CYTOGENIX INC, 10SB12G/A, 2000-03-07

CYTOGENIX INC
10SB12G/A, 2000-03-07
MEDICAL LABORATORIES

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-SB/A

GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934

CytoGenix, Inc.
(Name of Small Business Issuer in its charter)

Nevada 76-0484097
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

9881 South Wilcrest, Houston, Texas 77099
(Address of principal executive offices)(Zip Code)

Issuer's telephone number, (281) 988-6118

Securities to be registered under Section 12(b) of the Act:

Title of each class Name of each exchange on which
to be so registered each class is to be registered
NA NA

Securities to be registered under Section 12(g) of the Act:

The registrant had 28,814,442 shares of Common Stock, at $.001 par value,
outstanding as of September 30,1999.

(Title of class)
<PAGE>
CYTOGENIX, INC.

FORM 10 - SB

TABLE OF CONTENTS

PART I

ITEM 1. DESCRIPTION OF BUSINESS........................................ 2

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION.............................................. 6

ITEM 3. DESCRIPTION OF PROPERTY........................................ 8

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.......................................... 8

ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS............................................ 9

ITEM 6. EXECUTIVE COMPENSATION......................................... 10

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................. 10

ITEM 8. LEGAL PROCEEDINGS.............................................. 10

ITEM 9. MARKET FOR COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS............................................ 10

ITEM 10. DESCRIPTION OF SECURITIES...................................... 12

ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS...................... 12

ITEM 13. FINANCIAL STATEMENTS........................................... 12

PART F/S
FINANCIAL STATEMENTS OF THE REGISTRANT................................... F-1

2
<PAGE>
Item 1. Description of Business

CytoGenix, Inc. (the company) is a development stage biotechnology company that
has never had any sales. The primary focus of the CytoGenix, Inc. research is
the implementing and enabling technologies useful in the final stage of
delivery of therapeutic DNA and RNA molecules in cells.

The company was formed in 1995 as a biomedical research and development
operation. Equity funding has been the only source of operational and research
support from the outset. Capital resources have been carefully husbanded with
the bulk of the funding allocated directly to research with administrative
overhead held to a minimum.

IN AN EFFORT TO EXPLAIN THE CYTOGENIX(TM) ANTISENSE MOLECULE DELIVERY TECHNOLOGY
(SSDNA INTRACELLULAR EXPRESSION VECTOR) IN EVERYDAY TERMS, SCIENTIFIC ACCURACY
HAS NECESSARILY BEEN COMPROMISED. A FULLY ACCURATE SCIENTIFIC EXPLANATION IS
AVAILABLE ON THE CYTOGENIX WEBSITE, WWW.CYTOGENIX.COM.

THE ROLE OF DNA

The DNA sequence within a gene is what cells use to produce proteins, which
perform the most important tasks in the body. By studying how genes work and
understanding how they go awry, scientists expect to develop new medicines that
attack the underlying causes of disease, not just the symptoms. Makers of the
new gene-based drugs hope they will offer advantages over existing treatments
and command premium prices.

ANTISENSE THERAPY

The genetic code (operating system) for the human body is made up of nucleic
acid constructs (DNA) which naturally occurs as a double strand of four
nucleotides arranged in various sequences that control every function of the
body. A similar material, RNA (three of the four nucleotides are the same) is
used to convey the information contained in the DNA to other parts of the cells
where various biological functions are performed, like the production of amino
acids, proteins, enzymes, hormones, etc.

Most diseases are caused by incorrect or excess production of proteins in the
cells of the body. This may be caused by a faulty gene or the activities of a
bacteria or virus.

To produce a protein, the cell first makes a messenger RNA (mRNA) copy of the
DNA code containing the information necessary to produce the protein. This is
called the "sense" molecule. This message then moves to another part of the cell
where it is translated into the process to produce the protein.

Scientists use the information content of the mRNA nucleotide sequence to
construct highly specific "Antisense" molecules made up of single stranded DNA
(ssDNA) comprised of the same naturally occurring biological material (nucleic
acid) already found in the cells. An ssDNA antisense molecule specifically binds
to and neutralizes the mRNA sequence coding for a target protein to prevent the
cell from using that message to make that protein

Because of their specificity, Antisense molecules don't have the potential for
toxicity of traditional chemical or herbal compounds. In addition, Antisense
molecules can be designed to treat a wide range of infectious and inflammatory
diseases, cardiovascular diseases, and cancer.

A key distinction of Antisense therapy is that it intervenes earlier in the
disease process than traditional drug therapies.

Biotech researchers have identified and patented over 600 of the ssDNA molecules
called oligodeoxyribonucleotides (ODNs) that are potential Antisense agents. The
impediment to developing effective therapies using the Antisense molecules has
been the problem of "delivering" the ODNs into individual cells where they can
bind to the offending mRNA and prevent the production of harmful proteins.

This activity involves the design and use of a biological "vector". This use of
the term "vector" implies is a recombinant biological construct (genetically
engineered molecule) containing synthesized DNA sequences that may be delivered
to a specific location by specific means with defined results.

The CytoGenix(TM) "ssDNA intracellular expression vector " (TroVec(TM))
overcomes the final stage "delivery" barrier by actually synthesizing sequence
specific ODN antisense molecules in the cell where they must be to do their job.

By way of illustration: The DNA in the cell is the communications center that
sends instructions to the cell to produce harmful proteins. This DNA may be part
of the basic genetic structure (genome) or it could be a parasitic rogue gene,
such as a virus, that may inhabit certain cells. RNA is the signal that carries
the message. The antisense ODN "delivered" by the CytoGenix(TM) vector
technology intercepts the signal and cancels the message. The harmful proteins
are therefore not produced. The disease is arrested.

3
<PAGE>
ANTISENSE THERAPY vis a vis GENE THERAPY

Unlike Antisense Therapy, which merely intercepts and cancels the messages that
result in the production of disease causing proteins, Gene Therapy involves
actually modifying the genetic code contained in the chromosomes of each cell.
This is a much more radical procedure and has the inherent potential for
unanticipated and unwanted results.

Gene therapy is the equivalent to rewriting part of the basic code in the
operating system of a computer. Antisense therapy is analogous to deleting a
file from a computer.

A MORE COMPREHENSIVE SCIENTIFIC EXPLANATION OF COMPANY TECHNOLOGY

Genetics research has discovered that it is possible to interrupt the progress
of many diseases by interfering with the transmission of genetic information
within the individual cells thus preventing the disease at the cellular level.
This is called "antisense" therapy. An "antisense molecule" (ODN) must be
introduced into the infected cells to intercept the "sense" messenger molecule
and cancel it out. The CytoGenix, Inc. technology enables the process by
"delivering" the antisense molecule to the targeted cells. The company intends
to license its technology to commercial interests who own the patents for the
various gene sequences.

The company has developed a "cassette" (Antisense molecule delivery system) that
can be inserted into a viral delivery/expression vector of choice. The cassette
enables the vector to express any desired sequence-specific, single-stranded DNA
(ssDNA) ODN.

Most human diseases arise from the function or dysfunction of genes within the
body, either those of pathogens, such as viruses, or the body's own genes. New
technological advances in molecular biology have led to the identification of
genes associated with major human diseases and the determination of their
genetic basis.

Antisense oligonucleotide technology is providing a highly specific strategy for
targeting a wide range of diseases at the genetic level, by interfering with
mRNA to inhibit production of disease associated proteins.

In this rapidly expanding market, the race is on to develop ODN drugs for the
treatment of diseases such as cancer, HIV, Hepatitis B and a range of
inflammatory conditions such as arthritis and psoriasis.

According to The Institute for Human Gene Therapy at the University of
Pennsylvania research scientists believe that antisense approaches coupled with
available genome and viral genetic information could ultimately lead to viable
genetic medical therapies. Currently, there are two major types of antisense
molecules used in antisense strategies. The first uses RNA to form duplexes with
cellular RNA. RNA expression vectors offer high transfection rates, cell
targeting, and in vivo transcription of the desired RNA. However, affecting
messenger RNA-antisense RNA duplex formation has often proved ineffective
because of low hybridization rates to target RNA and a brief antisense RNA
half-life due to host-cell mediated degradation.

The second antisense molecule types are ODN's composed of DNA or DNA analogs.
DNA oligonucleotide mediated antisense formation with messenger RNA has proved
effective in cell culture. Advantages of using DNA oligos are that DNA has a
higher binding affinity for cellular RNA than does an RNA molecule and DNA has a
longer half-life than RNA. Most importantly, DNA-RNA hybrids activate RNase H,
an enzyme which digests the target RNA in the duplex. The RNase H enzymatic
activity permanently removes the RNA from the cell and frees the ODN to bind to
additional RNAs. This subsequently lowers the amount of DNA ODN's required for
RNA hybridization and lessens problems caused by toxicity. The list, of viral
and chromosomal genes that have been successfully turned off in cell culture, by
this antisense mechanism, is fast growing and the number of patents issued on
specific genetic sequences for antisense use is also expanding rapidly. There
are approximately 600 such U.S. patents at this writing.

Heretofore, DNA and DNA analog ODN mediated antisense strategies have been
ineffective as an antisense therapy in living organisms. In contrast to RNA
vectors, no effective ssDNA vector has previously been designed which can bind,
penetrate, and synthesize ssDNA in cells and tissues of living animals. The DNA
ODN antisense approach has worked well in vitro but not in vivo because cells
cultured in vitro, e.g., in cell cultures, can be saturated with the ODN, a
factor that is not practical in the living organism. In fact, even with liposome
uptake enhancers and chemical modifications to the DNA backbone, which increase
half-life, the requisite quantity of DNA oligos introduced into the organism is
often toxic. Animal studies have shown this approach to induce hypotension,
renal failure, coma, and death.

4
<PAGE>
The CytoGenix, Inc. proprietary technology merges the above antisense
approaches. Our new technology allows a delivery/expression vector to bind
cells, enter the cell, and replicate. Our cassette, when inserted into the
desired targeting vector, will express sequence-specific ssDNA rather than RNA.
The ssDNA (1) can be regulated to attempt expression of ssDNA at therapeutic but
subtoxic levels, (2) is sequence specific and possesses a relatively long
half-life, (3) can be targeted to multiple sites on a target RNA or be targeted
to multiple target RNAs, (4) provide binding sites for DNA- binding proteins,
and (5) induce RNase H activity freeing the ssDNA to hybridize with other RNAs.

DEVELOPMENT TO DATE

The ssDNA expression vector technology (antisense molecule delivery system) was
developed as the direct result of an exclusive license and sponsored research
agreement with Dr. Charles Conrad and InGene, Inc. Dr. Conrad first invented and
filed a patent on the precursor technology of expressing single strands of
sequence specific DNA in bacteria as a research laboratory technique, not
contemplating any therapeutic use in living organisms.

CytoGenix personnel became aware of the technique through a mutual patent
attorney and negotiated the license and a continuing sponsored research
agreement to revive the patent and to expand and refine the technology for
possible use in human and animal therapies. Each of these developments was
reported in detail in press releases which are available on the company website.

Beta test kits of the ssDNA vector have been provided at cost of $250.00 by
CytoGenix to 12 universities and commercial biotech R&D companies in order to
demonstrate and validate the CytoGenix research results through impartial third
party testing. Additional live animal (IN VIVO) studies are budgeted for this
year beginning with one in progress at the Southwest Foundation for Biomedical
Research in San Antonio, Texas where CytoGenix's TroVec(TM) technology will be
used to deliver molecules that are believed to antisense SIV (Simian Immuno
Virus) which is the monkey version of HIV.

The technology has been successfully tested by our principal research facility,
Ingene, Inc. in various tissue samples. The company has also delivered sample
versions of the technology to over a dozen universities for third party
validation of the product. The costs of the studies will be funded by the
universities. The results of these studies will be published upon their
completion sometime in the second quarter 2000. In addition to these ongoing
studies the company intends to publish a comprehensive manuscript describing
these studies in concert or subsequent to the issuance of its first patent
expected in March, 2000.

Having developed an effective technology for the delivery of therapeutic
antisense molecules, the choice is how to most effectively get the products
resulting from the technology into the health care marketplace.

The company has spent approximately $1,000,000 per year for the past two years
on research and development activities.

To date there are limited ways to deliver single stranded DNA oligonucleotides
into cells, but they are not reliable and can only be used in limited
applications. The company's ssDNA expression vector can be used in very broad
applications and can be delivered safely into the cells of living animals. To
our knowledge there is no effective competition to the company's proprietary
technology. On December 28, 1998 the United States Patent Office (USPTO)
notified the company that it has allowed all the claims contained in the patent
application for the company's single stranded DNA expression vector. The Patent
is expected to issue in March, 2000.

The company has 7 full time employees.

Dr. Jonathan Elliston was hired on September 1, 1999 as Director of Strategic
Planing and Intellectual Property. Ms. Kim Totsky was hired as an Executive
Assistant. The five Officers of the company are described in Item 5,"Directors,
Officers, Promoters and Control Persons."

Regulatory Issues

The FDA approves compounds that have been demonstrated both safe and effective
as individual parts and in combination. The safety of our vector by itself is
easily demonstrated since it has no efficacy by itself. The task is to prove .
safety with a sufficient number of efficacious ODN to comfortably extrapolate
universal safety of the vector alone.

The FDA recognizes different categories of disease that deserve different
approval standards. The most lenient is accorded to those drugs that have been
designated "compassionate use" in that any dangers or side effects they may
exhibit are less harmful than those inherent in the disease itself when compared
with the potential benefits.

Certain diseases have been designated as "orphan" diseases in that there are so
few cases that the major drug companies cannot justify the expense of
investigational development and submitting to the full approval process. Many of
the orphan diseases, although rare, are nonetheless devastating to the patients
and their families from both a physical and financial point of view. The FDA
therefore, has afforded less rigorous requirements for their approval.

5
<PAGE>
Accordingly, application for approval of disease specific ODN's for "orphan"
drugs with "compassionate use" status offer the easiest and fastest way to
demonstrate the safety of our vector and the efficacy of the specific ODN's in
combination.

Although this approach does not represent enormous profit potential in the early
stages, it minimizes the expense and time involved in gaining the first set of
approvals. Therefore, an important component of the company's regulatory
strategy involves cycling through a number of applications to the FDA beginning
with the simplest and easiest to win approval. The Company is now in the process
of deciding which applications should be best.

Company Technology

The technology that became the ssDNA IEV was invented by an MD, Dr. Charles
Conrad, founder of InGene, Inc and a practicing neural oncologist. The
technology was exclusively licensed and developed under a sponsored research
agreement by CytoGenix, Inc.. The United States Patent Office (USPTO) has
allowed all the claims and the first ssDNA IEV patent is scheduled to be issued
in March 2000. Patent filings including co-inventions by CytoGenix, Inc.
scientists and Dr. Conrad are in process. The company has also initiated work on
additional technologies and is in the process of filing patents with the USPTO.

The company has developed a "cassette" that can be inserted into a viral
delivery/expression vector of choice. The cassette enables the vector to express
any desired sequence-specific, single-stranded DNA (ssDNA) oligonucleotide.

In this rapidly expanding market, the race is on to develop oligonucleotide
drugs for the treatment of diseases such as cancer, HIV, Hepatitis B and a range
of inflammatory conditions such as arthritis and psoriasis.

According to The Institute for Human Gene Therapy at the University of
Pennsylvania research scientists agree that antisense approaches coupled with
available genome and viral genetic information will ultimately lead to viable
genetic medical therapies. Currently, there are two major types of antisense
molecules used in antisense strategies. The first uses RNA to form duplexes with
cellular RNA. RNA expression vectors offer high transfection rates, cell
targeting, and in vivo transcription of the desired RNA. However, affecting
messenger RNA-antisense RNA duplex formation has often proved ineffective
because of low hybridization rates to target RNA and a brief antisense RNA
half-life due to host-cell mediated degradation.

The second antisense molecule types are oligonucleotides composed of DNA or DNA
analogs. DNA oligonucleotide mediated antisense formation with messenger RNA has
proved effective in cell culture. Advantages of using DNA oligos are that DNA
has a higher binding affinity for cellular RNA than does an RNA molecule and DNA
has a longer half-life than RNA. Most importantly, DNA-RNA hybrids activate
RNase H, an enzyme which digests the target RNA in the duplex. The RNase H
enzymatic activity permanently removes the RNA from the cell and frees the oligo
to bind to additional RNAs. This subsequently lowers the amount of DNA oligos
required for RNA hybridization and lessens problems caused by toxicity. The
list, of viral and chromosomal genes that have been successfully turned off in
cell culture, by this antisense mechanism, is fast growing and the number of
patents issued on specific genetic sequences for antisense use is also expanding
rapidly. There are approximately 600 such U.S. patents at this writing.

Heretofore, DNA and DNA analog oligonucleotide mediated antisense strategies
have been ineffective as an antisense therapy in living organisms. In contrast
to RNA vectors, no effective ssDNA vector has previously been designed which can
bind, penetrate, and synthesize ssDNA in cells and tissues of living animals.
The DNA oligonucleotide antisense approach has worked well in vitro but not in
vivo because cells cultured in vitro, e.g., in cell cultures, can be saturated
with the oligonucleotide, a luxury that is not practical in the living organism.
In fact, even with liposome uptake enhancers and chemical modifications to the
DNA backbone, which increase half-life, the requisite quantity of DNA oligos
introduced into the organism is often toxic. Animal studies have shown this
approach to induce hypotension, renal failure, coma, and death.

The CytoGenix, Inc. proprietary technology merges the above antisense
approaches. Our new technology allows a delivery/expression vector to bind
cells, enter the cell, and replicate. Our cassette, when inserted into the
desired targeting vector, will express sequence-specific ssDNA rather than RNA.
The ssDNA (1) can be regulated to attempt expression of ssDNA at therapeutic but
subtoxic levels, (2) is sequence specific and possesses a relatively long
half-life, (3) can be targeted to multiple sites on a target RNA or be targeted
to multiple target RNAs, (4) provide binding sites for DNA- binding proteins,
and (5) induce RNase H activity freeing the ssDNA to hybridize with other RNAs.

6
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation

The company has budgeted $2,000,000 for operations in fiscal year 2000. $840,000
has been allocated for General & Administrative costs. $930,000 has been
allocated for Research & Development including 6 animal studies. The scientific
protocols will be determined in March 2000. $230,000 will be reserved for
contingencies. The company will rely on equity financing to attain it's working
capital requirements.

The traditional method of developing the business aspects of this type of
biomedical technology is through licensing the use of the technology to other
biomedical entities (biotechs who have developed therapeutic molecules in need
of compatible delivery methodology), or to pharmaceutical companies who will
combine it with therapeutic molecules they have licensed from other biotechs. It
is not uncommon to form strategic alliances with larger biotech companies or
pharmaceutical companies to collaborate on further research and development.
Historically, it is not uncommon for smaller biotechs like CytoGenix to be
acquired or merge with companies with compatible and complementary technology.
CytoGenix is keeping its options open and will select the route that is most
advantageous to the shareholders.

There are currently over 600 U.S. patents for ODN's with therapeutic potential,
each of which is a prospective license for the CytoGenix antisense molecule
delivery technology. Our standard license calls for a $100,000 initiation fee,
and a maintenance fee of $15,000 per year versus an 8% royalty, whichever is
greater. We anticipate 12 to 15 licenses during the calendar year 2000. The
first to be executed in February 2000 with PharmaGenix, LLC, an affiliated
company in which CytoGenix is half owner.

CytoGenix has formed a joint enterprise with Professional Compounding Centers of
America (PCCA) called PharmaGenix, LLC that will apply part of the nucleic acid
technology (synthesized DNA and RNA sequences) to developing non prescription
products for distribution through the 2,500 member compounding pharmacies that
are affiliated with PCCA.

The objective is to generate sufficient revenue by the end of the year 2000 to
support the company's ongoing research and overhead without depending on equity
funding and the resultant dilution to shareholders.

Sometimes the alliances are more intended to match financing to innovation than
to match complimentary technologies. Each alliance has a valuable role in the
biotechnology arena.

Initial contact has been made by various firms that could result in a strategic
alliance.

CytoGenix, Inc. ability to continue operations in 2000 depends on its success in
obtaining equity financing in an amount sufficient to support its operations
through the end of 1999, and in connection therewith, is in negotiations with
several parties to obtain such financing.

Thus far the major role of management has been to obtain the funding for the
research, monitoring the progress, husbanding intellectual property, and
development of the technology.

1) The decision was made early on that equity funding would be the primary
source with an eye to grants whenever possible. Debt has not been an option.

2) The management team has successfully kept the G&A extremely low and dedicated
the largest share of available funds for research and development.

3) The Company has vigorously pursued prosecution of patents for both its
licensed technology and internally developed technology. The first of such has
been allowed and is scheduled for issue by November, 1999.

4) The combination of Beta Tests and RFP's assures a flow of corroborative data
while new approaches and technologies are tested.

The strategy from this point forward is simple:

1) Provide the ssDNA IEV Test Kits (product samples that may not be reverse
engineered) to as many respected investigators as possible at cost so that they
can demonstrate the efficacy of our proprietary vector by delivering their own
patented oligos.

2) Complete primate studies being conducted at The Southwest Foundation for
Biomedical Research, San Antonio, Texas to prove in vivo expression in
pharmacologically significant quantities. The research is intended to turn off
or antisense the SIV virus. Results of such studies are expected by the spring
of 2000.

3) Identify promising "compassionate use" therapies that qualify for fast-track
FDA approval to demonstrate safety and efficacy in human trials.

This strategy has been initiated and is progressing with deliberate speed. In
addition, the company is posting Requests for Proposals (RFP) from interested
and competent research facilities to conduct in vivo studies from a list
suggested by the CytoGenix, Inc. Scientific Advisory Board.

7
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In Kind Stock Swap

In January 1999 rules governing Regulation D, 504 Private Placements were
amended by the U.S. Securities and Exchange Commission whereby issuers were
compelled to offer one year restricted stock to suitable investors. Prior to
this amendment, issuers were permitted to offer freely transferable shares to
investors, typically at a slight discount to market in order to secure equity
financing. This new rule governing equity financing in the opinion of the
company placed shareholders at a large disadvantage due to the fact that in
order to secure funds for continued operations management would be forced to
offer unusually large discounts to market in consideration for the one year
restriction for sale of securities.

To continue to fund future operations of the company the management of
CytoGenix, Inc. decided to offer all current shareholders the opportunity to
exchange their freely transferable shares for one year restricted shares at a 2
for 1 ratio.

On or about May 13, 1999 management decided not to attempt a Rule 504 offering
which had previously been the company's main method of raising investor equity
and to instead offer existing shareholders the opportunity to exchange with the
Company one share of free trading stock held by the shareholder for two shares
of restricted stock to be issued by the Company. The Company initially proposed
to issue a total of 20,000,000 restricted trading shares in exchange for
10,000,000 free trading shares. The free trading shares would then be sold in
the market and privately by the Company which would use the funds obtained for
general corporate purposes. Between, May 16, 1999 and August 21, 1999, a total
of 424 existing shareholders agreed to exchange a total of 5,825,761 free
trading shares for 11,651,522 restricted shares. The Company then in a series of
brokerage and private transactions sold a total of 2,611,572 purportedly free
trading shares in the market realized a total of $ 1,367,813 as a result of such
activity. The Company retained a total of 3,214,189 shares which it received
from shareholders in the treasury of the Company.

No Form D relating to the Exchange offering was filed with the Securities and
Exchange Commission. The SEC has challenged that the shares sold in the market
were exempt from registration.

The Company disputes the following assertions, but it is possible that the sale
of the free trading shares described above may have violated securities
registration provisions of the federal and state securities laws which could
subject the Company to fines, penalties or other regulatory enforcement action.
There can be no assurance that the SEC or applicable state authorities will not
pursue any enforcement action. The Company disputes any such liability.

Additionally, while the Company also disputes the following assertions, it is
possible that shareholders who purchased the shares described above in market
transactions may have the right under state and federal securities laws to
require the Company to repurchase their shares, for the amount originally paid,
plus interest. The Company disputes any such liability.

Based up on the best information available to the Company at this time, the
Company has calculated a range of possible, but disputed, exposure that exists
for the Company in light of the disputed civil liabilities described above.

Accordingly, in the event these disputed civil liabilities were successfully
asserted, the Company could be liable to certain shareholders who purchased the
securities in market transactions in an amount of approximately $ 1,367,813 ,
plus interest. This range of possible exposure is calculated by reference to the
average closing price for a share of the Company's common stock, weighted for
reported daily volume, during the period May 16, 1999 to January 31, 2000; the
number of shares possibly sold during the same period of time; and the closing
price of one share on January 31 , 2000. The foregoing range could be adjusted
higher or lower depending upon adjustments to any of the referenced items and as
any new information become available to the Company.

Shareholders were notified of the In Kind Stock Swap via public press releases,
information contained on the Internet and through bulletins issued by the
Depository Trust Company (DTC).

The company's transfer agency, Nevada Agency and Trust Company (NATCO) of Reno,
Nevada acted as trustee for the exchange and was issued 20,000,000 shares to
implement the transaction.

8
<PAGE>
The results of the completion of the In Kind Stock Swap are;

Number of one year restricted shares issued: 11,651,522 shares
Number of freely transferable shares transferred to treasury: 5,825,761 shares
Number of freely transferable shares sold from treasury: 2,611,572 shares
Number of freely transferable shares remaining in treasury: 3,214,189 shares

The remaining 8,348,478 shares of the 20,000,000 issued to the trustee NATCO
were retired back to authorized and un-issued upon completion of the exchange.

The total number of shares outstanding as of September 27, 1999 is 28,814,442
common.

DIVESTITURE OF PHYSICAL THERAPY ASSOCIATES

One of the early research objectives of CytoGenix was to define and develop a
method of processing human stem cells (from bone marrow) back to the state of
total potential (totipotency) that they had as first stage development after
fertilization, then selectively differentiate the cells to early stage
(pluripotent) nerve cells. These cells should then have the potential of
regenerating and reconnecting nerve cells for treatment of brain disorders and
nerve damage like severed spinal cords. In countries where fetal tissue research
is allowed, like Australia and most of Europe, the effectiveness of the
totipotent tissue in nerve cell repair has been demonstrated. This new approach
could be even more effective because it would eliminate any problem of rejection
because it would be made from the patients own cells.

CytoGenix purchased Physical Therapy Associates with stock for equity
(1.5million shares) in order to acquire the technical expertise in traditional
nerve damage therapy and to provide a platform for future clinical trials
contemplated after the necessary molecular biology research was completed.

This line of research was subsequently suspended when the more promising
antisense molecule delivery (ssDNA expression vector) technology was identified.
The nerve damage repair research was indefinitely postponed because of
insufficient resources to pursue both research objectives simultaneously.

CytoGenix divested PTA, who repaid 1,000,000 shares but retained the balance
(500,000 shares) as compensation for good faith services provided, and to
reserve the option of revisiting the research when available resources allow.

Change in Management

In May of 1999 Laurence Mealey, CEO of the company died, subsequently Mike
Skillern assumed the position of temporary CEO and President. On September 1,
1999 Malcolm Skolnick was appointed as CEO and President of the Company. He was
also appointed as a director of the company beginning September 1, 1999 for a
term of three years.

Lawrence Wunderlich, Vice President of Finance and Corporate Secretary was also
appointed to the Board of Directors on September 1, 1999 for a term of three
years.

Item 3. Description of Property.

The Company's corporate executive offices are located at 1501 Winrock, #9909,
Houston, Texas 77057. The Company has occupied this approximate 1100 square foot
unit since August 1998. The facility is in excellent condition and is adequate
for corporate use. Rent on the facility is $775.00 per month.

Item 4. Security Ownership of Certain Beneficial Owners and Management.

Principal Shareholders

The following table sets forth the name and address, as of September 30, 1999,
and the approximate number of Shares of Common Stock of the Company owned of
record or beneficially by each person who owned of record, or was known by the
Company to own beneficially, more than 5% of the Company's Common Stock, and the
name and shareholdings of each Officer and Director, and all Officers and
Directors as a group.

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Name of Number of Percent of
Beneficial Owner Shares Owned Shares Owned
- --------------------------- ------------ ------------
Skillern Family Partnership 2,000,000 6.9% D,O
2900 South Gessner #504 common
Houston, Texas 77063

Dell T. Gibson 1,150,000 3.9% D,O
6524 San Felipe #388 common
Houston, Texas 77057

Gibson Family Partnership 569,399 1.9%
6524 San Felipe #388 common
Houston, Texas, 77057

Lawrence Wunderlich 150,000 .5% D,O
6524 San Felipe #388 common
Houston. TX 77057

Mike Walters, L.P.T. 500,000 1.7% D
1220 Blalock #220 common
Houston, Texas 77055

Malcolm Skolnick, Ph.D. J.D. 1,100,000 3.8% D,O
6524 San Felipe #388 common
Houston, Texas 77057

D A Director of Company
O An Officer of Company

Officers and Directors as a group: 5,469,399 18.9%
Common

Item 5. Directors, Executive Officers, Promoters and Control Persons.

The following table sets forth certain information with respect to each of the
Directors, executive Officers, key employees and control persons of the Company.

NAME TITLE

Malcolm Skolnick 63 Chief Executive Officer, President, Director
Term of Office: 9/30/99 to 9/30/02

Dell Gibson 61 Executive Vice President, Chairman of the Board
Term of Office: 9/10/98 to 9/10/02

Mike Skillern 32 Vice President Research & Development, Director
Term of Office: 9/10/98 to 9/10/01

Lawrence Wunderlich 41 Vice President, Finance, Director
Term of Office 9/30/99 to 9/10/02

Michael Walters 65 Director
Term of Office 9/10/98 to 9/10/01

None of the members of Management are related. The Company has entered into
agreements with the officers of the Company where they are paid salary of
$60,000 each per year. Such payment can be made in form of cash or restricted
common stock at the prevailing ask price of the stock. The officers are given
the option of accruing cash payments until such time as the Company can afford
to make such payments, in the opinion of the Board of Directors. The payment of
stock is based on the closing asked price of the Company's common stock on the
1st and 15th of each month for the preceding pay period.

Malcolm Skolnick has been the Chief Executive Officer and President of the
Company since September 1, 1999. Prior to that time and for the last 30 years
Dr. Skolnick was a Professor in the University of Texas Health Sciences Center
at Houston. Dr. Skolnick received a Ph.D. in physics from Cornell University and
a J.D. from the University of Houston. He is licensed to practice law in Texas
and is a registered patent attorney.

Mr. Skillern has been an officer of the company since February 1995. Prior to
that he attended Texas Tech University before working for the State of Texas
Senate. In 1986 Mr. Skillern worked as Vice President of Finance for Doctors'
Insurance Exchange in Houston, Texas where he arranged credit lines and
partnership financing exceeding $1,000,000. Mr. Skillern is the founder and
currently serves as a Director and Vice President of Research and development
for CytoGenix, Inc. Mr. Skillern serves as one of three general
partners for Skillern Family Partnership,LTD. which owns 2,000,000 common
shares of the Company.

10
<PAGE>
Mr. Gibson has been an officer of the company since February, 1995. He
graduated from the University of Texas in Austin and has done post graduate
work there. After U.S. Army service in Europe, Mr. Gibson has worked in a
wide variety of Sales, Marketing and Management positions with companies such
as Searle Cardio Pulmonary Instruments and AMSCO Rehab. Mr. Gibson currently
serves as Vice President and Director for CytoGenix, Inc. Mr.
Gibson owns 1,150,000 common shares of The Company. Mr. Gibson serves as one
of three general partners for the Gibson Family Partnership which owns 569,399
shares.

Mr. Wunderlich worked as a financial consultant at the investment banking
firm of Josephthal and Company from October 1996 until August 1998. At that
time Mr. Wunderlich joined the management team of CytoGenix, Inc.
as Vice President of Finance. Prior to his employment with Josephthal, Mr.
Wunderlich co-owned The Language Loop from 1991 to 1996 and held the position
of President. The company was a translation and interpreting service provider
to international companies. Mr. Wunderlich is fluent in German and Russian.
Mr. Wunderlich attended the University of Vienna and Manhattan College in
Riverdale, New York. He owns 150,000 shares.

Michael Walters, L.P.T. has been a Director since February, 1995 and is a
Licensed Physical Therapist and has been in private practice for over 36 years.
During this time he has been associated with the Brook Army Hospital Burn Center
in San Antonio, Texas and trained in that facility. He has also served and
trained in the trauma ward in this same facility. Michael Walters owns 500,000
shares of Cryogenic Solutions, Inc. common stock.

An equity interest in The Company will be made available, on an incentive basis,
to all employees, through an incentive and non-qualified stock option plan.

Item 6. Executive Compensation

The Company has entered into agreements with the officers of the Company where
they are paid salary of $60,000 each per year. Such payment can be made in form
of cash or restricted common stock at the prevailing ask price of the stock. The
officers are given the option of accruing cash payments until such time as the
Company can afford to make such payments, in the opinion of the Board of
Directors. The payment of stock is based on the closing asked price of the
Company's common stock on the 1st and 15th of each month for the preceding pay
period.

Item 7. Certain Relationships and Related Transactions

Management is unaware of any other interests of its officers and directors that
may create a potential conflict of interest with the Company.

Item 8. Legal Proceedings.

The Company has no pending litigation.

Item 9. Market for Common Equity and Related Stockholder Matters.

Principal Market

The Company's securities are traded on the NASD electronic bulletin board,
quotations for which are under the symbol "CYGX." The market makers are:
Herzog, Heine, Geduld, Inc
USCC Trading/A Division of Fleet Securities
WM.V. Frankel & Co. Inc.
Hill Thompson Magid & Co., Inc.
Wein Securities Corp.
Sharpe Capital, Inc.
Knight Securities, Inc.
Waterhouse Securities, Inc.
Advanced Clearing, Inc.
Continental Broker-Dealer Corp.
Brown & Company Securities Corporation
GVR Company

11
<PAGE>
Bid Information

The high and low bid price for the Company's common stock for each quarter
within the last two fiscal years, as received from OTC Bulletin Board follows.
The quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.

High Low
---- ---
Third Quarter Ending 09/30/99 .51 .48
Second Quarter Ending 06/30/99 .66 .62
First Quarter Ending 03/31/99 .94 .91

Fiscal Year Ending December 31, 1998
Fourth Quarter Ending 12/31/98 .54 .51
Third Quarter Ending 09/30/98 .59 .56
Second Quarter Ending 06/30/98 .75 .63
First Quarter Ending 03/31/98 .35 .34

Fiscal Year Ending December 31, 1997
Fourth Quarter Ending 12/31/97 .48 .43
Third Quarter Ending 09/30/97 .20 .20
Second Quarter Ending 06/30/97 .30 .30
First Quarter Ending 03/31/97 .18 .18

Stockholders

There approximately 1260 shareholders of record for the Company as of the date
of this submission. Dividends To date, the Company has not paid any dividends on
its Common Stock. The payment of dividends, if any, in the future, rests within
the discretion of its Board of Directors and will depend, among other things,
upon the Company's earnings, its capital requirements and its financial
condition, as well as other relevant factors. The Board does not intend to
declare any dividends in the foreseeable future, but instead intends to retain
all earnings, if any, for use in the Company's business operations. Under Nevada
corporate law, dividends may be paid out of surplus or, in case there is no
surplus, out of net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year.

Item 10. Recent Sales of Unregistered Securities.

The following tables outlines all securities the Company sold or issued within
the past three years without registering the securities under the Securities
Act, Regulation D Rule 504 (an exemption from registration).

Type Number of Number of
Date of Security Securities Issued Investors Consideration
- -------- ----------- ----------------- --------- ------------------
03/25/97 Common 3,687,425 5 Received par value
$.001 for a total
of $3,687.00
to Skillern Family
Partnership, Dell
Gibson, Malcolm
Skolnick, Susan
Kerr, Alex Bernal.

03/11/98 Common 1,283,960 9 Received par value
$.001 for a total
of $1,283.00
to Craig Tomlinson,
Gibson Family Family
Partnership, Malcolm
Skolnick, Mark Wisner,
Charles Conrad,
Charles Boyd,
Harry Morgenthal,
William Waldroff,
Skillern Family
Partnership.

03/26/98 Common 30,000 1 Received par value
$.001 for a total
of $30.00 to Allan
Richardson.

07/16/98 Common 980,000 7 Received par value
$.001 for a total
of $980.00
to InGene Inc.,
Ellis Gibson,
Charles Bardwell,
Dell Gibson,
Laurence Mealey,
Craig Tomlinson,
Steven Sloat.

12
<PAGE>
Item 11. Description of Securities

General

The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of Directors, with the result that the
holders of more than 50% of the Shares voted for the election of Directors can
elect all of the Directors. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of funds
legally available therefore, in the event of liquidation, dissolution or wind up
of the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining available for distribution to them after payment of liabilities
and after provision has been made for each class of stock, if any, having
preference over the Common Stock. Holders of Shares of Common Stock as such,
have no conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to the Common Stock. The Company has not issued
any Preferred Stock. However, the Preferred Stock if issued, may contain special
preferences as determined by the board of Directors of the Company, including,
but not limited to, the bearing of interest and convertibility into Shares of
Common Stock of the Company.

Item 12. Indemnification of Directors and Officers.

The Company and its affiliates may not be liable to its shareholders for errors
in judgment or other acts or omissions not amounting to intentional misconduct,
fraud or a knowing violation of the law, since provisions have been made in the
Articles of Incorporation and By-laws limiting such liability. The Articles of
Incorporation and By-laws also provide for indemnification of the Officers and
Directors of the Company in most cases for any liability suffered by them or
arising out of their activities as Officers and Directors of the company if they
were not engaged in intentional misconduct, fraud or a knowing violation of the
law.

Item 13. Financial Statements.

13
<PAGE>
SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.

/s/ LAWRENCE WUNDERLICH
Lawrence Wunderlich, Chief Financial Officer
(Registrant)

Date_________________________ By______________________________________________
(Signature)*

*Print the name and title of each signing officer under his or her signature.

14
<PAGE>
CYTOGENIX, INC.
(A Development Stage Company)
BALANCE SHEET
As of September 30, 1999 and December 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SEP' 30, 1999 DEC' 31, 1998
------------- -------------
<S> <C> <C>
ASSETS

CURRENT ASSETS
CHECKING/SAVINGS
COASTAL .............................. $ 28,274.29 $ 173,231.84
DONALDSON, LUFKIN & JENRETTE -MM ..... 4.81

------------- -------------
TOTAL CHECKING/SAVINGS .................. $ 28,279.10 $ 173,231.84

OTHER CURRENT ASSETS
OTHER CURRENT ASSETS

FEDERAL INCOME TAX WITHHELD ....... $ 18.65
PETTY CASH ........................ 600.00 $ 600.00
------------- -------------
TOTAL OTHER CURRENT ASSETS .............. $ 618.65 $ 600.00
------------- -------------
TOTAL CURRENT ASSETS ....................... $ 28,897.75 $ 173,831.84

FIXED ASSETS

RESEARCH AND DEVELOPMENT ASSET

COMPUTER EQUIPMENT ................... $ 2,079.24 $ 79.24
CYROSTORAGE .......................... 1,457.91 1,457.91
FREEZER .............................. 600.00 3,000.00
PHOENIX-CENTRIFUGE/MICROSCOPE ........ 2,500.00 2,500.00
PHOENIX-MICROSCOPE ................... 1,259.91 1,259.91
PHOENIX -1/2 CENTRIFUGE .............. 1,982.34 1,982.34
PHOENIX EQUIPMENT-INCUBATOR .......... 4,319.08 4,319.08
REFRIGERATOR ......................... 400.00
SHAKER BATH .......................... 1,800.00
SHELVES FOR LAB ...................... 291.36 291.36
STRALIGENE-PCR MACHINE ............... 8,177.74 8,177.74
VWR-INCUBATOR ........................ 2,208.21 2,208.21
VWR-WATER BATH/PLATFORM .............. 3,742.23 3,742.23
ACC. DEPRECIATION .................... (16,785.24) -9,970.74
------------- -------------
TOTAL RESEARCH AND DEVELOPMENT ASSET .... $ 14,032.78 $ 19,047.28
TOTAL FIXED ASSETS ......................... $ 14,032.78 $ 19,047.28
OTHER ASSETS
DEVELOPMENT STAGE EXPENSES

ACCOUNTING FEES ...................... $ 22,664.62 $ 8,395.00
ADVERTISING .......................... 18,963.64 16,813.87
AUTO ALLOWANCE ....................... 3,300.00 600.00
AUTO INSURANCE ....................... 2,986.58 2,986.58
</TABLE>
Accompanying Notes to Statements

F-1
<PAGE>
CYTOGENIX, INC.
(A Development Stage Company)
BALANCE SHEET - Continued
As of September 30, 1999 and December 31, 1998
(UNAUDITED)

SEP' 30, 1999 DEC' 31, 1998
------------- -------------

AUTO MILEAGE REIMBURSEMENT .................. 227.50 227.50
AUTO REPAIRS ................................ 681.12 681.12
AUTO-LEASE .................................. 6,244.81 1,414.52
AUTO-MISCELLANEOUS EXPENSE .................. 192.47 120.17
AUTO-PARKING/TOLLS .......................... 435.71 422.71
BANK SERVICE CHARGES ........................ 786.23 516.23
CELLULAR PHONE EXP .......................... 1,266.98 1,266.98
DOMAIN REG .................................. 210.00
COMPUTER-RELATED EXPENSES ................... 3,685.85 1,120.28
FIXED ASSET
COMPUTER EQUIPMENT ....................... 14,261.75 $ 12,668.73
OFFICE EQUIPMENT ......................... 1,491.71 $ 1,210.54
TELEPHONES, ETC .......................... 966.39 966.39
------------- -------------
TOTAL FIXED ASSET ........................... $ 16,719.85 $ 14,845.66

FREIGHT/DELIVERY ............................ 2,775.66 2,527.21
INVESTIGATORY EXPENSES ...................... 624.83 60.83
LEGAL FEES .................................. 84,525.84 48,620.90
MEALS AND ENTERTAINMENT ..................... 4,574.33 3,784.22
MEDICAL INSURANCE ........................... 38,668.53 7,861.53
MISCELLANEOUS EXP ........................... 13,765.76 12,965.93
OFFICE SUPPLIES/EXPENSES .................... 15,932.11 12,019.22
PAYROLL EXPENSES ............................ 438,805.29 191,747.34
PROFESSIONAL FEES ........................... 164,258.04 134,011.54
REGISTERED AGENT'S FEE ...................... 570.00 570.00
RENTAL OF OFFICE SPACE ...................... 19,950.00 12,925.00
TELEPHONE ................................... 28,315.81 13,936.19
TELEPHONE MESSAGE SERVICE ................... 1,084.17 1,084.17
TRAVEL EXPENSES ............................ 8,801.59 6,620.07
UTILITIES ................................... 1,285.42 288.23
------------- -------------
TOTAL DEVELOPMENT STAGE EXPENSES ............... $ 902,302.74 $ 498,433.00
DEPOSITS

OFFICE DEPOSIT .............................. $ 250.00 $ 250.00
TELEPHONE SERVICE ........................... 260.00 260.00
------------- -------------
TOTAL DEPOSITS ................................. $ 510.00 $ 510.00

INVESTMENT

QUATUM BIT INDUCTION TECHNOLOGY ............. $ 10,100.00
-------------
TOTAL INVESTMENT ............................... $ 10,100.00
ORGANIZATIONAL EXPENSES
ACCOUNTING FEES ............................. $ 2,595.00 $ 2,595.00

Accompanying Notes to Statements

F-2
<PAGE>
CYTOGENIX, INC.
(A Development Stage Company)
BALANCE SHEET - Continued
As of September 30, 1999 and December 31, 1998
(UNAUDITED)

<TABLE>
<CAPTION>
SEP' 30, 1999 DEC' 31, 1998
------------- -------------
<S> <C> <C>
FREIGHT/DELIVERY ............................ $ 249.00 249.00
LEGAL FEES .................................. $ 3,275.00 3,275.00
OFFICE SUPPLIES/EXPENSES .................... $ 185.29 185.29
PROFESSIONAL FEES ........................... $ 1,250.00 1,250.00
STATE INCORPORATION FEES .................... $ 340.00 340.00
------------- -------------
TOTAL ORGANIZATIONAL EXPENSES .................. $ 7,894.29 $ 7,894.29
------------- -------------
TOTAL OTHER ASSETS ................................ $ 920,807.03 $ 506,837.29
------------- -------------
TOTAL ASSETS .......................................... $ 963,737.56 $ 699,716.41
============= =============
LIABILITIES & EQUITY
LIABILITIES
CURRENT LIABILITIES

ACCOUNTS PAYABLE ......................... $ 59,377.69 $ 3,747.58
PAYROLL EXPENSE .......................... $ 11,745.99 $ 5,867.56
TOTAL CURRENT LIABILITIES ...................... $ 71,123.68 $ 9,615.14

LONG-TERM LIABILITY

COMMITMENTS AND CONTINGENCIES (NOTE 1)
------------- -------------
TOTAL LIABILITIES ................................. $ 71,123.68 $ 9,615.14

EQUITY
CORP. SHAREHOLDER'S EQUITY

COMMON STOCK ................................ $ 28,814.44 $ 17,485.70
PAID-IN CAPITAL ............................. $1,374,015.15 915,052.44
TREASURY SHARES ............................. $ (60,000.00)
CORP. SHAREHOLDER'S EQUITY - OTHER .......... $ 25,000.00
LESS STOCK SUBSCRIPTIONS .................... $ (5,825.76) -2,215.15
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE $ (469,389.95) -240,221.72
------------- -------------
TOTAL EQUITY ...................................... $ 892,613.88 $ 690,101.27
------------- -------------
TOTAL LIABILITIES & EQUITY ............................ $ 963,737.56 $ 699,716.41
============= =============
</TABLE>
Accompanying Notes to Statements

F-3
<PAGE>
CYTOGENIX, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Nine Months Ended September 30, 1999
and
the Period from February 10, 1995 (Date of Inception) to Sep 30, 1999
(UNAUDITED)

FEB. 10, 1995
(INCEPTION) TO
SEP 30, 99 SEP 30, 99
------------- -------------

INCOME

DIVIDEND INCOME ............................. $ 1,401.26 $ 1,659.29
------------- -------------
TOTAL INCOME ................................... $ 1,401.26 $ 1,659.29

EXPENSE

INTEREST PAID ............................... $ 734.98
MISCELLANEOUS

OTHER SPRING VALLEY EXP .................. $ 10,012.83
SPRING VALLEY LITIGATION EXP ............. $ 7,398.00
RENT ........................................ $ 450.00
-------------
TOTAL MISCELLANEOUS ......................... $ 18,595.81

RESEARCH AND DEVELOPMENT EXPENSE

BIO RESEARCH FEES ........................ $ 12,225.30 $ 29,497.80
BIOTECHNOLOGY ............................ 153,575.00 288,717.13
CONSULTANTS .............................. 2,260.75
DEPRECIATION EXPENSE ..................... 6,814.50 16,785.24
FREIGHT/DELIVERY ......................... 83.98 98.62
PATENT ATTORNEYS' FEES/EXPENSES .......... 57,470.72 72,814.26
PAYROLL EXPENSES ......................... 37,615.92
QUANTUM OPTICS

Accompanying Notes to Statements

F-4
<PAGE>
CYTOGENIX, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS - Continued
Nine Months Ended September 30, 1999
and
the Period from February 10, 1995 (Date of Inception) to Sep 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
FEB. 10, 1995
(INCEPTION) TO
SEP 30, 99 SEP 30, 99
------------- -------------
<S> <C> <C>
SUPPLIES ............................ 300.00
SUPPLIES

LAB ................................. 400.00 4,063.71

TRAVEL ................................. $ 300.00
------------- -------------
Total Research and Development Expense .... $ 230,569.50 $ 452,453.43
------------- -------------
TOTAL EXPENSE ................................ $ 230,569.50 $ 471,049.24
------------- -------------
NET DEFICIT FROM OPERATIONS ...................... $ (229,168.24) $ (469,389.95)

Deficit Accumulated During the Development

STAGE AT THE BEGINNING OF THE PERIOD ...... $ (240,221.72) 0
------------- -------------

DEFICIT ACCUMULATED DURING THE DEVELOPMENT

STAGE AT THE END OF THE PERIOD ............ $ (469,389.96) $ (469,389.95)
------------- -------------
</TABLE>
Accompanying Notes to Statements

F-5
<PAGE>
CYTOGENIX, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1999
and
the Period from February 10, 1995 (Date of Inception) to September 30, 1999
(UNAUDITED)

FEB. 10, 1995
(Inception) to
SEP 30, 1999 30-SEP-99
------------- -------------
STOCKHOLDERS' EQUITY: COMMON STOCK ........... $ 11,328.74 $ 28,814.44

STOCKHOLDERS' EQUITY: PAID-IN CAPITAL ........ 458,962.71 1,374,015.15

CORP. SHAREHOLDER'S EQUITY - OTHER ........... 25,000.00 25,000.00

LESS STOCK SUBSCRIPTIONS ..................... -5,825.76 -5,825.76

STOCKHOLDERS' EQUITY: TREASURY STOCK ......... -60,000.00 -60,000.00
------------- -------------

TOTAL .................................... $ 429,465.69 $1,362,003.83

DEFICIT FROM OPERATIONS ...................... $ (229,168.24) $ (469,389.95)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY.................... $ 200,297.45 $ 892,613.88
============= =============

Accompanying Notes to Statements

F-6
<PAGE>
CYTOGENIX, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Nine Months Ended June 30, 1999
and
the Period from February 10, 1995 (Date of Inception) to September 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
FEB. 10, 1995
(INCEPTION) TO
Sep 30, 1999 30-SEP-99
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
DEFICIT FROM OPERATIONS .................. $ (229,168.24) $ (469,389.95)

ADJUSTMENTS:

DEPRECIATION EXPENSE ..................... 6,814.50 16,785.24
PETTY CASH ............................... 0.00 -600.00
ACCOUNTS PAYABLE ......................... 55,630.11 59,377.69
PAYROLL EXPENSE .......................... 5,878.43 11,745.99
FEDERAL INCOME TAX WITHHELD .............. -18.65 (18.65)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ...... $ (160,863.85) $ (382,099.68)
------------- -------------
INVESTING ACTIVITIES

RESEARCH AND DEVELOPMENT ASSET ACQUISITIONS . $ (4,800.00) $ (33,818.02)
DEVELOPMENT STAGE EXPENSES .................. $ (403,880.34) $ (902,313.35)
DEPOSITS: OFFICE DEPOSIT .................... 0.00 -510.00
INVESTMENT-QUANTUM BIT INDUCTION TECHNOLOGY . -10,100.00 (10,100.00)
ORGANIZATIONAL EXPENSES ..................... 0.00 -7,894.29
------------- -------------
NET CASH PROVIDED BY INVESTING ACTIVITIES ...... $ (418,780.34) $ (954,635.66)
------------- -------------
FINANCING ACTIVITIES

INCREASE DUE TO SALE OF COMMON STOCK ........ $ 11,328.74 $ 28,814.44
INCREASE DUE TO ADDITIONAL PAID-IN-CAPITAL .. 458,962.71 1,374,015.15
INCREASE DUE TO SALE OF STOCK WARRANTS ...... 25,000.00 25,000.00
REDUCTION DUE TO STOCK SUBSCRIPTION ......... -2,215.15
REDUCTION DUE TO REPURCHASE OF COMMON STOCK . -60,000.00 -60,000.00
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ...... $ 435,291.45 $1,365,614.44
------------- -------------
</TABLE>
Accompanying Notes to Statements

F-7
<PAGE>
CYTOGENIX, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS - Continued
Nine Months Ended June 30, 1999
and
the Period from February 10, 1995 (Date of Inception) to September 30, 1999
(UNAUDITED)

JUNE 30, '99 JUNE 30, '99
------------- -------------
Net cash increase for period .................. $ (144,352.74) $ 28,879.10
CASH AT BEGINNING OF PERIOD ................... 173,231.84 0
------------- -------------

CASH AT END OF PERIOD ......................... $ 28,879.10 $ 28,879.10
============= =============

Accompanying Notes to Statements

F-8
<PAGE>
CYTOGENIX, INC.
(A Development Stage Company)

NOTE 1

On or about May 13, 1999 management decided not to attempt a Rule 504 offering
which had previously been the company's main method of raising investor equity
and to instead offer existing shareholders the opportunity to exchange with the
Company one share of free trading stock held by the shareholder for two shares
of restricted stock to be issued by the Company. The Company initially proposed
to issue a total of 20,000,000 restricted trading shares in exchange for
10,000,000 free trading shares. The free trading shares would then be sold in
the market by the Company which would use the funds obtained for general
corporate purposes. Between, May 16, 1999 and August 21, 1999, a total of 424
existing shareholders agreed to exchange a total of 5,825,761 free trading
shares for 11,651,522 restricted shares. The Company then in a series of
brokerage and private transactions sold a total of 2,611,572 purportedly free
trading shares in the market realized a total of $ 1,367,813 as a result of such
activity. The Company retained a total of 3,214,189 shares which it received
from shareholders in the treasury of the Company.

No Form D relating to the Exchange offering was filed with the Securities and
Exchange Commission. The SEC has challenged that the shares sold in the market
were exempt from registration.

Accordingly, in the event theses disputed civil liabilities were successfully
asserted, the Company could be liable to certain shareholders who purchased the
securities in market transactions in an amount of approximately $ 1,367,813 ,
plus interest. This range of possible exposure is calculated by reference to the
average closing price for a share of the Company's common stock, weighted for
reported daily volume, during the period May 16, 1999 to January 31, 2000; the
number of shares possibly sold during the same period of time; and the closing
price of one share on January 31 , 2000. The foregoing range could be adjusted
higher or lower depending upon adjustments to any of the referenced items and as
any new information become available to the Company.

F-9
<PAGE>
To the Board of Directors and Stockholders
of Cryogenic Solutions, Inc.
6524 San Felipe, Suite 388
Houston, Texas 77057

I have audited the accompanying balance sheet of Cryogenic Solutions, Inc. (a
Nevada corporation in the development stage) as of December 31, 1998, and the
related statement of operations, stockholders' equity, and cash flows for the
year then ended and for the period from February 10, 1995 (inception), to
December 31, 1998. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit 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.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Cryogenic Solutions, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
year then ended and for the period from February 10, 1995 (inception), to
December 31, 1998, in conformity with generally accepted accounting principles.

Harrie Marie Pollok Operhall,
A Professional Corporation
Houston, Texas

November 11, 1999

F-10
<PAGE>
CRYOGENIC SOLUTIONS, INC.
(A Development Stage Company)
BALANCE SHEET
As of December 31, 1998

DEC' 31, 1998
-------------
ASSETS

CURRENT ASSETS
CHECKING/SAVINGS

COASTAL .............................................. $ 173,231.84
-------------
TOTAL CHECKING/SAVINGS .................................. $ 173,231.84
OTHER CURRENT ASSETS

PETTY CASH ........................................... $ 600.00
-------------
TOTAL OTHER CURRENT ASSETS .............................. $ 600.00
-------------
TOTAL CURRENT ASSETS ....................................... $ 173,831.84
FIXED ASSETS

RESEARCH AND DEVELOPMENT ASSET

COMPUTER EQUIPMENT ................................... $ 79.24
CYROSTORAGE .......................................... 1,457.91
FREEZER .............................................. 3,000.00
PHOENIX-CENTRIFUGE/MICROSCOPE ........................ 2,500.00
PHOENIX-MICROSCOPE ................................... 1,259.91
PHOENIX -1/2 CENTRIFUGE .............................. 1,982.34
PHOENIX EQUIPMENT-INCUBATOR .......................... 4,319.08
SHELVES FOR LAB ...................................... 291.36
STRALIGENE-PCR MACHINE ............................... 8,177.74
VWR-INCUBATOR ........................................ 2,208.21
VWR-WATER BATH/PLATFORM .............................. 3,742.23
ACC. DEPRECIATION .................................... -9,970.74
-------------
TOTAL RESEARCH AND DEVELOPMENT ASSET .................... $ 19,047.28
-------------
TOTAL FIXED ASSETS ......................................... $ 19,047.28
OTHER ASSETS
DEVELOPMENT STAGE EXPENSES

ACCOUNTING FEES ...................................... $ 8,395.00
ADVERTISING .......................................... 16,813.87
AUTO ALLOWANCE ....................................... 600.00
AUTO INSURANCE ....................................... 2,986.58
AUTO MILEAGE REIMBURSEMENT ........................... 227.50
AUTO REPAIRS ......................................... 681.12
AUTO-LEASE ........................................... 1,414.52
AUTO-MISCELLANEOUS EXPENSE ........................... 120.17
AUTO-PARKING/TOLLS ................................... 422.71

SEE ACCOMPANYING FOOTNOTES

F-11
<PAGE>
CRYOGENIC SOLUTIONS, INC.
(A Development Stage Company)
BALANCE SHEET - Continued
As of December 31, 1998

DEC' 31, 1998
-------------
Bank Service Charges ................................ 516.23
CELLULAR PHONE EXP .................................. 1,266.98
COMPUTER-RELATED EXPENSES ........................... 1,120.28
FIXED ASSET

COMPUTER EQUIPMENT ............................... $ 12,668.73
OFFICE EQUIPMENT ................................. $ 1,210.54
TELEPHONES, ETC .................................. 966.39
-------------
TOTAL FIXED ASSET ................................... $ 14,845.66
FREIGHT/DELIVERY .................................... 2,527.21
INVESTIGATORY EXPENSES .............................. 60.83
LEGAL FEES .......................................... 48,620.90
MEALS AND ENTERTAINMENT ............................. 3,784.22
MEDICAL INSURANCE ................................... 7,861.53
MISCELLANEOUS EXP ................................... 12,965.93
OFFICE SUPPLIES/EXPENSES ............................ 12,019.22
PAYROLL EXPENSES .................................... 191,747.34
PROFESSIONAL FEES ................................... 134,011.54
REGISTERED AGENT'S FEE .............................. 570.00
RENTAL OF OFFICE SPACE .............................. 12,925.00
TELEPHONE ........................................... 13,936.19
TELEPHONE MESSAGE SERVICE ........................... 1,084.17
TRAVEL EXPENSES .................................... 6,620.07
UTILITIES ........................................... 288.23
-------------
TOTAL DEVELOPMENT STAGE EXPENSES ....................... $ 498,433.00
DEPOSITS

OFFICE DEPOSIT ...................................... $ 250.00
TELEPHONE SERVICE ................................... 260.00
-------------
TOTAL DEPOSITS ......................................... $ 510.00
ORGANIZATIONAL EXPENSES

ACCOUNTING FEES ..................................... $ 2,595.00
FREIGHT/DELIVERY .................................... 249.00
LEGAL FEES .......................................... 3,275.00
OFFICE SUPPLIES/EXPENSES ............................ 185.29
PROFESSIONAL FEES ................................... 1,250.00
STATE INCORPORATION FEES ............................ 340.00
-------------
TOTAL ORGANIZATIONAL EXPENSES .......................... $ 7,894.29
-------------
TOTAL OTHER ASSETS ........................................ $ 506,837.29
-------------
TOTAL ASSETS .................................................. $ 699,716.41
=============

SEE ACCOMPANYING FOOTNOTES

F-12
<PAGE>
CRYOGENIC SOLUTIONS, INC.
(A Development Stage Company)
BALANCE SHEET - Continued
As of December 31, 1998

DEC' 31, 1998
-------------
LIABILITIES & EQUITY
LIABILITIES
CURRENT LIABILITIES

ACCOUNTS PAYABLE .................................. $ 3,747.58
PAYROLL EXPENSE ................................... $ 5,867.56
-------------
TOTAL CURRENT LIABILITIES ............................... $ 9,615.14
-------------
TOTAL LIABILITIES .......................................... $ 9,615.14
EQUITY

CORP. SHAREHOLDER'S EQUITY

COMMON STOCK ......................................... $ 17,485.70
PAID-IN CAPITAL ...................................... 915,052.44
LESS STOCK SUBSCRIPTIONS ............................. -2,215.15
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE ........ -240,221.72
-------------
TOTAL EQUITY ............................................... $ 690,101.27
-------------
TOTAL LIABILITIES & EQUITY ..................................... $ 699,716.41
=============

SEE ACCOMPANYING FOOTNOTES

F-13
<PAGE>
CRYOGENIC SOLUTIONS, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Year Ended December 31, 1998 and the Period from
February 10, 1995 (Date of Inception) to December 31, 1998

FEB. 10, 1995
(INCEPTION) TO
Dec' 31, 1998 DEC. 31, 1998
------------- -------------
INCOME

DIVIDEND INCOME ............................. $ 61.08 $ 258.03
------------- -------------
TOTAL INCOME ................................... $ 61.08 $ 258.03

EXPENSE

INTEREST PAID ............................... $ 0.90 $ 734.98
MISCELLANEOUS

OTHER SPRING VALLEY EXP .................. 2,374.32 10,013.83
SPRING VALLEY LITIGATION EXP ............. 9,475.00 7,398.00
RENT ........................................ 0.00 450.00
------------- -------------
TOTAL MISCELLANEOUS ......................... $ 11,850.22 $ 18,595.81

RESEARCH AND DEVELOPMENT EXPENSE

BIO RESEARCH FEES ........................ $ 1,500.00 $ 17,272.50
BIOTECHNOLOGY ............................ 78,880.79 135,142.13
CONSULTANTS .............................. 2,260.75
DEPRECIATION EXPENSE ..................... 5,535.92 9,970.74
FREIGHT/DELIVERY ......................... 14.64 14.65
PATENT ATTORNEYS' FEES/EXPENSES .......... 12,343.54 15,343.54
PAYROLL EXPENSES ......................... 33,958.34 37,615.92
QUANTUM OPTICS
SUPPLIES .............................. 300.00
SUPPLIES

LAB ................................... 298.00 3663.71

SEE ACCOMPANYING FOOTNOTES

F-14
<PAGE>
CRYOGENIC SOLUTIONS, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS - Continued
Year Ended December 31, 1998 and the Period from
February 10, 1995 (Date of Inception) to December 31, 1998

FEB. 10, 1995
(INCEPTION) TO
DEC. 31, 1998 DEC. 31, 1998
------------- -------------
TRAVEL ............................... 0.00 300.00
------------- -------------
TOTAL RESEARCH AND DEVELOPMENT EXPENSE .. $ 132,531.23 $ 221,883.94
------------- -------------
TOTAL EXPENSE .............................. $ 144,381.45 $ 240,030.75
------------- -------------
NET DEFICIT FROM OPERATIONS .................... $ (144,320.37) $ (240,221.72)

Deficit Accumulated During the Development

STAGE AT THE BEGINNING OF THE PERIOD .... -95,901.35 0
------------- -------------

Deficit Accumulated During the Development

STAGE AT THE END OF THE PERIOD .......... $ (240,221.72) $ (240,221.72)
============= =============

SEE ACCOMPANYING FOOTNOTES

F-15
<PAGE>
CRYOGENIC SOLUTIONS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Year Ended December 31, 1998 and the Period from
February 10, 1995 (Date of Inception) to December 31, 1998
<TABLE>
<CAPTION>
FEB. 10, 1995
(INCEPTION) TO
DEC. 31, 1998 DEC. 31, 1998
------------- -------------
<S> <C> <C>
STOCKHOLDERS' EQUITY: COMMON STOCK ............... $ 6,777.81 $ 17,485.70

STOCKHOLDERS' EQUITY: PAID-IN CAPITAL ............ 664,040.98 943,484.77

STOCKHOLDERS' EQUITY: STOCK EXPENSE/ ISSUANCE/SALE -14,243.70 -28,432.33
------------- -------------

TOTAL ......................................... $ 656,575.09 $ 932,538.14

DEFICIT FROM OPERATIONS .......................... $ (144,320.37) -240,221.72
------------- -------------
TOTAL STOCKHOLDERS' EQUITY .......................... $ (512,254.72) $ (692,316.42)
============= =============
</TABLE>
SEE ACCOMPANYING FOOTNOTES

F-16
<PAGE>
CRYOGENIC SOLUTIONS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Year Ended December 31, 1998 and the Period from
February 10, 1995 (Date of Inception) to December 31, 1998
<TABLE>
<CAPTION>
FEB. 10, 1995
(INCEPTION) TO
DEC. 31, 1998 DEC. 31, 1998
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
DEFICIT FROM OPERATIONS ...................... $ (144,320.37) $ (240,221.72)
ADJUSTMENTS:

DEPRECIATION EXPENSE ......................... 5,535.92 9,970.74
PETTY CASH ................................... -600.00 -600.00
STOCK SUBSCRIPTIONS .......................... -2,215.15 -2,215.15
ACCOUNTS PAYABLE ............................. 2,822.58 3,747.58
PAYROLL EXPENSE .............................. 5,867.56 5,867.56
OTHER CURRENT LIABILITY: LOAN FROM SHAREHOLDER -56,040.00 --
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES .......... $ (188,949.46) (223,450.99)
INVESTING ACTIVITIES

RESEARCH AND DEVELOPMENT ASSET ACQUISITIONS ..... $ (5,742.25) $ (29,018.02)
DEVELOPMENT STAGE EXPENSES ...................... -303,616.41 (498,433.00)
DEPOSITS: OFFICE DEPOSIT ........................ -250.00 -510.00
ORGANIZATIONAL EXPENSES ......................... -3,000.00 -7,894.29
------------- -------------
NET CASH PROVIDED BY INVESTING ACTIVITIES .......... $ (312,608.66) $ (535,855.31)
FINANCING ACTIVITIES

REDUCTION OF SHAREHOLDER LOANS .................. $ (15,000.00) $ --
PURCHASE OF COMMON STOCK ........................ 6,777.81 17,485.70
ADDITIONAL PAID-IN CAPITAL UPON PURCHASE OF STOCK 664,040.98 943,484.77
PAYMENT OF EXPENSES RELATED TO PURCHASE OF STOCK -14,243.70 -28,432.33
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES .......... $ 641,575.09 $ 932,538.14
------------- -------------
NET CASH INCREASE FOR PERIOD ........................... $ 140,016.97 $ 173,231.84
CASH AT BEGINNING OF PERIOD ............................ 33,214.87 0.00
------------- -------------

CASH AT END OF PERIOD .................................. $ 173,231.84 $ 173,231.84
============= =============
</TABLE>
SEE ACCOMPANYING ACCOUNTANT'S REPORT AND FOOTNOTES

F-17
<PAGE>
CRYOGENIC SOLUTIONS, INC.
(A Development Stage Company)

NOTE A.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Cryogenic Solutions, Inc. was incorporated in Nevada on February 10, 1995. It is
a biotechnology company focusing on controlled cellular dedifferentiation and
transdifferentiation processes. The Company has acquired the exclusive rights
for applications to a specialized expression vector capable of producing single
stranded DNA (ssDNA) in both eukaryotes and prokaryotes.

Equity funding has been the only source of operational and research support from
the outset. Capital resources have been carefully husbanded with the bulk of the
funding allocated directly to research with administrative overhead held to a
minimum.

Depreciation

Currently, depreciation on the research and development equipment is computed
using the straight-line method over the assets' expected useful life of 5 years.

Amortization

The development stage expenses and the organization expenses are being
capitalized for future amortization purposes, once the corporation begins its
business operations of marketing the results of its research to the medical
profession to cure its patients of certain ailments.

Income Tax

The financial statements do not include a provision for income taxes because the
Corporation has incurred net operating losses for all periods to date. The
"Deficit Accumulated During the Development Stage at December 31, 1998" for $
240,221.72 reflects the net operating loss to date.

NOTE B-DEVELOPMENT STAGE OPERATIONS

The Corporation's operations, as explained in Note A, is still devoted to
raising capital, obtaining financing, and providing the funding for the research
described in Notes A and D.

NOTE C-PROPERTY AND EQUIPMENT

Property and equipment are individually identified on the Balance Sheet and are
stated at cost.

Research and Development equipment is being depreciated using the straight-line
method over

F-18
<PAGE>
CRYOGENIC SOLUTIONS, INC.
(A Development Stage Corporation)

NOTE C-PROPERTY AND EQUIPMENT(Continued)

the useful life of five years of the respective assets.

The General and Administrative equipment has been set up under the Development
Stage Expenses and no depreciation has been calculated at this time since the
business operations of the business has not begun.

NOTE D-RESEARCH AND DEVELOPMENT EXPENSES

The research and the development of the technology that became known as the
ssDNA IEV was invented by an MD, Dr. Charles Conrad, founder of InGene, Inc. and
a practicing neural oncologist. The technology was exclusively licensed and
developed under a sponsored research agreement by the Corporation. The financial
arrangements of the contract are monitored by the Corporation's management.

The research and development expense categories also reflect the expenses of the
patent attorneys hired to assist the Corporation in the patent filings of the
first ssDNA IEV patent, which is scheduled to be issued in August of l999. Other
patent filings include co-inventions by a Corporation scientist and Dr. Conrad.

NOTE E-LOANS FROM SHAREHOLDERS

When the Corporation was initially set up and prior to raising capital, the
original officers and shareholders loaned the Corporation funds to pay its
expenses. In addition, several of the officers were not paid for services
rendered, these expenses were accrued at that time.

During this audit period, the management decided that to meet these obligations
any and all shareholder loans were to be repaid by issuance of common stock.

F-19