each common share issued upon conversion of Series A preferred share, a five year common stock purchase warrant is issued to the Subscriber.&#160; The warrant is exercisable at the conversion price of the common shares issued.&#160; The fair value of the common stock into which the Series A Preferred Stock is convertible will exceed the price at which the common stock will be issued on the date of issuance of the preferred stock.&#160; The amount by which the fair value of the common stock exceeds the issue price of the common stock is a beneficial conversion feature.&#160; The Company will recognize the beneficial conversion feature as a one-time, non-cash deemed dividend to the holders of the Series A Preferred Stock on the date of issuance, which is the date the preferred stock first became convertible.&#160; &#160;The Series A Convertible Preferred shares do not pay dividends.&#160; &#160;The Common shares underlying the Series A Preferred Shares and the common stock purchase warrants are subject to piggy back registration rights. To date an aggregate of $400,000 was funded, and the Company issued an aggregate of 848,084 common shares and 848,084 common stock purchase warrants. The subscription for the remaining $600,000 subscription agreement was mutually terminated between&#160;the parties on January 8, 2013.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On&#160;July 3, 2012 a tranche funding&#160;was made to purchase Series A Convertible Preferred shares in the amount of seventy five thousand dollars ($75,000) for the purchase 7,500 Series A Convertible Preferred Shares.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On June 25, 2012 the subscriber converted 10,000&#160;Preferred Shares equal to $100,000 face value at $0.39&#160;per share based on 85% of the closing bid price on May 7,&#160;2012 of $0.46.&#160;&#160; The company issued to the subscriber 255,754&#160;shares of Cellceutix common stock.&#160; In connection thereto the Company issued 255,754&#160;warrants to purchase common shares of Cellceutix Corporation at $0.39 per share&#160;valid for five years.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On July 30, 2012,&#160;a tranche funding was made to purchase Series A Convertible Preferred shares&#160;in the amount of seventy five thousand dollars ($75,000)&#160;for the purchase 7,500 Series A Convertible Preferred Shares.</font></p> <p class="msonormal"><font style="font-family: times new roman,times;" size="2">On August 1, 2012 the Series A Convertible Preferred subscriber converted 7,500 Preferred Shares equal to $75,000 face value at $0.49 per share based on 85% of the closing bid price on July 25, 2012 of $0.59.&#160;&#160; 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text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On August 31, 2012 a tranche funding was made to purchase Series A Convertible Preferred shares in the amount of $75,000 USD for the purchase of 7,500 Series A Convertible Preferred Shares. &#160;</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On September 19, 2012 the Series A Convertible Preferred subscriber converted 7,500 Preferred Shares equal to $75,000 face value at $0.527 per share based on 85% of the closing bid price on August 31, 2012 at $0.62.&#160;&#160; The company issued to the subscriber 142,315&#160;shares of Cellceutix Class A common stock.&#160; In connection thereto the Company issued 142,315&#160;warrants to purchase common shares of Cellceutix Corporation at $0.527 per share and is valid for five years.&#160;&#160; The shares and the warrants are subject to piggy back registration rights.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On September 20, 2012 a tranche funding was made to purchase Series A Convertible Preferred shares in the amount of $75,000 USD for the purchase of 7,500 Series A Convertible Preferred Shares.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On September 24, 2012 the subscriber converted 7,500 Preferred Shares equal to $75,000 face value at $0.527 per share based on 85% of the closing bid price on August 31, 2012&#160;of $0.62.&#160; The company issued to the subscriber 142,315 shares of Cellceutix Class A common stock.&#160; In connection thereto the Company issued 142,315&#160;warrants to purchase Class A common shares of Cellceutix Corporation at $0.527 per share and is valid for five years.&#160;&#160; The shares and the warrants are subject to piggy back registration rights.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2"><u>Other Equity Transactions during the Nine Months Ended March 31, 2013</u></font></p> <p class="msonormal"><font style="font-family: times new roman,times;" size="2">On July 25, 2012, the Company issued a total of 25,000 Class A common shares to consultants for services, valued at</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">$14,750 based on the closing bid price as quoted on the OTC Bulletin Board on July 24, 2012 at $.59 per share.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On August 26, 2012, the Company issued a total of 50,000 Class A common shares to consultants for services, valued at</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">$30,000 based on the closing bid price as quoted on the OTC Bulletin Board on August 25, 2012 at $.60 per share.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On September 7, 2012&#160;a consultant exercised their option to purchase 250,000 shares of Class A common shares at $0.20, resulting in a payment to the Company of $50,000 and the issuance of 250,000&#160;shares of&#160;Class A&#160;common stock.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On October 24, 2012 the Company issued a total of 50,000 Class A common shares to consultants for services through December 31, 2012, valued at $43,500 based on the closing bid price as quoted on the OTC Bulletin Board on October 23, 2012 at $.87 per share.&#160;</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On&#160;December 19, 2012 the Company issued 320,000 Class A common shares par value $.0001 to a consultant upon exercise of stock options granted to him pursuant to the Company&#8217;s 2009 and 2010 Equity Incentive Plans of which 80,000 were granted on March 2, 2009, exercisable at $0.14 per share; 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mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt;" valign="top" width="161"> <p align="center" style="text-align: center; line-height: 11.0pt; mso-line-height-rule: exactly;" class="msonormal"><font style="font-family: times new roman,times;" size="2"><b>Nine Months Ended March 31, 2013</b></font></p> </td> <td style="width: 14.2pt; border: solid windowtext 1.0pt; border-left: none; mso-border-left-alt: solid windowtext .5pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt;" valign="top" width="19"> <p align="center" style="text-align: center; line-height: 11.0pt; mso-line-height-rule: exactly;" class="msonormal">&#160;</p> </td> <td style="width: 111.7pt; border: solid windowtext 1.0pt; border-left: none; mso-border-left-alt: solid windowtext .5pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt;" valign="top" width="149"> <p align="center" style="text-align: center; line-height: 11.0pt; mso-line-height-rule: exactly;" class="msonormal"><font style="font-family: times new roman,times;" size="2"><b>Nine Months Ended March 31, 2012</b></font></p> </td> </tr> <tr style="mso-yfti-irow: 1;"> <td style="width: 163.05pt; border: solid windowtext 1.0pt; border-top: none; mso-border-top-alt: solid windowtext .5pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt;" valign="top" width="217"> <p style="line-height: 11.0pt; mso-line-height-rule: exactly;" class="msonormal"><font style="font-family: times new roman,times;" size="2">Expected term (in years)</font></p> </td> <td style="width: 120.45pt; border-top: none; border-left: none; border-bottom: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; mso-border-top-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt;" valign="top" width="161"> <p align="right" style="text-align: right; line-height: 11.0pt; mso-line-height-rule: exactly;" class="msonormal"><font style="font-family: times new roman,times;" size="2">5-10</font></p> </td> <td style="width: 14.2pt; border-top: none; border-left: none; border-bottom: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; 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text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2"><b>Note 1.</b><b> Basis of Presentation and Nature of Operations</b></font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2"><b>Basis of Presentation</b></font></p> <p class="msonormal"><font style="font-family: times new roman,times;" size="2">The accompanying unaudited condensed consolidated financial statements of Cellceutix Corporation have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with our audited financial statements for the year ended June 30, 2012, included in our Annual Report on Form 10-K for the year ended June 30, 2012.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three month and nine month periods have been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. When used in these notes, the terms "Company", "we", "us" or "our" mean Cellceutix Corporation.&#160;</font></p> <div style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">Cellceutix Corporation, formerly known as EconoShare, Inc., (&#8220;Cellceutix&#8221; or the &#8220;Company&#8221;) was incorporated on August 1, 2005. On December 6, 2007, the Company acquired Cellceutix Pharma, Inc. which was incorporated in the State of Delaware on June 20, 2007, in exchange for newly issued shares of the Company&#8217;s common stock. As a result of the exchange, Cellceutix Pharma, Inc. became a wholly-owned subsidiary of the Company. The Company is a clinical stage biopharmaceutical company and has no customers, products or revenues to date. The Company also follows the accounting guidelines for accounting for and reporting in Development Stage Enterprises in preparing its financial statements.</font></div> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">The Company&#8217;s Common Stock is quoted on the Over the Counter Bulletin Board (OTCBB), symbol &#8220;CTIX&#8221;.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">All amounts, where it is designated in these notes to the financial statements as an approximate amount, are rounded to the nearest thousand dollars.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2"><b>Nature of Operations</b></font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2"><b><u>Overview</u></b></font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">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.&#160;Our strategy is to use our business and scientific expertise to maximize the value of our pipeline.&#160;We will do this by focusing initially on our lead compounds, Kevetrin and Prurisol and advancing them as quickly as possible along the regulatory pathway.&#160;We will develop the highest quality data and broadest intellectual property to support our compounds.&#160;&#160;</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">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.&#160;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.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2"><b>Pharmaceutical Compounds &#8211; Kevetrin and Prurisol</b></font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">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 (Prurisol), KM 362 and KM 3174. In July 2009, the Company was assigned all right, title, and interest to KM 732.&#160;&#160;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.&#160;&#160;In December 2012, the Company was issued a US patent&#160;for Kevetrin. &#160;In January 2012 the Company filed a patent application for KM 133. The Company intends to file patent applications for each of the other six compounds as studies advance and funds become available for these projects. &#160; &#160;&#160;</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">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.&#160;&#160;In exchange for this compound, the Company agreed to pay the inventors $10,000 plus 4.5% of net sales of the compound in countries where a composition of matter patent has been issued and 3% of net sales in other countries.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">In March 2012, we&#160;entered into an agreement with Beth Israel Deaconess Medical Center (BIDMC), a teaching hospital of Harvard Medical School, on an innovative research project with Kevetrin. The Medical Center wishes to exploit the nuclear and/or mitochondrial pro-apoptotic function of p53 in melanoma and renal cell carcinoma, two types of cancer that are particularly resistant to therapy. BIDMC hopes to improve therapy for melanoma and renal cell carcinoma, cancers that are particularly resistant to therapy. BIDMC initiated combination studies with multikinase inhibitors which activate pro-apoptotic activity by translocation of p53 in mitochondria thereby inducing apoptosis. Apoptosis is enhanced by MDM2 inhibitors by stabilizing p53. As presented at the American Association for Cancer Research (AACR) meeting in April, Kevetrin phosphorylates MDM2 which activates and stabilizes p53 by monoubiquitination inducing apoptosis. Prior data from the BIDMC laboratory showed that agents of this class can augment the pro-apoptotic and antitumor effects of MDM2 antagonists and is expected to have a synergistic effect with Kevetrin. BIDMC will test the effects of Kevetrin alone and in combination with FDA-approved VEGFR antagonists in the renal cell carcinoma and melanoma studies. In vitro study endpoints include apoptosis by measuring caspase activation and PARP cleavage. In vivo endpoints include efficacy in a xenograft model, tumor vascularity, p53 levels, p21 expression and apoptosis. This study will provide vital insight to exploit the nuclear and/or mitochondrial pro-apoptotic function by Kevetrin in combination with other multikinase inhibitors in treatment of these difficult to treat malignancies. At this time the study is in progress. The most recent results were received from BIDMC in April 2013, which showed apoptosis induction (TUNEL) in renal cancer (786). Results of these preclinical tests provided to date to the Company are encouraging and BIDMC and Cellceutix wish to move the study further. Cellceutix has provided the requested information from BIDMC that will be used to investigate a Specialized Programs of Research Excellence (SPORE) grant for a phase 2 clinical study of renal cancer upon completion of a successful phase 1 clinical study presently in progress.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On June 21, 2012, the U.S. Food and Drug Administration ("FDA") approved the Investigational New Drug (&#8220;IND&#8221;) application for Kevetrin, Cellceutix's novel anti-cancer compound. The Phase 1 trials are being conducted at Harvard Cancer Center's Dana-Farber Cancer Institute and partner Beth Israel Deaconess Medical Center.&#160; The clinical trial will test Kevetrin against a variety of different solid tumor cancer types in patients with advanced-stage cancers. Primary endpoints for the study will be safety, tolerable dosing levels and establishing the dose for a future Phase II clinical trial.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">The trial is registered on www.clinical trials.gov. http://clinicaltrials.gov/ct2/show/NCT01664000?term=Kevetrin&amp;rank=1</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">On December 25, 2012 the United States Patent and Trademark Office (USPTO) awarded the Company U.S. Patent No. 8,338,454 B2, titled "Nitrile Derivatives and their Pharmaceutical Use and Compositions." The patent covers pharmaceutical compositions comprising Kevetrin, and related compounds and compositions.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">In January 2013 the Company announced that the University of Bologna in Italy (the &#8220;University&#8221;) and The Italian Cooperative Study Group on Chronic Myeloid Leukemia (ICSG on CML) and Acute Leukemia (GIMEMA Group) plan on testing Kevetrin against Acute Myelogenous Leukemia (AML). The Company has been advised that the study, a phase 1b trial, will be titled &#8220;A Multi-Center, Open-Label, Phase 1B Study of Escalating Doses of Kevetrin (Thioureidobutyronitrile) Administered Intravenously, with Cytarabine Adminstered A) Subcutaneously, or B) Intravenously, in Patients with Acute Myelogenous Leukemia (AML).&#8221; The trial&#8217;s principal investigator plans for this phase 1b trial to begin once a higher patient dosing is achieved at the Dana Farber trial. We expect the trial to begin in the second half of 2013. The University will source the funding for this trial.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">The Company is presently in discussions with other institutions for collaborations in conducting clinical trials and acquiring a new drug. There are now two material transfer agreements pending with major hospitals.</font></p> <p style="text-align: justify; text-justify: inter-ideograph;" class="msonormal"><font style="font-family: times new roman,times;" size="2">In June 2012, we participated in a pre IND meeting with the U.S. Food and Drug Administration ("FDA") pertaining to Prurisol our compound targeting psoriasis. Cellceutix had requested the meeting for guidance on its initiatives to seek a section 505(b)(2) designation for Prurisol, which would allow us to forgo early-stage trials and advance Prurisol into latter-stage clinical trials.&#160;Cellceutix was advised by the FDA that a 505(b)(2) application would be an acceptable approach for Prurisol. Our Prurisol manufacturer, Dr. Reddy&#8217;s Laboratories Ltd., has advised us that the manufacturing of Prurisol took longer than planned, has been completed, and it is now being formulated. 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