10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2016

o 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: 001-37357

Cellceutix Corporation 

 (Exact name of registrant as specified in its charter)

Nevada	30-0565645
(State or other jurisdiction of incorporation or organization)	(I.R.S. Empl. Ident. No.)

100 Cumming Center, Suite 151-B

Beverly, MA 01915

(Address of principal executive offices, Zip Code)

(978)-921-4125

(Registrant’s telephone number, including area code)

__________________________________________________________________

(Former Name, Former Address and Former Fiscal Year if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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 x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	o	Accelerated Filer	x
Non-Accelerated Filer	o	Smaller reporting company	¨
(Do not check if a 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 o No x

The number of shares outstanding of each of the issuer’s classes of common equity, as of November 1, 2016 is as follows:

Class of Securities	Shares Outstanding
Common Stock Class A, $0.0001 par value	125,108,756
Common Stock Class B, $0.0001 par value	None

CELLCEUTIX CORPORATION

FORM 10-Q

For the Quarter Ended September 30, 2016

TABLE OF CONTENTS

Item 1.	Financial Statements (unaudited)	4
	Condensed Balance Sheets as of September 30, 2016 (unaudited) and June 30, 2016 (audited)	4
	Condensed Statements of Operations (unaudited) for the three months ended September 30, 2016 and 2015	5
	Condensed Statements of Cash Flows (unaudited) for the three months ended September 30, 2016 and 2015	6
	Notes to Condensed Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
SIGNATURES		33

 

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FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. 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. These forward-looking statements include, but are not limited to, statements concerning our future drug development plans and projected timelines for the initiation and completion of preclinical and clinical trials; the potential for the results of ongoing preclinical or clinical trials; other statements regarding our future product development and regulatory strategies, including with respect to specific indications; any statements regarding our future financial performance, results of operations or sufficiency of capital resources to fund our operating requirements; and any other statements which are other than statements of historical fact. 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, but are not limited to, our ability to continue to fund and successfully progress internal research and development efforts and to create effective, commercially-viable drugs; our ability to effectively and timely conduct clinical trials; our ability to ultimately distribute our drug candidates; compliance with regulatory requirements; and our capital needs, as well as other factors described elsewhere in this report and our other reports filed with the Securities and Exchange Commission (the “SEC”). 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.

Forward-looking statements speak only as of the date on which they are made. 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 SEC that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business. Readers are cautioned not to put undue reliance on forward-looking statements.

For further information about these and other risks, uncertainties and factors, please review the disclosure included in our Annual Report on Form 10-K under “Part I, Item 1A, Risk Factors” and in this report under “Part II, Item 1A, Risk Factors.” 

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PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CELLCEUTIX CORPORATION

CONDENSED BALANCE SHEETS

(Rounded to nearest thousand except for per share data)

	September 30,			June 30,
	2016			2016
	Unaudited
ASSETS
Current Assets:
Cash	$	5,556,000		$	6,310,000
Prepaid expenses		181,000			272,000
Other receivable		403,000			-
Subscription receivable		26,000			26,000
Total Current Assets		6,166,000			6,608,000
Other Assets:
Patent costs - net		4,246,000			4,311,000
Property, plant and equipment -net		88,000			90,000
Deferred offering costs		326,000			358,000
Security deposits		78,000			78,000
Total Other Assets		4,738,000			4,837,000
Total Assets	$	10,904,000		$	11,445,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable - (including related party payables of approx. $1,506,000 and $1,502,000, respectively)	$	3,718,000		$	3,528,000
Accrued expenses - (including related party accruals of approx. $105,000 and $72,000, respectively)		170,000			97,000
Accrued salaries and payroll taxes -(including related party accrued salaries of approx. $2,777,000 and $2,777,000, respectively)		2,863,000			2,834,000
Note payable - related party		2,022,000			2,022,000
Total Current Liabilities		8,773,000			8,481,000
Total Liabilities		8,773,000			8,481,000
Commitments and contingencies (Note 8)
Stockholders' Equity
Preferred stock, $0.001 par value, 500,000 designated shares, no shares issued and outstanding		-			-
Common Stock - Class A, $.0001 par value, 300,000,000 shares authorized, 125,108,756 and 123,589,536 issued and outstanding as of September 30, 2016 and June 30, 2016, respectively		13,000			12,000
Common Stock - Class B, (10 votes per share); $.0001 par value, 100,000,000 shares authorized, no shares issued and outstanding as of September 30, 2016 and June 30, 2016, respectively		-			-
Additional paid-in capital		59,163,000			56,969,000
Accumulated deficit		(57,045,000	)		(54,017,000	)
Total Stockholders' Equity		2,131,000			2,964,000
Total Liabilities and Stockholders' Equity	$	10,904,000		$	11,445,000

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

4

CELLCEUTIX CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(Unaudited)

(Rounded to nearest thousand except for shares and per share data)

	2016			2015
Revenues	$	-		$	-
Operating expenses:
Research and development expenses		2,277,000			1,831,000
General and administrative expenses		362,000			339,000
Officers' payroll and payroll tax expenses		130,000			130,000
Professional fees		209,000			227,000
Total operating expenses		2,978,000			2,527,000
Loss from operations		(2,978,000	)		(2,527,000	)
Other expenses
Interest income		1,000			1,000
Interest expense		(51,000	)		(51,000	)
Total other expenses		(50,000	)		(50,000	)
Loss before provision for income taxes		(3,028,000	)		(2,577,000	)
Provision for income taxes		-			-
Net loss	$	(3,028,000	)	$	(2,577,000	)
Basic and diluted loss per share attributable to common stockholders	$	(0.02	)	$	(0.02	)
Weighted average number of common shares		124,289,082			118,140,424

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

5

CELLCEUTIX CORPORATION

CONDENSED STATEMENTS OF CASH FLOW

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(Unaudited)

(Rounded to nearest thousand)

	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,028,000	)	$	(2,577,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Common stock and stock options issued as
payment for services compensation, services
rendered and financing costs		344,000			98,000
Amortization of patent costs		91,000			97,000
Depreciation of equipment		5,000			3,000
Changes in operating assets and liabilities:
Prepaid expenses and security deposits		91,000			90,000
Other receivable		(403,000	)		-
Accounts payable		190,000			219,000
Accrued expenses		73,000			27,000
Accrued officers' salaries and payroll taxes		29,000			(64,000	)
Net cash used in operating activities		(2,608,000	)		(2,107,000	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment		(3,000	)		-
Patent costs		(26,000	)		(39,000	)
Net cash used in investing activities		(29,000	)		(39,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock, net of offering costs		1,883,000			1,498,000
Exercise of stock options and warrants		-			12,000
Net cash provided by financing activities		1,883,000			1,510,000
NET DECREASE IN CASH		(754,000	)		(636,000	)
CASH, BEGINNING OF PERIOD		6,310,000			8,410,000
CASH, END OF PERIOD	$	5,556,000		$	7,774,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	15,000		$	15,000

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

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CELLCEUTIX CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(Unaudited)

1. Basis of Presentation and Nature of Operations

Unaudited Interim Financial Information

The accompanying unaudited condensed financial statements of Cellceutix Corporation have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements for the year ended June 30, 2016, included in our Annual Report on Form 10-K for the year ended June 30, 2016.

In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three month period have been made. Results for the interim period presented are not necessarily indicative of the results that might be expected for the entire fiscal year. When used in these notes, the terms "Company", "we", "us" or "our" mean Cellceutix Corporation. 

Basis of Presentation

Cellceutix Corporation (“Cellceutix” or the “Company”) was incorporated as Econoshare, Inc. on August 1, 2005, in the State of Nevada. On December 6, 2007, the Company acquired Cellceutix Pharma, Inc., a privately owned corporation formed under the laws of the State of Delaware on June 20, 2007. Following the acquisition, the Company changed its name to Cellceutix Corporation. Cellceutix Corporation has no subsidiaries since Cellceutix Pharma, Inc. was dissolved in 2014. The Company is a clinical stage biopharmaceutical company and has no customers, products or revenues to date.

The Company’s Common Stock is quoted on OTCQB, symbol “CTIX”.

Nature of Operations -Overview

We are in the business of developing innovative small molecule therapies to treat diseases with significant medical need, particularly in the areas of cancer, antibiotics and inflammatory disease. Our strategy is to use our business and scientific expertise to maximize the value of our pipeline. We will do this by focusing initially on our lead compounds, Brilacidin, Kevetrin and Prurisol and advancing them as quickly as possible along the regulatory pathway. We will 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.

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2. Liquidity

At September 30, 2016, we had $5.6 million in cash. We have expended substantial funds on the research and development of our product candidates. Our net losses incurred for the three months ended September 30, 2016 and 2015, amounted to $3.0 million and $2.6 million, respectively, and a working capital (deficit) of approximately $(2.6) million and $(1.9) million, respectively at September 30, 2016 and June 30, 2016.

On March 30, 2015, the Company entered into a common stock purchase agreement with Aspire Capital Fund, LLC, an Illinois limited liability company ("Aspire Capital") which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of the Company's common stock over the 36-month term of the Purchase Agreement. As of September 30, 2016, the available balance is approximately $20 million.

The Company plans to incur expenses of approximately $19 million over the next twelve months, including approximately $15 million for clinical trials. The Company has limited experience with pharmaceutical drug development. As such, the budget estimate 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 and on our projected timeline of drug development.

Management believes that the amounts available from Aspire and under the Company’s effective shelf registration statement will be sufficient to fund the Company’s operations for the next 12 months.

If we are unable to generate enough working capital from our current financing agreement with Aspire Capital when needed or secure additional sources of funding, it may be necessary to significantly reduce our current rate of spending through reductions in staff and delaying, scaling back or stopping certain research and development programs, including more costly Phase 2 and Phase 3 clinical trials on our wholly-owned development programs as these programs progress into later stage development. Insufficient liquidity may also require us to relinquish greater rights to product candidates at an earlier stage of development or on less favorable terms to us and our stockholders than we would otherwise choose in order to obtain up-front license fees needed to fund operations. These events could prevent us from successfully executing our operating plan.

3. Significant Accounting Policies and Recent Accounting Pronouncements

Reclassifications

Certain prior year amounts have been reclassified to conform to current period presentation. Such reclassifications were limited to the Condensed Balance Sheets and did not impact the Condensed Statement of Operations and Condensed Statement of Cash Flows.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include contract research accruals, recoverability of long-lived assets, measurement of stock-based compensation, and the periods of performance under collaborative research and development agreements. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

8

Basic Earnings (Loss) per Share

Basic and diluted earnings (loss) per share are computed based on the weighted-average common shares and common share equivalents outstanding during the period. Common share equivalents consist of stock options, warrants and convertible notes payable. Common share equivalents of 45,036,175 and 44,436,980 were excluded from the computation of diluted earnings (loss) per share for the three months ended September 30, 2016 and 2015, respectively, because their effect is anti-dilutive.

Accounting for Stock Based Compensation

The stock-based compensation expense incurred by Cellceutix for employees and directors in connection with its stock option plan is based on the employee model of ASC 718, and the fair market value of the options is measured at the grant date. Under ASC 718 employee is defined as “An individual over whom the grantor of a share-based compensation award exercises or has the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in case law and currently under U.S. tax regulations”. Our consultants do not meet the employer-employee relationship as defined by the IRS and therefore are accounted for under ASC 505-50.

ASC 505-50-30-11 (previously EITF 96-18) further provides that an issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date:

i.	The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); and
ii.	The date at which the counterparty’s performance is complete.

We have elected to use the Black-Scholes-Merton pricing model to determine the fair value of stock options on the dates of grant. Restricted stock is measured based on the fair market values of the underlying stock on the dates of grant. We recognize stock-based compensation using the straight-line vesting method over the requisite service period of the equity awards.

The components of stock based compensation related to stock options in the Company’s Statement of Operations for the three months ended September 30, 2016 and 2015 are as follows (rounded to nearest thousand):

	Three months ended September 30
	2016		2015
Research and development expenses
Professional fees	$	42,000	$	78,000
Employees’ bonus		13,000		-
Officers’ bonus		289,000		20,000
Total share-based compensation expense	$	344,000	$	98,000

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Recent Accounting Pronouncements

Standards Issued Not Yet Adopted

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements—Going Concern—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. ASU 2014-15 is effective for annual periods, and interim periods within those annual periods, starting after December 15, 2016; the Company’s first quarter of fiscal 2018. Management is currently evaluating the impact of this standard on our consolidated financial statements.

In May 2014, the FASB issued authoritative guidance that defines how companies should report revenues from contracts with customers. The standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It provides companies with a single comprehensive five-step principles based model to use in accounting for revenue and supersedes current revenue recognition requirements, including most industry-specific and transaction-specific revenue guidance. In August 2015, the FASB deferred the effective date of the new revenue standard by one year. As a result, the new standard would not be effective for the Company until 2019. In addition, the FASB is allowing companies to early adopt this guidance for non-public entities beginning in fiscal year 2017. The guidance permits an entity to apply the standard retrospectively to all prior periods presented, with certain practical expedients, or apply the requirements in the year of adoption, through a cumulative adjustment. The Company will apply this new guidance when it becomes effective and has not yet selected a transition method. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. For finance leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; interest on the lease liability will be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income; and repayments of the principal portion of the lease liability will be classified within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; a single lease cost will be recognized, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and all cash payments will be classified within operating activities in the statement of cash flows. Under Topic 842 the accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments in Topic 842 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management believes that the adoption of this guidance will not have a material impact on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (“ASU 2016-09”). Under ASU 2016-09, entities will be required to recognize the income tax effects of awards in the income statement when the awards vest or are settled. The guidance on employers’ accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation and for forfeitures is also changing. For public business entities, ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted, but all of the guidance must be adopted in the same period. The Company is currently evaluating the impact the adoption of ASU 2016-09 will have on its financial statements and disclosures.

Standards Issued and Adopted

In June 2014, the FASB issued ASU 2014-12, Compensation - Stock Compensation. The amendments in this ASU apply to reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target can be achieved after the requisite service period. This ASU is the final version of Proposed ASU EITF-13D--Compensation--Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, which has been deleted. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. Management has adopted this guidance and it did not have a material impact on our condensed financial statements.

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4. Other Receivables

Other receivables represent amounts to be reimbursed by vendors.

5. Patents, net

Patents, net consisted of the following (rounded to nearest thousand):

	Useful life (years)	September 30, 2016			June 30, 2016
Purchased Patent Rights – Brilacidin, and related compounds	14	$	4,082,000		$	4,082,000
Purchased Patent Rights – Anti-microbial – surfactants and related compounds	12		144,000			144,000
Patents – Kevetrin and related compounds	17		1,061,000			1,035,000
			5,287,000			5,261,000
Less: Accumulated amortization for Brilacidin, Anti-microbial- surfactants and related compounds			(931,000	)		(855,000	)
Accumulated amortization for Patents –Kevetrin and related compounds			(110,000	)		(95,000	)
		$	4,246,000		$	4,311,000

The patents are amortized on a straight-line basis over the estimated remaining useful lives of the assets, determined 12-17 years from the date of acquisition.

Amortization expense for the three months ended September 30, 2016 and 2015 was approximately $91,000 and $97,000, respectively.

At September 30, 2016, the future amortization period for all patents was approximately 9 years to 16 years. Future estimated annual amortization expenses are approximately $270,000 for 2017, $363,000 for each year from 2018 to 2025, $353,000 for the year ending June 30, 2026, $351,000 for the year ending June 30, 2027, $113,000 for the year ending June 30, 2028, $59,000 for the years ending June 30, 2029 to 2032, and $22,000 for year ending June 30, 2033.

6. Accrued Expenses

Accrued expenses consisted of the following (rounded to nearest thousand):

	September 30, 2016		June 30, 2016
Accrued research and development consulting fees	$	64,000	$	25,000
Accrued rent (Note 9) – related party		29,000		32,000
Accrued interest – (Note 10) related parties		77,000		40,000
Total	$	170,000	$	97,000

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7. Accrued Salaries and Payroll Taxes – Related Parties And Other

Accrued salaries and payroll taxes consisted of the following (rounded to nearest thousand):

	September 30, 2016		June 30, 2016
Accrued salaries – related parties	$	2,647,000	$	2,647,000
Accrued payroll taxes – related parties		130,000		130,000
Withholding tax		86,000		57,000
Total	$	2,863,000	$	2,834,000

8. Commitments and Contingencies

Lease Commitments

Operating Leases

The Company signed a lease extension agreement with Cummings Properties which began on October 1, 2013. The lease is for a term of five years ending on September 30, 2018, and requires monthly payments of approximately $18,000. Innovative Medical Research Inc., a company owned by Leo Ehrlich and Dr. Krishna Menon, officers of the Company, have co-signed the lease and will sublease 200 square feet of space previously used by the Company and pay the Company $900 per month.

As of September 30, 2016, future minimum lease payments to Cummings Properties required under the non-cancelable operating lease are as follows (rounded to nearest thousand):

Year ending June 30,
2017		161,000
2018		214,000
2019		55,000
Total minimum payments	$	430,000

Rent expense, net of lease income, under this operating lease agreement was approximately $50,000 for both of three months ended September 30, 2016 and 2015. Before September, 2013, the Company paid rent to KARD for its share of office space and details are shown at Note 9. Related Party Transactions.

Contractual Commitments

The Company has no contractual minimum commitments to Contract Research Organizations as of September 30, 2016. Services are billed to Cellceutix when performed by the vendors.

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9. Related Party Transactions

Office Lease

Dr. Menon, a significant shareholder of the Company and its President of Research and a Director, also serves as the Chief Operating Officer and Director of Kard Scientific (“KARD”). On December 7, 2007, the Company began renting office space from KARD, on a month to month basis for $900 per month. This continued through August 2013 and since September 1, 2013, the Company no longer leases space from KARD or pays rent to KARD.

In September 2013, the Company signed a lease extension agreement with Cummings Properties for the Company’s offices and laboratories at 100 Cummings Center, Suite 151-B Beverly, MA 01915. The lease is for a term of five years from October 1, 2013 to September 30, 2018 and requires monthly payments of approximately $18,000. Cellceutix had taken over the space occupied by KARD. In addition, Innovative Medical Research Inc., (“Innovative Medical”) a company owned by Leo Ehrlich and Dr. Krishna Menon, officers of Cellecutix, has co-signed the lease and rents approximately 200 square feet of office space, the space previously used by Cellceutix and pays Cellceutix $900 per month, the same amount Cellceutix previously paid KARD. Innovative Medical paid total rent of approximately $3,000, to Cellceutix for both of the three months ended September 30, 2016 and 2015 and the rental payment was offset with the accrued rent owed to KARD.

At September 30, 2016 and June 30, 2016, rent payable to KARD of approximately $29,000 and $32,000, respectively, were included in accrued rent – related party.

Clinical Studies

The Company previously engaged KARD to conduct specified pre-clinical studies. The Company did not have an exclusive arrangement with KARD. The Company no longer uses KARD. At September 30, 2016 and June 30, 2016, the accrued research and development expenses to KARD was approximately $1,486,000 and this amount was included in accounts payable.

10. Note Payable – Related Party

During the year ended June 30, 2010, Mr. Ehrlich loaned the Company a total of approximately $973,000. A condition for this note was that the Ehrlich Promissory Note A and Ehrlich Promissory Note B be replaced with a new note, Ehrlich Promissory Note C. The Ehrlich Promissory Note C is an unsecured demand note that bears 9% simple interest per annum and is convertible into the Company’s common stock at $0.50 per share. The note requires that the interest rate on the amounts due on Ehrlich Promissory Notes A and B be changed retroactively, beginning October 1, 2009, to 9%. On April 1, 2011, the Company amended the Ehrlich Promissory Note C and agreed to retroactively convert accrued interest of approximately $97,000 through December 31, 2010 into additional principal. During the year ended June 30, 2011, Mr. Ehrlich loaned the Company an additional approximate $997,000 which brought the total balance of the demand note to approximately $2,002,000. During the year ended June 30, 2012, Mr. Ehrlich loaned the Company an additional $20,000 which brought the balance of the demand note to approximately $2,022,000.

On May 8, 2012, the Company did not have the ability to repay the Ehrlich Promissory Note C loan and agreed to change the interest rate on the outstanding balance of principal and interest of approximately $2,248,000, as of March 31, 2012, from 9% simple interest to 10% simple interest, and the Company issued 2,000,000 Equity Incentive Options exercisable at $0.51 per share equal to 110% of the closing bid price of $0.46 per share on May 7, 2012. Options are valid for ten years from the date of issuance.

At September 30, 2016 and June 30, 2016, approximately $77,000 and $40,000, respectively, was accrued as interest expense on this note.

At September 30, 2016 and June 30, 2016, principal balances of the demand note was approximately $2,022,000.

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11. Equity Incentive Plans, Stock-Based Compensation and Warrants

Equity Incentive Plans

2009 Stock Option Plan

On April 5, 2009 the Board of Directors of the Registrant adopted the 2009 Stock Option Plan (“the 2009 Plan”). The 2009 Plan permits the grant of 2,000,000 shares of both Incentive Stock Options (“ISOs”), intended to qualify under section 422 of the Code, and Non-Qualified Stock Options.

2010 Equity Incentive Plan

Under the 2010 Equity Incentive Plan (the "2010 Plan") the total number of shares of common stock reserved and available for issuance under the 2010 Plan is 45,000,000 shares. Shares of common stock under the 2010 Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares. The term of each stock option shall be fixed as provided, however, an Incentive Stock Option may be granted only within the ten-year period commencing from the effective date of the 2010 Plan and may only be exercised within ten years of the date of grant (or five years in the case of an Incentive Stock Option granted to an optionee who, at the time of grant, owns common stock possessing more than 10% of the total combined voting power of all classes of voting stock of the Company).

2016 Equity Incentive Plan

On June 30, 2016, the Board adopted the Cellceutix Corporation 2016 Equity Incentive Plan (the "2016 Plan"). The 2016 Plan became effective upon adoption by the Board on June 30, 2016.

Up to 20,000,000 shares of the Company's common stock may be issued under the 2016 Plan (subject to adjustment as described in the 2016 Plan); provided that, no Outside Director (as defined in the 2016 Plan) may be granted awards covering more than 250,000 shares of common stock in any year and no participant shall be granted, during any one year period, options to purchase common stock and stock appreciation rights with respect to more than 4,000,000 shares of common stock in the aggregate or any other awards with respect to more than 2,500,000 shares of common stock in the aggregate. The 2016 Plan permits the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance share awards and performance compensation awards to employees, directors, and consultants of the Company and its affiliates.

In connection with adoption of the 2016 Plan, the Board of Directors also approved forms of Incentive Stock Option Agreement for Employees, Non-qualified Stock Option Agreement for Employees, Non-qualified Stock Option Agreement for Non-Employee Directors, Restricted Stock Award Agreement for Employees and Restricted Stock Award Agreement for Non-Employee Directors that will be utilized by the Company to grant options and restricted shares under the 2016 Plan.

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The following table summarizes all stock option activity under the above equity incentive plans:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at June 30, 2016		40,444,728	$	0.22		4.58	$	48,185,911
Granted		368,779		1.31		9.80		-
Exercised		-		-		-		-
Forfeited/expired		-		-		-		-
Outstanding at September 30, 2016		40,813,507	$	0.23		4.38	$	44,341,745
Exercisable at September 30, 2016		39,769,611	$	0.20		4.25	$	44,333,975

The fair value of options granted for the three months ended September 30, 2016 and 2015 was estimated on the date of grant using the Black Scholes model that uses assumptions noted in the following table.

	Three months ended September 30,
	2016	2015
Expected term (in years)	3-10		3
Expected stock price volatility	57.63%-111.62%		65.76%
Risk-free interest rate	0.71%-1.73%		1.04%
Expected dividend yield	-		-

Stock-Based Compensation

The Company recognized approximately $344,000 and $77,000 of total stock-based compensation costs related to stock options awards for the three months ended September 30, 2016 and 2015, respectively. The $344,000 of stock based compensation expense for the three months ended September 30, 2016 included approximately $127,000 of stock options expenses and $217,000 of stock awards (see Note 12).

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For the three months ended September 30, 2016

On February 16, 2016, the Company issued 119,424 stock options to purchase shares of the Company’s common stock, par value $0.0001 per share to two consultants for services, valued at approximately $55,000, based on the closing bid price as quoted on the OTC on February 16, 2016 at $1.15 per share. These options were issued with an exercise price of $1.105. One third vested immediately, one third vested in six months (August 11, 2016), and the balance will be vested on February 11, 2017, and will be valid for a period of three years. These options have piggyback registration rights. The Company recorded approximately $9,000 of stock option expenses during the three months ended September 30, 2016.

On April 6, 2016, the Company issued 25,000 shares and 25,000 stock options to purchase shares of the Company’s common stock, par value $0.0001 per share to a consultant for service. The stock options valued at approximately $14,000, based on the closing bid price as quoted on the OTC on April 6, 2016 at $1.61 per share. These options were issued with an exercise price of $1.77 and shall vest on April 30, 2017, with a three year option term. These options have piggyback registration rights. The Company recorded approximately $3,000 of stock option expenses for the three months ended September 30, 2016.

On June 27, 2016, the Company and Dr. Bertolino entered into an executive employment agreement as our President and Chief Medical Officer, effective on June 27, 2016. Commencing on June 27, 2016, the Company agreed to pay Dr. Bertolino an annual salary of $440,000. In addition, the Company agreed to grant to Dr. Bertolino under the Cellceutix Corporation 2016 Equity Incentive Plan (i) 1,066,667 shares of restricted stock and (ii) a ten-year option to purchase 617,839 shares of the Company's Class A common stock at an exercise price of $1.39 per share. Both shares and options shall vest upon the earliest to occur of the following: (1) 50% upon the first anniversary of the effective date, and the remaining 50% upon the second anniversary of the effective date (2) completion of both a Phase 2b psoriasis study and a Phase 2 oral mucositis study; (3) the Company’s common stock closes above $3.00 per share (as may be adjusted for any stock splits or similar actions); (4) the commencement of trading of the Company’s common stock on a national securities exchange (e.g. Nasdaq or the NYSE); or (5) upon a Change in Control (as defined in the employment agreement) of the Company. The Company could not conclude that it was probable that these awards will fully vest until the second anniversary of the effective date, because such events listed above are outside the Company’s control. The Company will evaluate the probability of these events occurring for each reporting period. The 1,066,667 shares were valued at approximately $1.5 million, which will be amortized over two years to June 27, 2018. The 617,839 stock options were valued at approximately $800,000 and will be exercisable for 10 years at an exercise price of $1.39 per share. They will be amortized over 2 years to June 27, 2018 or sooner if the Company determines that it is probable that one of the events listed above will occur. During the three months ended September 30, 2016, the Company recorded approximately $289,000 of total stock-based compensation, including approximately $188,000 of stock based compensation expense and approximately $101,000 of stock option expense. The Company may award Dr. Arthur P. Bertolino an annual bonus at the sole discretion of the Board of Directors of the Company. The Company may accelerate the amortization of the $1.5 million stock-based compensation expense if there are conditions which will accelerate the vesting, as mentioned above.

On July 18, 2016, the Company issued 7,500 stock options to purchase shares of the Company’s common stock to a consultant for service rendered, exercisable for 3 years at $1.38 per share of common stock. The value of these 7,500 options was approximately $4,000.

On September 1, 2016, the Company and Jane Harness entered into an executive employment agreement as the Company’s VP, Clinical Sciences and Project Management, effective on September 1, 2016. Commencing on September 1, 2016, the Company agreed to pay Ms. Harness an annual salary of $250,000. In addition, the Company agreed to grant to Ms. Harness under the Cellceutix Corporation 2016 Equity Incentive Plan (i) 58,394 shares of restricted stock, which shall vest upon the earliest to occur of the following: (1) one third (33 1/3 %) upon the first anniversary of the effective date, one third (33 1/3 %) upon the second anniversary of the effective date, and the remaining one third (33 1/3 %) upon the third anniversary of the effective date; or (2) upon a Change in Control (as defined in the employment agreement) of the Company. Ten-year options to purchase 172,987 shares of the Company’s common stock were also granted at an exercise price of $1.37 per share, which shall vest upon the earliest to occur of the following: (1) one third (33 1/3 %) upon the first anniversary of the effective date, and the remaining balance vesting monthly in equal portions over the following 24 months; and (2) upon a Change in Control (as defined in the employment agreement) of the Company. The 58,394 shares were valued at approximately $80,000, which will be amortized over three years to September 1, 2019. The 172,987 stock options were valued at approximately $220,000 and will be exercisable for 10 years at an exercise price of $1.26 per share. They will be amortized over 3 years to September 1, 2019. During the three months ended September 30, 2016, the Company recorded approximately $8,000 of total stock-based compensation, including approximately $2,000 of stock based compensation expense and approximately $6,000 of stock option expense.

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On September 15, 2016, the Company and LaVonne Lang entered into an executive employment agreement as the Company’s VP, Regulatory Affairs, effective on September 15, 2016. Commencing on September 15, 2016, the Company agreed to pay Dr. Lang an annual salary of $250,000. In addition, the Company agreed to grant to Dr. Lang under the Cellceutix Corporation 2016 Equity Incentive Plan (i) 63,492 shares of restricted stock, which shall vest upon the earliest to occur of the following: (1) one third (33 1/3 %) upon the first anniversary of the effective date, one third (33 1/3 %) upon the second anniversary of the effective date, and the remaining one third (33 1/3 %) upon the third anniversary of the effective date; or (2) upon a Change in Control (as defined in the employment agreement) of the Company. Ten-year options to purchase 188,262 shares of the Company’s common stock were also granted at an exercise price of $1.26 per share, which shall vest upon the earliest to occur of the following: (1) one third (33 1/3 %) upon the first anniversary of the effective date, and the remaining balance vesting monthly in equal portions over the following 24 months; and (2) upon a Change in Control (as defined in the employment agreement) of the Company. The 63,492 shares were valued at approximately $80,000, which will be amortized over three years to September 15, 2019. The 188,263 stock options were valued at approximately $220,000 and will be exercisable for 10 years at an exercise price of $1.26 per share. They will be amortized over 3 years to September 15, 2019. During the three months ended September 30, 2016, the Company recorded approximately $4,000 of total stock-based compensation, including approximately $1,000 of stock based compensation expense and approximately $3,000 of stock option expense.

For the three months ended September 30, 2015

On July 10, 2015, the Company issued 7,028 shares and 50,000 options to a consultant for his one year contract, which options are exercisable for 3 years at $2.49 per share of common stock. The total value of these 50,000 options was approximately $60,000 and we recognized approximately $60,000 of stock based compensation costs that was charged to additional paid-in capital as of September 30, 2015. The assumptions we used in the Black Scholes option-pricing model were disclosed as above.

Stock Warrants

For the three months ended September 30, 2016

During the three months ended September 30, 2016, there were no warrants issued or exercised.

The following table summarizes stock warrants:

	Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at June 30, 2016		25,000	$	1.79		0.56	$	-
Extended		-		-		-
Granted		-		-		-
Exercised		-		-		-
Expired		-		-		-
Outstanding at September 30, 2016		25,000	$	1.79		0.31	$	-
Exercisable at September 30, 2016		25,000	$	1.79		0.31	$	-

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12. Equity Transactions

Issuance of Common Stock for Cash

$30 million Class A Common Stock Purchase Agreement with Aspire Capital Fund, LLC

On March 30, 2015, the Company entered into a common stock purchase agreement (the "Purchase Agreement") with Aspire Capital Fund, LLC, an Illinois limited liability company ("Aspire Capital") which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of the Company's common stock over the 36-month term of the Purchase Agreement. In consideration for entering into the Purchase Agreement, the Company issued to Aspire Capital 160,000 shares of its Class A common stock as a commitment fee. The commitment fee of approximately $499,000 will be amortized as the funding is received. The amortized amount of $32,000 and $25,000 were debited to additional paid-in capital during the three months ended September 30, 2016 and 2015. The unamortized portion is carried on the balance sheet as deferred offering costs and was $326,000 and $358,000 at September 30, 2016 and June 30, 2016, respectively. During the period from March 30, 2015 to September 30, 2016, the Company had completed sales to Aspire totaling 7,300,000 shares of common stock generating gross proceeds of approximately $10 million.

Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Aspire Capital, in which the Company agreed to file one or more registration statements, as permissible and necessary to register, under the Securities Act of 1933, as amended, the sale of the shares of the Company's common stock that have been and may be issued to Aspire Capital under the Purchase Agreement. The Company has filed with the Securities and Exchange Commission a prospectus supplement, dated March 31, 2015, to the Company's prospectus filed as part of the Company's effective $75 million shelf registration statement on Form S-3, File No. 333-199725, registering all of the shares of common stock that have been or may be offered and sold to Aspire Capital from time to time.

During the three months ended September 30, 2016 and 2015, the Company had completed sales to Aspire totaling 1,500,000 shares and 700,000 shares of common stock generating gross proceeds of approximately $1.9 million and $1.5 million, respectively.

Issuance of Common Stock by Exercise of Common Stock Options

For the three months ended September 30, 2016

During the three months ended September 30, 2016, the Company has no issuance of common stock by exercise of common stock options.

For the three months ended September 30, 2015

During the three months ended September 30, 2015, the Company received cash of $15,000 in total and recorded subscription receivable of $25,400 for the exercise of 74,000 Common Stock options at a range of $0.42 to $1.11 per share.

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Issuance of Common Stock to Consultants For Services

For the three months ended September 30, 2016

On July 18, 2016, the Company issued 7,500 shares to a consultant for service rendered. The value of these 7,500 shares at $1.38 per share was approximately $10,000.

On August 1, 2016, the Company issued 11,720 restricted shares to a consultant for service. The value of these 11,720 shares at $1.28 per share was approximately $15,000.

For the three months ended September 30, 2015

On July 10, 2015, the Company issued 7,028 shares of restricted Class A common shares to a consultant for services rendered. The shares were granted and vested on July 10, 2015. The shares were valued at $17,500.

Issuances of Common Stock and Stock Options – Pursuant to Employment Agreements

For the three months ended September 30, 2016

On September 1, 2016, the Company and Jane Harness entered into an executive employment agreement as the Company’s VP, Clinical Sciences and Project Management, effective on September 1, 2016. Pursuant to the employment agreement, the Company issued 58,394 shares of restricted stock and options to purchase 172,987 shares of common stock to Ms. Harness under the Cellceutix Corporation 2016 Equity Incentive Plan. See Note 11 for additional information concerning the restricted stock and stock options granted to Ms. Harness.

On September 15, 2016, the Company and LaVonne Lang entered into an executive employment agreement as the Company’s VP, Regulatory Affairs, effective on September 15, 2016. Pursuant to the employment agreement, the Company issued 63,492 shares of restricted stock and options to purchase 188,263 shares of common stock to Dr. Lang under the Cellceutix Corporation 2016 Equity Incentive Plan. See Note 11 for additional information concerning the restricted stock and stock options granted to Dr. Lang.

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The following summarizes our restricted stock activity for the above restricted stock issuances:

			Weighted
			Average
			Grant
	Number of		Date Fair
	Shares		Value
Total awards outstanding at June 30, 2016		1,066,667	$	1.4
Total shares granted		121,886		1.3
Total shares outstanding at September 30, 2016		1,188,553	$	1.4

Scheduled vesting for outstanding restricted stock at September 30, 2016 is as follows:

	Year Ending June 30,
	2017		2018		2019		2020		Total
Scheduled vesting—restricted stock		533,333		573,963		40,629		40,628		1,188,533

As of September 30, 2016, there was $1.5 million of net unrecognized compensation cost related to unvested restricted stock-based compensation arrangements. This compensation is recognized on a straight line basis resulting in approximately $0.8 million of the compensation expected to be expensed in the next twelve months, and the total unrecognized compensation has a weighted average recognition period of 1.87 years.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and plan of operations should be read in conjunction with the financial statements and the notes to those statements included in this Form 10-Q. This discussion includes forward-looking statements that involve risk and uncertainties. You should review our important note about forward-looking statements preceding the financial statements. As a result of many factors, such as those set forth under “Risk Factors” in this Form 10-Q and in our Annual Report on Form 10-K, actual results may differ materially from those anticipated in these forward-looking statements.

Management’s Plan of Operation

Overview

Cellceutix is a clinical stage biopharmaceutical company developing innovative therapies with oncology, dermatology and antimicrobial applications. Cellceutix owns the rights to numerous drug compounds, including Kevetrin (thioureidobutyronitrile), our lead anti-cancer compound; Prurisol (KM-133), which is in development for psoriasis; and Brilacidin, our lead drug in a new class of compounds called defensin-mimetics.

The Company devotes most of its efforts and resources on its compounds already in clinical trials. These trials are evaluating our drug candidates: Kevetrin for the treatment of cancers, Prurisol for the treatment of psoriasis, and Brilacidin for treatments of skin infections, prevention of oral mucositis complicating chemoradiation treatment for cancer, and ulcerative proctitis. 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) design and oversight of clinical trials; (ii) development and execution of strategies for the protection and maintenance of intellectual property rights; and (iii) interactions with regulatory authorities domestically and 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 for a promising compound to be identified and brought into clinical trials.

Recent Developments

At this time the Company is focusing its research and development efforts on Kevetrin, Prurisol, Brilacidin, and to a lesser extent on our other anti-bacterial and anti-fungal compounds. Set forth below is an overview our research and development efforts on Kevetrin, Prurisol and Brilacidin for the three months ended September 30, 2016 and through the date of this Quarterly Report on Form 10-Q:

Kevetrin. The first-in-human clinical trial evaluating the safety and pharmacokinetics of Kevetrin was completed at Dana-Farber Cancer Institute and Beth Israel Deaconess Medical Center. The study enrolled a total of 48 patients, who had failed previous therapies, with various types of advanced solid tumors, including 11 patients with advanced ovarian cancer. A dose-escalation design was used with patients enrolled in 11 cohorts with the maximum dose administered at 750 mg/m2. Kevetrin appeared to be safe and well tolerated, with no dose-limiting toxicities occurring among patients who received even the highest dose of Kevetrin. Cellceutix is currently preparing for a Phase 2a trial of Kevetrin in treating late-stage ovarian cancer, which is anticipated to start in the fourth quarter of calendar 2016 or early 2017. The main objective of this trial focuses on confirming the modulation by Kevetrin of p53 in tumors, as well as monitoring response of tumors to the treatment. Presently and planned concurrent with the Phase 2a trial is the development of an oral formulation of Kevetrin for treating cancer. Pharmacokinetic data collected on Kevetrin during the initial clinical trial demonstrates that the compound has a short half-life of approximately two hours. Kevetrin’s short half-life makes it a compelling candidate for an oral drug delivery treatment for the main purpose of allowing simple daily, or multiple-times daily, administrations within or outside the hospital setting. Compared to injectable or intravenous treatments, oral therapy is the preferred drug delivery method of patients. Preliminary laboratory studies are encouraging and support the potential of developing an oral formulation of Kevetrin, but there are no assurances made or implied that Cellceutix will be successful in completing development of an oral formulation of Kevetrin.

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Cellceutix’s expenditures on Kevetrin were approximately $0.06 million during the quarter ended September 30, 2016.

Prurisol. The Company completed an initial Phase 2 trial of oral Prurisol for mild to moderate plaque psoriasis. After a detailed analysis, the data showed that the most robust response to Prurisol was in patients with moderate psoriasis in the trial’s highest dosing arm (200mg), with no serious adverse events reported in that arm. Among these patients (with the severest form of psoriasis in study), those having a baseline IGA score of 3 (“moderate”), the primary endpoint was met in 46% of patients who received 200 mg of Prurisol per day. These data were derived from analyses of all patients. Benefits were apparent by two weeks and showed further improvement by the end of the study at 12 weeks.

Cellceutix has commenced a randomized, double-blind, parallel-group, placebo-controlled Phase 2b trial of Prurisol for approximately 189 subjects with moderate to severe plaque psoriasis. Daily Prurisol dosage has been increased from 200mg. The treatment group arms are Prurisol 300mg, Placebo, Prurisol 400mg (Ratio 3:3:1) with a treatment duration of 12 weeks.

The Company expects interim analysis top-line results in the second quarter of calendar 2017. Cellceutix’s expenditures on Prurisol were approximately $0.4 million during the quarter ended September 30, 2016. We expect our expenditures on Prurisol to increase for the fiscal year ended June 30, 2017.

Brilacidin. In February 2016, Cellceutix submitted a Special Protocol Assessment (SPA) request, along with a final protocol, to the FDA, for a Phase 3 clinical trial of Brilacidin for the treatment of Acute Bacterial Skin and Skin Structure Infection (ABSSSI) caused by Gram-positive bacteria, including methicillin-resistant Staphylococcus aureus (MRSA). We have received from the FDA comments and considerations for incorporation into our study design, and we are now preparing our response. In addition, multiple other trials of Brilacidin remain ongoing, including a double-blind Phase 2 clinical trial of Brilacidin-OM for the treatment of oral mucositis (OM), and an open-label Phase 2 Proof-of-Concept (P-o-C) trial of Brilacidin for the treatment of ulcerative proctitis (UP) or ulcerative proctosigmoiditis (UPS), two types of Inflammatory Bowel Diseases (IBD).

In October 2016, Cellceutix disclosed the first of interim results from the UP/UPS study. The ongoing Phase 2 trial comprises three sequential cohorts (6 patients per cohort), with progressive dose escalation by cohort—50 mg, 100 mg, and 200 mg, respectively. Treatment with Brilacidin by daily enema administration is performed for 42 days. At the time of interim data release, four of six patients in the lowest dosing cohort (50 mg) completed the study. Comparison to baseline after six weeks of treatment showed that all four patients completing the study experienced a clinically meaningful response, as measured by the partial or full Modified Mayo Disease Activity Index (MMDAI), without measurable plasma drug levels. More specifically, measurements of concentrations of Brilacidin in plasma showed all levels, across all time points, to be below the lower limit of quantification (i.e., <100 ng/mL), which is consistent with limited systemic exposure from administration per rectum by enema. These data suggest that other inflammatory conditions may, likewise, be treated locally and efficaciously with Brilacidin without significant systemic absorption, better ensuring a safe and well-tolerated therapeutic profile. Given Brilacidin’s low level of systemic exposure, moderate-to-high dosing of the drug by topical application to the skin might also be supported in treating various dermatology disorders and conditions.

Additional reporting of results from the Phase 2 P-o-C clinical trial of Brilacidin-UP/UPS is anticipated over the coming months, as is an interim analysis in the first half of 2017 of the Phase 2 clinical trial of Brilacidin-OM. Cellceutix’s expenditures on Brilacidin were approximately $0.7 million during the quarter ended September 30, 2016.

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Advancing the Platform and Developing Compounds with Activity Against Gram-Negative Bacteria and Fungi

Also in our antibiotic/antifungal portfolio, we are actively testing several of our compounds both in house and through research grants at major universities. In the Gram-negative program, our lead compounds are active in laboratory testing against some of the most problematic pathogens, such as Pseudomonas, Klebsiella, E. coli and Acinetobacter. We have compounds active against drug-susceptible strains as well as multi-drug resistant strains that produce Klebsiella pneumoniae carbapenamase (KPC). These are also called carbapenem-resistant Enterobacteriaceae (CRE). CRE has been identified by the Centers for Disease Control (CDC) as an “urgent threat” to public health. Importantly, several of our compounds have been shown to be active against CRE in the laboratory. These results were reported in an oral presentation at the European Society of Clinical Microbiology and Infectious Diseases (ECCMID) in Copenhagen in May 2015.

In our anti-fungal program, we have identified a series of host defense protein (HDP) mimics that are highly active against Candida species and exhibit very low cytotoxicity against mammalian cell types. Additional studies of our HDP mimics suggest possible new treatments for other fungal pathogens, including Aspergillus strains. 

Other

In addition to their antimicrobial activity, we are evaluating the use of current and future HDP mimics for disorders of barrier function, where the innate immune system plays a vital role. For these disorders, the goal is to exploit the anti-inflammatory and anti-biofilm properties to restore and maintain healthy skin and mucous membranes, and to treat refractory biofilm-related infections on natural and artificial surfaces. This would include inflammatory or trauma-related conditions of the skin, eyes, GI tract, and respiratory mucosa; exacerbations of chronic bronchitis and cystic fibrosis; and infections of catheters, valves, and prosthetic joints

Critical Accounting Policies and Estimates

Management's discussion and analysis of financial condition and results of operations are based upon our accompanying financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles, or U.S. GAAP, and which requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. These estimates are the basis for our judgments about the carrying values of assets and liabilities, which in turn may impact our reported revenue and expenses. Our actual results could differ significantly from these estimates under different assumptions or conditions.

Please see Note 3 of Part I, Item 1 of this Quarterly Report on Form 10-Q for the summary of significant accounting policies. In addition, please see Part II Item 7, "Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended June 30, 2016. There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended June 30, 2016.

Recently Issued Accounting Pronouncements

See Note 3 to the Financial Statements, Significant Accounting Policies and Recent Accounting Pronouncements, in the accompanying notes to Financial Statements for a discussion of recent accounting pronouncements and their effect, if any, on our financial statements.

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Results of Operations

We expect to incur losses from operations for the next few years. We expect to incur increasing research and development expenses, including expenses related to additional clinical trials for our proprietary programs. We expect that our general and administrative expenses will also increase in the future as we expand our business development, by adding employees, consultants, additional infrastructure and incurring other additional costs. Based upon our expected rate of expenditures over the next 12 months and beyond, management anticipates seeking additional working capital to meet our anticipated clinical trial obligations. 

Revenue

We generated no revenue and incurred operating expenses of $3.0 million and $2.5 million for the three months ended September 30, 2016 and 2015, respectively. 

Research and Development Expenses for Proprietary Programs

Below is a summary of our research and development expenses for our proprietary programs by categories of costs for the three months ended September 30, 2016 and 2015, respectively (rounded to nearest thousand):

	For the three months ended
	September 30,
	2016		2015		2016 vs. 2015
					$			%
Clinical studies and development research	$	1,347,000	$	1,222,000		125,000			10	%
Stock-based compensation - consultants		42,000		78,000		(36,000	)		(46	)%
Officers' payroll and payroll tax expenses related to R&D department		235,000		106,000		129,000			122	%
Employees payroll and payroll tax expenses related to R&D department		255,000		305,000		(50,000	)		(16	)%
Stock-based compensation-Officers		289,000		20,000		269,000			1,345	%
The Stock-based compensation- Employee		13,000		-		13,000			n/a
Depreciation and amortization Expenses		96,000		100,000		(4,000	)		(4	)%
Total	$	2,277,000	$	1,831,000		446,000			24	%

Research and development expenses for proprietary programs increased during the three months ended September 30, 2016 primarily due to higher spending on our Brilacidin program and Prusisol program.

Stock-based compensation- consultants decreased during the three months ended September 30, 2016 due to granting fewer stock awards to consultants in the first quarter of fiscal 2017.

Officers' payroll and payroll tax expenses related to R&D department increased during the three months ended September 30, 2016 primarily related to the hiring of our President and Chief Medical Officer who joined us on June 27, 2016.

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Employees payroll and payroll tax expenses decreased primarily related to the resignation of one senior employee in our research and development department offset by the hiring of our VP Clinical Services and Project Management.

Stock-based compensation – Officers increased during the three months ended September 30, 2016 primarily related to the stock-based compensation given to our new President and Chief Medical Officer who joined us on June 27, 2016.

Stock-based compensation- Employee increased during the three months ended September 30, 2016 primarily related to the stock-based compensation given to our new VP Regulatory Affairs and our VP Clinical Services and Project Management who joined us in September, 2016.

Our research and development expenses include costs related to preclinical and clinical trials, outsourced services and consulting, officers' payroll and related payroll tax expenses, other wages and related payroll tax expenses, stock-based compensation, depreciation and amortization expenses. We manage our proprietary programs based on scientific data and achievement of research plan goals. Our scientists record their time to specific projects when possible; however, many activities occurring simultaneously benefit multiple projects and cannot be readily attributed to a specific project. Accordingly, the accurate assignment of time and costs to a specific project is difficult and may not give a true indication of the actual costs of a particular project. As a result, we do not report costs on an individual program basis.

General and Administrative Expenses

General and administrative expenses consist mainly of compensation and associated fringe benefits not included in cost of research and development expenses for proprietary programs and include other management, business development, accounting, information technology and administration costs, including patent filing and prosecution, recruiting, consulting and professional services, travel and meals, facilities, depreciation and other office expenses.

Below is a summary of our general and administrative expenses for the three months ended September 30, 2016 and 2015, respectively (rounded to nearest thousand):

	Three months ended
	September 30
	2016		2015		2016 vs. 2015
					$			%
Insurance and health expense	$	136,000	$	122,000		14,000			11	%
Patent expenses		2,000		13,000		(11,000	)		(85	)%
Rent and utility expense		62,000		68,000		(6,000	)		(9	)%
Other G&A		162,000		136,000		26,000			19	%
Total	$	362,000	$	339,000		23,000			7	%

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Officers' payroll and payroll tax expenses

Below is a summary of our Officers' payroll and payroll tax expenses for the three months ended September 30, 2016 and 2015, respectively (rounded to nearest thousand):

	Three months ended
	September 30
	2016		2015		2016 vs. 2015
					$		%
Officers' payroll and payroll tax expenses	$	130,000	$	130,000		-		-

There was no change in Officers' payroll and payroll tax expenses for the Company during the three months ended September 30, 2016 and 2015. Officers' payroll and payroll tax expenses decreased during fiscal 2016 primarily related to a decrease in bonus paid. The officers’ payroll and payroll tax expenses represented one officer’s annual payroll and payroll tax expenses and 10% of payroll and payroll tax expenses paid for Mr. Menon. The Company recorded 90% of annual payroll paid to Mr. Menon and his payroll tax expenses under Research and Development Expense.

Professional fees

Below is a summary of our Professional fees for the three months ended September 30, 2016 and 2015, respectively (rounded to nearest thousand):

	Three months ended
	September 30,
	2016		2015		2016 vs. 2015
					$			%
Audit Fee, legal and professional fees	$	209,000	$	227,000		(18,000	)		(8	)%

Professional fees decreased during the three months ended September 30, 2016 primarily related to decrease in professional fee paid to external consultants as the Company hired more internal staff.

Other Income (Expense)

Below is a summary of our other income (expense) for the three months ended September 30, 2016 and 2015, respectively (rounded to nearest thousand):

	Three months ended
	September 30,
	2016			2015			2016 vs. 2015
							$		%
Interest Income	$	1,000		$	1,000			-		-
Interest Expenses		(51,000	)		(51,000	)		-		-
Other Income (Expense), net	$	(50,000	)	$	(50,000	)		-		-

There was no change in Interest Income received from banks and interest expenses paid on the note payable – related party (see note 10).

Net Losses

We incurred net losses of $3.0 million and $2.6 million for the three months ended September 30, 2016 and 2015, respectively because of the above factors. 

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Liquidity and Capital Resources

Projected Future Working Capital Requirements – Next 12 Months

As of September 30, 2016, we had approximately $5.6 million in cash and cash equivalents and $20 million remaining available for stock sales under the terms of the purchase agreement with Aspire Capital, compared to $6.3 million of cash and cash equivalents as of June 30, 2016. We anticipate that future budget expenditures will be approximately $19 million over the next 12 months, including approximately $15 million for clinical trials.

We will require additional sources of equity capital during the fiscal year ended June 30, 2017, to meet our working capital requirements for our planned clinical trials. This assessment is based on current estimates and assumptions regarding our clinical development programs and business needs. Actual working capital requirements could differ materially from this above working capital projection.

Our ability to successfully raise sufficient funds through the sale of equity securities, when needed, is subject to many risks and uncertainties and even if we are successful, future equity issuances would result in dilution to our existing stockholders. Our risk factors are described under the heading "Risk Factors" in Part I Item 1A and elsewhere in our Annual Report on Form 10-K and in other reports we file with the SEC.

If we are unable to generate enough working capital from our current financing agreement with Aspire Capital when needed or secure additional sources of funding, it may be necessary to significantly reduce our current rate of spending through reductions in staff and delaying, scaling back or stopping certain research and development programs, including more costly Phase 2 and Phase 3 clinical trials on our wholly-owned development programs as these programs progress into later stage development. Insufficient liquidity may also require us to relinquish greater rights to product candidates at an earlier stage of development or on less favorable terms to us and our stockholders than we would otherwise choose in order to obtain up-front license fees needed to fund operations. These events could prevent us from successfully executing our operating plan.

$75 Million Shelf Registration Statement

The Company has an effective shelf registration statement on Form S-3, registering the sale of up to $75 million of the Company’s securities. The Company filed with the Securities and Exchange Commission a prospectus supplement, dated March 31, 2015, registering up to $30 million of our common stock that have been or may be offered and sold to Aspire Capital from time to time, leaving $45 million available under the Company’s effective shelf registration statement.

Aspire Capital Agreement and Other Equity Issuances

On March 30, 2015, the Company entered into a new common stock purchase agreement (the “March 2015 Agreement”) with Aspire Capital which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of the Company's common stock over the 36-month term of the March 2015 Agreement.

During the period from March 30, 2015 to September 30, 2016, the Company had completed sales to Aspire totaling 7,300,000 shares of common stock generating gross proceeds of approximately $10 million relating to this $30 million purchase agreement. The Company has $20 million remaining available for stock sales under the terms of the purchase agreement with Aspire Capital. Other Equity Issuances are disclosed at note 12.

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Cash Flows

The following table provides information regarding our cash position, cash flows and capital expenditures for the three months ended September 30, 2016 and 2015 (rounded to nearest thousand):

	Three Months Ended September 30,						% Change Increase/
	2016			2015			(decrease)
Net cash used in operating activities	$	(2,608,000	)	$	(2,107,000	)		24	%
Net cash used in investing activities		(29,000	)		(39,000	)		-26	%
Net cash provided by financing activities		1,883,000			1,510,000			25	%
Net (decrease) increase in cash and cash equivalents	$	(754,000	)	$	(636,000	)		19	%

Operating activities

The increase in net cash used in operating activities of $0.5 million versus the prior-year three-month period was mainly due to increase in our losses from operations of $0.6 million.

Our operating activities used cash of $2.6 million and $2.1 million for the three months ended September 30, 2016 and 2015, respectively. The use of cash in these periods principally resulted from our losses from operations, as adjusted for non-cash charges for stock-based compensation and depreciation, and changes in our working capital accounts.

Investing activities

The decrease in net cash used in investing activities of $0.01 million versus the prior-year three-month period was due to a decrease in acquiring patents of $0.01 million.

During the three months ended September 30, 2016, our investing activities used cash of $0.03 million, including the purchases of patents of $0.03 million. During the three months ended September 30, 2015, our investing activities used cash of $0.04 million, including the purchases of patents of $0.04 million.

Financing activities

The increase in net cash provided by financing activities of $0.40 million versus the prior-year three-month period was due to an increase in sales of our common stock to Aspire.

During the three months ended September 30, 2016, we raised approximately $1.88 million in net cash proceeds, including $1.88 million in net proceeds from the sale of 1.5 million shares of our common stock to Aspire.

During the three months ended September 30, 2015, we raised approximately $1.51 million in net cash proceeds, including $1.50 million in net proceeds from the sale of 0.7 million shares of our common stock to Aspire and $0.01 million from the exercise of warrants.

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Requirement for Additional Working Capital

The Company plans to incur expenses of approximately $19 million over the next twelve months, including approximately $15 million for clinical trials. The Company has limited experience with pharmaceutical drug development. As such, the budget estimate 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 and on our projected timeline of drug development.

The Company will be unable to proceed with its full planned drug development programs, meet its administrative expense requirements, capital costs and staffing costs without accessing approximately $16 million (as per current management’s budgets) of our remaining financing available with Aspire Capital, of approximately $20 million as of the date of this filing, or accessing additional sources of working capital under the Company’s effective shelf registration statement.

Contractual Obligations

Below is a table that presents our contractual obligations and commercial commitments as of September 30, 2016 (rounded to the nearest thousand):

	Payments Due by Period
	Total		Less than One Year		2 Year		3-5 Years		More than 5 Years
Lease obligations (1)	$	430,000	$	161,000	$	214,000	$	55,000	$	-
Total (2)	$	430,000	$	161,000	$	214,000	$	55,000	$	-

_________ 

(1)

The Company signed a lease extension agreement with Cummings Properties which began on October 1, 2013. The lease is for a term of five years ending on September 30, 2018, and requires monthly payments of approximately $18,000. The Company will receive $900 per month from the sublease of 200 square feet of space to Innovative Medical Research Inc., a company owned by Leo Ehrlich and Dr. Krishna Menon, officers of our Company, which is not included in the table above.

(2)

The Company has no contractual minimum commitments to Contract Research Organizations as of September 30, 2016. Services are billed to Cellceutix, when performed by the vendors.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company maintains an investment portfolio in accordance with our investment policy. The primary objectives of our investment policy is to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. The Company holds investments that are subject to credit risk, but not interest rate risks. The Company does not own derivative financial instruments in our investment portfolio. Accordingly, the Company does not believe there is any material market risk exposure that would require disclosure under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

As of September 30, 2016, management, with the participation of our principal executive officer and principal financial officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on such evaluation, as of September 30, 2016, the principal executive officer and principal financial officer of the Company have concluded that the Company’s disclosure controls and procedures are effective.

Changes in Internal Controls

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended June 30, 2016, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common and capital stock. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended June 30, 2016.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

None

ITEM 5. OTHER INFORMATION

None

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ITEM 6. EXHIBITS

(a) Exhibit index

(1) The documents set forth below are filed herewith or incorporated herein by reference to the location indicated.

EXHIBIT INDEX

Exhibit No.	Title	Method of Filing
10.1	Form of executive employment agreement	Filed herewith
31.1	President of Research Certifications required under Section 302 of the Sarbanes Oxley Act of 2002	Filed herewith
31.2	Chief Executive Officer and Chief Financial Officer Certifications required under Section 302 of the Sarbanes Oxley Act of 2002	Filed herewith
32.1	President of Research Certifications required under Section 906 of the Sarbanes Oxley Act of 2002	Furnished herewith
32.2	Chief Executive Officer and Chief Financial Officer Certifications required under Section 906 of the Sarbanes Oxley Act of 2002	Furnished herewith
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2016 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Statements of Income, (ii) the Condensed Statements of Comprehensive Income, (iii) the Condensed Balance Sheets, (iv) the Condensed Statements of Cash Flows, and (v) related notes	Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CELLCEUTIX CORPORATION
Dated: November 8, 2016	By:	/s/  Leo Ehrlich
		Leo Ehrlich
		Chief Executive Officer and Chief Financial Officer (Principal Executive, Accounting and Financial Officer)
Dated: November 8, 2016	By:	/s/ Krishna Menon
		Krishna Menon
		President of Research

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EX-10.1

EXHIBIT 10.1

FORM OF EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (the “Agreement”), made between Cellceutix Corporation (the “Company”) and ______________ (“Executive”) (collectively, the “Parties”), is effective as of _____________ (the “Effective Date”).

WHEREAS, the Company desires for Executive to provide services to the Company; and

WHEREAS, Executive is willing to accept employment by the Company, on the terms and conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

1. Employment by the Company.

1.1 Position. Executive shall serve as the Company’s ___________________. During the term of Executive’s employment with the Company, Executive will devote Executive’s best efforts and substantially all of Executive’s business time and attention to the business of the Company, except for approved vacation periods and reasonable periods of illness or other incapacities permitted by the Company’s general employment policies. During the term of Executive’s employment, Executive shall be entitled to ___ paid vacation days per fiscal year (prorated for partial years) in accordance with the Company’s vacation policies, as in effect from time to time.

1.2 Duties and Location. Executive shall _____________________, and perform such other duties as are required by the Company’s ____________, to whom Executive will report. Executive will primarily work remotely and will travel to the Company’s sites and other locations as may be required by the needs of the Company. The Company may modify Executive’s job title and duties as it deems necessary and appropriate in light of the Company’s needs and interests from time to time.

1.3 Policies and Procedures. The employment relationship between the Parties shall be governed by the general employment policies and practices of the Company, except that when the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.

2. Compensation.

2.1 Salary. For services to be rendered hereunder, Executive shall receive a base salary at the rate of _________________ dollars ($___________) per year, or in the event of a portion of a year, a pro rata amount of such annual salary (the “Base Salary”), subject to standard payroll deductions and withholdings and payable in accordance with the Company’s regular payroll schedule. Executive’s Base Salary shall be reviewed by the Board of Directors (the “Board”) or the Compensation Committee thereof for possible adjustment annually.

 

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2.2 Annual Bonus. For each complete fiscal year during the term of Executive’s employment with the Company, Executive shall be eligible to receive an annual bonus (the “Annual Bonus”). As of the Effective Date, Executive’s target Annual Bonus opportunity shall be equal to ____% of Base Salary, provided that, depending on results, Executive’s actual Annual Bonus may be higher or lower than the target Annual Bonus, as determined by the Board or the Compensation Committee thereof. Executive’s annual discretionary target bonus percentage, whether Executive receives an Annual Bonus for any given fiscal year, and the amount of any such Annual Bonus, will be determined by the Board (or the Compensation Committee thereof) in its sole discretion based upon the Company’s and Executive’s achievement of objectives and milestones to be determined on an annual basis by the Board (or the Compensation Committee thereof) in consultation with Executive. Bonuses are generally paid by the end of the first fiscal quarter following the applicable bonus year, and Executive shall first be eligible for an Annual Bonus for the fiscal year ending June 30, 2017. Executive must be an active employee on the date any Annual Bonus is paid in order to earn any such Annual Bonus. Executive will not be eligible for, and will not earn, any Annual Bonus (including a prorated bonus) if Executive’s employment terminates for any reason before the date annual bonuses are paid.

2.3 Benefits. Executive shall be entitled to participate in all employee benefit programs for which Executive is eligible under the terms and conditions of the benefit plans that may be in effect from time to time and provided by the Company to its employees. The Company shall offer Executive health insurance per the Company plan for the Executive [and spouse]. The Company reserves the right to cancel or change the benefit plans or programs it offers to its employees at any time.

2.4 Expenses. The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in furtherance or in connection with the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy and requirements of the Internal Revenue Service as in effect from time to time.

2.5 Effective Date Equity. In consideration of Executive entering into this Agreement and as an inducement to join the Company, within five business days of the Effective Date, the Company will grant the following equity awards to Executive pursuant to the Company’s 2016 Omnibus Incentive Plan:

(a) ____________

All other terms and conditions of such restricted stock award shall be governed by the terms and conditions of the Company’s 2016 Omnibus Incentive Plan and the applicable award agreement.

(b) ____________

All other terms and conditions of such option stock award shall be governed by the terms and conditions of the Company’s 2016 Omnibus Incentive Plan and the applicable award agreement.

The Company acknowledges that Executive would not accept employment with the Company but for the granting of these awards.

2.6 Annual Equity Award. With respect to each fiscal year of the Company ending during the term of Executive’s employment and commencing with the fiscal year ending June 30, 20___, Executive shall be eligible to receive annual equity awards under the Company’s 2016 Omnibus Incentive Plan or any successor plan, with a target award of options to purchase _________ shares of the Company’s common stock with an exercise price equal to the last closing price of the Company’s common stock prior to the date of grant, which options shall vest ratably each month over the ___ months following the date of grant.

 

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2.7 Clawback Provisions. Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).

3. Termination of Employment; Severance. Executive’s employment relationship is at-will. Either Executive or the Company may terminate the employment relationship at any time, with or without cause or advance notice. Upon termination of Executive’s employment, Executive shall be entitled to the compensation and benefits described in this Section 3 and shall have no further rights to any compensation or any other benefits from the Company or any of its affiliates.

3.1 For Cause or Without Good Reason.

(a)	If Executive’s employment is terminated by the Company for Cause or by Executive without Good Reason, Executive shall be entitled to receive:
	(i)	any accrued but unpaid Base Salary and accrued but unused vacation which shall be paid on the pay date immediately following the Termination Date (as defined below) in accordance with the Company’s customary payroll procedures;
	(ii)	reimbursement for unreimbursed business expenses properly incurred by Executive, which shall be subject to and paid in accordance with the Company’s expense reimbursement policy; and
	(iii)	such employee benefits, if any, to which Executive may be entitled under the Company’s employee benefit plans as of the Termination Date; provided that, in no event shall Executive be entitled to any payments in the nature of severance or termination payments except as specifically provided herein.

Items 3.1(a)(i) through 3.1(a)(iii) are referred to herein collectively as the “Accrued Amounts”.

(b)	For purposes of this Agreement, “Cause” shall mean:
	(i)	Executive’s willful failure to perform his/her duties (other than any such failure resulting from incapacity due to physical or mental illness);
	(ii)	Executive’s willful failure to comply with any valid and legal directive of the Company’s Chief Executive Officer;
	(iii)	Executive’s engagement in dishonesty, illegal conduct, or gross misconduct, which is, in each case, materially injurious to the Company or its affiliates;
	(iv)	Executive’s embezzlement, misappropriation, or fraud, whether or not related to Executive’s employment with the Company;
	(v)	Executive’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude and that results in material reputational or financial harm to the Company or its affiliates; or

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(vi) Executive’s material breach of any material obligation under this Agreement or any other written agreement between Executive and the Company.

For purposes of this provision, no act or failure to act on the part of Executive shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company.

Termination of Executive’s employment shall not be deemed to be for Cause unless and until the Company delivers to Executive a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the Board (after reasonable written notice is provided to Executive and Executive is given an opportunity, together with counsel, to be heard before the Board), finding that Executive has engaged in the conduct described in any of Section 3.1(b)(i)-(vi) above. Except for a failure, breach, or refusal which, by its nature, cannot reasonably be expected to be cured, Executive shall have ten (10) business days from the delivery of written notice by the Company within which to cure any acts constituting Cause; provided however, that, if the Company reasonably expects irreparable injury from a delay of ten (10) business days, the Company may give Executive notice of such shorter period within which to cure as is reasonable under the circumstances, which may include the termination of Executive’s employment without notice and with immediate effect. The Company may place Executive on paid leave while it is determining whether there is a basis to terminate Executive’s employment for Cause. Any such action by the Company will not constitute Good Reason.

(c)	For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following, in each case during the term of Executive’s employment without Executive’s written consent:
	(i)	a material reduction in Executive’s Base Salary other than a general reduction in Base Salary that affects all similarly situated executives in substantially the same proportions;
	(ii)	a material reduction in Executive’s target Annual Bonus opportunity;
	(iii)	any material breach by the Company of any material provision of this Agreement or any material provision of any other agreement between Executive and the Company; or
	(iv)	the Company’s failure to obtain an agreement from any successor to the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such assumption occurs by operation of law.

Executive cannot terminate his/her employment for Good Reason unless he/she has provided written notice to the Company of the existence of the circumstances providing grounds for termination for Good Reason within 10 days of the initial existence of such grounds and the Company has had at least 30 days from the date on which such notice is provided to cure such circumstances. If Executive does not terminate his/her employment for Good Reason within 60 days after the first occurrence of the applicable grounds, then Executive will be deemed to have waived his/her right to terminate for Good Reason with respect to such grounds.

 

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3.2 Without Cause or for Good Reason. Executive’s employment hereunder may be terminated by Executive for Good Reason or by the Company without Cause. In the event of such termination, Executive shall be entitled to receive the Accrued Amounts and subject to Executive’s compliance with Section 6 of this Agreement and his/her execution of a release of claims in favor of the Company, its affiliates and their respective officers and directors in a form provided by the Company (the “Release”), which Release shall become effective within the period specified therein (the “Release Execution Period”), Executive shall be entitled to receive continued Base Salary for ________ following the Termination Date payable in equal installments in accordance with the Company’s normal payroll practices, but no less frequently than monthly; provided that, if the Release Execution Period begins in one taxable year and ends in another taxable year, payments shall not begin until the beginning of the second taxable year and provided further that, the first installment payment shall include all amounts of Base Salary that would otherwise have been paid to Executive during the period beginning on the Termination Date and ending on the first payment date if no delay had been imposed.

The treatment of any outstanding equity awards shall be determined in accordance with the terms of the Company’s 2016 Omnibus Incentive Plan and the applicable award agreements.

3.3 Death or Disability.

(a)	Executive’s employment hereunder shall terminate automatically upon Executive’s death, and the Company may terminate Executive’s employment on account of Executive’s Disability.
(b)	If Executive’s employment is terminated on account of Executive’s death or Disability, Executive (or Executive’s estate and/or beneficiaries, as the case may be) shall be entitled to receive the following:
	(i)	the Accrued Amounts; and
	(ii)	a lump sum payment equal to the product of: (A) Executive’s target Annual Bonus for the year in which the Termination Date occurs and (B) a fraction, the numerator of which is the number of days Executive was employed by the Company during the year in which the Termination Date occurs and the denominator of which is the number of days in such year, which shall be paid within 30 days following the Termination Date.

Notwithstanding any other provision contained herein, all payments made in connection with Executive’s Disability shall be provided in a manner which is consistent with federal and state law.

(c) For purposes of this Agreement, “Disability” shall mean Executive is entitled to receive long-term disability benefits under the Company’s long-term disability plan, or if there is no such plan, Executive’s inability, due to physical or mental incapacity, to perform the essential functions of his/her job, with or without reasonable accommodation, for one hundred eighty (180) days out of any three hundred sixty-five (365) day period or one hundred twenty (120) consecutive days. Any question as to the existence of Executive’s Disability as to which Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive shall be final and conclusive for all purposes of this Agreement.

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3.4 Change in Control Termination.

(a)	Notwithstanding any other provision contained herein, if Executive’s employment hereunder is terminated by Executive for Good Reason or by the Company without Cause (other than on account of Executive’s death or Disability), in each case within twelve (12) months following a Change in Control, Executive shall be entitled to receive the Accrued Amounts and subject to Executive’s compliance with Section 6 of this Agreement and his/her execution of a Release, Executive shall be entitled to receive the following:
	(i)	a lump sum payment equal to ____ months of Executive’s Base Salary for the year in which the Termination Date occurs (or if greater, the year immediately preceding the year in which the Change in Control occurs), which shall be paid within 60 days following the Termination Date; provided that, if the Release Execution Period begins in one taxable year and ends in another taxable year, payment shall not be made until the beginning of the second taxable year; and
	(ii)	a lump sum payment equal to Executive’s target Annual Bonus for the fiscal year in which the Termination Date (as determined in accordance with Section 3.6) occurs (or if greater, the year in which the Change in Control occurs), which shall be paid within 60 days following the Termination Date; provided that, if the Release Execution Period begins in one taxable year and ends in another taxable year, payment shall not be made until the beginning of the second taxable year.
(b)	If Executive timely and properly elects health continuation coverage under COBRA, the Company shall reimburse Executive for the difference between the monthly COBRA premium paid by Executive for himself/herself and his/her dependents and the monthly premium amount paid by similarly situated active executives. Executive shall be eligible to receive such reimbursement until the earliest of: (i) the eighteen-month anniversary of the Termination Date; (ii) the date Executive is no longer eligible to receive COBRA continuation coverage; and (iii) the date on which Executive receives substantially similar coverage from another employer or other source. Notwithstanding the foregoing, if the Company’s making payments under this Section 3.4(b) would violate the nondiscrimination rules applicable to non-grandfathered plans under the Affordable Care Act (the “ACA”), or result in the imposition of penalties under the ACA, the parties agree to reform this Section 3.4(b) in a manner as is necessary to comply with the ACA.
(c)	Notwithstanding the terms of any equity incentive plan or award agreements, as applicable:
	(i)	all outstanding unvested stock options granted to Executive shall become fully vested and exercisable for the remainder of their full term;
	(ii)	all outstanding equity-based compensation awards other than stock options that are not intended to qualify as performance-based compensation under Section 162(m)(4)(C) of the Internal Revenue Code (the “Code”) shall become fully vested and the restrictions thereon shall lapse; provided that, any delays in the settlement or payment of such awards that are set forth in the applicable award agreement and that are required under Section 409A of the Code (“Section 409A”) shall remain in effect; and
	(iii)	all outstanding equity-based compensation awards other than stock options that are intended to constitute performance-based compensation under Section 162(m)(4)(C) of the Code shall remain outstanding and shall vest or be forfeited in accordance with the terms of the applicable award agreements, if the applicable performance goals are satisfied.

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(d)	For purposes of this Agreement, “Change in Control” shall mean the occurrence of any of the following after the Effective Date:
	(i)	one person (or more than one person acting as a group) acquires ownership of stock of the Company that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation;
	(ii)	one person (or more than one person acting as a group) acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition) ownership of the Company’s stock possessing 50% or more of the total voting power of the stock of such corporation;
	(iii)	a majority of the members of the Board are replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the Board before the date of appointment or election; or
	(iv)	the sale of all or substantially all of the Company’s assets.

Notwithstanding the foregoing, a Change in Control shall not occur unless such transaction constitutes a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership of a substantial portion of the Company’s assets under Section 409A.

3.5 Notice of Termination. Any termination of Executive’s employment hereunder by the Company or by Executive (other than termination pursuant to Section 3.3(a) on account of Executive’s death) shall be communicated by written notice of termination (“Notice of Termination”) to the other party hereto in accordance with Section 9.1.

3.6 Termination Date. Executive’s “Termination Date” shall be:

(a)	If Executive’s employment hereunder terminates on account of Executive’s death, the date of Executive’s death;
(b)	If Executive’s employment hereunder is terminated on account of Executive’s Disability, the date that it is determined that Executive has a Disability;
(c)	If the Company terminates Executive’s employment hereunder for Cause, the date the Notice of Termination is delivered to Executive;
(d)	If the Company terminates Executive’s employment hereunder without Cause, the date specified in the Notice of Termination; and
(e)	If Executive terminates his/her employment hereunder with or without Good Reason, the date specified in Executive’s Notice of Termination.

Notwithstanding anything contained herein, the Termination Date shall not occur until the date on which Executive incurs a “separation from service” within the meaning of Section 409A.

 

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3.7 Resignation of All Other Positions. Upon termination of Executive’s employment hereunder for any reason, Executive shall be deemed to have resigned from all positions that Executive holds as an officer or member of the Board (or a committee thereof) of the Company or any of its affiliates.

3.8 Section 280G. If any of the payments or benefits received or to be received by Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments”) constitute “parachute payments” within the meaning of Section 280G of the Code and would, but for this Section 3.8, be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then such 280G Payments shall be reduced in a manner determined by the Company (by the minimum possible amounts) that is consistent with the requirements of Section 409A until no amount payable to Executive will be subject to the Excise Tax. If two economically equivalent amounts are subject to reduction but are payable at different times, the amounts shall be reduced (but not below zero) on a pro rata basis.

All calculations and determinations under this Section 3.8 shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Counsel”) whose determinations shall be conclusive and binding on the Company and Executive for all purposes. For purposes of making the calculations and determinations required by this Section 3.8, the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company and Executive shall furnish the Tax Counsel with such information and documents as the Tax Counsel may reasonably request in order to make its determinations under this Section 3.8. The Company shall bear all costs the Tax Counsel may reasonably incur in connection with its services.

4. Proprietary Information Obligations.

4.1 Confidential Information Defined. For purposes of this Agreement, “Confidential Information” includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes, practices, methods, policies, plans, documents, research, operations, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, computer programs, computer software, applications, operating systems, databases, manuals, records, articles, systems, financial information, results, accounting information, accounting records, legal information, pricing information, credit information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, market studies, revenue, costs, formulae, notes, communications, algorithms, product plans, designs, styles, models, ideas, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, manufacturing information of the Company (including its affiliates) or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company (including its affiliates) in confidence.

Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.

Executive understands and agrees that Confidential Information includes information developed by him/her in the course of his/her employment by the Company as if the Company furnished the same Confidential Information to Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to Executive; provided that, such disclosure is through no direct or indirect fault of Executive or person(s) acting on Executive’s behalf.

 

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4.2 Company Creation and Use of Confidential Information. Executive understands and acknowledges that he/she will have access to and learn about Confidential Information. Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money, and specialized knowledge into developing its resources, research and product candidates and training its employees. Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.

4.3 Disclosure and Use Restrictions. Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential; and (ii) not to directly or indirectly disclose, publish, communicate, or make available Confidential Information, or allow it to be disclosed, published, communicated, or made available, in whole or part, to any entity or person whatsoever not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company, and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of Executive’s authorized employment duties to the Company or with the prior consent of the Chief Executive Officer acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent). Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order.

4.4 Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016 (“DTSA”). Notwithstanding any other provision of this Agreement:

(a)	Executive will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that:
	(i)	is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or
	(ii)	is made in a complaint or other document filed under seal in a lawsuit or other proceeding.
(b)	If Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive:
	(i)	files any document containing trade secrets under seal; and
	(ii)	does not disclose trade secrets, except pursuant to court order.

 

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4.5 Work Product. Executive acknowledges and agrees that all right, title, and interest in and to all writings, works of authorship, technology, inventions, discoveries, processes, techniques, methods, ideas, concepts, research, proposals, materials, and all other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived, or reduced to practice by Executive individually or jointly with others during the period of his/her employment by the Company and relate in any way to the business or contemplated business, products, activities, research, or development of the Company or result from any work performed by Executive for the Company (in each case, regardless of when or where prepared or whose equipment or other resources is used in preparing the same), all rights and claims related to the foregoing, and all printed, physical and electronic copies, and other tangible embodiments thereof (collectively, “Work Product”), as well as any and all rights in and to US and foreign (a) patents, patent disclosures and inventions (whether patentable or not), (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, (c) copyrights and copyrightable works (including computer programs), and rights in data and databases, (d) trade secrets, know-how, and other confidential information, and (e) all other intellectual property rights, in each case whether registered or unregistered and including all registrations and applications for, and renewals and extensions of, such rights, all improvements thereto and all similar or equivalent rights or forms of protection in any part of the world (collectively, “Intellectual Property Rights”), shall be the sole and exclusive property of the Company.

For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, computer programs, computer applications, software design, web design, work in process, databases, manuals, results, developments, reports, graphics, drawings, sketches, market studies, formulae, notes, communications, algorithms, product plans, product designs, styles, models, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, client information, customer lists, client lists, manufacturing information, marketing information, advertising information, and sales information.

4.6 Work Made for Hire; Assignment. Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, Executive hereby irrevocably assigns to the Company, for no additional consideration, Executive’s entire right, title, and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim, and recover for all past, present, and future infringement, misappropriation, or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s rights, title, or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.

4.7 Further Assurances; Power of Attorney. During and after his/her employment, Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect, and transfer to the Company the Work Product as well as any and all Intellectual Property Rights in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, giving testimony and executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments, and other documents and instruments as shall be requested by the Company. Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on Executive’s behalf in his/her name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, prosecution, issuance, and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be affected by Executive’s subsequent incapacity.

 

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4.8 No License. Executive understands that this Agreement does not, and shall not be construed to, grant Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software, or other tools made available to him/her by the Company.

5. Outside Activities During Employment.

5.1 Non-Company Business. Except with the prior written consent of the Board, Executive will not, during the term of Executive’s employment with the Company, undertake or engage in any other employment, occupation or business enterprise, other than ones in which Executive is a passive investor. Executive may engage in civic and not-for-profit activities so long as such activities do not materially interfere with the performance of Executive’s duties hereunder.

5.2 No Adverse Interests. Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise.

6. Covenants.

6.1 Non-Solicitation of Employees. Executive agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any then current employee of the Company during the year following his/her separation from the Company.

6.2 Non-Disparagement. Executive agrees and covenants that he/she will not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments, or statements concerning the Company or its businesses, or any of its employees, officers or directors. This Section 6.2 does not, in any way, restrict or impede Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order.

The Company agrees and covenants that it shall cause its officers and directors to refrain from making any defamatory or disparaging remarks, comments, or statements concerning Executive to any third parties.

7. Dispute Resolution. To ensure timely and economical resolution of any disputes that may arise in connection with Executive’s employment with the Company, as a condition of Executive’s employment, Executive and the Company hereby agree that any and all claims, disputes or controversies of any nature whatsoever arising out of, or relating to, this letter, or its interpretation, enforcement, breach, performance or execution, Executive’s employment with the Company, or the termination of such employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration conducted before a single arbitrator by JAMS, Inc. (“JAMS”) or its successor, under the then applicable JAMS arbitration rules (which can be found at http://www.jamsadr.com/rules-clauses/). The arbitration shall take place in the county (or comparable governmental unit) in which Executive was last employed by the Company, as determined by the arbitrator; provided, however, that if the arbitrator determines there will be an undue hardship to Executive to have the arbitration in such location, the arbitrator will choose an alternative appropriate location. Executive and the Company each acknowledge that by agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute, claim or demand through a trial by jury or judge or by administrative proceeding. Executive will have the right to be represented by legal counsel at Executive’s expense at any arbitration proceeding. The arbitrator shall: (i) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be available under applicable law in a court proceeding; and (ii) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based. The arbitrator, and not a court, shall also be authorized to determine whether the provisions of this paragraph apply to a dispute, controversy, or claim sought to be resolved in accordance with these arbitration procedures. The Company shall pay all costs and fees in excess of the amount of court fees that Executive would be required to incur if the dispute were filed or decided in a court of law. Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any arbitration.

 

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8 Indemnification; D&O Insurance. In the event that Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by Executive or the Company related to any contest or dispute between Executive and the Company or any of its affiliates with respect to this Agreement or Executive’s employment hereunder, by reason of the fact that Executive is or was a director or officer of the Company, or any affiliate of the Company, or is or was serving at the request of the Company as a director, officer, member, employee, or agent of another corporation or a partnership, joint venture, trust, or other enterprise, Executive shall be indemnified and held harmless by the Company to the maximum extent permitted under applicable law and the Company’s bylaws from and against any liabilities, costs, claims, and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys’ fees). Costs and expenses incurred by Executive in defense of such Proceeding (including attorneys’ fees) shall be paid by the Company in advance of the final disposition of such litigation upon receipt by the Company of: (i) a written request for payment; (ii) appropriate documentation evidencing the incurrence, amount, and nature of the costs and expenses for which payment is being sought; and (iii) an undertaking adequate under applicable law made by or on behalf of Executive to repay the amounts so paid if it shall ultimately be determined that Executive is not entitled to be indemnified by the Company under this Agreement.

During the term of Executive’s employment with the Company, the Company or any successor to the Company shall purchase and maintain, at its own expense, directors’ and officers’ liability insurance providing coverage to Executive on terms that are no less favorable than the coverage provided to other directors (if Executive is serving as a director) and similarly situated executives of the Company.

9. General Provisions.

9.1 Notices. Any notices provided must be in writing and will be deemed effective upon the earlier of personal delivery (including personal delivery by fax) or the next day after sending by overnight carrier, to the Company at its primary office location and to Executive at the address as listed on the Company payroll.

9.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction to the extent possible in keeping with the intent of the parties.

9.3 Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by Executive and by the Chief Executive Officer or Chairman of the Company. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power, or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege.

9.4 Complete Agreement. This Agreement constitutes the entire agreement between Executive and the Company with regard to this subject matter and is the complete, final, and exclusive embodiment of the Parties’ agreement with regard to this subject matter. This Agreement is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations. It is entered into without reliance on any promise or representation other than those expressly contained herein, and it cannot be modified or amended except in a writing signed by a duly authorized officer of the Company.

 

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9.5 Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

9.6 Headings. The headings of the paragraphs hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.

9.7 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of his/her duties hereunder and he/she may not assign any of his/her rights hereunder without the written consent of the Company, which shall not be withheld unreasonably.

9.8 Tax Withholding and Indemnification. All payments and awards contemplated or made pursuant to this Agreement will be subject to withholdings of applicable taxes in compliance with all relevant laws and regulations of all appropriate government authorities. Executive acknowledges and agrees that the Company has neither made any assurances nor any guarantees concerning the tax treatment of any payments or awards contemplated by or made pursuant to this Agreement. Executive has had the opportunity to retain a tax and financial advisor and fully understands the tax and economic consequences of all payments and awards made pursuant to the Agreement.

9.9 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the Commonwealth of Massachusetts without regard to conflicts of law principles.

10 Section 409A.

10.1 General Compliance. This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by Executive on account of non-compliance with Section 409A.

 

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10.2 Specified Employees. Notwithstanding any other provision of this Agreement, if any payment or benefit provided to Executive in connection with his/her termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date or, if earlier, on Executive’s death (the “Specified Employee Payment Date”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date and interest on such amounts calculated based on the applicable federal rate published by the Internal Revenue Service for the month in which Executive’s separation from service occurs shall be paid to Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.

10.3 Reimbursements. To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:

(a)	the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;
(b)	any reimbursement of an eligible expense shall be paid to Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and
(c)	any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.

11. Acknowledgement of Full Understanding. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE/SHE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE/SHE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF HIS/HER CHOICE BEFORE SIGNING THIS AGREEMENT.

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the day and year first written above. 

CELLCEUTIX CORPORATION

By:

Name:

Title:

EXECUTIVE

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Krishna Menon, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Cellceutix Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 8, 2016	By:	/s/ Krishna Menon
		Krishna Menon
		President of Research

EX-31.2

EXHIBIT 31.2

 CERTIFICATION

I, Leo Ehrlich, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Cellceutix Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 8, 2016	By:	/s/ Leo Ehrlich
		Leo Ehrlich
		Chief Executive Officer and Chief Financial Officer  (Principal Executive, Accounting and Financial Officer)

EX-32.1

EXHIBIT 32.1 

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Cellceutix Corporation, a Nevada corporation (the "Company"), does hereby certify, to such officer's knowledge, that: 

The Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. 

A signed original of this written statement required by Section 906 has been provided to Cellceutix Corporation and will be retained by Cellceutix Corporation and furnished to the Securities and Exchange Commission or its staff upon request. 

Dated: November 8, 2016	By:	/s/ Krishna Menon
		Krishna Menon
		President of Research

EX-32.2

 EXHIBIT 32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Cellceutix Corporation, a Nevada corporation (the "Company"), does hereby certify, to such officer's knowledge, that: 

The Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. 

A signed original of this written statement required by Section 906 has been provided to Cellceutix Corporation and will be retained by Cellceutix Corporation and furnished to the Securities and Exchange Commission or its staff upon request. 

Dated: November 8, 2016	By:	/s/ Leo Ehrlich
		Leo Ehrlich
		Chief Executive Officer and Chief Financial Officer (Principal Executive, Accounting and Financial Officer)

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Document and Entity Information - shares	3 Months Ended
	Sep. 30, 2016	Nov. 01, 2016
Document And Entity Information
Entity Registrant Name	Cellceutix CORP
Entity Central Index Key	0001355250
Trading Symbol	ctix
Current Fiscal Year End Date	--06-30
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Amendment Flag	false
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Entity Common Stock, Shares Outstanding		125,108,756

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CONDENSED BALANCE SHEETS - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Current Assets:
Cash	$ 5,556,000	$ 6,310,000
Prepaid expenses	181,000	272,000
Other receivable	403,000
Subscription receivable	26,000	26,000
Total Current Assets	6,166,000	6,608,000
Other Assets:
Patent costs - net	4,246,000	4,311,000
Property, plant and equipment -net	88,000	90,000
Deferred offering costs	326,000	358,000
Security deposits	78,000	78,000
Total Other Assets	4,738,000	4,837,000
Total Assets	10,904,000	11,445,000
Current Liabilities:
Accounts payable - (including related party payables of approx. $1,506,000 and $1,502,000, respectively)	3,718,000	3,528,000
Accrued expenses - (including related party accruals of approx. $105,000 and $72,000, respectively)	170,000	97,000
Accrued salaries and payroll taxes -(including related party accrued salaries of approx. $2,777,000 and $2,777,000, respectively)	2,863,000	2,834,000
Note payable - related party	2,022,000	2,022,000
Total Current Liabilities	8,773,000	8,481,000
Total Liabilities	8,773,000	8,481,000
Commitments and contingencies (Note 8)
Stockholders' Equity
Preferred stock, $0.001 par value, 500,000 designated shares, no shares issued and outstanding
Additional paid-in capital	59,163,000	56,969,000
Accumulated deficit	(57,045,000)	(54,017,000)
Total Stockholders' Equity	2,131,000	2,964,000
Total Liabilities and Stockholders' Equity	10,904,000	11,445,000
Common Class A
Stockholders' Equity
Common Stock, Value	13,000	12,000
Common Class B
Stockholders' Equity
Common Stock, Value

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CONDENSED BALANCE SHEETS (Parenthetical) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Current Liabilities:
Accounts payable, related party payables (in dollars)	$ 1,506,000	$ 1,502,000
Accrued expenses, related party accruals (in dollars)	105,000	72,000
Accrued salaries, due to related parties (in dollars)	$ 2,777,000	$ 2,777,000
Stockholders' Equity
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares designated (in shares)	500,000	500,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common Class A
Stockholders' Equity
Common Stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common Stock, shares authorized (in shares)	300,000,000	300,000,000
Common Stock, shares issued (in shares)	125,108,756	123,589,536
Common Stock, shares outstanding (in shares)	125,108,756	123,589,536
Common Class B
Stockholders' Equity
Common Stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common Stock, shares authorized (in shares)	100,000,000	100,000,000
Common Stock, shares issued (in shares)	0	0
Common Stock, shares outstanding (in shares)	0	0

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CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Condensed Statements Of Operations
Revenues
Operating expenses:
Research and development expenses	2,277,000	1,831,000
General and administrative expenses	362,000	339,000
Officers' payroll and payroll tax expenses	130,000	130,000
Professional fees	209,000	227,000
Total operating expenses	2,978,000	2,527,000
Loss from operations	(2,978,000)	(2,527,000)
Other expenses
Interest income	1,000	1,000
Interest expense	(51,000)	(51,000)
Total other expenses	(50,000)	(50,000)
Loss before provision for income taxes	(3,028,000)	(2,577,000)
Provision for income taxes
Net loss	$ (3,028,000)	$ (2,577,000)
Basic and diluted loss per share attributable to common stockholders	$ (0.02)	$ (0.02)
Weighted average number of common shares	124,289,082	118,140,424

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CONDENSED STATEMENTS OF CASH FLOW (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (3,028,000)	$ (2,577,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Common stock and stock options issued as payment for services compensation, services rendered and financing costs	344,000	98,000
Amortization of patent costs	91,000	97,000
Depreciation of equipment	5,000	3,000
Changes in operating assets and liabilities:
Prepaid expenses and security deposits	91,000	90,000
Other receivable	(403,000)
Accounts payable	190,000	219,000
Accrued expenses	73,000	27,000
Accrued officers' salaries and payroll taxes	29,000	(64,000)
Net cash used in operating activities	(2,608,000)	(2,107,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment	(3,000)
Patent costs	(26,000)	(39,000)
Net cash used in investing activities	(29,000)	(39,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock, net of offering costs	1,883,000	1,498,000
Exercise of stock options and warrants		12,000
Net cash provided by financing activities	1,883,000	1,510,000
NET DECREASE IN CASH	(754,000)	(636,000)
CASH - BEGINNING OF YEAR	6,310,000	8,410,000
CASH - END OF YEAR	5,556,000	7,774,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
Cash paid for interest	$ 15,000	$ 15,000

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Basis of Presentation and Nature of Operations

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Note 1 - Basis of Presentation and Nature of Operations

Unaudited Interim Financial Information

The accompanying unaudited condensed financial statements of Cellceutix Corporation have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements for the year ended June 30, 2016, included in our Annual Report on Form 10-K for the year ended June 30, 2016.

In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three month period have been made. Results for the interim period presented are not necessarily indicative of the results that might be expected for the entire fiscal year. When used in these notes, the terms "Company", "we", "us" or "our" mean Cellceutix Corporation. 

Basis of Presentation

Cellceutix Corporation (“Cellceutix” or the “Company”) was incorporated as Econoshare, Inc. on August 1, 2005, in the State of Nevada. On December 6, 2007, the Company acquired Cellceutix Pharma, Inc., a privately owned corporation formed under the laws of the State of Delaware on June 20, 2007. Following the acquisition, the Company changed its name to Cellceutix Corporation. Cellceutix Corporation has no subsidiaries since Cellceutix Pharma, Inc. was dissolved in 2014. The Company is a clinical stage biopharmaceutical company and has no customers, products or revenues to date.

The Company’s Common Stock is quoted on OTCQB, symbol “CTIX”.

Nature of Operations -Overview

We are in the business of developing innovative small molecule therapies to treat diseases with significant medical need, particularly in the areas of cancer, antibiotics and inflammatory disease. Our strategy is to use our business and scientific expertise to maximize the value of our pipeline. We will do this by focusing initially on our lead compounds, Brilacidin, Kevetrin and Prurisol and advancing them as quickly as possible along the regulatory pathway. We will 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.

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Liquidity

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Note 2 - Liquidity

At September 30, 2016, we had $5.6 million in cash. We have expended substantial funds on the research and development of our product candidates. Our net losses incurred for the three months ended September 30, 2016 and 2015, amounted to $3.0 million and $2.6 million, respectively, and a working capital (deficit) of approximately $(2.6) million and $(1.9) million, respectively at September 30, 2016 and June 30, 2016.

On March 30, 2015, the Company entered into a common stock purchase agreement with Aspire Capital Fund, LLC, an Illinois limited liability company ("Aspire Capital") which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of the Company's common stock over the 36-month term of the Purchase Agreement. As of September 30, 2016, the available balance is approximately $20 million.

The Company plans to incur expenses of approximately $19 million over the next twelve months, including approximately $15 million for clinical trials. The Company has limited experience with pharmaceutical drug development. As such, the budget estimate 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 and on our projected timeline of drug development.

Management believes that the amounts available from Aspire and under the Company’s effective shelf registration statement will be sufficient to fund the Company’s operations for the next 12 months.

If we are unable to generate enough working capital from our current financing agreement with Aspire Capital when needed or secure additional sources of funding, it may be necessary to significantly reduce our current rate of spending through reductions in staff and delaying, scaling back or stopping certain research and development programs, including more costly Phase 2 and Phase 3 clinical trials on our wholly-owned development programs as these programs progress into later stage development. Insufficient liquidity may also require us to relinquish greater rights to product candidates at an earlier stage of development or on less favorable terms to us and our stockholders than we would otherwise choose in order to obtain up-front license fees needed to fund operations. These events could prevent us from successfully executing our operating plan.

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Significant Accounting Policies and Recent Accounting Pronouncements

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Note 3 - Significant Accounting Policies and Recent Accounting Pronouncements

Reclassifications

Certain prior year amounts have been reclassified to conform to current period presentation. Such reclassifications were limited to the Condensed Balance Sheets and did not impact the Condensed Statement of Operations and Condensed Statement of Cash Flows.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include contract research accruals, recoverability of long-lived assets, measurement of stock-based compensation, and the periods of performance under collaborative research and development agreements. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

Basic Earnings (Loss) per Share

Basic and diluted earnings (loss) per share are computed based on the weighted-average common shares and common share equivalents outstanding during the period. Common share equivalents consist of stock options, warrants and convertible notes payable. Common share equivalents of 45,036,175 and 44,436,980 were excluded from the computation of diluted earnings (loss) per share for the three months ended September 30, 2016 and 2015, respectively, because their effect is anti-dilutive.

Accounting for Stock Based Compensation

The stock-based compensation expense incurred by Cellceutix for employees and directors in connection with its stock option plan is based on the employee model of ASC 718, and the fair market value of the options is measured at the grant date. Under ASC 718 employee is defined as “An individual over whom the grantor of a share-based compensation award exercises or has the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in case law and currently under U.S. tax regulations”. Our consultants do not meet the employer-employee relationship as defined by the IRS and therefore are accounted for under ASC 505-50.

ASC 505-50-30-11 (previously EITF 96-18) further provides that an issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date:

i.	The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); and
ii.	The date at which the counterparty’s performance is complete.

We have elected to use the Black-Scholes-Merton pricing model to determine the fair value of stock options on the dates of grant. Restricted stock is measured based on the fair market values of the underlying stock on the dates of grant. We recognize stock-based compensation using the straight-line vesting method over the requisite service period of the equity awards.

The components of stock based compensation related to stock options in the Company’s Statement of Operations for the three months ended September 30, 2016 and 2015 are as follows (rounded to nearest thousand):

	Three months ended September 30
	2016		2015
Research and development expenses
Professional fees	$	42,000	$	78,000
Employees’ bonus		13,000		-
Officers’ bonus		289,000		20,000
Total share-based compensation expense	$	344,000	$	98,000

Recent Accounting Pronouncements

Standards Issued Not Yet Adopted

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements—Going Concern—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. ASU 2014-15 is effective for annual periods, and interim periods within those annual periods, starting after December 15, 2016; the Company’s first quarter of fiscal 2018. Management is currently evaluating the impact of this standard on our consolidated financial statements.

In May 2014, the FASB issued authoritative guidance that defines how companies should report revenues from contracts with customers. The standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It provides companies with a single comprehensive five-step principles based model to use in accounting for revenue and supersedes current revenue recognition requirements, including most industry-specific and transaction-specific revenue guidance. In August 2015, the FASB deferred the effective date of the new revenue standard by one year. As a result, the new standard would not be effective for the Company until 2019. In addition, the FASB is allowing companies to early adopt this guidance for non-public entities beginning in fiscal year 2017. The guidance permits an entity to apply the standard retrospectively to all prior periods presented, with certain practical expedients, or apply the requirements in the year of adoption, through a cumulative adjustment. The Company will apply this new guidance when it becomes effective and has not yet selected a transition method. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. For finance leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; interest on the lease liability will be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income; and repayments of the principal portion of the lease liability will be classified within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; a single lease cost will be recognized, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and all cash payments will be classified within operating activities in the statement of cash flows. Under Topic 842 the accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments in Topic 842 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management believes that the adoption of this guidance will not have a material impact on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (“ASU 2016-09”). Under ASU 2016-09, entities will be required to recognize the income tax effects of awards in the income statement when the awards vest or are settled. The guidance on employers’ accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation and for forfeitures is also changing. For public business entities, ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted, but all of the guidance must be adopted in the same period. The Company is currently evaluating the impact the adoption of ASU 2016-09 will have on its financial statements and disclosures. 

Standards Issued and Adopted

In June 2014, the FASB issued ASU 2014-12, Compensation - Stock Compensation. The amendments in this ASU apply to reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target can be achieved after the requisite service period. This ASU is the final version of Proposed ASU EITF-13D--Compensation--Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, which has been deleted. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. Management has adopted this guidance and it did not have a material impact on our condensed financial statements.

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Other Receivables

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Note 4 - Other Receivables

Other receivables represent amounts to be reimbursed by vendors.

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Patents, net

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Note 5 - Patents, net

Patents, net consisted of the following (rounded to nearest thousand):

	Useful life (years)	September 30, 2016			June 30, 2016
Purchased Patent Rights – Brilacidin, and related compounds	14	$	4,082,000		$	4,082,000
Purchased Patent Rights – Anti-microbial – surfactants and related compounds	12		144,000			144,000
Patents – Kevetrin and related compounds	17		1,061,000			1,035,000
			5,287,000			5,261,000
Less: Accumulated amortization for Brilacidin, Anti-microbial- surfactants and related compounds			(931,000	)		(855,000	)
Accumulated amortization for Patents –Kevetrin and related compounds			(110,000	)		(95,000	)
		$	4,246,000		$	4,311,000

The patents are amortized on a straight-line basis over the estimated remaining useful lives of the assets, determined 12-17 years from the date of acquisition.

Amortization expense for the three months ended September 30, 2016 and 2015 was approximately $91,000 and $97,000, respectively.

At September 30, 2016, the future amortization period for all patents was approximately 9 years to 16 years. Future estimated annual amortization expenses are approximately $270,000 for 2017, $363,000 for each year from 2018 to 2025, $353,000 for the year ending June 30, 2026, $351,000 for the year ending June 30, 2027, $113,000 for the year ending June 30, 2028, $59,000 for the years ending June 30, 2029 to 2032, and $22,000 for year ending June 30, 2033.

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Accrued Expenses

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Note 6 - Accrued Expenses

Accrued expenses consisted of the following (rounded to nearest thousand):

	September 30, 2016		June 30, 2016
Accrued research and development consulting fees	$	64,000	$	25,000
Accrued rent (Note 9) – related party		29,000		32,000
Accrued interest – (Note 10) related parties		77,000		40,000
Total	$	170,000	$	97,000

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Accrued Salaries and Payroll Taxes - Related Parties And Other

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Note 7 - Accrued Salaries and Payroll Taxes - Related Parties And Other

Accrued salaries and payroll taxes consisted of the following (rounded to nearest thousand):

	September 30, 2016		June 30, 2016
Accrued salaries – related parties	$	2,647,000	$	2,647,000
Accrued payroll taxes – related parties		130,000		130,000
Withholding tax		86,000		57,000
Total	$	2,863,000	$	2,834,000

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Commitments and Contingencies

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Note 8 - Commitments and Contingencies

Lease Commitments

Operating Leases

The Company signed a lease extension agreement with Cummings Properties which began on October 1, 2013. The lease is for a term of five years ending on September 30, 2018, and requires monthly payments of approximately $18,000. Innovative Medical Research Inc., a company owned by Leo Ehrlich and Dr. Krishna Menon, officers of the Company, have co-signed the lease and will sublease 200 square feet of space previously used by the Company and pay the Company $900 per month.

As of September 30, 2016, future minimum lease payments to Cummings Properties required under the non-cancelable operating lease are as follows (rounded to nearest thousand):

Year ending June 30,
2017		161,000
2018		214,000
2019		55,000
Total minimum payments	$	430,000

Rent expense, net of lease income, under this operating lease agreement was approximately $50,000 for both of three months ended September 30, 2016 and 2015. Before September, 2013, the Company paid rent to KARD for its share of office space and details are shown at Note 9. Related Party Transactions.

Contractual Commitments

The Company has no contractual minimum commitments to Contract Research Organizations as of September 30, 2016. Services are billed to Cellceutix when performed by the vendors.

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Related Party Transactions

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Note 9 - Related Party Transactions

Office Lease

Dr. Menon, a significant shareholder of the Company and its President of Research and a Director, also serves as the Chief Operating Officer and Director of Kard Scientific (“KARD”). On December 7, 2007, the Company began renting office space from KARD, on a month to month basis for $900 per month. This continued through August 2013 and since September 1, 2013, the Company no longer leases space from KARD or pays rent to KARD.

In September 2013, the Company signed a lease extension agreement with Cummings Properties for the Company’s offices and laboratories at 100 Cummings Center, Suite 151-B Beverly, MA 01915. The lease is for a term of five years from October 1, 2013 to September 30, 2018 and requires monthly payments of approximately $18,000. Cellceutix had taken over the space occupied by KARD. In addition, Innovative Medical Research Inc., (“Innovative Medical”) a company owned by Leo Ehrlich and Dr. Krishna Menon, officers of Cellecutix, has co-signed the lease and rents approximately 200 square feet of office space, the space previously used by Cellceutix and pays Cellceutix $900 per month, the same amount Cellceutix previously paid KARD. Innovative Medical paid total rent of approximately $3,000, to Cellceutix for both of the three months ended September 30, 2016 and 2015 and the rental payment was offset with the accrued rent owed to KARD.

At September 30, 2016 and June 30, 2016, rent payable to KARD of approximately $29,000 and $32,000, respectively, were included in accrued rent – related party.

Clinical Studies

The Company previously engaged KARD to conduct specified pre-clinical studies. The Company did not have an exclusive arrangement with KARD. The Company no longer uses KARD. At September 30, 2016 and June 30, 2016, the accrued research and development expenses to KARD was approximately $1,486,000 and this amount was included in accounts payable.

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Note Payable-Related Party

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Note 10 - Note Payable - Related Party

During the year ended June 30, 2010, Mr. Ehrlich loaned the Company a total of approximately $973,000. A condition for this note was that the Ehrlich Promissory Note A and Ehrlich Promissory Note B be replaced with a new note, Ehrlich Promissory Note C. The Ehrlich Promissory Note C is an unsecured demand note that bears 9% simple interest per annum and is convertible into the Company’s common stock at $0.50 per share. The note requires that the interest rate on the amounts due on Ehrlich Promissory Notes A and B be changed retroactively, beginning October 1, 2009, to 9%. On April 1, 2011, the Company amended the Ehrlich Promissory Note C and agreed to retroactively convert accrued interest of approximately $97,000 through December 31, 2010 into additional principal. During the year ended June 30, 2011, Mr. Ehrlich loaned the Company an additional approximate $997,000 which brought the total balance of the demand note to approximately $2,002,000. During the year ended June 30, 2012, Mr. Ehrlich loaned the Company an additional $20,000 which brought the balance of the demand note to approximately $2,022,000.

On May 8, 2012, the Company did not have the ability to repay the Ehrlich Promissory Note C loan and agreed to change the interest rate on the outstanding balance of principal and interest of approximately $2,248,000, as of March 31, 2012, from 9% simple interest to 10% simple interest, and the Company issued 2,000,000 Equity Incentive Options exercisable at $0.51 per share equal to 110% of the closing bid price of $0.46 per share on May 7, 2012. Options are valid for ten years from the date of issuance.

At September 30, 2016 and June 30, 2016, approximately $77,000 and $40,000, respectively, was accrued as interest expense on this note.

At September 30, 2016 and June 30, 2016, principal balances of the demand note was approximately $2,022,000.

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Equity Incentive Plans, Stock-Based Compensation and Warrants

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Note 11 - Equity Incentive Plans, Stock-Based Compensation and Warrants

Equity Incentive Plans

2009 Stock Option Plan

On April 5, 2009 the Board of Directors of the Registrant adopted the 2009 Stock Option Plan (“the 2009 Plan”). The 2009 Plan permits the grant of 2,000,000 shares of both Incentive Stock Options (“ISOs”), intended to qualify under section 422 of the Code, and Non-Qualified Stock Options.

2010 Equity Incentive Plan

Under the 2010 Equity Incentive Plan (the "2010 Plan") the total number of shares of common stock reserved and available for issuance under the 2010 Plan is 45,000,000 shares. Shares of common stock under the 2010 Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares. The term of each stock option shall be fixed as provided, however, an Incentive Stock Option may be granted only within the ten-year period commencing from the effective date of the 2010 Plan and may only be exercised within ten years of the date of grant (or five years in the case of an Incentive Stock Option granted to an optionee who, at the time of grant, owns common stock possessing more than 10% of the total combined voting power of all classes of voting stock of the Company).

2016 Equity Incentive Plan

On June 30, 2016, the Board adopted the Cellceutix Corporation 2016 Equity Incentive Plan (the "2016 Plan"). The 2016 Plan became effective upon adoption by the Board on June 30, 2016.

Up to 20,000,000 shares of the Company's common stock may be issued under the 2016 Plan (subject to adjustment as described in the 2016 Plan); provided that, no Outside Director (as defined in the 2016 Plan) may be granted awards covering more than 250,000 shares of common stock in any year and no participant shall be granted, during any one year period, options to purchase common stock and stock appreciation rights with respect to more than 4,000,000 shares of common stock in the aggregate or any other awards with respect to more than 2,500,000 shares of common stock in the aggregate. The 2016 Plan permits the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance share awards and performance compensation awards to employees, directors, and consultants of the Company and its affiliates.

In connection with adoption of the 2016 Plan, the Board of Directors also approved forms of Incentive Stock Option Agreement for Employees, Non-qualified Stock Option Agreement for Employees, Non-qualified Stock Option Agreement for Non-Employee Directors, Restricted Stock Award Agreement for Employees and Restricted Stock Award Agreement for Non-Employee Directors that will be utilized by the Company to grant options and restricted shares under the 2016 Plan.

The following table summarizes all stock option activity under the above equity incentive plans:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at June 30, 2016		40,444,728	$	0.22		4.58	$	48,185,911
Granted		368,779		1.31		9.80		-
Exercised		-		-		-		-
Forfeited/expired		-		-		-		-
Outstanding at September 30, 2016		40,813,507	$	0.23		4.38	$	44,341,745
Exercisable at September 30, 2016		39,769,611	$	0.20		4.25	$	44,333,975

The fair value of options granted for the three months ended September 30, 2016 and 2015 was estimated on the date of grant using the Black Scholes model that uses assumptions noted in the following table.

	Three months ended September 30,
	2016	2015
Expected term (in years)	3-10		3
Expected stock price volatility	57.63%-111.62%		65.76%
Risk-free interest rate	0.71%-1.73%		1.04%
Expected dividend yield	-		-

Stock-Based Compensation

The Company recognized approximately $344,000 and $77,000 of total stock-based compensation costs related to stock options awards for the three months ended September 30, 2016 and 2015, respectively. The $344,000 of stock based compensation expense for the three months ended September 30, 2016 included approximately $127,000 of stock options expenses and $217,000 of stock awards (see Note 12).

For the three months ended September 30, 2016

On February 16, 2016, the Company issued 119,424 stock options to purchase shares of the Company’s common stock, par value $0.0001 per share to two consultants for services, valued at approximately $55,000, based on the closing bid price as quoted on the OTC on February 16, 2016 at $1.15 per share. These options were issued with an exercise price of $1.105. One third vested immediately, one third vested in six months (August 11, 2016), and the balance will be vested on February 11, 2017, and will be valid for a period of three years. These options have piggyback registration rights. The Company recorded approximately $9,000 of stock option expenses during the three months ended September 30, 2016.

On April 6, 2016, the Company issued 25,000 shares and 25,000 stock options to purchase shares of the Company’s common stock, par value $0.0001 per share to a consultant for service. The stock options valued at approximately $14,000, based on the closing bid price as quoted on the OTC on April 6, 2016 at $1.61 per share. These options were issued with an exercise price of $1.77 and shall vest on April 30, 2017, with a three year option term. These options have piggyback registration rights. The Company recorded approximately $3,000 of stock option expenses for the three months ended September 30, 2016.

On June 27, 2016, the Company and Dr. Bertolino entered into an executive employment agreement as our President and Chief Medical Officer, effective on June 27, 2016. Commencing on June 27, 2016, the Company agreed to pay Dr. Bertolino an annual salary of $440,000. In addition, the Company agreed to grant to Dr. Bertolino under the Cellceutix Corporation 2016 Equity Incentive Plan (i) 1,066,667 shares of restricted stock and (ii) a ten-year option to purchase 617,839 shares of the Company's Class A common stock at an exercise price of $1.39 per share. Both shares and options shall vest upon the earliest to occur of the following: (1) 50% upon the first anniversary of the effective date, and the remaining 50% upon the second anniversary of the effective date (2) completion of both a Phase 2b psoriasis study and a Phase 2 oral mucositis study; (3) the Company’s common stock closes above $3.00 per share (as may be adjusted for any stock splits or similar actions); (4) the commencement of trading of the Company’s common stock on a national securities exchange (e.g. Nasdaq or the NYSE); or (5) upon a Change in Control (as defined in the employment agreement) of the Company. The Company could not conclude that it was probable that these awards will fully vest until the second anniversary of the effective date, because such events listed above are outside the Company’s control. The Company will evaluate the probability of these events occurring for each reporting period. The 1,066,667 shares were valued at approximately $1.5 million, which will be amortized over two years to June 27, 2018. The 617,839 stock options were valued at approximately $800,000 and will be exercisable for 10 years at an exercise price of $1.39 per share. They will be amortized over 2 years to June 27, 2018 or sooner if the Company determines that it is probable that one of the events listed above will occur. During the three months ended September 30, 2016, the Company recorded approximately $289,000 of total stock-based compensation, including approximately $188,000 of stock based compensation expense and approximately $101,000 of stock option expense. The Company may award Dr. Arthur P. Bertolino an annual bonus at the sole discretion of the Board of Directors of the Company. The Company may accelerate the amortization of the $1.5 million stock-based compensation expense if there are conditions which will accelerate the vesting, as mentioned above.

On July 18, 2016, the Company issued 7,500 stock options to purchase shares of the Company’s common stock to a consultant for service rendered, exercisable for 3 years at $1.38 per share of common stock. The value of these 7,500 options was approximately $4,000.

On September 1, 2016, the Company and Jane Harness entered into an executive employment agreement as the Company’s VP, Clinical Sciences and Project Management, effective on September 1, 2016. Commencing on September 1, 2016, the Company agreed to pay Ms. Harness an annual salary of $250,000. In addition, the Company agreed to grant to Ms. Harness under the Cellceutix Corporation 2016 Equity Incentive Plan (i) 58,394 shares of restricted stock, which shall vest upon the earliest to occur of the following: (1) one third (33 1/3 %) upon the first anniversary of the effective date, one third (33 1/3 %) upon the second anniversary of the effective date, and the remaining one third (33 1/3 %) upon the third anniversary of the effective Date; or (2) upon a Change in Control (as defined in the employment agreement) of the Company. Ten-year options to purchase 172,987 shares of the Company’s common stock were also granted at an exercise price of $1.37 per share, which shall vest upon the earliest to occur of the following: (1) one third (33 1/3 %) upon the first anniversary of the effective date, and the remaining balance vesting monthly in equal portions over the following 24 months; and (2) upon a Change in Control (as defined in the employment agreement) of the Company. The 58,394 shares were valued at approximately $80,000, which will be amortized over three years to September 1, 2019. The 172,987 stock options were valued at approximately $220,000 and will be exercisable for 10 years at an exercise price of $1.26 per share. They will be amortized over 3 years to September 1, 2019. During the three months ended September 30, 2016, the Company recorded approximately $8,000 of total stock-based compensation, including approximately $2,000 of stock based compensation expense and approximately $6,000 of stock option expense.

On September 15, 2016, the Company and LaVonne Lang entered into an executive employment agreement as the Company’s VP, Regulatory Affairs, effective on September 15, 2016. Commencing on September 15, 2016, the Company agreed to pay Dr. Lang an annual salary of $250,000. In addition, the Company agreed to grant to Dr. Lang under the Cellceutix Corporation 2016 Equity Incentive Plan (i) 63,492 shares of restricted stock, which shall vest upon the earliest to occur of the following: (1) one third (33 1/3 %) upon the first anniversary of the effective date, one third (33 1/3 %) upon the second anniversary of the effective date, and the remaining one third (33 1/3 %) upon the third anniversary of the effective date; or (2) upon a Change in Control (as defined in the employment agreement) of the Company. Ten-year options to purchase 188,262 shares of the Company’s common stock were also granted at an exercise price of $1.26 per share, which shall vest upon the earliest to occur of the following: (1) one third (33 1/3 %) upon the first anniversary of the effective date, and the remaining balance vesting monthly in equal portions over the following 24 months; and (2) upon a Change in Control (as defined in the employment agreement) of the Company. The 63,492 shares were valued at approximately $80,000, which will be amortized over three years to September 15, 2019. The 188,263 stock options were valued at approximately $220,000 and will be exercisable for 10 years at an exercise price of $1.26 per share. They will be amortized over 3 years to September 15, 2019. During the three months ended September 30, 2016, the Company recorded approximately $4,000 of total stock-based compensation, including approximately $1,000 of stock based compensation expense and approximately $3,000 of stock option expense.

For the three months ended September 30, 2015

On July 10, 2015, the Company issued 7,028 shares and 50,000 options to a consultant for his one year contract, which options are exercisable for 3 years at $2.49 per share of common stock. The total value of these 50,000 options was approximately $60,000 and we recognized approximately $60,000 of stock based compensation costs that was charged to additional paid-in capital as of September 30, 2015. The assumptions we used in the Black Scholes option-pricing model were disclosed as above.

Stock Warrants

For the three months ended September 30, 2016

During the three months ended September 30, 2016, there were no warrants issued or exercised.

The following table summarizes stock warrants:

	Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at June 30, 2016		25,000	$	1.79		0.56	$	-
Extended		-		-		-
Granted		-		-		-
Exercised		-		-		-
Expired		-		-		-
Outstanding at September 30, 2016		25,000	$	1.79		0.31	$	-
Exercisable at September 30, 2016		25,000	$	1.79		0.31	$	-

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Equity Transactions

3 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Note 12 - Equity Transactions

Issuance of Common Stock for Cash

$30 million Class A Common Stock Purchase Agreement with Aspire Capital Fund, LLC

On March 30, 2015, the Company entered into a common stock purchase agreement (the "Purchase Agreement") with Aspire Capital Fund, LLC, an Illinois limited liability company ("Aspire Capital") which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of the Company's common stock over the 36-month term of the Purchase Agreement. In consideration for entering into the Purchase Agreement, the Company issued to Aspire Capital 160,000 shares of its Class A common stock as a commitment fee. The commitment fee of approximately $499,000 will be amortized as the funding is received. The amortized amount of $32,000 and $25,000 were debited to additional paid-in capital during the three months ended September 30, 2016 and 2015. The unamortized portion is carried on the balance sheet as deferred offering costs and was $326,000 and $358,000 at September 30, 2016 and June 30, 2016, respectively. During the period from March 30, 2015 to September 30, 2016, the Company had completed sales to Aspire totaling 7,300,000 shares of common stock generating gross proceeds of approximately $10 million.

Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Aspire Capital, in which the Company agreed to file one or more registration statements, as permissible and necessary to register, under the Securities Act of 1933, as amended, the sale of the shares of the Company's common stock that have been and may be issued to Aspire Capital under the Purchase Agreement. The Company has filed with the Securities and Exchange Commission a prospectus supplement, dated March 31, 2015, to the Company's prospectus filed as part of the Company's effective $75 million shelf registration statement on Form S-3, File No. 333-199725, registering all of the shares of common stock that have been or may be offered and sold to Aspire Capital from time to time.

During the three months ended September 30, 2016 and 2015, the Company had completed sales to Aspire totaling 1,500,000 shares and 700,000 shares of common stock generating gross proceeds of approximately $1.9 million and $1.5 million, respectively.

Issuance of Common Stock by Exercise of Common Stock Options

For the three months ended September 30, 2016

During the three months ended September 30, 2016, the Company has no issuance of common stock by exercise of common stock options.

For the three months ended September 30, 2015

During the three months ended September 30, 2015, the Company received cash of $15,000 in total and recorded subscription receivable of $25,400 for the exercise of 74,000 Common Stock options at a range of $0.42 to $1.11 per share.

Issuance of Common Stock to Consultants For Services

For the three months ended September 30, 2016

On July 18, 2016, the Company issued 7,500 shares to a consultant for service rendered, The value of these 7,500 shares at $1.38 per share was approximately $10,000.

On August 1, 2016, the Company issued 11,720 restricted shares to a consultant for service. The value of these 11,720 shares at $1.28 per share was approximately $15,000.

For the three months ended September 30, 2015

On July 10, 2015, the Company issued 7,028 shares of restricted Class A common shares to a consultant for services rendered. The shares were granted and vested on July 10, 2015. The shares were valued at $17,500.

Issuances of Common Stock and Stock Options – Pursuant to Employment Agreements

For the three months ended September 30, 2016

On September 1, 2016, the Company and Jane Harness entered into an executive employment agreement as the Company’s VP, Clinical Sciences and Project Management, effective on September 1, 2016. Pursuant to the employment agreement, the Company issued 58,394 shares of restricted stock and options to purchase 172,987 shares of common stock to Ms. Harness under the Cellceutix Corporation 2016 Equity Incentive Plan. See Note 11 for additional information concerning the restricted stock and stock options granted to Ms. Harness.

On September 15, 2016, the Company and LaVonne Lang entered into an executive employment agreement as the Company’s VP, Regulatory Affairs, effective on September 15, 2016. Pursuant to the employment agreement, the Company issued 63,492 shares of restricted stock and options to purchase 188,263 shares of common stock to Dr. Lang under the Cellceutix Corporation 2016 Equity Incentive Plan. See Note 11 for additional information concerning the restricted stock and stock options granted to Dr. Lang.

The following summarizes our restricted stock activity for the above restricted stock issuances:

			Weighted
			Average
			Grant
	Number of		Date Fair
	Shares		Value
Total awards outstanding at June 30, 2016		1,066,667	$	1.4
Total shares granted		121,886		1.3
Total shares outstanding at September 30, 2016		1,188,553	$	1.4

Scheduled vesting for outstanding restricted stock at September 30, 2016 is as follows:

	Year Ending June 30,
	2017		2018		2019		2020		Total
Scheduled vesting—restricted stock		533,333		573,963		40,629		40,628		1,188,533

As of September 30, 2016, there was $1.5 million of net unrecognized compensation cost related to unvested restricted stock-based compensation arrangements. This compensation is recognized on a straight line basis resulting in approximately $0.8 million of the compensation expected to be expensed in the next twelve months, and the total unrecognized compensation has a weighted average recognition period of 1.87 years.

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Significant Accounting Policies and Recent Accounting Pronouncements (Policies)

3 Months Ended

Sep. 30, 2016

Significant Accounting Policies And Recent Accounting Pronouncements Policies

Reclassifications

Certain prior year amounts have been reclassified to conform to current period presentation. Such reclassifications were limited to the Condensed Balance Sheets and did not impact the Condensed Statement of Operations and Condensed Statement of Cash Flows.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include contract research accruals, recoverability of long-lived assets, measurement of stock-based compensation, and the periods of performance under collaborative research and development agreements. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

Basic Earnings (Loss) per Share

Basic and diluted earnings (loss) per share are computed based on the weighted-average common shares and common share equivalents outstanding during the period. Common share equivalents consist of stock options, warrants and convertible notes payable. Common share equivalents of 45,036,175 and 44,436,980 were excluded from the computation of diluted earnings (loss) per share for the three months ended September 30, 2016 and 2015, respectively, because their effect is anti-dilutive.

Accounting for Stock Based Compensation

The stock-based compensation expense incurred by Cellceutix for employees and directors in connection with its stock option plan is based on the employee model of ASC 718, and the fair market value of the options is measured at the grant date. Under ASC 718 employee is defined as “An individual over whom the grantor of a share-based compensation award exercises or has the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in case law and currently under U.S. tax regulations”. Our consultants do not meet the employer-employee relationship as defined by the IRS and therefore are accounted for under ASC 505-50.

ASC 505-50-30-11 (previously EITF 96-18) further provides that an issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date:

i.	The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); and
ii.	The date at which the counterparty’s performance is complete.

We have elected to use the Black-Scholes-Merton pricing model to determine the fair value of stock options on the dates of grant. Restricted stock is measured based on the fair market values of the underlying stock on the dates of grant. We recognize stock-based compensation using the straight-line vesting method over the requisite service period of the equity awards.

The components of stock based compensation related to stock options in the Company’s Statement of Operations for the three months ended September 30, 2016 and 2015 are as follows (rounded to nearest thousand):

	Three months ended September 30
	2016		2015
Research and development expenses
Professional fees	$	42,000	$	78,000
Employees’ bonus		13,000		-
Officers’ bonus		289,000		20,000
Total share-based compensation expense	$	344,000	$	98,000

Recent Accounting Pronouncements

Standards Issued Not Yet Adopted

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements—Going Concern—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. ASU 2014-15 is effective for annual periods, and interim periods within those annual periods, starting after December 15, 2016; the Company’s first quarter of fiscal 2018. Management is currently evaluating the impact of this standard on our consolidated financial statements.

In May 2014, the FASB issued authoritative guidance that defines how companies should report revenues from contracts with customers. The standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It provides companies with a single comprehensive five-step principles based model to use in accounting for revenue and supersedes current revenue recognition requirements, including most industry-specific and transaction-specific revenue guidance. In August 2015, the FASB deferred the effective date of the new revenue standard by one year. As a result, the new standard would not be effective for the Company until 2019. In addition, the FASB is allowing companies to early adopt this guidance for non-public entities beginning in fiscal year 2017. The guidance permits an entity to apply the standard retrospectively to all prior periods presented, with certain practical expedients, or apply the requirements in the year of adoption, through a cumulative adjustment. The Company will apply this new guidance when it becomes effective and has not yet selected a transition method. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. For finance leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; interest on the lease liability will be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income; and repayments of the principal portion of the lease liability will be classified within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; a single lease cost will be recognized, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and all cash payments will be classified within operating activities in the statement of cash flows. Under Topic 842 the accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments in Topic 842 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management believes that the adoption of this guidance will not have a material impact on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (“ASU 2016-09”). Under ASU 2016-09, entities will be required to recognize the income tax effects of awards in the income statement when the awards vest or are settled. The guidance on employers’ accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation and for forfeitures is also changing. For public business entities, ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted, but all of the guidance must be adopted in the same period. The Company is currently evaluating the impact the adoption of ASU 2016-09 will have on its financial statements and disclosures. 

Standards Issued and Adopted

In June 2014, the FASB issued ASU 2014-12, Compensation - Stock Compensation. The amendments in this ASU apply to reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target can be achieved after the requisite service period. This ASU is the final version of Proposed ASU EITF-13D--Compensation--Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, which has been deleted. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. Management has adopted this guidance and it did not have a material impact on our condensed financial statements.

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Significant Accounting Policies and Recent Accounting Pronouncements (Tables)

3 Months Ended

Sep. 30, 2016

Significant Accounting Policies And Recent Accounting Pronouncements Tables

Schedule of components of stock based compensation related to stock options recognized in the company's statement of operations

	Three months ended September 30
	2016		2015
Research and development expenses
Professional fees	$	42,000	$	78,000
Employees’ bonus		13,000		-
Officers’ bonus		289,000		20,000
Total share-based compensation expense	$	344,000	$	98,000

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Patents, net (Tables)

3 Months Ended

Sep. 30, 2016

Patents Net Tables

Schedule of patents

	Useful life (years)	September 30, 2016			June 30, 2016
Purchased Patent Rights – Brilacidin, and related compounds	14	$	4,082,000		$	4,082,000
Purchased Patent Rights – Anti-microbial – surfactants and related compounds	12		144,000			144,000
Patents – Kevetrin and related compounds	17		1,061,000			1,035,000
			5,287,000			5,261,000
Less: Accumulated amortization for Brilacidin, Anti-microbial- surfactants and related compounds			(931,000	)		(855,000	)
Accumulated amortization for Patents –Kevetrin and related compounds			(110,000	)		(95,000	)
		$	4,246,000		$	4,311,000

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Accrued Expenses (Tables)

3 Months Ended

Sep. 30, 2016

Accrued Expenses Tables

Schedule of accrued expenses

	September 30, 2016		June 30, 2016
Accrued research and development consulting fees	$	64,000	$	25,000
Accrued rent (Note 9) – related party		29,000		32,000
Accrued interest – (Note 10) related parties		77,000		40,000
Total	$	170,000	$	97,000

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Accrued Salaries and Payroll Taxes - Related Parties And Other (Tables)

3 Months Ended

Sep. 30, 2016

Accrued Salaries And Payroll Taxes - Related Parties And Other Tables

Schedule of accrued salaries and payroll taxes

	September 30, 2016		June 30, 2016
Accrued salaries – related parties	$	2,647,000	$	2,647,000
Accrued payroll taxes – related parties		130,000		130,000
Withholding tax		86,000		57,000
Total	$	2,863,000	$	2,834,000

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Commitments and Contingencies (Tables)

3 Months Ended

Sep. 30, 2016

Commitments And Contingencies Tables

Future minimum lease payments required under the non-cancelable operating lease

Year ending June 30,
2017		161,000
2018		214,000
2019		55,000
Total minimum payments	$	430,000

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Equity Incentive Plans, Stock-Based Compensation and Warrants (Tables)

3 Months Ended

Sep. 30, 2016

Stock Warrants [Member]

Schedule of stock option activity

	Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at June 30, 2016		25,000	$	1.79		0.56	$	-
Extended		-		-		-
Granted		-		-		-
Exercised		-		-		-
Expired		-		-		-
Outstanding at September 30, 2016		25,000	$	1.79		0.31	$	-
Exercisable at September 30, 2016		25,000	$	1.79		0.31	$	-

Stock Options [Member]

Valuation assumptions for stock options/warrants and SARs

	Three months ended September 30,
	2016	2015
Expected term (in years)	3-10		3
Expected stock price volatility	57.63%-111.62%		65.76%
Risk-free interest rate	0.71%-1.73%		1.04%
Expected dividend yield	-		-

Schedule of stock option activity

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at June 30, 2016		40,444,728	$	0.22		4.58	$	48,185,911
Granted		368,779		1.31		9.80		-
Exercised		-		-		-		-
Forfeited/expired		-		-		-		-
Outstanding at September 30, 2016		40,813,507	$	0.23		4.38	$	44,341,745
Exercisable at September 30, 2016		39,769,611	$	0.20		4.25	$	44,333,975

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Equity Transactions (Tables)

3 Months Ended

Sep. 30, 2016

Equity Transactions Tables

Schedule of Restricted Stock Award Activity

	Number of Shares		Weighted Average Grant Date Fair Value
Total awards outstanding at June 30, 2016		1,066,667	$	1.4
Total shares granted		121,886		1.3
Total shares outstanding at September 30, 2016		1,188,553	$	1.4

Schedule of vesting outstanding restricted stock

	Year Ending June 30,
	2017		2018		2019		2020		Total
Scheduled vesting—restricted stock		533,333		573,963		40,629		40,628		1,188,533

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Liquidity (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Liquidity Details Narrative
Cash and cash equivalents	$ 5,556,000	$ 7,774,000	$ 6,310,000	$ 8,410,000
Net loss	(3,028,000)	$ (2,577,000)
Working capital (deficit)	$ (2,600,000)		(1,900,000)
Common stock purchase available balance			$ 20,000,000

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Significant Accounting Policies and Recent Accounting Pronouncements (Details) - Stock Options [Member] - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Research and development expenses
Professional fees	$ 42,000	$ 78,000
Employees' bonus	13,000
Officers' bonus	289,000	20,000
Total share-based compensation expense	$ 344,000	$ 98,000

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Significant Accounting Policies and Recent Accounting Pronouncements (Detail Narrative) - shares	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Significant Accounting Policies And Recent Accounting Pronouncements Detail Narrative
Diluted earnings (loss) per share	45,036,175	44,436,980

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Patents, net (Details) - USD ($)	3 Months Ended
	Sep. 30, 2016	Jun. 30, 2016
Purchased Patent Rights	$ 5,287,000	$ 5,261,000
Patent costs - net	$ 4,246,000	4,311,000
Patents [Member]
Useful life	14 years
Purchased Patent Rights	$ 4,082,000	4,082,000
Accumulated amortization	$ (931,000)	(855,000)
Patents Two [Member]
Useful life	12 years
Purchased Patent Rights	$ 144,000	144,000
Accumulated amortization	$ (110,000)	(95,000)
Patents Three [Member]
Useful life	17 years
Purchased Patent Rights	$ 1,061,000	$ 1,035,000

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Patents, net (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Amortization expense	$ 91,000	$ 97,000
Year 2017 [Member]
Estimated annual amortization expense	270,000
Year 2018-2025 [Member]
Estimated annual amortization expense	363,000
Year 2026 [Member]
Estimated annual amortization expense	353,000
Year 2027 [Member]
Estimated annual amortization expense	351,000
Year 2028 [Member]
Estimated annual amortization expense	113,000
Year 2029 and 2032 [Member]
Estimated annual amortization expense	59,000
Year 2033 [Member]
Estimated annual amortization expense	$ 22,000
Minimum and Intangible Assets - Patent (Member)
Estimated remaining useful lives of the assets	12 years
Amortization period	9 years
Maxiimum and Intangible Assets - Patent (Member)
Estimated remaining useful lives of the assets	17 years
Amortization period	16 years

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Accrued Expenses (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Accrued Expenses Details
Accrued research and development consulting fees	$ 64,000	$ 25,000
Accrued rent (Note 9) – related parties	29,000	32,000
Accrued interest (Note 10) related parties	77,000	40,000
Total	$ 170,000	$ 97,000

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Accrued Salaries and Payroll Taxes - Related Parties And Other (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Accrued Salaries And Payroll Taxes - Related Parties And Other Details
Accrued salaries - related parties	$ 2,647,000	$ 2,647,000
Accrued payroll taxes - related parties	130,000	130,000
Withholding tax	86,000	57,000
Total	$ 2,863,000	$ 2,834,000

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Commitments and Contingencies (Details)	Sep. 30, 2016 USD ($)
Year ending June 30,
2017	$ 161,000
2018	214,000
2019	55,000
Total minimum payments	$ 430,000

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Commitments and Contingencies (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Commitments And Contingencies Details Narrative
Operating leases, rental expense	$ 50,000	$ 50,000

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Related Party Transactions (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Jun. 30, 2016
Kard Scientific [Member]
Rent expense	$ 3,000	$ 3,000
Rent payables included in accrued expenses	29,000		$ 32,000
Clinical Studies [Member]
Accrued research and development expenses	$ 1,486,000		$ 1,486,000

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Note Payable - Related Party (Details Narrative) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Note Payable - Related Party Details Narrative
Interest accrued	$ 77,000	$ 40,000
Principal balances of the demand note	$ 2,022,000	$ 2,022,000

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Equity Incentive Plans, Stock-Based Compensation and Warrants (Details) - Stock Options [Member]	3 Months Ended
	Sep. 30, 2016 USD ($) $ / shares shares
Number of Outstanding, Beginning Balance | shares	40,444,728
Granted | shares	368,779
Exercised | shares
Forfeited/expired | shares
Number of Outstanding, Ending Balance | shares	40,813,507
Number of Outstanding, Exercisable | shares	39,769,611
Weighted Average Exercise Price, Beginning Balance | $ / shares	$ 0.22
Granted | $ / shares	1.31
Exercised | $ / shares
Forfeited/expired | $ / shares
Weighted Average Exercise Price, Ending Balance | $ / shares	0.23
Weighted Average Exercise Price, Exercisable | $ / shares	$ 0.20
Weighted average remaining contractual life (Years), Outstanding, Beginning Balance	4 years 6 months 29 days
Weighted average remaining contractual life (Years), Granted	9 years 9 months 18 days
Weighted average remaining contractual life (Years), Outstanding, Ending Balance	4 years 4 months 17 days
Weighted average remaining contractual life (Years), Exercisable	4 years 3 months
Aggregate intrinsic value, Beginning Balance | $	$ 48,185,911
Aggregate intrinsic value, Ending Balance | $	44,341,745
Aggregate intrinsic value, Exercisable | $	$ 44,333,975

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Equity Incentive Plans, Stock-Based Compensation and Warrants (Details 1) - Stock Options [Member]	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Expected term (in years)		3 years
Expected stock price volatility		65.76%
Risk-free interest rate		1.04%
Expected dividend yield	0.00%	0.00%
Minimum [Member]
Expected term (in years)	3 years
Expected stock price volatility	57.63%
Risk-free interest rate	0.71%
Maximum [Member]
Expected term (in years)	10 years
Expected stock price volatility	111.62%
Risk-free interest rate	1.73%

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Equity Incentive Plans, Stock-Based Compensation and Warrants (Details 2) - Stock Warrants [Member]	3 Months Ended
	Sep. 30, 2016 USD ($) $ / shares shares
Number of Outstanding, Beginning Balance | shares	25,000
Extended | shares
Granted | shares
Exercised | shares
Expired | shares
Number of Outstanding, Ending Balance | shares	25,000
Number of Outstanding, Exercisable | shares	25,000
Weighted Average Exercise Price, Beginning Balance | $ / shares	$ 1.79
Extended | $ / shares
Granted | $ / shares
Exercised | $ / shares
Expired | $ / shares
Weighted Average Exercise Price, Ending Balance | $ / shares	1.79
Weighted Average Exercise Price, Exercisable | $ / shares	$ 1.79
Weighted average remaining contractual life (Years), Outstanding, Beginning Balance	6 months 22 days
Weighted average remaining contractual life (Years), Outstanding, Ending Balance	3 months 22 days
Weighted average remaining contractual life (Years), Exercisable	3 months 22 days
Aggregate intrinsic value, Beginning Balance | $
Aggregate intrinsic value, Ending Balance | $
Aggregate intrinsic value, Exercisable | $

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Equity Incentive Plans, Stock-Based Compensation and Warrants (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Stock Options [Member]
Stock based compensation	$ 344,000	$ 77,000
Stock option expenses	127,000
Stock awards	217,000
On February 16, 2016 [Member]
Stock option expenses	9,000
On April 6, 2016 [Member]
Stock option expenses	3,000
On June 27, 2016 [Member]
Stock based compensation	289,000
Stock option expenses	101,000
Stock awards	188,000
On September 1, 2016 [Member]
Stock based compensation	8,000
Stock option expenses	6,000
Stock awards	2,000
On September 15, 2016 [Member]
Stock based compensation	4,000
Stock option expenses	3,000
Stock awards	$ 1,000

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Equity Transactions (Details) - Restricted Stock [Member]	3 Months Ended
	Sep. 30, 2016 $ / shares shares
Number of Outstanding, Beginning Balance | shares	1,066,667
Total shares granted | shares	121,886
Number of Outstanding, Ending Balance | shares	1,188,553
Weighted Average Exercise Price, Beginning Balance | $ / shares	$ 1.4
Total shares granted | $ / shares	1.3
Weighted Average Exercise Price, Ending Balance | $ / shares	$ 1.4

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Equity Transactions (Details 1) - shares	3 Months Ended	12 Months Ended
	Sep. 30, 2016	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2017
Restricted Stock [Member]
Scheduled vesting - restricted stock	1,188,533	40,628	40,629	573,963	533,333

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Equity Transactions (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Jun. 30, 2016
Deferred offering costs	$ 326,000		$ 358,000
Unrecognized compensation	$ 1,500,000
On September 1, 2016 [Member]
Restricted stock and options issued	58,394
Common stock purchased	172,987
On September 15, 2016 [Member]
Restricted stock and options issued	63,492
Common stock purchased	188,263
Common Class A | 30 Million Common Stock Purchase Agreement [Member] | Aspire Capital Fund Llc [Member]
Amortization amount	$ 32,000	$ 25,000
Deferred offering costs	$ 326,000		$ 358,000
Number of common stock shares sold	1,500,000	700,000
Value of common stock shares sold	$ 1,900,000	$ 1,500,000