Cellceutix CORP (Form: 10-K, Received: 09/30/2013 15:59:48)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 2013

☐ 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 Employer
of 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, CLASS A, 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 ☒

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 ☒

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 ☒ 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 ☐ .

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 ☒ .

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 ☒ .

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒ .

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 December 31, 2012 was $101,015,081computed by reference to the last traded sale price as reported on the Over the Counter market on such date.

There were 101,518,984 and -0- shares, respectively, of the registrant’s $ 0.0001 par value Class A and Class B common stock outstanding as of September 17, 2013.

CELLCEUTIX CORPORATION

FORM 10-K

For the Fiscal Year Ended June 30, 2013

TABLE OF CONTENTS

		PAGE NO
PART I

ITEM 1	DESCRIPTION OF BUSINESS	5
ITEM 1A	RISK FACTORS	20
ITEM 1B	UNRESOLVED STAFF COMMENTS	31
ITEM 2	DESCRIPTION OF PROPERTY	31
ITEM 3	LEGAL PROCEEDINGS	32
ITEM 4	MINE SAFETY DISCLOSURES	32

PART II

ITEM 5	MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	32
ITEM 6	SELECTED FINANCIAL DATA	33
ITEM 7	MANAGEMENT'S DISCUSSION AND FINANCIAL CONDITION AND RESULTS OF OPERATIONS	33
ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36
ITEM 8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	37
ITEM 9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	54
ITEM 9A	CONTROLS AND PROCEDURES	54
ITEM 9B	OTHER INFORMATION	57

PART III

ITEM 10	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT	57
ITEM 11	EXECUTIVE COMPENSATION	58
ITEM 12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	59
ITEM 13	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	60
ITEM 14	PRINCIPAL ACCOUNTANTS FEES AND SERVICES	61

PART IV

ITEM 15	EXHIBITS	62
SIGNATURES		65

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.”

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW ABOUT OUR BUSINESS

Cellceutix Corporation (the “Company” or Cellceutix or the “Registrant”) is a clinical stage biotechnology company focused on discovering small molecule drugs for hard to treat diseases, including drug-resistant cancers, psoriasis, autism and inflammatory disease.

Our flagship compound, Kevetrin, is a drug that has shown promising laboratory data as a new cancer treatment. A Phase 1 clinical trial is in progress at Harvard Cancer Center's Dana-Farber Cancer Institute and partner Beth Israel Deaconess Medical Center, to test Kevetrin against advanced solid tumors.

We have acquired exclusive rights to a total of eight (8) pharmaceutical compound candidates that are designed for treatment of diseases which may be either existing or diseases identified in the future. The Company has spent most of its efforts and resources on its anti-cancer compound, Kevetrin, for the treatment of certain cancers, and on Prurisol, for the treatment of psoriasis. Based on the studies to date, the Company has decided to advance these drugs 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.

On September 4, 2013, we purchased substantially all of the assets of Polymedix Inc, and Polymedix Pharmaceuticals, Inc. from the Chapter 7 trustee for the bankrupt estate of these entities. The aggregate purchase price for the sale and transfer of these Purchased Assets was $2.1 million in cash, plus 1.4 million shares of our Class A common stock. For further information see the Polymedix Asset Acquisition section below in this Part I, Item 1 section and Note 13 of the Notes to our Financial Statements included in this Annual Report on Form 10-K for information regarding the Polymedix Assets Acquisition.

OUR BUSINESS STRATEGY

We are in the business of developing and or acquiring innovative small molecule therapies to treat diseases with significant medical need. Our strategy is to use our business and scientific expertise to maximize the value of our diverse pipeline. We expect to develop the highest quality data and broadest intellectual property to support our compounds.

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.

HISTORY AND CORPORATE STRUCTURE

Cellceutix Corporation, formerly known as 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, the Company acquired CellceutixPharma, Inc., a privately owned Delaware corporation pursuant to an Agreement and Plan of Share Exchange (the “Exchange”). CellceutixPharma, 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 CellceutixPharma, 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, CellceutixPharma, Inc. became a wholly-owned subsidiary of the Company. The Company’s shares were issued to the CellceutixPharma, Inc. shareholders on a pro rata basis, on the basis of 82 shares of Common Stock for each share of CellceutixPharma, Inc. common stock held by such CellceutixPharma, Inc. shareholder at the time of the Exchange. This resulted in the former holders of CellceutixPharma, 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 CellceutixPharma, Inc., under the purchase method of accounting, and was treated as a recapitalization with CellceutixPharma, Inc. as the legal acquirer. Upon consummation of the Exchange, the Company adopted the business plan of CellceutixPharma, Inc. 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.

On January 14, 2008, a majority of the shareholders of the Company 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.

On September 13, 2012, the company filed a Certificate of Correction with the State of Nevada to correct the par value of the preferred shares from the amended articles of incorporation filed June 24, 2011 from $.0001 per share to $.001 per share.

POLYMEDIX ASSET ACQUISITION

On September 4, 2013, the Company purchased substantially all of the assets (“Purchased Assets”) of Polymedix Inc, and Polymedix Pharmaceuticals, Inc. (“Seller”) from the U.S. Bankruptcy Court. The Bankruptcy Cases were pending before the Bankruptcy Court for the District of Delaware and were being jointly administered under Case No. 13-10690 (BLS).

The aggregate purchase price for the sale and transfer of the Purchased Assets was $2.1 million in cash, plus 1.4 million shares of the Company’s Class A common stock (the “Registrable Securities”), total aggregate purchase price of approximately $4.8 million. These common shares were valued at $1.93 per share, based on the September 4, 2013 opening stock price as quoted on the OTB Bulletin Board, resulting in approximately $2.7 million of stock issued to acquire the Purchased Assets. The Company shall, not later than sixty days from the date of acquisition prepare and deliver to the Seller for their consent a schedule allocating the Purchase Price among the Purchased Assets acquired by the Company.

The Company is required to file a Registration with the Securities and Exchange Commission to register the common stock within 60 days. At any time between one day after the Closing and three hundred and sixty-five (365) days after the Closing, the Seller or any holder of the Registrable Securities may make written demand upon the Purchaser for the Purchaser to repurchase the Registrable Securities for $1 per share.

The Asset Purchase Agreement was included in a Form 8-K filed with the US Securities and Exchange Commission on September 4, 2013. Included in the purchase are rights to intellectual property (IP), compounds, clinical studies and equipment; the most significant value being the clinical studies and IP.

The following is a summary of the acquired assets as described in the last quarterly filing by Polymedix with the US Securities and Exchange Commission on November 9, 2012.

Brilacidin™

The intravenous formulation of Polymedix’s lead product candidate, brilacidin, is an antibiotic which has the potential to treat a variety of indications, including ACUTE BACTERIAL SKIN AND SKIN STRUCTURE INFECTIONS (“ABSSSI”) caused by either drug-sensitive or drug-resistant strains of Staphylococcus aureus bacteria.

ABSSSI

In April 2012, Polymedix completed and announced positive results from a Phase 2 clinical trial with brilacidin. This randomized, blinded, active-controlled, multinational Phase 2 clinical trial was conducted at multiple sites in Canada, Russia and Ukraine. The study objectives were to evaluate the safety and efficacy of brilacidin as treatment for ABSSSI caused by Staphylococcus aureus, including methicillin-resistant Staphylococcus aureus (MRSA). The study objectives were met, with all evaluated doses of brilacidin demonstrating similar clinical response rates to those of the active control, daptomycin. The study was conducted in accordance with FDA’s most recent ABSSSI guidelines and is intended to support regulatory approval in the United States. As expected, and consistent with previous clinical studies, patients receiving brilacidin commonly reported sensations of numbness and tingling that were generally characterized as mild and resolved following treatment. No patient stopped treatment as a result of these sensations. Other treatment-related adverse events included hypertension, injection site pain, nausea, vomiting, vertigo, and pyrexia. There was one treatment-related serious adverse event that was at least possibly drug-related reported in each brilacidin study arm. Treatment-related serious adverse events included an instance of hypertension in the medium and high dose regimens, which discontinued therapy, and an instance of increased platelets in the low dose regimen.

Oral Mucositis

In animal models of oral mucositis, an oral rinse containing brilacidin was shown to reduce the occurrence of severe ulcerative oral mucositis by more than 90% compared to placebo. Brilacidin and related compounds have shown antibacterial, anti-biofilm and anti-inflammatory properties in various pre-clinical studies. Polymedix believed that the combination of these attributes contribute to the efficacy of brilacidin in these animal models.

Delparantag™

Delparantag (formerly PMX-60056) is a synthetic, small-molecule intended to reverse the effects of the commonly used anticoagulants unfractionated heparin (UFH), and its derivatives, low molecular weight heparins (LMWH), to help manage the balance of antithrombosis and anticoagulation and reduce the incidence of bleeding in certain interventional cardiology procedures, such as Percutaneous Coronary Intervention (PCI) and Coronary Arterial Bypass Grafting (CABG), and other situations where UFH and LMWH are used and bleeding may occur.

In May 2012, Polymedix announced that they had stopped enrollment in two clinical trials for delparantag: a Phase 2 clinical trial for reversing the anticoagulant activity of UFH in patients undergoing PCI procedures, and a Phase 1B/2 clinical trial for reversing the anticoagulant activity of the LMWH enoxaparin in healthy volunteers. While delparantag showed activity in neutralizing both UFH and the LMWH enoxaparin in these clinical trials, Polymedix decided to stop enrollment in both trials due to observations of reductions in blood pressure in some patients.

Other

Other product candidates acquired by Cellceutix, include; compounds active against Gram-negative bacteria, fungal infections, malaria, tuberculosis, biowarfare pathogens, and PolyCide® antimicrobial biomaterials.

Cellceutix is now evaluating all these programs. It is too soon in our acquisition process to develop a comprehensive plan or budget for the development costs of these newly acquired assets.

Intellectual Property Acquired from Polymedix

The intellectual property portfolio of the former Polymedix which we acquired consists of the following:

Patent	Status	Description
COMPOSITION AND USE PATENTS
Design, preparation and properties of antibacterial beta-peptides. (1)	United States - Issued 01/13/04	This patent claims composition of matter for particular beta-peptides that have antibacterial properties. It also claims pharmaceutical preparations containing particular antibacterial beta-peptides and methods for creating sanitizing surfaces by treatment with an antibacterial beta-peptide.
Amphiphilic Polymers as Anti-Infective Agents: 1 (1)	United States – filed Patent Cooperation Treaty – filed National Phase entered United States - issued 02/06/2007 European Patent - issued 09/17/2008 Other issued patents include Australia, China, Japan, South Korea	These patents and application family claims composition of matter for facially amphiphilic polymers that are polyamides, polyesters, polyurea, polyurethane, polycarbonate, or polyphenylene, compounds. Also claimed are material articles made from the amphiphilic polymers that have antimicrobial properties.
Amphiphilic Polymers as Anti-Infective Agents: 2 (Phenylalkynes) (1)	United States – filed Patent Cooperation Treaty – filed National Phase entered European Patent - issued 05/25/2011 Other issued patents: Australia, South Korea European Divisional filed Other divisional filings: Japan, China	These patents are similar to “Amphiphilic Polymers as Anti-Infective Agents: 1” above, but further claims facially amphiphilic polymers that are polyphenylene and heteroarylene compounds.
Facially amphiphilic polymers and oligomers and uses thereof: 1 (1)	United States – filed Patent Cooperation Treaty - filed National Phase entered Other issued patents: Australia United Stated Divisional – issued 08/07/2012 European Divisionals – four filed Other Divisional filings: Australia, China, Japan	This application claims pharmaceutical compositions and uses for facially amphiphilic polymers, oligomers and small molecules that are polyamides, polyesters, polyurea, polyurethane, polycarbonate, or polyphenylene, compounds. Uses include method of treatment (systemic and topical) as antimicrobial agents against bacteria, fungi and viruses and as an antidote to heparin and LMWH. Also, composition of matter claims are expanded.

Patent	Status	Description
Facially amphiphilic polymers and oligomers and uses thereof: 2 (Phenylalkynes) (1)	United States – filed Patent Cooperation Treaty - filed National Phase entered United States patent issued 07/17/2012 Other issued patents: Australia United States Divisional – filed European Divisional - filed Other Divisional filings: China, South Korea	These patents are similar to “Amphiphilic Polymers as Anti-Infective Agents: 1” above, except that the small molecules to which it claims use are polyphenylene and heteroarylene compounds.
Polycationic Compounds and Uses thereof	United States – filed Patent Cooperation Treaty – filed National Phase entered United States patent issued 06/30/2009 European Patent issued 08/07/13 Australia Patent issued 05/17/12 China Patent Issued 08/22/12 South Korea Patent issued 08/03/12 United States Continuations – five filed: four issued 06/29/10; 03/06/12; 07/31/12; 08/13/13; one pending Other Divisional filings: Japan, China South Korea Divisional issued 06/26/12	This application claims method of use for modulating angiogenesis with polycationic compounds, compositions of anti-heparin compounds and methods of inhibiting heparin activity.
Composition and Use of Polymethacrylate Co-Polymers (1)	United States – filed Patent Cooperation Treaty - filed National Phase entered Australian Patent issued European Divisionals - three filed	This application claims amphiphilic co-polymers that exhibit antimicrobial activity and uses in a number of pharmaceutical and material applications.

Ophthalmic and Otic Compositions of Facially Amphiphilic Polymers and Oligomers and Use Thereof	United States – filed Patent Cooperation Treaty - filed National Phase entered Other patents issued: China Other divisional filings: China	This application relates to antimicrobial compositions of facially amphiphilic antimicrobial polymers and oligomers useful for the treatment or prevention of ophthalmic and otic infections. The application also relates to methods of using the compositions for treating and/or preventing ophthalmic and otic infections.
Combination of Synthetic Antimicrobial Polymers and Sesquiterpenoid Compounds	United States – filed	This application relates to the combination of facially amphiphilic antimicrobial polymers and oligomers with sesquiterpenoids to enhance antimicrobial activities.
Anti-Malarial Compounds	United States – filed Patent Cooperation Treaty - filed National Phase entered	This application relates in to arylamide and other classes of compounds and their use in treating malaria.
Synthetic Mimetics of Host Defense and Uses Thereof	United States – issued 10/02/12 United States Continuation filed Patent Cooperation Treaty - filed National Phase entered	This application relates to arylamide compounds, their antimicrobial uses and methods of synthesis.

Antimicrobial Molecules for Treating Multi-Drug Resistant and Extensively-Drug Resistant Strains of Mycobacterium	United States - filed Patent Cooperation Treaty - filed National Phase entered	This application relates to treating multi-drug resistant and extremely drug resistant strains of mycobacterium with antimicrobial compounds and compositions.
Processes for Preparing a Polymeric Compound	United States – issued 01/15/13 United States Continuation filed Mexican Patent issued 06/06/13 Patent Cooperation Treaty - filed	This application relates to preferred methods for synthesizing and preparing pharmaceutical compositions of representative compounds in the salicylamide class of compounds
Anti-Heparin Compounds	United States – filed Patent Cooperation Treaty – filed National Phase entered	This application relates to methods of antagonizing anticoagulant agents, such as unfractionated heparin, low molecular weight heparin, and/or a derivatives and compositions of the antagonists.
Methods of Immune Modulation	United States - filed Patent Cooperation Treaty – filed National Phase entered	The present invention is directed, in part, to methods of modulating an immune response in an animal with facially amphiphilic compounds.
Facially Amphiphilic Compounds, Compositions, and Uses Thereof in Treating Cancer	United States - filed Patent Cooperation Treaty – filed This entire family was abandoned	The present invention relates to compositions of facially amphiphilic compounds and their use in methods for treating cancers in animals, such as humans.
Compounds For Use in Treatment of Mucositis	United States – filed Patent Cooperation Treaty – filed National Phase due 11/13	The application relates to methods of treating and/or preventing mucositis.
Hybrid Compounds and Methods of Making and Using the Same	United States provisional filed	The application relates to compositions and use of anti-microbial compounds.
Polycyclic Compounds and Methods of Making and Using the Same	United States provisional filed	The application relates to compositions and use of anti-microbial compounds.
Antagonizing Heparin with Salicylamide Compounds and Histamine Blocking Agents	United States provisional filed	The application relates to use of anti-heparin salicylamide compounds with histamine blocking agents to treat cardiovascular disorders.
Compounds and Methods for Treating Candidiasis and Aspergillus Infections	United States – filed Patent Cooperation Treaty – filed National Phase due 07/14	The application relates to compositions and use of anti-fungal compounds.
Compounds and Methods for Treating Malaria	Patent Cooperation Treaty – filed National Phase due 08/14	The application relates to compositions and use of anti-malarial compounds.
Compositions of Arylamide Compounds and Antimicrobial Agents	United States provisional filed	The application relates to compositions and use of arylamide compounds and anti-microbial agents.
COMPUTATIONAL PATENTS
Methods, systems and computer program products for computational analysis and design of amphiphilic polymers (1)	United States - issued 09/15/2009	This application is directed to the creation and use of novel force field packages for modeling the structure and behavior of complex molecules in complex environments. Specific utilities are the prediction of oligomer structures in polar and apolar medias.

Computer simulation of biomembranes using a Coarse Grain Model (1)

United States - filed

This application is directed to the creation and use of a novel coarse grain model for studying complex biological structures, such as membranes. Specifically a computational approach is described that accurately predicts the structural and dynamic properties of membranes that are far less demanding of CPU time than comparable methods.

Computational design of a water-soluble analog of a protein, such as phospholamban and potassium channel Kcsa (1)

United States - filed

This application claims methods and computer programs for the computational design of water-soluble analogs of membrane proteins that retain biological function.

(1)

Patent rights obtained pursuant to a license agreement with the University of Pennsylvania.

In addition, we have trademark protection for the marks PolyMedix, ® PolyCide ® , and PolyDentix ® .

The agreement with, and patent rights obtained pursuant to a license agreement with the University of Pennsylvania (“Penn”) are included herewith as an Exhibit to this 10-K filing.

A summary of the royalties to be paid for the exclusive license is as follows:

(a)

3.0% on Gross Sales for Penn licensed Products that are sold as pharmaceuticals under an approved NDA or other similar regulatory filing;

(b)

1.5% on Gross Sales for Penn licensed Products that are sold as coatings for use in medical devices under an approved PMA, 510(k) application or other similar regulatory filing; and

(c)

0.5% on all other Gross Sales for Penn licensed Products

INTELLECTUAL PROPERTY

We rely on a combination of patents and trade secrets, as well as confidentiality and non-use agreements to protect our intellectual property. Our patent strategy is designed to facilitate commercialization of our current and future product candidates, and create barriers to entry.

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.

In January 2012, Cellceutix filed a U.S. patent application covering the pharmaceutical formulation of Prurisol ™ , also known as KM-133, a compound to treat psoriasis.

The Company intends to file additional patent applications for other compounds as funds and resources become available.

See above information regarding the Polymedix Asset Acquisition on September 4, 2013 for our other intellectual property that we just acquired.

DESCRIPTION OF INTELLECTUAL PROPERTY

Kevetrin

We are a clinical stage company. On June 21, 2012, the U.S. Food and Drug Administration ("FDA") approved the Investigational New Drug (IND) 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. 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. Presently, we are at the mid stage of the trial. The Company has received no notice of events outside of the parameters of the protocol and the trial is progressing. The trial is registered on www.clinicaltrials.gov. http://clinicaltrials.gov/ct2/show/NCT01664000?term=Kevetrin&rank=1

Kevetrin has demonstrated the potential for a major breakthrough in cancer research by exhibiting an activation of p53 in both wild and mutant types of p53. p53, often referred to as the “Guardian Angel Gene” or the “Guardian Angel of the Human Genome” due its crucial role in controlling cell mutations, is a tumor suppressor protein that is encoded by the TP53 gene in humans and has been widely regarded as possibly holding a key to the future of cancer therapies. Additional studies have shown that Kevetrin has potent anticancer activity in a wide range of tumor types by targeting histonedeacetylase (HDAC).

In March 2012, we 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 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 tested 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 provided 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. The results received from BIDMC in April 2013, 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 the successful phase 1 clinical study presently in progress.

The University of Bologna in Italy (the “University”) 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). We have been advised that the study, a phase 1b trial, will be titled “A Multi-Center, Open-Label, Phase 1B Study of Escalating Doses of Kevetrin (Thioureidobutyronitrile) Administered Intravenously, with Cytarabine Administered A) Subcutaneously, or B) Intravenously, in Patients with Acute Myelogenous Leukemia (AML).” The trial’s principal investigator wants this phase 1b trial to begin once a higher patient dosing is achieved at the Dana Farber trial. The University will source the funding for this trial.

Prurisol

Prurisol is our anti-psoriasis drug candidate. It is a small molecule with a molecular weight of less than 500 MW. It is synthesized through a multi-step process using commercially available starting materials. Prurisol acts through immune modulation and PRINS reduction.

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 the us to forgo early-stage trials and advance Prurisol into latter-stage clinical trials. Cellceutix was advised by the FDA that a 505(b)(2) application would be an acceptable approach for Prurisol. Our Prurisol manufacturer, Dr. Reddy’s Laboratories Ltd., has advised us that the manufacturing of Prurisol has been completed and is ready for shipment. We are now preparing the 505(b)(2) application for submission to the FDA to begin a Phase II/III clinical trial.

KEY DEVELOPMENTS DURING THE FISCAL YEAR ENDED JUNE 30, 2013 AND SUBSEQUENT EVENTS

On September 4, 2013, the Company purchased substantially all of the assets of Polymedix Inc, and Polymedix Pharmaceuticals, Inc. (“Seller”) from the U.S. Bankruptcy Court (see above). The Bankruptcy Cases were pending before the Bankruptcy Court for the District of Delaware and were being jointly administered under Case No. 13-10690 (BLS).

We are in a phase 1 clinical study for our anti-cancer drug Kevetrin. As of September 2013 we have completed four cohorts and are in the fifth cohort of the study which is receiving a dose of 75mg/m ² , 7.5-times the amount of Kevetrin received by the first patients in the trial. No dose limiting toxicity has been demonstrated to date.

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. Cellceutix was advised by the FDA that a 505(b)(2) application would be an acceptable approach for Prurisol. Our Prurisol manufacturer, Dr. Reddy’s Laboratories Ltd., has advised us that the manufacturing of Prurisol has been completed. We are now preparing the 505(b)(2) application for submission to the FDA to begin a Phase II/III clinical trial.

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.

The University of Bologna in Italy (the “University”) 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). We have been advised that the study, a phase 1b trial, will be titled “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).” The trial’s principal investigator wants this phase 1b trial to begin once a higher patient dosing is achieved at the Dana Farber trial. The University will source the funding for this trial.

In June 2013, we signed a Material Transfer Agreement with the University of Texas, MDAnderson Cancer Center. MDAnderson intends to utilize in vivo and in vitro methods to research specific pathways, gene expression, mechanism of action and apoptotic activity of our cancer drugs in a range of concentrations and time points in both mutant and wild-type p53 Myeloma and Lymphoma cell lines. They also wish to study our cancer compounds against a broad array of Multiple Myeloma cell lines that are resistant to today’s FDA-approved chemotherapies. MDAnderson is covering the expenses of the research, with Cellceutix only supplying the drugs.

OUR COMPOUNDS PIPELINE AND CURRENT STATUS

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.

Angiogenesis: is a physiological process involving the growth of new blood vessels from pre-existing vessels.

Cytotoxicity: is the quality of being toxic to cells.

Folate: A B-complex vitamin that is being studied as a cancer prevention agent.

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.

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.

Xenograft: The cells of one species transplanted to another species.

OUR COMPOUND PIPELINE

The Company’s Pipeline (excluding the Polymedix Assets recently acquired and disclosed above) consists of the following compounds:

Compound	Disease	Development Stage
Kevetrin	Cancer	Phase 1
KM 133	Psoriasis	Preclinical
KM 391	Autism	Preclinical
KM 277	Arthritis	Preclinical
KM 278	Arthritis/Asthma	Preclinical
KM 362	MS/ALS/Parkinsons	Early R&D
KM-3174	Cancer	Early R&D
KM-732	Hypertensive emergency	Early R&D

CURRENT STATUS OF OUR COMPOUNDS

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 Kevetrin™ for Cancer

Current status		Information on the status of the Kevetrin study at Harvard Cancer Centers is available at http://clinicaltrials.gov/ct2/show/nct01664000?term=kevetrin+rank=1 The phase 1 study is titled, “A Safety, Pharmacokinetic and Pharmacodynamic Study of Kevetrin in Patients With Advanced Solid Tumors.”

Nature, timing and estimated costs		The Company has budgeted $1,500,000 for the Phase 1 clinical study 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.

Project		Drug Development of Prurisol™ for Psoriasis

Current status		Cellceutix is preparing an FDA 505(b)(2) application for Prurisol™, which would allow Prurisol™ to start phase 2 / 3 clinical trials. Dr. Reddy's Laboratories, our contract manufacturer of Prurisol, has completed the manufacturing of this drug for use in the clinical trial.

Nature, timing and estimated costs		We plan on applying for regulatory approvals to conduct phase 2\3 clinical studies in Europe and the U.S. The Company has budgeted $2,500,000 for the clinical studies 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 our application or clinical testing cannot be known at this time, and this poses substantial risk and uncertainty as to whether or when if ever, Prurisol will become marketable.

The Company intends to commit limited resources towards the development of compounds other than Kevetrin, Prurisol and the newly acquired Polymedix compounds 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 believes it can contract the manufacturing of all its compounds at sites certified by the FDA 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 support our Phase 1 clinical trial for Kevetrin and the start of a Phase 2 clinical trial for Prurisol. 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.

Compound: Kevetrin

Disease: Cancer

The Company acquired exclusive rights to Kevetrin in August 2007 from Dr. Krishna Menon, a Company founder. (See Item 13. Certain Relationships and Related Transactions)

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, prostate cancer, pancreatic cancer and in leukemia models. Several of these studies have involved cell lines that are resistant to standard drugs. Information about these cancers is available at http://www.cancer.gov

Kevetrin is being developed as an intravenous (IV) infusion therapy (the giving of the drug directly into the vein).

Phase 1 Clinical Trial at Dana-Farber Cancer Institute and Beth Israel Deaconess Medical Center

On June 21, 2012, the U.S. Food and Drug Administration ("FDA") approved the Investigational New Drug (IND) 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. 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.

The trial is registered on www.clinicaltrials.gov (http://clinicaltrials.gov/ct2/show/NCT01664000?term=Kevetrin&rank=1)

Kevetrin mechanism involves p53 and p21

In laboratory mechanism of action studies, it showed that Kevetrin strongly induced apoptosis in a human lung adenocarcinoma cell line (A549). Treatment of A549 cells with Kevetrin for 48 hours resulted in apoptosis induction that was characterized by activation of Caspase 3 and cleavage of PARP.

Reactivation of p53 in tumor cells has been recognized as a promising strategy for cancer treatment. The p53 tumor suppressor is a well characterized transcription factor controlling cell growth and apoptosis during times of cellular stress. Kevetrin activates both transcription-dependent and transcription-independent pathways to promote apoptosis through p53 activation in tumor cells.

Western blotting revealed a concentration dependent increase in phosphorylation of p53 at serine15 (Ser15). The phosphorylation of p53 at Ser15 leads to a reduced interaction between p53 and its negative regulator, the oncoprotein MDM2, an ubiquitin ligase for p53 that plays a central role in p53 stability. Also, phosphorylation of p53 induced apoptosis by inducing the expression of p53 upregulated modulator of apoptosis (PUMA). In addition, Kevetrin increased expression of p53 target genes such as p21 (Waf1). The tumor suppressor protein p21 (Waf1) acts as an inhibitor of cell cycle progression.

Kevetrin activates both transcription-dependent and transcription-independent pathways to promote apoptosis. Kevetrin showed potent efficacy in various mutant and wild type tumor xenograft models, thus Kevetrin demonstrated effectiveness in a wide range of tumor types. Kevetrin enhanced the phosphorylation of MDM2 in a dose dependent manner. Phosphorylation of MDM2 alters the E3 ligase processivity. Stable monoubiquitinated form of p53 was induced by Kevetrin. MDM2 mediated monoubiquitination of p53 greatly promotes its mitochondrial translocation and thus its mitochondrial apoptosis. The induction of transcription-independent p53 induced apoptosis by Kevetrin has far reaching significance with tumor with mutant p53.

Inactivation of p53 by mutation occurs in ~50% of human cancers. Transcription mediated response of activated mutant p53 does not necessarily lead to apoptosis. Mutant p53 can act in the cytosol and mitochondria to promote apoptosis through a transcription-independent mechanism. Kevetrin can stabilize the transactivation-deficient mutant p53 and induce apoptosis.

Stable monoubiquitinated mutant p53 was induced by Kevetrin. This stable form of p53 accumulates in the cytoplasm and mitochondria and retains the ability to interact with BAK or BAX proteins in mitochondria to induce apoptosis.

Since Kevetrin activates both transcription-dependent and transcription-independent pathways to promote p53 activation, Kevetrin can function as a major inducer of apoptosis in many types of tumors independent of p53 mutation status. Activation of both modes of apoptosis by Kevetrin may not be mutually exclusive. Most likely, both modes of apoptosis induction cooperate and complement each other.

Genotoxicity

Most currently available chemotherapeutic drugs are genotoxic in nature and damage DNA. A DNA damaging drug results in rapid phosphorylation of H2A.X at Ser 139 by PI3K-like kinases. Kevetrin did not induce this phosphorylation at a concentration that caused cell cycle arrest and apoptosis; whereas, Doxorubicin did induce the phosphorylation of H2A.X, as shown by Western blot assay. These results suggest that Kevetrin, in a non-genotoxic way, induces p53 activation.

Biomarker

We identified the increased expression of p21 as a potential biomarker in our clinical trial for Kevetrin. Preliminary data on the p21 biomarker suggests that Kevetrin slightly affected p21 in some low-dose patients, but these tests require being redone and reanalyzed at higher doses to confirm that Kevetrin is indeed activating p21.

Study at Beth Israel Deaconess Medical Center

MDAnderson Cancer Center

Compound: Prurisol (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.

Regulatory

In June 2012 Cellceutix participated in a pre IND meeting with the U.S. Food and Drug Administration ("FDA") pertaining to Prurisol™. The Company had requested the meeting for guidance on its initiatives to seek a section 505(b)(2) designation for Prurisol™, which would allow the Company to forgo early-stage trials and advance Prurisol™ into latter-stage clinical trials. Cellceutix was advised by the FDA that a 505(b)(2) application would be an acceptable approach for Prurisol. In September 2012, Cellceutix selected Dr. Reddy's Laboratories as its vendor to manufacture and formulate Prurisol for planned clinical trials. The Company plans on filing a 505(b)(2) application in 2013.

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.