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 March 31, 2017

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to  _____________

Commission File No. 001-31326

SEVION THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware	84-1368850
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

10210 Campus Point Drive, Suite 150

San Diego, CA 92121
(Address of principal executive offices)

(858) 909-0749
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes: x No: ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes: x No: ¨

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x
	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes: ¨ No: x

26,920,556 shares of the issuer’s common stock, par value $0.01 per share, were outstanding as of April 28, 2017.

SEVION THERAPEUTICS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	CONDENSED CONSOLIDATED BALANCE SHEETS as of March 31, 2017 and June 30, 2016	2
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS For the Three Months and Nine Months Ended March 31, 2017 and 2016	3
	CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY For the Nine Months Ended March 31, 2017	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended March 31, 2017 and 2016	5
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
	Overview	14
	Liquidity and Capital Resources	17
	Changes to Critical Accounting Policies and Estimates	17
	Results of Operations	18
	Off-Balance Sheet Arrangements	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION	24
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	39
SIGNATURES		40

PART I. FINANCIAL INFORMATION.

Item 1. Financial Statements (Unaudited).

Certain information and footnote disclosures required under United States generally accepted accounting principles have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. However, Sevion Therapeutics, Inc., a Delaware corporation, and its wholly owned subsidiaries, Senesco, Inc., a New Jersey corporation and Fabrus, Inc., a Delaware corporation (collectively, “Sevion” or the “Company”), believe that the disclosures are adequate to assure that the information presented is not misleading in any material respect.

The results of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the entire fiscal year.

1

SEVION THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

	31-Mar			June 30,
	2017			2016
ASSETS
CURRENT ASSETS:
Cash	$	241,950		$	810,808
Prepaid expenses and other current assets		30,309			171,820
Total Current Assets		272,259			982,628
Equipment, furniture and fixtures,  net		60,146			92,554
Acquired research and development		5,500,000			8,100,000
Security deposits		9,800			50,770
TOTAL ASSETS	$	5,842,205		$	9,225,952
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	109,146		$	90,305
Accrued expenses		157,993			256,376
Notes payable		256,819			-
Derivative liability		533,516			-
Other current liabilities		-			22,310
Total Current Liabilities		1,057,474			368,991
Warrant and stock right liabilities		-			956,575
Deferred tax liability		2,200,000			3,240,000
Other liabilities		-			99,728
TOTAL LIABILITIES		3,257,474			4,665,294
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $0.01 par value, authorized 1,228,500 shares
Series C 235,837 shares issued and 225,004 and 235,004 shares outstanding, respectively (liquidation preference of $2,250 and $2,350 at March 31, 2017 and June 30, 2016, respectively)		2,250			2,350
Series A 10,297 shares issued and 270 shares outstanding (liquidation preference of $271,166 at March 31, 2017 and $389,500 at June 30, 2016)		3			4
Common stock, $0.01 par value, authorized 500,000,000 shares, issued and outstanding 26,920,556 and 20,496,385 at March 31, 2017 and June 30, 2016, respectively		269,206			204,964
Capital in excess of par		121,767,033			119,983,399
Accumulated deficit		(119,453,761	)		(115,630,059	)
Total Stockholders' Equity		2,584,731			4,560,658
TOTAL LIABILITIES AND STOCKHOLDERS'  EQUITY	$	5,842,205		$	9,225,952

See Notes to Condensed Consolidated Financial Statements

2

SEVION THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2017			2016			2017			2016
Licensing Revenue	$	-		$	-		$	-		$	75,000
Operating expenses:
General and administrative		215,146			331,611			995,275			1,319,986
Research and development		126,743			576,443			614,359			1,772,530
Impairment of goodwill		-			2,980,951			-			5,780,951
Impairment of acquired R&D		-			1,000,000			2,600,000			1,000,000
Gain on Sale of patents		-			-			(149,728	)		-
Total operating expenses		341,889			4,889,005			4,059,906			9,873,467
Loss from operations		(341,889	)		(4,889,005	)		(4,059,906	)		(9,798,467	)
Other non-operating income (expense)
Change in fair value of stock right		-			742,253			651,484			315,862
Change in fair value of warrant liability		-			667,639			305,091			1,967,700
Change in fair value of note derivative liability		55,550			-			55,550			-
Stock issuance for anti-dilution right		(1,417,922	)		-			(1,417,922	)		-
Modification of warrant exercise price		(307,774	)		-			(307,774	)		-
Interest income (expense) - net		(53,997	)		-			(55,962	)		(371	)
Net loss before income tax benefit		(2,066,032	)		(3,479,113	)		(4,829,439	)		(7,515,276	)
Income tax benefit		-			400,000			1,040,000			400,000
Net loss		(2,066,032	)		(3,079,113	)		(3,789,439	)		(7,115,276	)
Preferred dividends		(8,979	)		(9,501	)		(34,263	)		(171,984	)
Loss applicable to common shares		(2,075,011	)		(3,088,614	)		(3,823,702	)		(7,287,260	)
Other comprehensive loss		-			-			-			-
Comprehensive loss	$	(2,075,011	)	$	(3,088,614	)	$	(3,823,702	)	$	(7,287,260	)
Basic and diluted net loss per common share	$	(0.09	)	$	(0.15	)	$	(0.18	)	$	(0.36	)
Basic and diluted weighted-average number of common shares outstanding		23,521,726			20,420,608			21,644,282			20,282,054

See Notes to Consolidated Financial Statements

3

SEVION THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED MARCH 31, 2017

(unaudited)

											Capital in Excess			Accumulated			Stockholders'
	Preferred Stock						Common Stock				of Par Value			Deficit			Equity
	Shares			Amount			Shares		Amount
Balance at June 30, 2016		235,384		$	2,354			20,496,385	$	204,964	$	119,983,399		$	(115,630,059	)	$	4,560,658
Stock issued for anti-dilution right					-			5,671,689		56,717		1,361,205			-			1,417,922
Warrant modification		-			-			-		-		307,774			-			307,774
Stock-based compensation		-			-			-		-		79,482			-			79,482
Preferred stock converted into common stock		(10,110	)		(101	)		540,000		5,400		(5,299	)		-			-
Dividends Paid								212,482		2,125		40,472			(33,096	)		9,501
Dividends accrued and unpaid at March 31, 2017		-			-			-		-		-			(1,167	)		(1,167	)
Net loss		-			-			-		-		-			(3,789,439	)		(3,789,439	)
Balance at March 31, 2017	$	225,274		$	2,253			26,920,556	$	269,206	$	121,767,033		$	(119,453,761	)	$	2,584,731

See Notes to Consolidated Financial Statements

4

SEVION THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months Ended March 31,
	2017			2016
Cash flows from operating activities:
Net loss	$	(3,789,439	)	$	(7,115,276	)
Adjustments to reconcile net loss to net cash used in operating activities:
Noncash income related to change in fair value
- stock right		(651,484	)		(315,862	)
- warrant liability		(305,091	)		(1,967,700	)
- derivative liability		(55,550	)		-
Noncash charge for modification of warrant terms		307,774			-
Noncash charge for common stock anti-dilution issuance		1,417,922			-
Noncash charge for accretion of debt discount		45,885			-
Gain on sale of patents		(149,728	)
Stock-based compensation expense		79,482			95,008
Depreciation and amortization		34,908			80,588
Impairment of goodwill		-			5,780,951
Impairment of acquired R&D		2,600,000			1,000,000
Deferred tax liability reduction for impairment of acquired R&D		(1,040,000	)		(400,000	)
Deferred rent		(22,310	)		(46,572	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		141,511			317,009
Security deposit		40,970			-
Accounts payable		18,841			(175,430	)
Accrued expenses		(90,049	)		(139,145	)
Deferred revenue		-			(75,000	)
Net cash used in operating activities		(1,416,358	)		(2,961,429	)
Cash flows from investing activities:
Proceeds from sale of patents		50,000			-
Purchase of equipment, furniture and fixtures		(2,500	)		-
Net cash provided by investing activities		47,500			-
Cash flows from financing activities:
Proceeds from issuance of bridge notes		800,000			-
Proceeds from issuance of common stock and warrants, net and exercise of warrants and options		-			1,152,397
Net cash provided by financing activities		800,000			1,152,397
Net (decrease) in cash		(568,858	)		(1,809,032	)
Cash at beginning of period		810,808			3,334,626
Cash at end of period	$	241,950		$	1,525,594
Supplemental disclosure of non-cash transactions:
Conversion of preferred stock into common stock	$	5,299		$	6,075
Allocation of equity proceeds to warrants	$	-		$	559,261
Allocation of equity proceeds to stock rights	$	-		$	142,854
Allocation of preferred stock proceeds to beneficial conversion feature	$	-		$	135,701
Allocation of convertible note proceeds to derivative liability	$	589,066		$	-
Issuance of common stock for dividend payments on preferred stock	$	42,597		$	23,615
Dividends accrued on preferred stock	$	(1,167	)	$	(19,003	)

See Notes to Consolidated Financial Statements

5

SEVION THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1 - Basis of Presentation:

The financial statements included herein have been prepared by Sevion Therapeutics, Inc. (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 as subsequently amended.

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting solely of those which are of a normal recurring nature, necessary to present fairly its financial position as of March 31, 2017 and the results of its operations for the three months and nine months ended March 31, 2017 and cash flows for the nine months ended March 31, 2017.

Interim results are not necessarily indicative of results for the full fiscal year.

Note 2 – Liquidity:

As shown in the accompanying condensed consolidated financial statements, the Company has a history of losses with an accumulated deficit of $119,453,761 and has generated minimal revenues by licensing its technology to companies willing to share in its development costs. In addition, the Company’s technology may not be ready for commercialization for several years. The Company expects to continue to incur losses for the next several years because it anticipates that its expenditures on research and development and administrative activities will significantly exceed its revenues during that period. The Company cannot predict when, if ever, it will become profitable.

Given the Company’s limited capital resources, management recommended to the Company’s Board of Directors that certain executive level salaries be reduced by upwards of 80%, staff reductions be effected and that there be a temporary reduction of research and development expenditures to support the Company’s goal of cutting expenses and preserving cash on hand. The Company’s Board of Directors approved this recommendation and the reductions went into effect on March 23, 2016.

As of March 31, 2017, the Company had cash in the amount of $241,950. The Company estimates that its cash as of March 31, 2017 and the $300,000 proceeds to be received from the issuance of convertible promissory notes on May 19, 2017 to an existing stockholder of the Company, will cover its expenses through June 30, 2017.

The Company will need additional capital to operate and expand its research program and plans to raise additional capital possibly through the placement of debt instruments, equity instruments or any combination thereof. However, the Company may not be able to obtain adequate funds for its operations when needed or on acceptable terms. If the Company is unable to raise additional funds, it will need to do one or more of the following:

• license third parties to develop and commercialize products or technologies that it would otherwise seek to develop and commercialize itself;

6

• seek strategic alliances or business combinations;

• attempt to sell the Company;

• cease operations; or

• declare bankruptcy.

These conditions raise substantial doubt about our ability to continue as a going concern. Consequently, the audit reports prepared by our independent registered public accounting firm relating to our consolidated financial statements for the years ended June 30, 2016, 2015 and 2014 include an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. These interim consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 3 – Intangibles:

The Company assesses the impairment in value of intangible assets whenever events or circumstances indicate that their carrying value may not be recoverable. Factors the Company considers important which could trigger an impairment review include the following:

• significant negative industry trends;

• significant underutilization of the assets;

• significant changes in how the Company uses the assets or its plans for their use; and

• changes in technology and the appearance of competing technology.

If a triggering event occurs and if the Company's review determines that the future undiscounted cash flows related to the groups, including these assets, will not be sufficient to recover their carrying value, the Company will reduce the carrying values of these assets down to the Company’s estimate of fair value.

The Company determined enterprise value to be the most reasonable measurement of Intangibles for purposes of the analysis. The Company concluded that there was no impairment based on the Company’s market value for the three months ended March 31, 2017. Cumulative impairment recorded for the nine months ended March 31, 2017 was $2,600,000.

Note 4 - Loss Per Share:

Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of the Company’s Common Stock assumed to be outstanding during the period of computation. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional shares of Common Stock that would have been outstanding if the potential shares of Common Stock had been issued and if the additional shares of Common Stock were dilutive.

For all periods presented, basic and diluted loss per share are the same, as any additional Common Stock equivalents would be anti-dilutive. Potentially dilutive shares of Common Stock have been excluded from the calculation of the weighted average number of dilutive shares of Common Stock as follows:

7

	March 31,
	2017		2016
Common Stock to be issued upon conversion of convertible preferred stock - Series A		1,080,000		506,666
Common Stock to be issued upon conversion of convertible preferred stock - Series C		4,218,825		2,350,040
Outstanding warrants		5,011,591		8,698,580
Outstanding options		2,319,621		1,646,563
Total potentially dilutive shares of Common Stock		12,630,037		13,201,849

Note 5 – Stock-Based Compensation:

The terms and vesting schedules for share-based awards vary by type of grant and the employment status of the grantee. Generally, the awards vest based upon time-based conditions or achievement of specified goals and milestones.

Stock option activity under the Company’s 2008 Plan and 1998 Plan for the nine months ended March 31, 2017 is summarized as follows:

			Weighted
	Aggregate		Average		Exercise Price
	Number		Exercise Price		Range
Outstanding, June 30, 2016		1,917,238	$	3.29		$  0.22 - $  108.00
Granted		436,363	$	0.22		$0.22
Exercised		-	$	-		-
Cancelled		28,140	$	0.83		$0.83
Expired		5,840	$	62.93		$22.00 - $ 108.00
Outstanding, March 31, 2017		2,319,621	$	2.59		$ 0.22 - $ 99.00
Options exercisable at March 31, 2017		2,291,436	$	2.62

As of March 31, 2017, the aggregate intrinsic value of stock options outstanding was $0 with a weighted-average remaining term of 6.60 years. As of March 31, 2017, the Company has 5,119,079 shares available for future stock option grants.

Stock-based compensation expense for the three months ended March 31, 2017 and March 31, 2016 amounted to $74,333 and $6,175, respectively. Stock-based compensation expense for the nine months ended March 31, 2017 and March 31, 2016 amounted to $79,482 and $95,008, respectively.

As of March 31, 2017, total stock-based compensation expense not yet recognized related to stock option grants amounted to approximately $16,276 which will be recognized over the next 20 months.

Note 6 – Notes Payable:

On February 15, 2017, the Company issued convertible promissory notes (the “Notes”) in the aggregate amount of $500,000 to OPKO Health, Inc. and an existing stockholder of the Company (the “Noteholders”). The Notes have customary events of default, an interest rate of 6% per annum, and principal and interest due six months from the date of issuance (the “Maturity Date”).

8

The Notes provide for mandatory conversion: (a) if the Company enters into a transaction or series of transactions for an aggregate sale price of at least One Million Dollars ($1,000,000) of the Company’s capital stock (referred to as the “Qualified Financing”) then the outstanding principal balance and accrued but unpaid interest on the Notes will automatically convert into such capital stock sold in the Qualified Financing at a conversion price equal to the lesser of (i) the price per share paid by investors at the close of the Qualified Financing or (ii) $0.10 (the “Conversion Price”); or (b) upon a sale of all or substantially all of the Company’s assets, whether by sale, acquisition or merger, the outstanding principal balance and accrued but unpaid interest on the Notes will automatically convert at the Conversion Price into shares of Common Stock or such other securities on terms and conditions agreed upon by the Company and the holders of a majority of the outstanding principal amount of the Notes. Additionally, the Notes contain an optional conversion feature which provides that all or any portion of the outstanding principal balance and accrued but unpaid interest on the Notes may be converted at the Conversion Price.

In connection with the issuance of the Notes, the Company also amended and restated promissory notes issued to the Noteholders in November 2016 (the “Previous Notes”) in order to make the Previous Notes convertible upon the same terms as the Notes. As previously publicly disclosed, the Previous Notes had customary events of default, an interest rate of 5% per annum, and principal and interest due twelve months from their issuance. The Previous Notes, as amended and restated (the “Amended Notes”), bear interest at a rate of 6% per annum, with principal and interest due twelve months from their original issuance date.

The Company reviewed applicable guidance in Accounting Standards Codification (“ASC”) 470, Debt, and concluded that the amendment of the Previous Notes met the definition of trouble debt restructuring, because the Company was experiencing financial difficulty, and the debt holders granted a concession to the Company. Total undiscounted cash flows of the Amended Notes was greater than the carrying amount of the Previous Notes on the date of the amendment. Consequently, under the guidance of ASC 470, no gain or loss was recognized on the date of the amendment. The carrying amount of the Previous Notes on the date of the amendment is accreted to the maturity value under the Amended Notes using the effective interest method over the remaining term of the Amended Notes.

The Company evaluated the conversion options in the Notes and Amended Notes summarized above under the authoritative guidance in ASC 815 for Derivatives and Hedging, and concluded that the conversion options meet the definition of a derivative, and require bifurcation and separate accounting from the Notes (see Note 9). The fair value of the conversion options was recognized as a short term liability in the balance sheet, with any changes in fair value recorded in the statement of operations at each reporting period. The conversion option derivative created a debt discount of $589,066 to be amortized over the next 8 months.

Notwithstanding the above, the Notes and the Amended Notes contain a blocker feature which does not allow for conversion if it would cause such purchaser’s beneficial ownership of the shares of capital stock of any class of the Company outstanding at the time of conversion to exceed 4.99%, except that the Company may increase this beneficial ownership limitation to 9.99% in such purchaser’s sole discretion upon sixty-one (61) days’ notice. This limitation automatically terminates on the date that is fifteen (15) days prior to the Maturity Date.

The Notes and the Amended Notes were issued pursuant to the exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

Note 7 – Income Taxes:

The deferred tax liability in the amount of $3,240,000 remained in connection with the related Acquired Research and Development from the Company’s acquisition of Fabrus, Inc. in May 2014. Due to the impairment adjustment for the Acquired Research and Development costs, a tax benefit of $1,040,000 has been recognized for the nine month period ended March 31, 2017. Accordingly, the deferred tax liability has been reduced by $1,040,000 for the nine month period ended March 31, 2017, leaving a balance of $2,200,000 as of March 31, 2017.

9

No current provision for income taxes has been made for the nine months ended March 31, 2017 and 2016 given the Company’s losses in 2016 and 2015 and available net operating loss carryforwards. A benefit has not been recorded as the realization of the net operating losses is not assured and the timing in which the Company can utilize its net operating loss carryforwards in any year or in total may be limited by provisions of the Internal Revenue Code regarding changes in ownership of corporations.

Note 8 - Fair Value Measurements:

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2017 and June 30, 2016:

	Carrying		Fair Value Measurement at March 31, 2017
	Value		Level 1		Level 2		Level 3
Assets:
Cash	$	241,950	$	241,950	$	-	$	-
Derivative Liability	$	533,516	$	-	$	-	$	533,516
	Carrying		Fair Value Measurement at June 30, 2016
	Value		Level 1		Level 2		Level 3
Assets:
Cash	$	810,808	$	810,808	$	-	$	-
Warrant Liabilities	$	956,575	$	-	$	-	$	956,575

The following table summarizes the changes in fair value of the Company’s Level 3 financial investments:

For the Nine months ended March 31, 2017
Beginning Balance	$	956,575
Allocation of convertible note proceeds to derivative liability		589,066
Change in fair value of derivative liability		(55,550	)
Change in fair value of warrant liabilities, net		(305,091	)
Change in fair value of stock right, net		(651,484	)
Ending Balance	$	533,516

Note 9 – Warrant and Derivative Liabilities:

The warrant liabilities represent the fair value of Common Stock purchase warrants which have exercise price reset features estimated using a Monte Carlo valuation model. For the quarter ended December 31, 2016, it was determined that the exercise price reset provisions of the warrants and stock rights would expire prior to any equity financing. The Company recognized $956,575 as income and adjusted the warrant and stock rights liability to $0 as of December 31, 2016.

In connection with the issuance of the Notes (see Note 6), the Company amended the exercise price of the warrants downward to $0.40 a share. In addition, the warrant agreement was amended so that the price reset features would no longer be in force during the remaining term of the warrants. The Company reviewed the terms of the warrant agreement and guidance in the authoritative literature, and concluded that the warrants are classified in equity.

The Company recognized a one-time charge for the warrant price modification of $307,774 based upon the change in value of the warrants immediately prior to and subsequent to the exercise price adjustment. The Company used a modified Black Scholes fair value method to compute this value of the warrants based upon the exercise price of $0.75 and $1.50 for the warrants before and $0.40 exercise price after the modification. The stock price was $0.25, expected life ranged from 0.71 to 0.95 of a year, volatility ranged from 171% to 178% and the discount rate ranged from 0.77% to 0.86% for the before and after calculation.

Derivative liability recognized for the conversion option derivative (see Note 6) is a recurring fair value measurement that was established in February 2017, and marked to market at each reporting period, with any gain or loss recognized in the statement of operations. The Company estimated the fair value of the derivative financial instrument using a probability weighted Black Scholes pricing model, which uses inputs that are considered level 3 liabilities under authoritative guidance. Estimating the fair value of the derivative liability requires the use of significant and subjective inputs that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are volatile and sensitive to changes in the Company’s trading market price and other key assumptions. From February 2017 to March 2017, the Company recorded a gain of $55,550 due to a decrease in the fair value of the derivative liability, which was included as a non-operating income in the statement of operations for the three months ended March 31 2017. The assumptions used to value the derivative at the origination date and at March 31, 2017 are as follows:

	February 15, 2017	March 31, 2017
Stock Price	$0.15 - $0.25	$0.15 - $0.18
Estimated life in years	0.17 to 0.75	0.17 to 0.63
Risk-free interest rate(1)	0.54% - 0.77%	0.76% - 0.94%
Volatility	173.5% - 214.5%	160.0% - 178.0%
Dividend paid	0.00%	0.00%

⁽¹⁾ Represents the interest rate on a U.S. Treasury security with a maturity date corresponding to that of the term.

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Note 10 – Common Stock Issuance

On February 15, 2017, in connection with the Notes (see Note 6) and Series A Exchange Agreement (see Note 11), the Company executed a consent and waiver agreement, by and among the Company and certain investors (the “Consent and Waiver Agreement”), which extended certain anti-dilution and exercise price adjustment rights to the investors and placement agent that participated in the Company’s 2015 financing (the “Price Protection Provisions”) and set a floor at $0.40 per share. The Price Protection Provisions were triggered by the issuance of the Notes (Note 6).

The Company issued 5,671,689 shares of common stock as per the Price Protection Provisions of the Consent and Waiver Agreement. Based upon the market value of the stock on the date of issuance, the Company recognized a charge of $1,417,922 for the stock rights granted under the Price Protection Provisions, which was included as a non-operating expense in the statement of operations for the three months ended March 31, 2017. In connection with the issuance of common stock as described above, the Price Protection Provisions were extinguished and will not apply to any future financings.

Note 11 – Series A Preferred Stock:

On February 15, 2017, in connection with the issuance of the Notes (see Note 6), certain of the holders of the Company’s outstanding Series A Preferred Stock exchanged 110 shares of Series A Preferred Stock for 440,000 shares of Common Stock, at an exchange price of $0.25 per share, pursuant to a preferred stock exchange agreement, by and among the Company and the holders of its Series A Preferred Stock (the “Exchange Agreement”). Since February 2017, one holder owning 200 shares of Series A Preferred Stock has yet to convert after agreeing that such investor would convert.

The shares of Common Stock issued pursuant to the Exchange Agreement were issued solely to former holders of Series A Preferred Stock, upon exchange pursuant to the exemption from registration provided under Section 3(a)(9) of the Securities Act. This exemption is available to the Company because the shares of Common Stock were exchanged by the Company with its existing security holders with no commission or other remunerations being paid or given for soliciting such an exchange.

Note 12 – Series C Preferred Stock:

During the nine months ended March 31, 2017, 10,000 shares of Series C Preferred Stock were converted into 100,000 shares of Common Stock. Each share of Series C Preferred Stock converted into 10 shares of Common Stock.

In connection with the Consent and Waiver Agreement (see Note 10), the conversion rate for the Series C Preferred Stock was set at $0.40 per share. Prior to the Consent and Waiver Agreement, the conversion rate was $0.75 per share. Such reduction of conversion price did not have an impact on the consolidated financial statements for the three months ended March 31 2017.

Note 13 – Gain on Sale of Patents:

On September 8, 2015, the Company entered into an agreement to sell certain Intellectual Property consisting of patents, patent applications and license agreements related to those patents and patent applications. The Company is not actively developing any program related to the Intellectual Property included in the agreement. On July 19, 2016, the transaction closed and the Company received $50,000 cash up front and a 19.9% equity interest in the acquiring company. In addition, the reserve established by the Company in the amount of $99,728 for a potential grant liability was reversed as this was assumed by the acquiring company.

The stock received has been recorded under the cost method of accounting. It was determined that the fair value of the Intellectual Property sold and the equity received were $0. Therefore, there is no asset reflected in the consolidated balance sheet as of March 31, 2017. A gain of $149,728 was recognized as other income due to the cash received and the liability relieved exceeding the fair value of the Intellectual Property sold.

Note 14 – Recent Accounting Pronouncements:

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

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In May 2014, the FASB issued ASU No. 2014- 09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 requires that a company recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which the company expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In July 2015, the FASB approved a proposal to defer the effective date of the guidance until annual and interim reporting periods beginning after December 15, 2017, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company does not anticipate that the adoption of this standard will have a material impact on the Company’s financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern,” (“ASU 2014-15”). ASU 2014-15 amended existing guidance related to the disclosures about an entity’s ability to continue as a going concern. These amendments are intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. These amendments provide guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations in the financial statement footnotes. The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. The Company does not anticipate that the adoption of this standard will have a material impact on the Company’s financial statements.

In November 2014, the FASB issued ASU No. 2014-16, “Derivatives and Hedging (Topic 815), Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity,” (“ASU 2014-16”). All entities are required to use what is called the “whole instrument approach” to determine the nature of a host contract in a hybrid financial instrument issued in the form of a share. The guidance requires issuers and investors to consider all of a hybrid instrument’s stated and implied substantive terms and features, including any embedded derivative features being evaluated for bifurcation. The guidance eliminates the “chameleon approach,” under which all embedded features except the feature being analyzed are considered. The guidance is effective for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. The Company is implementing this update and based upon its initial evaluation, does not anticipate the full adoption of this standard will have a material impact on the Company’s financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which supersedes FASB ASC 840. All entities will be required to record operating leases on the balance sheet as assets and liabilities instead of recording only capital (finance) leases on the balance sheet. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2017. The Company does not anticipate that the adoption of this standard will have a material impact on the Company’s financial statements.

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In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation: Improvements to Employee Share Based Payment Accounting,” which is intended to simplify several aspects of accounting for share based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early application is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on the Company’s financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which addresses the presentation and classification of certain cash receipts and cash payments in the statement of cash flows under Accounting Standards Codification 230. The standard is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. Early application is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on the Company’s financial statements.

Note 15 – Subsequent Events

On May 19, 2017, the Company approved a convertible promissory note (the “May Note”) in the aggregate amount of $300,000 to an existing stockholder of the Company. The May Note has customary events of default, an interest rate of 6% per annum, and principal and interest due six months from the date of issuance.

The May Note provides for mandatory conversion: (a) if the Company enters into a transaction or series of transactions for an aggregate sale price of at least One Million Dollars ($1,000,000) of the Company’s capital stock (referred to as the “Qualified Financing”) then the outstanding principal balance and accrued but unpaid interest on the May Note will automatically convert into such capital stock sold in the Qualified Financing at a conversion price equal to the lesser of (i) the price per share paid by investors at the close of the Qualified Financing or (ii) $0.10 (the “Conversion Price”); or (b) upon a sale of all or substantially all of the Company’s assets, whether by sale, acquisition or merger, the outstanding principal balance and accrued but unpaid interest on the May Note will automatically convert at the Conversion Price into shares of Common Stock or such other securities on terms and conditions agreed upon by the Company and the holder of the outstanding principal amount of the May Note. Additionally, the May Note contains an optional conversion feature which provides that all or any portion of the outstanding principal balance and accrued but unpaid interest on the May Note may be converted at the Conversion Price.

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Item 2.            Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q. The discussion and analysis may contain forward-looking statements that are based upon current expectations and entail various risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this report.

Overview

Our Business

The primary business of Sevion Therapeutics, Inc., a Delaware corporation incorporated in 1999, and its wholly-owned subsidiaries, Senesco, Inc., a New Jersey corporation incorporated in 1998, and Fabrus, Inc., a Delaware corporation incorporated in 2011, collectively referred to as “Sevion,” “we,” “us” or “our,” is to build and develop a portfolio of innovative therapeutics, from both internal discovery and acquisition, for the treatment of cancer and immunological diseases. Our product candidates are derived from multiple key proprietary technology platforms, such as: cell-based arrayed antibody discovery, ultralong antibody scaffolds and Chimerasome nanocages.

Antibody Technology

Antibody Genes - We believe our antibody platforms have broad applicability to human health by allowing the discovery of unique monoclonal antibodies against difficult membrane targets in several therapeutic areas. Our antibody therapeutic candidates target the Kv1.3 ion channel, which is important in the pathogenesis of several autoimmune and inflammatory disorders. Other antibodies in our pipeline target important cell surface molecules involved in cancer progression.

Antibody Discovery Technology - Traditional antibody drug discovery methods, such as phage/yeast display or immunization, rely on competitive selection from a pool of antibodies to identify a lead therapeutic candidate. In these methods, a mixture of antibodies compete for binding to a purified target, and the antibody molecules that bind the strongest to the target, referred to as high affinity, are ultimately discovered. While these approaches have led to many successful antibody therapeutics, there are at least two drawbacks. First, the drug targets have been limited to only those proteins which can be easily purified. Many important target classes, including multispanning membrane proteins, cannot be easily purified in functional form. Secondly, when discovery is driven by selection based on competitive binding and affinity, the result is a significant limitation in the number of functional lead antibodies. However, the highest affinity antibody isn’t always the best therapeutic because lower affinity molecules may have unique activities or lower toxicities than the highest affinity binder. Thus, modulating a pathway more subtly to treat disease is often preferable to affecting it in a binary fashion through competition related to high-affinity binding. We believe the technology to identify (i) antibodies against unpurified targets, particularly multispanning membrane proteins like G Protein Coupled Receptors, or GPCR’s, and ion channels, and (ii) a range of antibodies with different affinities and activities will enable us to discover new antibody drug leads compared to existing technologies.

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We have developed the world’s first “spatially addressed” antibody library with an expansive combinatorial collection of recombinant antibodies in which each well contains a single species of antibody of known concentration, composition and sequence. Our spatially addressed library allows us to evaluate the therapeutic potential of each antibody individually in a non-competitive way and allows direct discovery on the cell surface. This approach is more analogous to traditional small molecule drug discovery and allows us to screen antibodies for functional drug activity as opposed to simple binding properties. This next generation discovery system unlocks epitopes, targets, and functions that are only identifiable in the context of a living cell.

Modified Cow Antibodies - Despite the enormous diversity of the antibody repertoire, human antibodies all have a similar geometry, shape and binding mode. Our scientists have discovered and humanized a novel class of therapeutic antibodies derived from cows that have a highly unusual structure for binding targets. This unique ultralong Complementary Determining Region 3, or CDR3, structural domain found in cow antibodies is comprised of a knob on a stalk that protrudes far from the antibody surface, creating the potential for entirely new types of therapeutic functionality. Using both our humanized spatially addressed antibody library and direct engineering of the knob, we are exploring the ability of utilizing the knob and stalk structure to functionally interact with important therapeutic targets, including GPCRs, ion channels and other multispanning membrane therapeutic targets on the cell surface. Our lead antibody, SVN001, was derived from these efforts.

Antibody Drug Candidates – We have created functional antibodies that modulate GPCRs and ion channels, two classes of targets that have proven difficult to address using conventional antibody discovery approaches.

SVN001 is an ion channel blocking antibody that is potentially the first therapeutic antibody against this target class. SVN001 targets an ion channel, Kv1.3, which has been implicated in a number of different autoimmune disorders including rheumatoid arthritis, psoriasis and multiple sclerosis. By targeting a unique subset of immune cells, SVN001 is not believed to be broadly immunosuppressive, therefore potentially improving the safety profile compared to typical immunosuppressants.

SVN002 is a unique antibody against an oncology target that holds the potential to significantly impact highly metastatic tumors that are resistant to the class of drugs that target vascular endothelial growth factor, or VEGF. The target is highly expressed in clear cell renal carcinoma, where it is associated with poor prognosis.

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Other Antibodies - We have discovered fully human antibodies against additional oncology targets, including ErbB2, ErbB3, CXCR4, and GLP1R which have been engineered to have activity in in vitro systems. These cell surface proteins are validated, therapeutically high value targets in the disease fields of oncology and diabetes. Additionally, we have early stage antibodies against other undisclosed targets which were derived from our addressed library platform.

Research Program

We are advancing SVN001 through preclinical development where it has demonstrated potent activity as well as advancing SVN002 through preclinical development. However, given our limited capital resources, we have temporarily reduced our research and development spending on our antibody program until we are able to consummate a strategic transaction or a financing transaction.

On December 18, 2014, we entered into a Collaboration Agreement with CNA Development, LLC, an affiliate of Janssen Pharmaceuticals, Inc., or Janssen, to discover antibodies using our spatially addressed library platform. The collaboration, facilitated by the Johnson & Johnson Innovation Center in California, included discovery of antibodies against multiple targets in several therapeutic areas. We and Janssen jointly conducted research on antibodies discovered by us, and Janssen has an option to an exclusive license to develop, manufacture, and commercialize candidates which result from the collaboration. Under the terms of the agreement, we received an up-front payment and research support payments for activities conducted in collaboration with Janssen. The research activities concluded in the third quarter of fiscal 2016 and the final report was transferred to Janssen. For candidates licensed by Janssen, we would be eligible to receive payments upon the achievement of certain development and commercial milestones potentially totaling up to $125 million as well as low single digit royalties on product sales.

In order to pursue the above research initiatives, as well as other research initiatives that may arise, we will use our cash reserves. However, it will be necessary for us to raise a significant amount of additional working capital in the future. If we are unable to raise the necessary funds, we may be required to significantly curtail the future development of some or all of our research initiatives and we will be unable to pursue other possible research initiatives.

Intellectual Property

We continue to develop our intellectual property internally and by in-licensing certain intellectual property related to our antibody platforms and our Chimerasome technology.

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Liquidity and Capital Resources

Overview

For the nine months ended March 31, 2017, net cash of $1,416,358 was used in operating activities primarily due to a net loss of $3,789,439 which was decreased by non-cash expense of $2,261,808 and by changes in operating assets and liabilities in the amount of $111,273.

The $111,273 change in operating assets and liabilities was the result of a decrease in prepaid expenses in the amount of $141,511, a decrease in deposits of $ 40,970 and an increase in accounts payable and accrued expenses in the amount of $71,208 due to the timing of expenses and payments. During the nine months ended March 31, 2017, $50,000 was received from investing activities related to the sale of patents and $2,500 utilized for the purchase of fixed assets.

We received $800,000 proceeds from the issuance of convertible promissory notes.

As of March 31, 2017, our cash balance totaled $241,950, and we had a working capital deficit of $785,215.

Our future liquidity and capital funding requirements will depend on numerous factors, including, but not limited to, the levels and costs of our research and development initiatives. We anticipate that, based upon our current cash balance at March 31, 2017, and the proceeds received from the issuance of a convertible promissory note, or the May Note, approved on May 19, 2017 to an existing stockholder of the Company, in the aggregate amount of $300,000, we will be able to cover our expenses through June 30, 2017. The May Note has customary events of default and an interest rate of 6% per annum with principal and interest due six months from its issuance.

Over the next six months, we plan to fund our research and development and commercialization activities:

· by utilizing our current cash balance and investments,

· by raising capital through the placement of equity or debt instruments

· by completing a strategic transaction, and / or

· by raising capital through the execution of additional licensing agreements for our technology.

We cannot assure you that we will be able to raise money through any of the foregoing transactions on favorable terms, if at all.

Changes to Critical Accounting Policies and Estimates

Prior to the fourth quarter of fiscal 2015, certain patent related costs were capitalized. We concluded, based on historical write offs of patent cost, that the future beneficial value of our patent assets were uncertain and as such made a change to our accounting policy. This change is considered a change in estimate for accounting purposes and is reflected on a prospective basis beginning in the fourth quarter of fiscal 2015.

There have been no changes to our critical accounting policies and estimates as set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2016.

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Results of Operations

Three Months Ended March 31, 2017 andThree Months Ended March 31, 2016

The net loss from operations for the three months ended March 31, 2017 was $341,889. The net loss from operations for the three months ended March 31, 2016 was $4,889,005. Such a change represents a decrease in net loss of $4,547,116 or 93%. This decrease in net loss was the result of impairment of Goodwill and Acquired Research and Development for the three months ended March 31, 2016, combined with the reduction of expenditures for general and administrative and research and development expenditures due do cost reduction efforts.

Revenue

During the three months ended March 31, 2017 and March 31, 2016, we did not generate revenues.

General and Administrative Expenses (000’s)

	Three Months ended March 31
	2017		2016		Change			%
Payroll and benefits	$	10	$	10	$	-			0.0	%
Professional fees		106		156		(50	)		-32.1	%
Consultants		22		47		(25	)		-53.2	%
Stock-based compensation		74		2		72			3600.0	%
Other general & Administrative Expenses		3		81		(78	)		-96.3	%
Total G&A	$	215	$	332	$	(117	)		-35.2	%

· Professional fees were lower due to a reduction in accounting fees, which were partially offset by increased legal fees.

· Stock-based compensation was higher as options were issued during the three months ended March 31, 2017 while no options were issued during the three months ended March 31, 2016.

· Consultant costs decreased as a result of salary reductions with respect to our Chief Executive Officer, who is treated as a consultant rather than an employee, along with reduced utilization of other consultants to preserve cash.

· Other general and administrative expenses decreased mostly due to a decrease in director fees as the expense was transferred to stock-based compensation upon the issuance of options in lieu of cash payment.

· Delaware Franchise Tax decreased due to reduced tax liability computed upon filing of the annual return.

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Research and Development Expenses (000’s)

	Three Months ended March 31
	2017		2016		Change			%
Payroll		88		280		(192	)		-68.6	%
Patent Costs		11		63		(52	)		-82.5	%
Facility Rent		13		83		(70	)		-84.3	%
Depreciation		9		19		(10	)		-52.6	%
Stock-based compensation		1		4		(3	)		-75.0	%
Other research and development		5		76		(71	)		-93.4	%
Research Supplies		-		51		(51	)		-100.0	%
Total research and development	$	127	$	576	$	(449	)		-78.0	%

· Payroll and benefits were lower due to a reduction in headcount and salary cuts for our Fabrus subsidiary during the three months ended March 31, 2017.

· Patent costs decreased due to the timing of certain required filings combined with efforts to focus on United States patent portfolio.

· Facility rent decreased for the three months ended March 31, 2017 as a result of our move to a smaller, less expensive facility at the end of October 2016.

· Research supplies were lower because, in an effort to preserve cash on hand, we drastically reduced research and development efforts.

· Other research and development expenses decreased because, in an effort to preserve cash on hand, we drastically reduced our research efforts.

Nine Months Ended March 31, 2017 andNine Months Ended March 31, 2016

The net loss from operations for the nine months ended March 31, 2017 was $4,059,906. The net loss from operations for the nine months ended March 31, 2016 was $9,798,467. Such a change represents a decrease in net loss of $5,738,561 or 59%. This decrease in net loss was the result of impairment of Goodwill and Acquired Research and Development for the nine months ended March 31, 2016, partially offset by the impairment of Acquired Research and Development for the nine months ended March 31, 2017, combined with the reduction of general and administrative and research and development expenditures due to cost reduction efforts.

Revenue

During the nine months ended March 31, 2017, we did not generate revenues.

This compares to $75,000 in revenues generated for the nine months ended March 31, 2016.

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General and Administrative Expenses (000’s)

	Nine Months ended March 31
	2017		2016		Change			%
Payroll and benefits	$	31	$	21	$	10			47.6	%
Professional fees		628		780		(152	)		-19.5	%
Delaware Franchise Tax		74		110		(36	)		-32.7	%
Stock-based compensation		74		75		(1	)		-1.3	%
Consultants		56		145		(89	)		-61.4	%
Other general & administrative expenses		132		189		(57	)		-30.2	%
Total G&A	$	995	$	1,320	$	(325	)		-24.6	%

· Payroll and benefits were higher for the nine months ended March 31, 2017 due to reversal of an accrual for severance benefits during the nine months ended March 31, 2016.

· Professional fees were lower due to a reduction in accounting fees, partially offset by increased legal fees.

· Delaware Franchise Tax decreased as the basis for the tax which includes total assets decreased resulting in lower estimated tax.

· Consultant costs decreased as a result of salary reductions with respect to our Chief Executive Officer, who is treated as a consultant rather than an employee, along with reduced utilization of other consultants to preserve cash.

· Other general and administrative expenses decreased in the current period due to reduced insurance expense as activities have been reduced combined with ongoing cost reduction efforts.

Research and Development Expenses (000’s)

	Nine Months ended March 31
	2017			2016		Change			%
Payroll		305			865		(560	)		-64.7	%
Patent costs		139			253		(114	)		-45.1	%
Facility rent		136			263		(127	)		-48.3	%
Research supplies		10			111		(101	)		-91.0	%
Depreciation		35			81		(46	)		-56.8	%
Stock-based compensation		6			20		(14	)		-70.0	%
Other research and development		(17	)		179		(196	)		-109.5	%
Total research and development	$	614		$	1,772	$	(1,158	)		-65.3	%

· Payroll and benefits were lower due to a reduction in headcount and salary cuts for our Fabrus subsidiary during the nine months ended March 31, 2017.

· Patent costs were lower for the nine months ended March 31, 2017 than the nine months ended March 31, 2016 due to cost reduction efforts.

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· Facility rent decreased for the nine months ended March 31, 2017 as a result of our move to a smaller, less expensive facility at the end of October 2016.

· Research supplies were lower because, in an effort to preserve cash on hand, we drastically reduced research and development efforts.

· Depreciation was lower because certain assets were fully depreciated prior to the nine months ended March 31, 2017.

· Stock-based compensation was lower primarily because options attributed to research and development were not issued during the nine months ended March 31, 2017.

· Other research and development expenses decreased because, in an effort to preserve cash on hand, we drastically reduced our research efforts and reduced certain accrued clinical costs.

Contractual Obligations and Contingent Liabilities

During the nine months ended March 31, 2017, we issued convertible promissory notes in the aggregate amount of $800,000. In February 2017, we issued convertible notes in the amount of $500,000, which we refer to as the Notes, to a related party, OPKO Health, Inc. and an existing stockholder of the Company, or the Noteholders. The Notes have customary events of default, an interest rate of 6% per annum with principal and interest due six to twelve months from their issuance. In connection with the Notes, we also amended and restated promissory notes issued to the Noteholders in November 2016 in the amount of $300,000, which we refer to as the Previous Notes, in order to make the Previous Notes convertible upon the same terms as the Notes. As previously publicly disclosed, the Previous Notes had customary events of default, an interest rate of 5% per annum, and principal and interest due twelve months from their issuance. As amended and restated, the Previous Notes bear interest at a rate of 6% per annum, with principal and interest due twelve months from their original issuance date.

There were no other material changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2016.

Off Balance-Sheet Arrangements

We do not have any off balance-sheet arrangements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Foreign Currency Risk

Our financial statements and all of our contracts are denominated in United States dollars. Therefore, we believe that fluctuations in foreign currency exchange rates will not result in any material adverse effect on our financial condition or results of operations. In the event we derive a greater portion of our revenues from international operations or in the event a greater portion of our expenses are incurred internationally and denominated in a foreign currency, then changes in foreign currency exchange rates could affect our results of operations and financial condition.

Interest Rate Risk

Our exposure to market risks for interest rate changes is not significant. Interest rates on our short-term debt are subject to change, however, the effect of interest rate changes would not be material. We invest in high-quality financial instruments, primarily money market funds, with an effective duration of the portfolio of less than one year, which we believe are subject to limited credit risk. We currently do not hedge our interest rate exposure. Due to the short-term nature of our investments, we do not believe that we have any material exposure to interest rate risk arising from our investments.

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures.

The principal executive officer and principal financial officer have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of March 31, 2017. Based on that evaluation, management has concluded that as of March 31, 2017, our disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting as noted in the Company’s Form 10-K for the year ended June 30, 2016 as filed with the SEC on October 13, 2016. The material weakness identified by management relates to the review of the accounting and calculation surrounding its equity-linked financial instruments, which resulted in material adjustments to our financial statements. The material weakness has not yet been remediated. Management is committed to remediate its control deficiencies that constitute the material weaknesses by implementing changes to our internal control over financial reporting and will continue to review and make the changes necessary in order to improve the overall effectiveness of our internal controls over financial reporting. In addition, management has commenced steps to remediate the material weakness identified and to adequately and appropriately review all equity-linked accounting instruments and related accounting issues. Notwithstanding the material weaknesses that existed as of June 30, 2016 and March 31, 2017, our principal executive officer and principal financial officer have concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material aspects, the financial position, results of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States of America.

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(b) Changes in internal controls.

As a result of the material weaknesses described above, there were changes (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) in internal control over financial reporting during the nine month period ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting. Management will continue to evaluate internal controls for effective remediation of the identified material weakness.

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PART II. OTHER INFORMATION.

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

The more prominent risks and uncertainties inherent in our business are described below. However, additional risks and uncertainties may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations may suffer.

Risks Related to Our Business

Recurring losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern and we may not be able to continue as a going concern.

Our recurring losses from operations and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern and as a result, our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements for the fiscal year ended June 30, 2016. Substantial doubt about our ability to continue as a going concern may create negative reactions to the price of the common shares of our stock and we may have a more difficult time obtaining financing.

We have prepared our financial statements on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should we be unable to continue in existence.

Based upon cash on hand as of March 31, 2017 and the proceeds from the issuance of the May Note, we believe we have enough cash to fund operations through June 30, 2017.

We have a limited operating history and have incurred substantial losses and expect to incur future losses.

We are a development stage biotechnology company with a limited operating history and limited assets and capital. We have incurred losses each year since inception and had an accumulated deficit of $119,453,761 at March 31, 2017. We have generated minimal revenues by licensing our technology for certain crops to companies willing to share in our development costs. In addition, our technology may not be ready for commercialization for several years. We expect to continue to incur losses for the next several years because we anticipate that our expenditures on research and development and administrative activities will significantly exceed our revenues during that period. We cannot predict when, if ever, we will become profitable.

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We will need additional capital to fund our operations until we are able to generate a profit.

Our operations to date have required significant cash expenditures. Our future capital requirements will depend on the results of our research and development activities, preclinical and clinical studies, and competitive and technological advances.

We will need to obtain more funding in the future through collaborations or other arrangements with research institutions and corporate partners, or public and private offerings of our securities, including debt or equity financing. We may not be able to obtain adequate funds for our operations from these sources when needed or on acceptable terms. Future collaborations or similar arrangements may require us to license valuable intellectual property to, or to share substantial economic benefits with, our collaborators. If we raise additional capital by issuing additional equity or securities convertible into equity, our stockholders may experience dilution and our share price may decline. Any debt financing may result in restrictions on our spending.

If we are unable to raise additional funds, we will need to do one or more of the following:

· provide licenses to third parties to develop and commercialize products or technologies that we would otherwise seek to develop and commercialize ourselves;

· seek strategic alliances or business combinations;

· attempt to sell our company;

· cease operations; or

· declare bankruptcy.

We believe that at the projected rate of spending and with proceeds from the May Note, we should have sufficient cash to maintain our present operations through June 30, 2017.

If we are unable to successfully remediate the material weakness in our internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

In connection with the audit of our fiscal year 2016 consolidated financial statements, our auditors noted a material weakness in our internal controls, principally relating to the review of the accounting and calculation surrounding our equity-linked financial instruments. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting that results in more than reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. We cannot assure that any measures that we take to correct this material weakness will fully remediate the deficiencies or material weakness described above. We also cannot assure you that we have identified all of our existing significant deficiencies and material weaknesses, or that we will not in the future have additional significant deficiencies or material weaknesses.

We may be adversely affected by the current economic environment.

Our ability to obtain financing, invest in and grow our business, and meet our financial obligations depends on our operating and financial performance, which in turn is subject to numerous factors. In addition to factors specific to our business, prevailing economic conditions and financial, business and other factors beyond our control can also affect our business and ability to raise capital. We cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

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Materials necessary to manufacture some of our compounds currently under development may not be available on commercially reasonable terms, or at all, which may delay our development and commercialization of these compounds.

Some of the materials necessary for the manufacture of our compounds under development may, from time to time, be available either in limited quantities, or from a limited number of manufacturers, or both. Our contract manufacturers need to obtain these materials for our preclinical studies and clinical trials and, potentially, for commercial distribution when and if we obtain marketing approval for these compounds. Suppliers may not sell us these materials at the time we need them or on commercially reasonable terms. If we are unable to obtain the materials needed to conduct our preclinical studies and clinical trials, product testing and potential regulatory approval could be delayed, adversely affecting our ability to develop the product candidates. Similarly, if we are unable to obtain critical manufacturing materials after regulatory approval has been obtained for a product candidate, the commercial launch of that product candidate could be delayed or there could be a shortage in supply, which could materially affect our ability to generate revenues from that product candidate. If suppliers increase the price of manufacturing materials, the price for one or more of our products may increase, which may make our products less competitive in the marketplace. If it becomes necessary to change suppliers for any of these materials or if any of our suppliers experience a shutdown or disruption at the facilities used to produce these materials, due to technical, regulatory or other reasons, it could harm our ability to manufacture our products.

We depend on a limited number of technologies and, if our technologies are not commercially successful, we will have no alternative source of revenue.

Our primary business is the development and licensing of technology to discover and engineer monoclonal antibodies. Our future revenue and profitability critically depend upon our ability, or our licensees’ ability, to successfully develop apoptosis and senescence gene technology and later license or market such technology. We have conducted certain preliminary cell-line and animal experiments, which have provided us with data upon which we have designed additional research programs. However, we cannot give any assurance that our technology will be commercially successful or economically viable for any therapeutic application.

In addition, no assurance can be given that adverse consequences might not result from the use of our technology such as the development of negative effects on patients that receive our product candidates. Our failure to obtain market acceptance of our technology or the failure of our current or potential licensees to successfully commercialize such technology would have a material adverse effect on our business.

We outsource much of our research and development activities and, if we are unsuccessful in maintaining our alliances with these third parties, our research and development efforts may be delayed or curtailed.

We rely on third parties to perform much of our research and development activities. At this time, we have limited internal capabilities to perform our own research and development activities. Accordingly, the failure of third party research partners to perform under agreements entered into with us, or our failure to renew important research agreements with these third parties, may delay or curtail our research and development efforts.

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We have significant future capital needs and may be unable to raise capital when needed, which could force us to delay or reduce our research and development efforts.

As of March 31, 2017, we had a cash balance of $241,950 and working capital deficit of $785,215. Using our available reserves as of March 31, 2017 and proceeds from the May Note, we believe that we can operate according to our current business plan at least through June 30, 2017.

To date, we have generated minimal revenues and anticipate that our operating costs will exceed any revenues generated over the next several years. Therefore, we will be required to raise additional capital in the future in order to operate in accordance with our current business plan, and this funding may not be available on favorable terms, if at all. If we are unable to raise additional funds, we will need to do one or more of the following:

· provide a license to third parties to develop and commercialize our technology that we would otherwise seek to develop and commercialize ourselves;

· seek strategic alliances or business combinations;

· attempt to sell our company;

· cease operations; or

· declare bankruptcy.

Investors may experience dilution in their investment from future offerings of our common stock. For example, if we raise additional capital by issuing equity securities, such an issuance would reduce the percentage ownership of existing stockholders. In addition, assuming the exercise of all options and warrants outstanding and the conversion of the preferred stock into common stock, as of March 31, 2017, we had 446,568,678 shares of common stock authorized but unissued and unreserved, which may be issued from time to time by our board of directors. Furthermore, we may need to issue securities that have rights, preferences and privileges senior to our common stock. Failure to obtain financing on acceptable terms would have a material adverse effect on our liquidity.

Since our inception, we have financed all of our operations through equity and debt financings. Our future capital requirements depend on numerous factors, including:

· the scope of our research and development;

· our ability to attract business partners willing to share in our development costs;

· our ability to successfully commercialize our technology;

· competing technological and market developments;

· our ability to enter into collaborative arrangements for the development, regulatory approval and commercialization of other products; and

· the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights.

Our business depends upon our patents and proprietary rights and the enforcement of these rights. Our failure to obtain and maintain patent protection may increase competition and reduce demand for our technology.

As a result of the substantial length of time and expense associated with developing products and bringing them to the marketplace in the biotechnology industry, obtaining and maintaining patent and trade secret protection for technologies, products and processes is of vital importance. Our success will depend in part on several factors, including, without limitation:

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· our ability to obtain patent protection for our technologies and processes;

· our ability to preserve our trade secrets; and

· our ability to operate without infringing the proprietary rights of other parties both in the United States and in foreign countries.

Our success depends in part upon the grant of patents from our pending patent applications. In addition, we have licensed certain antibody technology from The Scripps Research Institute, or Scripps, pursuant to a license agreement dated August 8, 2014. If we are in breach of this license agreement, and Scripps elects to terminate the agreement, this termination could have a material adverse effect to our business in the future.

Although we believe that our technology is unique and that it will not violate or infringe upon the proprietary rights of any third party, we cannot assure you that these claims will not be made or if made, could be successfully defended against. If we do not obtain and maintain patent protection, we may face increased competition in the United States and internationally, which would have a material adverse effect on our business.

Since patent applications in the United States are maintained in secrecy until patents are issued, and since publication of discoveries in the scientific and patent literature tend to lag behind actual discoveries by several months, we cannot be certain that we were the first creator of the inventions covered by our pending patent applications or that we were the first to file patent applications for these inventions.

In addition, among other things, we cannot assure you that:

· our patent applications will result in the issuance of patents;

· any patents issued or licensed to us will be free from challenge and if challenged, would be held to be valid;

· any patents issued or licensed to us will provide commercially significant protection for our technology, products and processes;

· other companies will not independently develop substantially equivalent proprietary information which is not covered by our patent rights;

· other companies will not obtain access to our know-how;

· other companies will not be granted patents that may prevent the commercialization of our technology; or

· we will not incur licensing fees and the payment of significant other fees or royalties to third parties for the use of their intellectual property in order to enable us to conduct our business.

Our competitors may allege that we are infringing upon their intellectual property rights, forcing us to incur substantial costs and expenses in resulting litigation, the outcome of which would be uncertain.

Patent law is still evolving relative to the scope and enforceability of claims in the fields in which we operate. We are like most biotechnology companies in that our patent protection is highly uncertain and involves complex legal and technical questions for which legal principles are not yet firmly established. In addition, if issued, our patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products, or provide us with any competitive advantage.

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The PTO and the courts have not established a consistent policy regarding the breadth of claims allowed in biotechnology patents. The allowance of broader claims may increase the incidence and cost of patent interference proceedings and the risk of infringement litigation. On the other hand, the allowance of narrower claims may limit the scope and value of our proprietary rights.

The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and many companies have encountered significant problems and costs in protecting their proprietary rights in these foreign countries.

We could become involved in infringement actions to enforce and/or protect our patents. Regardless of the outcome, patent litigation is expensive and time consuming and would distract our management from other activities. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we could because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of any patent litigation could limit our ability to continue our operations.

If our technology infringes the intellectual property of our competitors or other third parties, we may be required to pay license fees or damages.

If any relevant claims of third party patents that are adverse to us are upheld as valid and enforceable, we could be prevented from commercializing our technology or could be required to obtain licenses from the owners of such patents. We cannot assure you that such licenses would be available or, if available, would be on acceptable terms. Some licenses may be non-exclusive and, therefore, our competitors may have access to the same technology licensed to us. In addition, if any parties successfully claim that the creation or use of our technology infringes upon their intellectual property rights, we may be forced to pay damages, including treble damages.

Our security measures may not adequately protect our unpatented technology and, if we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology may be adversely affected.

Our success depends upon know-how, unpatentable trade secrets, and the skills, knowledge and experience of our scientific and technical personnel. We require all employees to disclose and assign to us the rights to their ideas, developments, discoveries and inventions. All of the current employees have also entered into Non-disclosure, Non-competition and Invention Assignment Agreements. We also attempt to enter into similar agreements with our consultants, advisors and research collaborators. We cannot assure you that adequate protection for our trade secrets, know-how or other proprietary information against unauthorized use or disclosure will be available.

We occasionally provide information to research collaborators in academic institutions and request that the collaborators conduct certain tests. We cannot assure you that the academic institutions will not assert intellectual property rights in the results of the tests conducted by the research collaborators, or that the academic institutions will grant licenses under such intellectual property rights to us on acceptable terms, if at all. If the assertion of intellectual property rights by an academic institution is substantiated, and the academic institution does not grant intellectual property rights to us, these events could limit our ability to commercialize our technology.

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As we evolve from a company primarily involved in the research and development of our technology into one that is also involved in the commercialization of our technology, we may have difficulty managing our growth and expanding our operations.

As our business grows, we may need to add employees and enhance our management, systems and procedures. We may need to successfully integrate our internal operations with the operations of our marketing partners, manufacturers, distributors and suppliers to produce and market commercially viable products. We may also need to manage additional relationships with various collaborative partners, suppliers and other organizations. Expanding our business may place a significant burden on our management and operations. We may not be able to implement improvements to our management information and control systems in an efficient and timely manner and we may discover deficiencies in our existing systems and controls. Our failure to effectively respond to such changes may make it difficult for us to manage our growth and expand our operations.

We have no marketing or sales history and depend on third party marketing partners. Any failure of these parties to perform would delay or limit our commercialization efforts.

We have no history of marketing, distributing or selling biotechnology products, and we are relying on our ability to successfully establish marketing partners or other arrangements with third parties to market, distribute and sell a commercially viable product both here and abroad. Our business plan envisions creating strategic alliances to access needed commercialization and marketing expertise. We may not be able to attract qualified sub-licensees, distributors or marketing partners, and even if qualified, these marketing partners may not be able to successfully market human therapeutic applications developed with our technology. If our current or potential future marketing partners fail to provide adequate levels of sales, our commercialization efforts will be delayed or limited and we may not be able to generate revenue.

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We will depend on joint ventures and strategic alliances to develop and market our technology and, if these arrangements are not successful, our technology may not be developed and the expenses to commercialize our technology will increase.

In its current state of development, our technology is not ready to be marketed to consumers. We intend to follow a multifaceted commercialization strategy that involves the licensing of our technology to business partners for the purpose of further technological development, marketing and distribution. We have and are seeking business partners who will share the burden of our development costs while our technology is still being developed, and who will pay us royalties when they market and distribute products incorporating our technology upon commercialization. The establishment of joint ventures and strategic alliances may create future competitors, especially in certain regions abroad where we do not pursue patent protection. If we fail to establish beneficial business partners and strategic alliances, our growth will suffer and the continued development of our technology may be harmed.

Competition in the human therapeutic industry is intense and technology is changing rapidly. If our competitors market their technology faster than we do, we may not be able to generate revenues from the commercialization of our technology.

There are many large companies working in the therapeutic antibody field and similarly may develop technologies related to antibody discovery. These companies include Genentech, Inc., Amgen, Inc., Biogen Idec, Inc., Novartis AG, Janssen Biotech, Inc., Sanofi-aventis U.S. LLC, Regeneron Pharmaceuticals, Inc., Bristol-Myers Squibb Company, Teva Pharmaceutical Industries Ltd, Pfizer, Inc., Takeda Pharmaceutical Company Limited, Kyawa Hokko Kirin Pharma, Inc., Daiichi Sankyo Company Limited, Astellas Pharma, Inc., Merck & Co. Inc., AbbVie, Inc., Seattle Genetics, Inc., and Immunogen, Inc. Similarly, there are several small companies developing technologies for antibody discovery, including Adimab LLC, X-body Biosciences, Inc., Innovative Targeting Solutions, Inc., Heptares Therapeutics Ltd, Kymab Ltd., and Novimmune SA. Other companies are working on unique scaffolds, including Ablynx NV and ArGen-X N.V.

We may be unable to compete successfully against our current and future competitors, which may result in price reductions, reduced margins and the inability to achieve market acceptance for products containing our technology. Many of these competitors have substantially greater financial, marketing, sales, distribution and technical resources than us and have more experience in research and development, clinical trials, regulatory matters, manufacturing and marketing. We anticipate increased competition in the future as new companies enter the market and new technologies become available. Our technology may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors, which will prevent or limit our ability to generate revenues from the commercialization of our technology.

Our business is subject to various government regulations and, if we or our licensees are unable to obtain regulatory approval, we may not be able to continue our operations.

Use of our technology, if developed for human therapeutic applications, is subject to FDA regulation. The FDA must approve any drug or biologic product before it can be marketed in the United States. In addition, prior to being sold outside of the United States, any of our product candidates must be approved by the regulatory agencies of foreign governments. Prior to filing a new drug application or biologics license application with the FDA, we would have to perform extensive clinical trials, and prior to beginning any clinical trial, we would need to perform extensive preclinical testing which could take several years and may require substantial expenditures.

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We expect to perform clinical trials in connection with our product candidates, which are subject to FDA approval. Additionally, federal, state and foreign regulations relating to human therapeutic applications developed through biotechnology are subject to public concerns and political circumstances, and, as a result, regulations have changed and may change substantially in the future. Accordingly, we may become subject to governmental regulations or approvals or become subject to licensing requirements in connection with our research and development efforts. We may also be required to obtain such licensing or approval from the governmental regulatory agencies described above, or from state agencies, prior to the commercialization of our human therapeutic technology. If unfavorable governmental regulations are imposed on our technology or if we fail to obtain licenses or approvals in a timely manner, we may not be able to continue our operations.

Preclinical studies of our product candidates may be unsuccessful, which could delay or prevent regulatory approval.

Preclinical studies may reveal that one or more of our product candidates is ineffective or harmful, and/or may be unsuccessful in demonstrating efficacy and safety of our human therapeutic technology, which would significantly limit the possibility of obtaining regulatory approval for any drug or biologic product manufactured with our technology. The FDA requires submission of extensive preclinical, clinical and manufacturing data to assess the efficacy and safety of potential products. Any delay in receiving approval for any applicable IND from the FDA would result in a delay in the commencement of the related clinical trial. Additionally, we could be required to perform additional preclinical studies prior to the FDA approving any applicable IND. Furthermore, the success of preliminary studies does not ensure commercial success, and later-stage clinical trials may fail to confirm the results of the preliminary studies.

Our success will depend on the success of our clinical trials of our product candidates.

It may take several years to complete the clinical trials of a product candidate, and failure of one or more of our clinical trials can occur at any stage of testing. We believe that the development of our product candidate involves significant risks at each stage of testing. If clinical trial difficulties and failures arise, our product candidate may never be approved for sale or become commercially viable.

There are a number of difficulties and risks associated with clinical trials. These difficulties and risks may result in the failure to receive regulatory approval to sell our product candidate or the inability to commercialize our product candidate. The possibility exists that:

· we may discover that the product candidate does not exhibit the expected therapeutic results in humans, may cause harmful side effects or have other unexpected characteristics that may delay or preclude regulatory approval or limit commercial use if approved;

· the results from early clinical trials may not be statistically significant or predictive of results that will be obtained from expanded advanced clinical trials;

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· institutional review boards or regulators, including the FDA, may hold, suspend or terminate our clinical research or the clinical trials of our product candidate for various reasons, including noncompliance with regulatory requirements or if, in their opinion, the participating subjects are being exposed to unacceptable health risks;

· subjects may drop out of our clinical trials;

· our preclinical studies or clinical trials may produce negative, inconsistent or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials; and

· the cost of our clinical trials may be greater than we currently anticipate.

Clinical trials for our product candidates will be lengthy and expensive and their outcome is uncertain.

Before obtaining regulatory approval for the commercial sales of any product containing our technology, we must demonstrate through clinical testing that our technology and any product containing our technology is safe and effective for use in humans. Conducting clinical trials is a time-consuming, expensive and uncertain process and typically requires years to complete. In our industry, the results from preclinical studies and early clinical trials often are not predictive of results obtained in later-stage clinical trials. Some products and technologies that have shown promising results in preclinical studies or early clinical trials subsequently fail to establish sufficient safety and efficacy data necessary to obtain regulatory approval. At any time during clinical trials, we or the FDA might delay or halt any clinical trial for various reasons, including:

· occurrence of unacceptable toxicities or side effects;

· ineffectiveness of the product candidate;

· negative or inconclusive results from the clinical trials, or results that necessitate additional studies or clinical trials;

· delays in obtaining or maintaining required approvals from institutions, review boards or other reviewing entities at clinical sites;

· delays in patient enrollment; or

· insufficient funding or a reprioritization of financial or other resources.

Any failure or substantial delay in successfully completing clinical trials and obtaining regulatory approval for our product candidates could severely harm our business.

If our clinical trials for our product candidates are delayed, we would be unable to commercialize our product candidates on a timely basis, which would materially harm our business.

Planned clinical trials may not begin on time or may need to be restructured after they have begun. Clinical trials can be delayed for a variety of reasons, including delays related to:

· obtaining an effective IND or regulatory approval to commence a clinical trial;

· negotiating acceptable clinical trial agreement terms with prospective trial sites;

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· obtaining institutional review board approval to conduct a clinical trial at a prospective site;

· recruiting qualified subjects to participate in clinical trials;

· competition in recruiting clinical investigators;

· shortage or lack of availability of supplies of drugs for clinical trials;

· the need to repeat clinical trials as a result of inconclusive results or poorly executed testing;

· the placement of a clinical hold on a study;

· the failure of third parties conducting and overseeing the operations of our clinical trials to perform their contractual or regulatory obligations in a timely fashion; and

· exposure of clinical trial subjects to unexpected and unacceptable health risks or noncompliance with regulatory requirements, which may result in suspension of the trial.

We believe that our product candidates have significant milestones to reach, including the successful completion of clinical trials, before commercialization. If we have significant delays in or termination of clinical trials, our financial results and the commercial prospects for our product candidates or any other products that we may develop will be adversely impacted. In addition, our product development costs would increase and our ability to generate revenue could be impaired.

Any inability to license from third parties their proprietary technologies or processes which we use in connection with the development of our technology may impair our business.

Other companies, universities and research institutions have or may obtain patents that could limit our ability to use our technology in a product candidate or impair our competitive position. As a result, we would have to obtain licenses from other parties before we could continue using our technology in a product candidate. Any necessary licenses may not be available on commercially acceptable terms, if at all. If we do not obtain required licenses, we may not be able to develop our technology into a product candidate or we may encounter significant delays in development while we redesign methods that are found to infringe on the patents held by others.

We face potential product liability exposure far in excess of our limited insurance coverage.

We may be held liable if any product we or our collaborators develop causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing or sale. Regardless of merit or eventual outcome, product liability claims could result in decreased demand for our product candidates, injury to our reputation, withdrawal of patients from our clinical trials, substantial monetary awards to trial participants and the inability to commercialize any products that we may develop. These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling or testing our products. We have obtained limited product liability insurance coverage for our clinical trials; however, our insurance may not reimburse us or may not be sufficient to reimburse us for expenses or losses we may suffer. Moreover, if insurance coverage becomes more expensive, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for any of our product candidates, we intend to expand our insurance coverage to include the sale of commercial products, but we may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing. On occasion, juries have awarded large judgments in class action lawsuits for claims based on drugs that had unanticipated side effects. In addition, the pharmaceutical and biotechnology industries, in general, have been subject to significant medical malpractice litigation. A successful product liability claim or series of claims brought against us could harm our reputation and business and would decrease our cash reserves.

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We depend on our key personnel and, if we are not able to attract and retain qualified scientific and business personnel, we may not be able to grow our business or develop and commercialize our technology.

We are highly dependent on our scientific advisors, consultants and third-party research partners. Our success will also depend in part on the continued service of our key employees and our ability to identify, hire and retain additional qualified personnel in an intensely competitive market. Additionally, we do not have employment agreements with our key employees. We do not maintain key person life insurance on any member of management. The failure to attract and retain key personnel could limit our growth and hinder our research and development efforts.

Certain provisions of our charter, by-laws, Delaware law and stock plans could make a takeover difficult.

Certain provisions of our certificate of incorporation and by-laws could make it more difficult for a third party to acquire control of us, even if the change in control would be beneficial to stockholders. Our certificate of incorporation authorizes our board of directors to issue, without stockholder approval, 5,000,000 shares of preferred stock with voting, conversion and other rights and preferences that could adversely affect the voting power or other rights of the holders of our common stock.

In addition, we are subject to the Business Combination Act of the Delaware General Corporation Law which, subject to certain exceptions, restricts certain transactions and business combinations between a corporation and a stockholder owning 15% or more of the corporation’s outstanding voting stock for a period of three years from the date such stockholder becomes a 15% owner. These provisions may have the effect of delaying or preventing a change of control of us without action by our stockholders and, therefore, could adversely affect the value of our common stock.

Furthermore, in the event of our merger or consolidation with or into another corporation, or the sale of all or substantially all of our assets in which the successor corporation does not assume our outstanding equity awards or issue equivalent equity awards, our current equity plans require the accelerated vesting of such outstanding equity awards.

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Risks Related to Our Common Stock

Penny stock regulations may impose certain restrictions on marketability of our securities.

The SEC has adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. As a result, our common stock is subject to rules that impose additional sales practice requirements on broker dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by such rules, the broker dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the penny stock market. The broker dealer must also disclose the commission payable to both the broker dealer and the registered representative, current quotations for the securities and, if the broker dealer is the sole market maker, the broker dealer must disclose this fact and the broker dealer’s presumed control over the market.

Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Broker-dealers must wait two business days after providing buyers with disclosure materials regarding a security before effecting a transaction in such security. Consequently, the “penny stock” rules restrict the ability of broker dealers to sell our securities and affect the ability of investors to sell our securities in the secondary market and the price at which such purchasers can sell any such securities, thereby affecting the liquidity of the market for our common stock.

Stockholders should be aware that, according to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:

· control of the market for the security by one or more broker-dealers that are often related to the promoter or issuer;

· manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

· “boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

· excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

· the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

Our management is aware of the abuses that have occurred historically in the penny stock market.

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Our management and other affiliates have significant control of our common stock and could significantly influence our actions in a manner that conflicts with our interests and the interests of other stockholders.

As of March 31, 2017, our executive officers and directors together beneficially own approximately 14% of the outstanding shares of our common stock, assuming the exercise of options and warrants which are currently exercisable or will become exercisable within 60 days of March 31, 2017, held by these stockholders. Additionally, there are three shareholders that each beneficially own more than 5% of the outstanding shares of our common stock. As a result, these stockholders, acting together, will be able to exercise significant influence over matters requiring approval by our stockholders, including the election of directors, and may not always act in the best interests of other stockholders. Such a concentration of ownership may have the effect of delaying or preventing a change in control of us, including transactions in which our stockholders might otherwise receive a premium for their shares over then-current market prices.

A significant portion of our total outstanding shares of common stock may be sold in the market in the near future, which could cause the market price of our common stock to drop significantly.

As of March 31, 2017, we had 26,920,556 shares of our common stock issued and outstanding, 270 shares of Series A convertible preferred stock outstanding which can convert into 1,080,000 shares of common stock and 225,004 shares of Series C convertible preferred stock outstanding which can convert into 4,218,825 shares of common stock. Of the 270 shares of Series A convertible preferred stock outstanding, one holder owning 200 shares has yet to convert after agreeing that such investor would convert. All of our outstanding shares of common stock are registered pursuant to registration statements on Forms S-1 or S-3 or are either eligible to be sold under Rule 144 of the Securities Act of 1933, as amended, or are in the public float.  In addition, we have registered 4,917,670 shares of our common stock underlying options granted or available to be granted under our stock option plans. Consequently, sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, may have a material adverse effect on our stock price.

Our common stock has a limited trading market, which could limit your ability to resell your shares of common stock at or above your purchase price.

Our common stock is currently quoted on the OTCQB Marketplace, operated by the OTC Markets Group, or OTCQB, and our common stock currently has a limited trading market. We cannot assure you that an active trading market will develop or, if developed, will be maintained. As a result, our stockholders may find it difficult to dispose of shares of our common stock and, as a result, may suffer a loss of all or a substantial portion of their investment.

37

The market price of our common stock may fluctuate and may drop below the price you paid.

We cannot assure you that you will be able to resell the shares of our common stock at or above your purchase price. The market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control. These factors include:

· quarterly variations in operating results;

· the progress or perceived progress of our research and development efforts;

· changes in accounting treatments or principles;

· announcements by us or our competitors of new technology, product and service offerings, significant contracts, acquisitions or strategic relationships;

· additions or departures of key personnel;

· future offerings or resales of our common stock or other securities;

· stock market price and volume fluctuations of publicly-traded companies in general and development companies in particular; and

· general political, economic and market conditions.

For example, during the three months ended March 31, 2017, our common stock traded between $0.16 and $0.30 per share.

Because we do not intend to pay, and have not paid, any cash dividends on our shares of common stock, our stockholders will not be able to receive a return on their shares unless the value of our common stock appreciates and they sell their shares.

We have never paid or declared any cash dividends on our common stock, and we intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Therefore, our stockholders will not be able to receive a return on their investment unless the value of our common stock appreciates and they sell their shares.

Our stockholders may experience substantial dilution as a result of the conversion of convertible preferred stock, the exercise of options and warrants to purchase our common stock, or due to anti-dilution provisions relating to any on the foregoing.

As of March 31, 2017, we have outstanding 270 shares of Series A convertible preferred stock which may convert into 1,080,000 shares of common stock, 225,004 shares of Series C convertible preferred stock outstanding which can convert into 4,218,825 shares of common stock and warrants to purchase 5,011,591 shares of our common stock. Of the 270 shares of Series A convertible preferred stock outstanding, one holder owning 200 shares has yet to convert after agreeing that such investor would convert. In addition, as of March 31, 2017, we have reserved 5,938,700 shares of our common stock for issuance upon the exercise of options granted or available to be granted pursuant to our stock option plan, all of which may be granted in the future. Furthermore, in connection with the preferred stock agreements, we are required to reserve an additional 5,298,825 shares of common stock. The conversion of the convertible preferred stock and the exercise of these options and warrants will result in dilution to our existing stockholders and could have a material adverse effect on our stock price. The conversion price of the convertible preferred stock is also subject to certain anti-dilution adjustments.

38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

On May 19, 2017, the Company issued a convertible promissory note (the “May Note”) in the amount of $300,000 to an existing stockholder of the Company. The May Note has customary events of default, an interest rate of 6% per annum, and principal and interest due six months from the date of issuance.

The May Note provides for mandatory conversion: (a) if the Company enters into a transaction or series of transactions for an aggregate sale price of at least One Million Dollars ($1,000,000) of the Company’s capital stock (referred to as the “Qualified Financing”) then the outstanding principal balance and accrued but unpaid interest on the May Note will automatically convert into such capital stock sold in the Qualified Financing at a conversion price equal to the lesser of (i) the price per share paid by investors at the close of the Qualified Financing or (ii) $0.10 (the “Conversion Price”); or (b) upon a sale of all or substantially all of the Company’s assets, whether by sale, acquisition or merger, the outstanding principal balance and accrued but unpaid interest on the May Note will automatically convert at the Conversion Price into shares of Common Stock or such other securities on terms and conditions agreed upon by the Company and the holders of a majority of the outstanding principal amount of the May Note. Additionally, the May Note contain an optional conversion feature which provides that all or any portion of the outstanding principal balance and accrued but unpaid interest on the May Note may be converted at the Conversion Price.

Item 6. Exhibits.

Exhibits.

Exhibit No.	Description
4.1	Form of Convertible Promissory Note, dated as of February 15, 2017, by and among the Company and the Noteholders (Incorporated by reference, Exhibit 4.1 to the Company’s Current Report on Form 8-K, File No. 001-31326, filed on February 22, 2017).
4.2	Form of Amended and Restated Convertible Promissory Note, dated as of February 15, 2017, by and among the Company and the Noteholders, amending and restating the Previous Notes, dated November 10, 2016 (Incorporated by reference, Exhibit 4.2 to the Company’s Current Report on Form 8-K, File No. 001-31326, filed on February 22, 2017).
10.1	Form of Consent and Waiver Agreement, dated as of February 15, 2017, by and among the Company and the Investors listed as signatories thereto (Incorporated by reference, Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 001-31326, filed on February 22, 2017).
10.2	Form of Series A Preferred Stock Exchange Agreement, dated as of February 15, 2017, by and among the Company and the Holders listed as signatories thereto (Incorporated by reference, Exhibit 10.2 to the Company’s Current Report on Form 8-K, File No. 001-31326, filed on February 22, 2017).
10.3	Form of Convertible Promissory Note, dated as of May 19, 2017, by and among the Company and the Noteholder. (filed herewith).
31.1	Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith).
31.2	Certification of principal financial and accounting officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith).
32.1	Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350. (furnished herewith).
32.2	Certification of principal financial and accounting officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350. (furnished herewith).
101.1	Financial Statements from the Quarterly Report on Form 10-Q of Sevion Therapeutics, Inc. for the quarter ended March 31, 2017, filed on May 22, 2017, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Stockholder’s Equity; (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements. (filed herewith).

39

SIGNATURES

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

	SEVION THERAPEUTICS, INC.
DATE:  May 22, 2017	By:	/s/ David Rector
		David Rector
		Chief Executive Officer
		(Principal Executive Officer)
DATE:  May 22, 2017	By:	/s/ James Schmidt
		James Schmidt
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

40

EX-10.3

Exhibit 10.3

NEITHER THIS CONVERTIBLE PROMISSORY NOTE (THE “NOTE”) NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR THE SECURITIES LAWS OF ANY STATE. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER THE ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN APPLICABLE EXEMPTION THEREFROM.

CONVERTIBLE PROMISSORY NOTE

		Issuance Date:
Principal Amount:	$300,000	Maturity Date:	Six months from Issuance Date

For value received, Sevion Therapeutics, Inc., a Delaware corporation (the “Company”) hereby promises to pay the Purchaser (as set forth on the signature page hereto) the Principal Amount (as set forth above), plus any accrued but unpaid Interest (as defined below).

1. Interest; Payments.

1.1           Simple interest on the unpaid Principal Amount shall accrue at the rate of 6% per annum (“Interest”) and will begin to accrue upon the Issuance Date. Interest shall be calculated based on a 365-day year and charged for the actual number of days elapsed.

1.2           All payments of the Principal Amount and Interest shall be in lawful money of the United States of America. All payments shall be applied first to accrued Interest, and thereafter to the Principal Amount. If any payments on this Note become due on a Saturday, Sunday or a federal public holiday, such payment shall be made on the next succeeding business day and such extension of time shall be included in computing Interest in connection with such payment.

2. Conversion.

2.1 Mandatory Conversion.

(a)          Qualified Financing. If, at any time prior to the repayment or conversion of this Note (as provided herein), the Company issues and sells shares of its capital stock to investors (the “Investors”) in a Qualified Financing (as defined herein), then, subject to Section 2.5, the outstanding principal balance of this Note and accrued but unpaid Interest thereon shall convert into the capital stock sold at the first closing of the Qualified Financing at a conversion price equal to the lesser of (i) the price per share (or conversion price) paid by the Investors purchasing such stock at such first closing of the Qualified Financing or (ii) the Conversion Price. For purposes of this Note the term “Qualified Financing” shall mean the sale of the Company’s capital stock, in one transaction or series of related transactions after the date hereof, for an aggregate sales price of at least One Million Dollars ($1,000,000), paid in cash and/or by conversion of indebtedness of the Company, excluding conversion of the Note.

(b)          Change in Control. In the event of a “Change in Control” (as defined below) of the Company prior to the repayment or conversion of this Note (as provided herein), all outstanding principal and unpaid accrued Interest due on this Note shall, subject to Section 2.5, convert into that number of shares (the “Shares”) of common stock, par value $0.01 per share, of the Company (“Common Stock”) as is determined by dividing such outstanding Principal Amount and accrued Interest by $0.10 per share (adjusted to reflect subsequent stock dividends, stock splits, combinations or recapitalizations) (the “Conversion Price”), or such other securities on terms and conditions agreed upon by the Company and the Requisite Purchasers (as defined below). For purposes of this Note, a “Change in Control” shall be deemed to be occasioned by, and to include, (i) a merger or consolidation in which (x) the Company is a constituent party or (y) a subsidiary of the Company is a constituent party and, in each case, the Company issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Company or a subsidiary in which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation, or (ii) a sale of all or substantially all of the assets of the Company. Notwithstanding the above, a financing or reincorporation transaction for purposes of changing the Company’s state of incorporation shall not be deemed a Change in Control transaction.

2.2           Optional Conversion. At any time on or prior to the Maturity Date, all or any portion of the outstanding Principal Amount of and all accrued Interest under this Note may be converted, subject to Section 2.5, at the option of the Purchaser, into that number of Shares as is determined by dividing such outstanding Principal Amount and accrued Interest by the Conversion Price. To convert this Note, the Purchaser shall deliver written notice substantially in the form attached to this Note (the “Conversion Notice”), to the Company at its address as set forth herein. The date upon which the conversion shall be effective (the “Conversion Date”) shall be deemed to be the date set forth in the Conversion Notice.

2.3           Fraction Shares. No fractional shares of the Company’s capital stock will be issued upon conversion of this Note. In lieu of any fractional share to which Purchaser would otherwise be entitled, the Company will pay to Purchaser in cash the amount of the unconverted Principal Amount and Interest balance of this Note that would otherwise be converted into such fractional share.

2.4           Effect of Conversion. Upon conversion of this Note pursuant to this Section 2, Purchaser shall surrender this Note, duly endorsed, at the principal offices of the Company. Upon conversion of this Note pursuant to Section 2.1, this Note will be deemed converted on the date that is immediately prior to the close of business on the date of the surrender of this Note, otherwise, the Note will be deemed converted on the Conversion Date. At its expense, the Company will, as soon as practicable thereafter, issue and deliver to Purchaser, at Purchaser’s address as set forth on the signature page hereto or such other address requested by Purchaser, a certificate or certificates for the number of shares to which Purchaser is entitled upon such conversion (bearing such legends as are required by any agreement entered into in connection with the any such conversion or applicable state and federal securities laws), together with a replacement Note (if any Principal Amount is not converted) and any other securities and property to which Purchaser is entitled upon such conversion under the terms of this Note, including a check payable to Purchaser for any cash amounts payable as a result of any fractional shares as described herein.

2.5           Limitation on Beneficial Ownership. Notwithstanding anything to the contrary contained herein, the Purchaser shall not be entitled to to convert this Note in accordance with this Section 2 to the extent (but only to the extent) that such conversion would cause the Purchaser to become, directly or indirectly, a “beneficial owner” (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) of a number of shares of capital stock of a class that is registered under the Exchange Act which exceeds 4.99% (the “Maximum Percentage”) of the shares of capital stock of such class that are outstanding at such time. This limitation on beneficial ownership (a) may be increased (but only up to 9.99% of the shares of capital stock of such class that are outstanding at such time), decreased or terminated, in the Purchaser’s sole discretion, upon sixty-one (61) days’ notice to the Company by the Purchaser and (b) shall terminate automatically on the date that is fifteen (15) days' prior to the Maturity Date. Any purported delivery of shares of capital stock in connection with this Section 2.5 prior to the termination of this restriction in accordance herewith shall be void and have no effect to the extent (but only to the extent) that such delivery would result in the Purchaser becoming the beneficial owner of more than the Maximum Percentage of shares of capital stock of a class that is registered under the Exchange Act that is outstanding at such time. If any delivery of shares of capital stock owed to the Purchaser following the conversion of this Note is not made, in whole or in part, as a result of this limitation, the Company’s obligation to make such delivery shall not be extinguished and the Company shall deliver such shares of capital stock as promptly as practicable after the Purchaser gives notice to the Company that such delivery would not result in such limitation being triggered or upon termination of the restriction in accordance with the terms hereof. To the extent limitations contained in this Section 2.5 apply, the determination of whether this Note is convertible and of which portion of this Note is convertible shall be the sole responsibility and in the sole determination of the Purchaser and the submission of a Conversion Notice shall be deemed to constitute the Purchaser’s determination that the issuance of the full number of shares requested in the Conversion Notice is permitted hereunder, and the Company shall not have any obligation to verify or confirm the accuracy of such determination. For any reason at any time, upon written or oral request of the Purchaser, the Company shall, within one (1) Trading Day of such request, confirm orally and in writing to the Purchaser the number of shares of capital stock of any class then outstanding, it being understood that the Purchaser may rely on such confirmation from the Company for purposes of the Purchaser’s determination referenced in the preceding sentence. The provisions of this paragraph Section 2.5 shall be construed, corrected and implemented in a manner so as to effectuate the intended beneficial ownership limitation herein contained.

3. Representations and Warranties of the Company.

3.1           Organization and Good Standing. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has the requisite corporate power to own and operate its properties and assets and to carry on its business as now conducted and as proposed to be conducted.

3.2           Corporate Power. The Company has all requisite corporate power to execute, deliver and to carry out and perform its obligations under the terms of this Note.

3.3           Capitalization. The capitalization of the Company is as set forth in its public filings with the U.S. Securities and Exchange Commission from time to time.

4. Representations And Warranties Of The Purchaser.

4.1           Purchase for Own Account. The Purchaser understands that the Note and the Shares (collectively, the “Securities”), have not been registered under the Act on the basis that no distribution or public offering of the stock of the Company is to be effected. The Purchaser realizes that the basis for the exemption may not be present if, notwithstanding its representations, the Purchaser has a present intention of acquiring the Securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the Securities. The Purchaser represents that it is acquiring the Securities solely for its own account and beneficial interest for investment and not for sale or with a view to distribution of the Securities or any part thereof, has no present intention of selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the same, and does not presently have reason to anticipate a change in such intention.

4.2           Information and Sophistication. The Purchaser hereby: (i) acknowledges that it has received all the information it has requested from the Company and it considers necessary or appropriate for deciding whether to acquire the Securities, (ii) represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities and to obtain any additional information necessary to verify the accuracy of the information given the Purchaser and (iii) further represents that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risk of this investment.

4.3           Ability to Bear Economic Risk. The Purchaser acknowledges that investment in the Securities involves a high degree of risk, and represents that it is able, without materially impairing its financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of its investment.

4.4           Rule 144. The Purchaser is aware that none of the Securities may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding specified limitations. Purchaser is aware that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company presently has no plans to satisfy these conditions in the foreseeable future.

4.5           Accredited Investor Status. The Purchaser is an “Accredited Investor” as such term is defined in Rule 501 under the Act.

4.6           Further Limitations on Disposition. Without in any way limiting the representations set forth above, the Purchaser further agrees not to make any disposition of all or any portion of the Securities unless and until:

(a)          There is then in effect a Registration Statement under the Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement; or

(b)          The Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, such Purchaser shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration under the Act or any applicable state securities laws.

(c)          Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by the Purchaser to (i) any shareholder, partner, retired partner, member or former member of the Purchaser for no additional consideration, (ii) any affiliate, including affiliated funds, for no additional consideration or (iii) transfers by gift, will or intestate succession to any spouse or lineal descendants or ancestors, if all transferees agree in writing to be subject to the terms hereof to the same extent as if they were Purchasers hereunder.

4.7           No “Bad Actor”. No “bad actor” disqualifying event described in Rule 506(d)(1) of the Act (a “Disqualification Event”) is applicable to the Purchaser.

5. Default; Remedies.

5.1           Each of the following shall constitute an event of default (each, an “Event of Default”) under this Note:

(a)          The Company shall fail to pay (i) when due any Principal Amount or Interest payment on the due date hereunder or (ii) any other payment required under the terms of this Note on the date due and such payment shall not have been made within five days of the Company’s receipt of the Purchaser’s written notice to the Company of such failure to pay;

(b)          The Company shall fail to observe or perform any other covenant, obligation, condition or agreement contained this Note and (i) such failure shall continue for 15 days, or (ii) if such failure is not curable within such 15-day period, but is reasonably capable of cure within 30 days, either (A) such failure shall continue for 30 days or (B) the Company shall not have commenced a cure in a manner reasonably satisfactory to Purchaser within the initial 15-day period;

(c)          The Company files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any general assignment for the benefit of creditors or takes any corporate action in furtherance of any of the foregoing;

(d)          An involuntary petition is filed against the Company (unless such petition is dismissed or discharged within thirty (30) days) under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of the Company;

(e)           The disposition or encumbrance of the Company’s assets, including, but not limited to, the grant of a license with regard to the Company’s intellectual property; or

(f)          The Company’s stockholders or board of directors affirmatively vote to liquidate, dissolve, or wind up the Company or the Company otherwise ceases to carry on its ongoing business operations.

5.2           Upon the occurrence and during the continuance of any Event of Default, all unpaid Principal Amount on this Note, accrued and unpaid Interest thereon and all other amounts owing hereunder shall, at the option of the Purchaser, and, upon the occurrence of any Event of Default pursuant to Sections 5.1 (c), (d), (e) or (f) of this Note, automatically, be immediately due, payable and collectible by Purchaser pursuant to applicable law. Purchaser shall have all rights and may exercise all remedies available to it under law, successively or concurrently.

6.          Ranking; Covenants. The Note shall be unsecured and rank on parity with all unsecured indebtedness of the Company existing as of the Issuance Date. At all times while this Note remains outstanding, the Company shall not incur any indebtedness for borrowed money which is either (a) not subordinated to this Note or (b) secured by the assets of the Company.

7.          Prepayment. The Company may prepay the outstanding Principal Amount and any accrued by unpaid Interest under this Note prior to the Maturity Date and prior to a conversion set forth in Section 2 of this Note without the consent of the Purchaser.

8.          Waiver; Payment Of Fees And Expenses. The Company waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note, and shall pay all costs of collection when incurred, including, without limitation, reasonable attorneys’ fees, costs and other expenses. The right to plead any and all statutes of limitations as a defense to any demands hereunder is hereby waived to the full extent permitted by law. No delay by Purchaser shall constitute a waiver, election or acquiescence by it.

9.          Transaction Fees and Expenses. The Company and the Purchaser shall pay their own costs and expenses in connection with the preparation, execution and delivery of this Note and the other transaction documents.

10.         Cumulative Remedies. Purchaser’s rights and remedies under this Note shall be cumulative. Purchaser shall have all other rights and remedies not inconsistent herewith as provided under the UCC, by law or in equity. No exercise by Purchaser of one right or remedy shall be deemed an election, and no waiver by Purchaser of any Event of Default shall be deemed a continuing waiver of such Event of Default or the waiver of any other Event of Default.

11. Miscellaneous.

11.1         Governing Law. The terms of this Note shall be construed in accordance with the laws of the State of Delaware, as applied to contracts entered into by Delaware residents within the State of Delaware, and to be performed entirely within the State of Delaware.

11.2         Successors and Assigns; Assignment. The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Neither party may assign this Note or delegate any of its rights or obligations hereunder without the written consent of the other party.

11.3         Titles and Subtitles. The titles and subtitles used in this Note are used for convenience only and are not to be considered in construing or interpreting the Note.

11.4         Notices. All notices or other communications required or permitted hereunder shall be in writing and faxed, e-mailed, mailed or delivered to each party at the respective addresses of the parties as set forth in this Section 11.4. All such notices and communications will be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one business day after being delivered by facsimile or electronic mail (with receipt of appropriate confirmation), (iv) one business day after being deposited with an overnight courier service of recognized standing or (v) four days after being sent by registered or certified mail, return receipt requested. All communications shall be sent to the Purchaser at the address, facsimile number, or e-mail address set forth on the signature page hereto, or if to the Company, to it at 10210 Campus Point Drive, Suite 150, San Diego, California 92121, Attn: David Rector (or to such other address or e-mail address as the Purchaser or the Company by notice to the other party) with a copy (which shall not constitute notice) to Morgan, Lewis & Bockius LLP, 502 Carnegie Center, Princeton, NJ 08540, Attn: Emilio Ragosa, Esq.

11.5         Amendment; Modification; Waiver. This Note may be amended, modified or waived with the written consent of the Company and the Purchaser. Notwithstanding the foregoing, no amendment or waiver of any provision of this Note shall be binding on the Company (unless consented to in writing by the Company) if such amendment or waiver would increase the financial obligations of the Company under this Note.

11.6         Usury. In the event any Interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the Interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of the Principal Amount and applied against the Principal Amount of this Note.

11.7         Counterparts. This Note may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[SIGNATURE PAGE TO FOLLOW]

IN WITNESS WHEREOF, the parties hereto have executed this Convertible Promissory Note as of the day and year first written above.

PURCHASER	SEVION THERAPEUTICS, INC.
Signature	Signature
	David Rector
Printed Name	Printed Name
	Chief Executive Officer
Address Line 1	Title
Address line 2

NOTICE OF CONVERSION

(To be executed by the Purchaser in order to convert the Note)

The undersigned hereby irrevocably elects to convert as identified below the Convertible Promissory Note issued by Sevion Therapeutics, Inc. (the “Company”) into shares of Common Stock of the Company according to the conditions of conversion stated therein, as of the Conversion Date written below:

Select One:

¨ All of the Principal and Interest accrued through the date of the conversion

¨ $ ___________________ of principal and accrued interest

Conversion Date: ____________________

PURCHASER

Signature

SHARES TO BE REGISTERED AND DELIVERED AS FOLLOWS:

Printed Name

Address Line 1

Address line 2

Address line 3

Phone number

Email address

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, David Rector, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Sevion Therapeutics, Inc.;

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 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 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.

Date: May 22, 2017	/s/ David Rector
	David Rector
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, James Schmidt, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Sevion Therapeutics, Inc.;

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 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 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.

Date: May 22, 2017	/s/ James Schmidt
	James Schmidt
	Chief Financial
	(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Sevion Therapeutics, Inc. for the period ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof, the undersigned, David Rector, President and Chief Executive Officer, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1)         The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)         The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of Sevion Therapeutics, Inc.

Dated: May 22, 2017	/s/ David Rector  *
	David Rector
	Chief Executive Officer
	(Principal Executive Officer)

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

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Sevion Therapeutics, Inc. for the period ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof, the undersigned, James Schmidt, Chief Financial Officer, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1)         The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)         The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of Sevion Therapeutics, Inc.

Dated: May 22, 2017	/s/ James Schmidt    *
	James Schmidt
	Chief Financial Officer (Principal Financial and Accounting Officer)

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

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Document And Entity Information - shares	9 Months Ended
	Mar. 31, 2017	Apr. 28, 2017
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Entity Registrant Name	Sevion Therapeutics, Inc.
Entity Central Index Key	0001035354
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Trading Symbol	SVON
Entity Common Stock, Shares Outstanding		26,920,556

XML

CONSOLIDATED BALANCE SHEETS - USD ($)	Mar. 31, 2017	Jun. 30, 2016
CURRENT ASSETS:
Cash	$ 241,950	$ 810,808
Prepaid expenses and other current assets	30,309	171,820
Total Current Assets	272,259	982,628
Equipment, furniture and fixtures, net	60,146	92,554
Acquired research and development	5,500,000	8,100,000
Security deposits	9,800	50,770
TOTAL ASSETS	5,842,205	9,225,952
CURRENT LIABILITIES:
Accounts payable	109,146	90,305
Accrued expenses	157,993	256,376
Notes payable	256,819	0
Derivative liability	533,516	0
Other current liabilities	0	22,310
Total Current Liabilities	1,057,474	368,991
Warrant and stock right liabilities	0	956,575
Deferred tax liability	2,200,000	3,240,000
Other liabilities	0	99,728
TOTAL LIABILITIES	3,257,474	4,665,294
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value, authorized 500,000,000 shares, issued and outstanding 26,920,556 and 20,496,385 at March 31, 2017 and June 30, 2016, respectively	269,206	204,964
Capital in excess of par	121,767,033	119,983,399
Accumulated deficit	(119,453,761)	(115,630,059)
Total Stockholders' Equity	2,584,731	4,560,658
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	5,842,205	9,225,952
Series A Convertible Preferred stock
STOCKHOLDERS' EQUITY:
Convertible preferred stock	3	4
Series C Convertible Preferred stock
STOCKHOLDERS' EQUITY:
Convertible preferred stock	$ 2,250	$ 2,350

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Mar. 31, 2017	Jun. 30, 2016
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	500,000,000	500,000,000
Common stock, issued	26,920,556	20,496,385
Common stock, outstanding	26,920,556	20,496,385
Series A Convertible Preferred Stock
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, authorized	1,228,500	1,228,500
Preferred stock, shares issued	10,297	10,297
Preferred stock, shares outstanding	270	270
Preferred stock, liquidation preference	$ 271,166	$ 389,500
Series C Convertible Preferred stock
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, authorized	1,228,500	1,228,500
Preferred stock, shares issued	235,837	235,837
Preferred stock, shares outstanding	225,004	235,004
Preferred stock, liquidation preference	$ 2,250	$ 2,350

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Licensing Revenue	$ 0	$ 0	$ 0	$ 75,000
Operating expenses:
General and administrative	215,146	331,611	995,275	1,319,986
Research and development	126,743	576,443	614,359	1,772,530
Impairment of goodwill	0	2,980,951	0	5,780,951
Impairment of acquired R&D	0	1,000,000	2,600,000	1,000,000
Gain on Sale of patents	0	0	(149,728)	0
Total operating expenses	341,889	4,889,005	4,059,906	9,873,467
Loss from operations	(341,889)	(4,889,005)	(4,059,906)	(9,798,467)
Other non-operating income (expense)
Change in fair value of stock right	0	742,253	651,484	315,862
Change in fair value of warrant liability	0	667,639	305,091	1,967,700
Change in fair value of note derivative liability	55,550	0	55,550	0
Stock issuance for anti-dilution right	(1,417,922)	0	(1,417,922)	0
Modification of warrant exercise price	(307,774)	0	(307,774)	0
Interest income (expense) - net	(53,997)	0	(55,962)	(371)
Net loss before income tax benefit	(2,066,032)	(3,479,113)	(4,829,439)	(7,515,276)
Income tax benefit	0	400,000	1,040,000	400,000
Net loss	(2,066,032)	(3,079,113)	(3,789,439)	(7,115,276)
Preferred dividends	(8,979)	(9,501)	(34,263)	(171,984)
Loss applicable to common shares	(2,075,011)	(3,088,614)	(3,823,702)	(7,287,260)
Other comprehensive loss	0	0	0	0
Comprehensive loss	$ (2,075,011)	$ (3,088,614)	$ (3,823,702)	$ (7,287,260)
Basic and diluted net loss per common share	$ (0.09)	$ (0.15)	$ (0.18)	$ (0.36)
Basic and diluted weighted-average number of common shares outstanding	23,521,726	20,420,608	21,644,282	20,282,054

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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - 9 months ended Mar. 31, 2017 - USD ($)	Total	Preferred stock	Common Stock	Capital in Excess of Par Value	Accumulated Deficit
Beginning Balance at Jun. 30, 2016	$ 4,560,658	$ 2,354	$ 204,964	$ 119,983,399	$ (115,630,059)
Beginning Balance (in shares) at Jun. 30, 2016		235,384	20,496,385
Stock issued for anti-dilution right	1,417,922	$ 0	$ 56,717	1,361,205	0
Stock issued for anti-dilution right (in shares)			5,671,689
Warrant modification	307,774	0	$ 0	307,774	0
Stock-based compensation	79,482	$ 0	$ 0	79,482	0
Stock-based compensation (in shares)		0	0
Preferred stock converted into common stock	0	$ (101)	$ 5,400	(5,299)	0
Preferred stock converted into common stock (in shares)		(10,110)	540,000
Dividends paid	9,501		$ 2,125	40,472	(33,096)
Dividends paid (in shares)			212,482
Dividends accrued and unpaid at March 31, 2017	(1,167)	$ 0	$ 0	0	(1,167)
Net loss	(3,789,439)	0	0	0	(3,789,439)
Ending Balance at Mar. 31, 2017	$ 2,584,731	$ 2,253	$ 269,206	$ 121,767,033	$ (119,453,761)
Ending Balance (in shares) at Mar. 31, 2017		225,274	26,920,556

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net loss	$ (3,789,439)	$ (7,115,276)
Noncash income related to change in fair value
- stock right	(651,484)	(315,862)
- warrant liability	(305,091)	(1,967,700)
- derivative liability	(55,550)	0
Noncash charge for modification of warrant terms	307,774	0
Noncash charge for common stock anti-dilution issuance	1,417,922	0
Noncash charge for accretion of debt discount	45,885	0
Gain on sale of patents	(149,728)	0
Stock-based compensation expense	79,482	95,008
Depreciation and amortization	34,908	80,588
Impairment of goodwill	0	5,780,951
Impairment of acquired R&D	2,600,000	1,000,000
Deferred tax liability reduction for impairment of acquired R&D	(1,040,000)	(400,000)
Deferred rent	(22,310)	(46,572)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	141,511	317,009
Security deposit	40,970	0
Accounts payable	18,841	(175,430)
Accrued expenses	(90,049)	(139,145)
Deferred revenue	0	(75,000)
Net cash used in operating activities	(1,416,358)	(2,961,429)
Cash flows from investing activities:
Proceeds from sale of patents	50,000	0
Purchase of equipment, furniture and fixtures	(2,500)	0
Net cash provided by investing activities	47,500	0
Cash flows from financing activities:
Proceeds from issuance of bridge notes	800,000	0
Proceeds from issuance of common stock and warrants, net and exercise of warrants and options	0	1,152,397
Net cash provided by financing activities	800,000	1,152,397
Net (decrease) in cash	(568,858)	(1,809,032)
Cash at beginning of period	810,808	3,334,626
Cash at end of period	241,950	1,525,594
Supplemental disclosure of non-cash transactions:
Conversion of preferred stock into common stock	5,299	6,075
Allocation of equity proceeds to warrants	0	559,261
Allocation of equity proceeds to stock rights	0	142,854
Allocation of preferred stock proceeds to beneficial conversion feature	0	135,701
Allocation of convertible note proceeds to derivative liability	589,066	0
Issuance of common stock for dividend payments on preferred stock	42,597	23,615
Dividends accrued on preferred stock	$ (1,167)	$ (19,003)

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Basis of Presentation

9 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Note 1 - Basis of Presentation:

The financial statements included herein have been prepared by Sevion Therapeutics, Inc. (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 as subsequently amended.

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting solely of those which are of a normal recurring nature, necessary to present fairly its financial position as of March 31, 2017 and the results of its operations for the three months and nine months ended March 31, 2017 and cash flows for the nine months ended March 31, 2017.

Interim results are not necessarily indicative of results for the full fiscal year.

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Liquidity

9 Months Ended

Mar. 31, 2017

Liquidity [Abstract]

Liquidity

Note 2 – Liquidity:

As shown in the accompanying condensed consolidated financial statements, the Company has a history of losses with an accumulated deficit of $119,453,761 and has generated minimal revenues by licensing its technology to companies willing to share in its development costs. In addition, the Company’s technology may not be ready for commercialization for several years. The Company expects to continue to incur losses for the next several years because it anticipates that its expenditures on research and development and administrative activities will significantly exceed its revenues during that period. The Company cannot predict when, if ever, it will become profitable.

Given the Company’s limited capital resources, management recommended to the Company’s Board of Directors that certain executive level salaries be reduced by upwards of 80%, staff reductions be effected and that there be a temporary reduction of research and development expenditures to support the Company’s goal of cutting expenses and preserving cash on hand. The Company’s Board of Directors approved this recommendation and the reductions went into effect on March 23, 2016.

As of March 31, 2017, the Company had cash in the amount of $241,950. The Company estimates that its cash as of March 31, 2017 and the $300,000 proceeds to be received from the issuance of convertible promissory notes on May 19, 2017 to an existing stockholder of the Company, will cover its expenses through June 30, 2017.

The Company will need additional capital to operate and expand its research program and plans to raise additional capital possibly through the placement of debt instruments, equity instruments or any combination thereof. However, the Company may not be able to obtain adequate funds for its operations when needed or on acceptable terms. If the Company is unable to raise additional funds, it will need to do one or more of the following:

• license third parties to develop and commercialize products or technologies that it would otherwise seek to develop and commercialize itself;

• seek strategic alliances or business combinations;

• attempt to sell the Company;

• cease operations; or

• declare bankruptcy.

These conditions raise substantial doubt about our ability to continue as a going concern. Consequently, the audit reports prepared by our independent registered public accounting firm relating to our consolidated financial statements for the years ended June 30, 2016, 2015 and 2014 include an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. These interim consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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Intangibles

9 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Intangibles

Note 3 – Intangibles:

The Company assesses the impairment in value of intangible assets whenever events or circumstances indicate that their carrying value may not be recoverable. Factors the Company considers important which could trigger an impairment review include the following:

• significant negative industry trends;

• significant underutilization of the assets;

• significant changes in how the Company uses the assets or its plans for their use; and

• changes in technology and the appearance of competing technology.

If a triggering event occurs and if the Company's review determines that the future undiscounted cash flows related to the groups, including these assets, will not be sufficient to recover their carrying value, the Company will reduce the carrying values of these assets down to the Company’s estimate of fair value.

The Company determined enterprise value to be the most reasonable measurement of Intangibles for purposes of the analysis. The Company concluded that there was no impairment based on the Company’s market value for the three months ended March 31, 2017. Cumulative impairment recorded for the nine months ended March 31, 2017 was $2,600,000.

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Loss Per Share

9 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Loss Per Share

Note 4 - Loss Per Share:

Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of the Company’s Common Stock assumed to be outstanding during the period of computation. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional shares of Common Stock that would have been outstanding if the potential shares of Common Stock had been issued and if the additional shares of Common Stock were dilutive.

For all periods presented, basic and diluted loss per share are the same, as any additional Common Stock equivalents would be anti-dilutive. Potentially dilutive shares of Common Stock have been excluded from the calculation of the weighted average number of dilutive shares of Common Stock as follows:

	March 31,
	2017		2016
Common Stock to be issued upon conversion of convertible preferred stock - Series A		1,080,000		506,666
Common Stock to be issued upon conversion of convertible preferred stock - Series C		4,218,825		2,350,040
Outstanding warrants		5,011,591		8,698,580
Outstanding options		2,319,621		1,646,563
Total potentially dilutive shares of Common Stock		12,630,037		13,201,849

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Stock-Based Compensation

9 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Note 5 – Stock-Based Compensation:

The terms and vesting schedules for share-based awards vary by type of grant and the employment status of the grantee. Generally, the awards vest based upon time-based conditions or achievement of specified goals and milestones.

Stock option activity under the Company’s 2008 Plan and 1998 Plan for the nine months ended March 31, 2017 is summarized as follows:

			Weighted
	Aggregate		Average		Exercise Price
	Number		Exercise Price		Range
Outstanding, June 30, 2016		1,917,238	$	3.29		$  0.22 - $  108.00
Granted		436,363	$	0.22		$0.22
Exercised		-	$	-		-
Cancelled		28,140	$	0.83		$0.83
Expired		5,840	$	62.93		$22.00 - $ 108.00
Outstanding, March 31, 2017		2,319,621	$	2.59		$ 0.22 - $ 99.00
Options exercisable at March 31, 2017		2,291,436	$	2.62

As of March 31, 2017, the aggregate intrinsic value of stock options outstanding was $0 with a weighted-average remaining term of 6.60 years. As of March 31, 2017, the Company has 5,119,079 shares available for future stock option grants.

Stock-based compensation expense for the three months ended March 31, 2017 and March 31, 2016 amounted to $74,333 and $6,175, respectively. Stock-based compensation expense for the nine months ended March 31, 2017 and March 31, 2016 amounted to $79,482 and $95,008, respectively.

As of March 31, 2017, total stock-based compensation expense not yet recognized related to stock option grants amounted to approximately $16,276 which will be recognized over the next 20 months.

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Notes Payable

9 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Notes Payable

Note 6 – Notes Payable:

On February 15, 2017, the Company issued convertible promissory notes (the “Notes”) in the aggregate amount of $500,000 to OPKO Health, Inc. and an existing stockholder of the Company (the “Noteholders”). The Notes have customary events of default, an interest rate of 6% per annum, and principal and interest due six months from the date of issuance (the “Maturity Date”).

The Notes provide for mandatory conversion: (a) if the Company enters into a transaction or series of transactions for an aggregate sale price of at least One Million Dollars ($1,000,000) of the Company’s capital stock (referred to as the “Qualified Financing”) then the outstanding principal balance and accrued but unpaid interest on the Notes will automatically convert into such capital stock sold in the Qualified Financing at a conversion price equal to the lesser of (i) the price per share paid by investors at the close of the Qualified Financing or (ii) $0.10 (the “Conversion Price”); or (b) upon a sale of all or substantially all of the Company’s assets, whether by sale, acquisition or merger, the outstanding principal balance and accrued but unpaid interest on the Notes will automatically convert at the Conversion Price into shares of Common Stock or such other securities on terms and conditions agreed upon by the Company and the holders of a majority of the outstanding principal amount of the Notes. Additionally, the Notes contain an optional conversion feature which provides that all or any portion of the outstanding principal balance and accrued but unpaid interest on the Notes may be converted at the Conversion Price.

In connection with the issuance of the Notes, the Company also amended and restated promissory notes issued to the Noteholders in November 2016 (the “Previous Notes”) in order to make the Previous Notes convertible upon the same terms as the Notes. As previously publicly disclosed, the Previous Notes had customary events of default, an interest rate of 5% per annum, and principal and interest due twelve months from their issuance. The Previous Notes, as amended and restated (the “Amended Notes”), bear interest at a rate of 6% per annum, with principal and interest due twelve months from their original issuance date.

The Company reviewed applicable guidance in Accounting Standards Codification (“ASC”) 470, Debt, and concluded that the amendment of the Previous Notes met the definition of trouble debt restructuring, because the Company was experiencing financial difficulty, and the debt holders granted a concession to the Company. Total undiscounted cash flows of the Amended Notes was greater than the carrying amount of the Previous Notes on the date of the amendment. Consequently, under the guidance of ASC 470, no gain or loss was recognized on the date of the amendment. The carrying amount of the Previous Notes on the date of the amendment is accreted to the maturity value under the Amended Notes using the effective interest method over the remaining term of the Amended Notes.

The Company evaluated the conversion options in the Notes and Amended Notes summarized above under the authoritative guidance in ASC 815 for Derivatives and Hedging, and concluded that the conversion options meet the definition of a derivative, and require bifurcation and separate accounting from the Notes (see Note 9). The fair value of the conversion options was recognized as a short term liability in the balance sheet, with any changes in fair value recorded in the statement of operations at each reporting period. The conversion option derivative created a debt discount of $589,066 to be amortized over the next 8 months.

Notwithstanding the above, the Notes and the Amended Notes contain a blocker feature which does not allow for conversion if it would cause such purchaser’s beneficial ownership of the shares of capital stock of any class of the Company outstanding at the time of conversion to exceed 4.99%, except that the Company may increase this beneficial ownership limitation to 9.99% in such purchaser’s sole discretion upon sixty-one (61) days’ notice. This limitation automatically terminates on the date that is fifteen (15) days prior to the Maturity Date.

The Notes and the Amended Notes were issued pursuant to the exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

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Income Taxes

9 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Note 7 – Income Taxes:

The deferred tax liability in the amount of $3,240,000 remained in connection with the related Acquired Research and Development from the Company’s acquisition of Fabrus, Inc. in May 2014. Due to the impairment adjustment for the Acquired Research and Development costs, a tax benefit of $1,040,000 has been recognized for the nine month period ended March 31, 2017. Accordingly, the deferred tax liability has been reduced by $1,040,000 for the nine month period ended March 31, 2017, leaving a balance of $2,200,000 as of March 31, 2017.

No current provision for income taxes has been made for the nine months ended March 31, 2017 and 2016 given the Company’s losses in 2016 and 2015 and available net operating loss carryforwards. A benefit has not been recorded as the realization of the net operating losses is not assured and the timing in which the Company can utilize its net operating loss carryforwards in any year or in total may be limited by provisions of the Internal Revenue Code regarding changes in ownership of corporations.

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Fair Value Measurements

9 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 8 - Fair Value Measurements:

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2017 and June 30, 2016:

	Carrying		Fair Value Measurement at March 31, 2017
	Value		Level 1		Level 2		Level 3
Assets:
Cash	$	241,950	$	241,950	$	-	$	-
Derivative Liability	$	533,516	$	-	$	-	$	533,516

	Carrying		Fair Value Measurement at June 30, 2016
	Value		Level 1		Level 2		Level 3
Assets:
Cash	$	810,808	$	810,808	$	-	$	-
Warrant Liabilities	$	956,575	$	-	$	-	$	956,575

The following table summarizes the changes in fair value of the Company’s Level 3 financial investments:

For the Nine months ended March 31, 2017
Beginning Balance	$	956,575
Allocation of convertible note proceeds to derivative liability		589,066
Change in fair value of derivative liability		(55,550)
Change in fair value of warrant liabilities, net		(305,091)
Change in fair value of stock right, net		(651,484)
Ending Balance	$	533,516

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Warrant and Derivative Liabilities

9 Months Ended

Mar. 31, 2017

Warrant Liabilities [Abstract]

Warrant and Derivative Liabilities

Note 9 – Warrant and Derivative Liabilities:

The warrant liabilities represent the fair value of Common Stock purchase warrants which have exercise price reset features estimated using a Monte Carlo valuation model. For the quarter ended December 31, 2016, it was determined that the exercise price reset provisions of the warrants and stock rights would expire prior to any equity financing. The Company recognized $956,575 as income and adjusted the warrant and stock rights liability to $0 as of December 31, 2016.

In connection with the issuance of the Notes (see Note 6), the Company amended the exercise price of the warrants downward to $0.40 a share. In addition, the warrant agreement was amended so that the price reset features would no longer be in force during the remaining term of the warrants. The Company reviewed the terms of the warrant agreement and guidance in the authoritative literature, and concluded that the warrants are classified in equity.

The Company recognized a one-time charge for the warrant price modification of $307,774 based upon the change in value of the warrants immediately prior to and subsequent to the exercise price adjustment. The Company used a modified Black Scholes fair value method to compute this value of the warrants based upon the exercise price of $0.75 and $1.50 for the warrants before and $0.40 exercise price after the modification. The stock price was $0.25, expected life ranged from 0.71 to 0.95 of a year, volatility ranged from 171% to 178% and the discount rate ranged from 0.77% to 0.86% for the before and after calculation.

Derivative liability recognized for the conversion option derivative (see Note 6) is a recurring fair value measurement that was established in February 2017, and marked to market at each reporting period, with any gain or loss recognized in the statement of operations. The Company estimated the fair value of the derivative financial instrument using a probability weighted Black Scholes pricing model, which uses inputs that are considered level 3 liabilities under authoritative guidance. Estimating the fair value of the derivative liability requires the use of significant and subjective inputs that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are volatile and sensitive to changes in the Company’s trading market price and other key assumptions. From February 2017 to March 2017, the Company recorded a gain of $55,550 due to a decrease in the fair value of the derivative liability, which was included as a non-operating income in the statement of operations for the three months ended March 31 2017. The assumptions used to value the derivative at the origination date and at March 31, 2017 are as follows:

	February 15, 2017	March 31, 2017
Stock Price	$0.15 - $0.25	$0.15 - $0.18
Estimated life in years	0.17 to 0.75	0.17 to 0.63
Risk-free interest rate(1)	0.54% - 0.77%	0.76% - 0.94%
Volatility	173.5% - 214.5%	160.0% - 178.0%
Dividend paid	0.00%	0.00%

⁽¹⁾ Represents the interest rate on a U.S. Treasury security with a maturity date corresponding to that of the term.

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Common Stock Issuance

9 Months Ended

Mar. 31, 2017

Stockholders' Equity Note [Abstract]

Common Stock Issuance

Note 10 – Common Stock Issuance

On February 15, 2017, in connection with the Notes (see Note 6) and Series A Exchange Agreement (see Note 11), the Company executed a consent and waiver agreement, by and among the Company and certain investors (the “Consent and Waiver Agreement”), which extended certain anti-dilution and exercise price adjustment rights to the investors and placement agent that participated in the Company’s 2015 financing (the “Price Protection Provisions”) and set a floor at $0.40 per share. The Price Protection Provisions were triggered by the issuance of the Notes (Note 6).

The Company issued 5,671,689 shares of common stock as per the Price Protection Provisions of the Consent and Waiver Agreement. Based upon the market value of the stock on the date of issuance, the Company recognized a charge of $1,417,922 for the stock rights granted under the Price Protection Provisions, which was included as a non-operating expense in the statement of operations for the three months ended March 31, 2017. In connection with the issuance of common stock as described above, the Price Protection Provisions were extinguished and will not apply to any future financings.

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Series A Preferred Stock

9 Months Ended

Mar. 31, 2017

Series A Preferred Stock [Member]

Preferred Stock

Note 11 – Series A Preferred Stock:

On February 15, 2017, in connection with the issuance of the Notes (see Note 6), certain of the holders of the Company’s outstanding Series A Preferred Stock exchanged 110 shares of Series A Preferred Stock for 440,000 shares of Common Stock, at an exchange price of $0.25 per share, pursuant to a preferred stock exchange agreement, by and among the Company and the holders of its Series A Preferred Stock (the “Exchange Agreement”). Since February 2017, one holder owning 200 shares of Series A Preferred Stock has yet to convert after agreeing that such investor would convert.

The shares of Common Stock issued pursuant to the Exchange Agreement were issued solely to former holders of Series A Preferred Stock, upon exchange pursuant to the exemption from registration provided under Section 3(a)(9) of the Securities Act. This exemption is available to the Company because the shares of Common Stock were exchanged by the Company with its existing security holders with no commission or other remunerations being paid or given for soliciting such an exchange.

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Series C Preferred Stock

9 Months Ended

Mar. 31, 2017

Series C Preferred Stock [Member]

Preferred Stock

Note 12 – Series C Preferred Stock:

During the nine months ended March 31, 2017, 10,000 shares of Series C Preferred Stock were converted into 100,000 shares of Common Stock. Each share of Series C Preferred Stock converted into 10 shares of Common Stock.

In connection with the Consent and Waiver Agreement (see Note 10), the conversion rate for the Series C Preferred Stock was set at $0.40 per share. Prior to the Consent and Waiver Agreement, the conversion rate was $0.75 per share. Such reduction of conversion price did not have an impact on the consolidated financial statements for the three months ended March 31 2017.  

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Gain on Sale of Patents

9 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Gain on Sale of Patents

Note 13 – Gain on Sale of Patents:

On September 8, 2015, the Company entered into an agreement to sell certain Intellectual Property consisting of patents, patent applications and license agreements related to those patents and patent applications. The Company is not actively developing any program related to the Intellectual Property included in the agreement. On July 19, 2016, the transaction closed and the Company received $50,000 cash up front and a 19.9% equity interest in the acquiring company. In addition, the reserve established by the Company in the amount of $99,728 for a potential grant liability was reversed as this was assumed by the acquiring company.

The stock received has been recorded under the cost method of accounting. It was determined that the fair value of the Intellectual Property sold and the equity received were $0. Therefore, there is no asset reflected in the consolidated balance sheet as of March 31, 2017. A gain of $149,728 was recognized as other income due to the cash received and the liability relieved exceeding the fair value of the Intellectual Property sold.

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Recent Accounting Pronouncements

9 Months Ended

Mar. 31, 2017

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

Note 14 – Recent Accounting Pronouncements:

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

In May 2014, the FASB issued ASU No. 2014- 09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 requires that a company recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which the company expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In July 2015, the FASB approved a proposal to defer the effective date of the guidance until annual and interim reporting periods beginning after December 15, 2017, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company does not anticipate that the adoption of this standard will have a material impact on the Company’s financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern,” (“ASU 2014-15”). ASU 2014-15 amended existing guidance related to the disclosures about an entity’s ability to continue as a going concern. These amendments are intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. These amendments provide guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations in the financial statement footnotes. The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. The Company does not anticipate that the adoption of this standard will have a material impact on the Company’s financial statements.

In November 2014, the FASB issued ASU No. 2014-16, “Derivatives and Hedging (Topic 815), Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity,” (“ASU 2014-16”). All entities are required to use what is called the “whole instrument approach” to determine the nature of a host contract in a hybrid financial instrument issued in the form of a share. The guidance requires issuers and investors to consider all of a hybrid instrument’s stated and implied substantive terms and features, including any embedded derivative features being evaluated for bifurcation. The guidance eliminates the “chameleon approach,” under which all embedded features except the feature being analyzed are considered. The guidance is effective for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. The Company is implementing this update and based upon its initial evaluation, does not anticipate the full adoption of this standard will have a material impact on the Company’s financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which supersedes FASB ASC 840. All entities will be required to record operating leases on the balance sheet as assets and liabilities instead of recording only capital (finance) leases on the balance sheet. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2017. The Company does not anticipate that the adoption of this standard will have a material impact on the Company’s financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation: Improvements to Employee Share Based Payment Accounting,” which is intended to simplify several aspects of accounting for share based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early application is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on the Company’s financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which addresses the presentation and classification of certain cash receipts and cash payments in the statement of cash flows under Accounting Standards Codification 230. The standard is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. Early application is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on the Company’s financial statements.

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Subsequent Events

9 Months Ended

Mar. 31, 2017

Subsequent Events [Abstract]

Subsequent Events

Note 15 – Subsequent Events

On May 19, 2017, the Company approved a convertible promissory note (the “May Note”) in the aggregate amount of $300,000 to an existing stockholder of the Company. The May Note has customary events of default, an interest rate of 6% per annum, and principal and interest due six months from the date of issuance.

The May Note provides for mandatory conversion: (a) if the Company enters into a transaction or series of transactions for an aggregate sale price of at least One Million Dollars ($1,000,000) of the Company’s capital stock (referred to as the “Qualified Financing”) then the outstanding principal balance and accrued but unpaid interest on the May Note will automatically convert into such capital stock sold in the Qualified Financing at a conversion price equal to the lesser of (i) the price per share paid by investors at the close of the Qualified Financing or (ii) $0.10 (the “Conversion Price”); or (b) upon a sale of all or substantially all of the Company’s assets, whether by sale, acquisition or merger, the outstanding principal balance and accrued but unpaid interest on the May Note will automatically convert at the Conversion Price into shares of Common Stock or such other securities on terms and conditions agreed upon by the Company and the holder of the outstanding principal amount of the May Note. Additionally, the May Note contains an optional conversion feature which provides that all or any portion of the outstanding principal balance and accrued but unpaid interest on the May Note may be converted at the Conversion Price.

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Loss Per Share (Tables)

9 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Weighted Average of Dilutive Shares of Common Stock

Potentially dilutive shares of Common Stock have been excluded from the calculation of the weighted average number of dilutive shares of Common Stock as follows:

	March 31,
	2017		2016
Common Stock to be issued upon conversion of convertible preferred stock - Series A		1,080,000		506,666
Common Stock to be issued upon conversion of convertible preferred stock - Series C		4,218,825		2,350,040
Outstanding warrants		5,011,591		8,698,580
Outstanding options		2,319,621		1,646,563
Total potentially dilutive shares of Common Stock		12,630,037		13,201,849

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Stock-Based Compensation (Tables)

9 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award Of Warrants

Stock option activity under the Company’s 2008 Plan and 1998 Plan for the nine months ended March 31, 2017 is summarized as follows:

			Weighted
	Aggregate		Average		Exercise Price
	Number		Exercise Price		Range
Outstanding, June 30, 2016		1,917,238	$	3.29		$  0.22 - $  108.00
Granted		436,363	$	0.22		$0.22
Exercised		-	$	-		-
Cancelled		28,140	$	0.83		$0.83
Expired		5,840	$	62.93		$22.00 - $ 108.00
Outstanding, March 31, 2017		2,319,621	$	2.59		$ 0.22 - $ 99.00
Options exercisable at March 31, 2017		2,291,436	$	2.62

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Fair Value Measurements (Tables)

9 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Assets and Liabilities Carried at Fair Value Measured on Recurring Basis

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2017 and June 30, 2016:

	Carrying		Fair Value Measurement at March 31, 2017
	Value		Level 1		Level 2		Level 3
Assets:
Cash	$	241,950	$	241,950	$	-	$	-
Derivative Liability	$	533,516	$	-	$	-	$	533,516

	Carrying		Fair Value Measurement at June 30, 2016
	Value		Level 1		Level 2		Level 3
Assets:
Cash	$	810,808	$	810,808	$	-	$	-
Warrant Liabilities	$	956,575	$	-	$	-	$	956,575

Changes in Fair Value of the Company's Level 3 Financial Instruments

The following table summarizes the changes in fair value of the Company’s Level 3 financial investments:

For the Nine months ended March 31, 2017
Beginning Balance	$	956,575
Allocation of convertible note proceeds to derivative liability		589,066
Change in fair value of derivative liability		(55,550)
Change in fair value of warrant liabilities, net		(305,091)
Change in fair value of stock right, net		(651,484)
Ending Balance	$	533,516

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Warrant and Derivative Liabilities (Tables)

9 Months Ended

Mar. 31, 2017

Warrant Liabilities [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The assumptions used to value the derivative at the origination date and at March 31, 2017 are as follows:

	February 15, 2017	March 31, 2017
Stock Price	$0.15 - $0.25	$0.15 - $0.18
Estimated life in years	0.17 to 0.75	0.17 to 0.63
Risk-free interest rate(1)	0.54% - 0.77%	0.76% - 0.94%
Volatility	173.5% - 214.5%	160.0% - 178.0%
Dividend paid	0.00%	0.00%

⁽¹⁾ Represents the interest rate on a U.S. Treasury security with a maturity date corresponding to that of the term.

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Liquidity - Additional Information (Detail) - USD ($)	1 Months Ended
	May 19, 2017	Mar. 31, 2017	Jun. 30, 2016	Mar. 31, 2016	Jun. 30, 2015
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents		$ 241,950	$ 810,808	$ 1,525,594	$ 3,334,626
Development Stage Enterprise Deficit Accumulated During Development Stages		$ 119,453,761
Subsequent Event [Member]
Cash and Cash Equivalents [Line Items]
Proceeds from Issuance of Debt	$ 300,000

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Intangibles - Additional Information (Detail) - USD ($)	9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Impairment of Intangible Assets (Excluding Goodwill)	$ 2,600,000	$ 1,000,000

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Calculation of Weighted Average Number of Dilutive Shares of Common Stock (Detail) - shares	9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Summary Of Significant Accounting Policies [Line Items]
Common Stock to be issued upon conversion of convertible preferred stock	12,630,037	13,201,849
Series A Preferred stock
Summary Of Significant Accounting Policies [Line Items]
Common Stock to be issued upon conversion of convertible preferred stock	1,080,000	506,666
Series C Preferred Stock
Summary Of Significant Accounting Policies [Line Items]
Common Stock to be issued upon conversion of convertible preferred stock	4,218,825	2,350,040
Outstanding options
Summary Of Significant Accounting Policies [Line Items]
Common Stock to be issued upon conversion of convertible preferred stock	2,319,621	1,646,563
Outstanding warrants
Summary Of Significant Accounting Policies [Line Items]
Common Stock to be issued upon conversion of convertible preferred stock	5,011,591	8,698,580

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Stock-Based Compensation Stock Option Activity (Detail)	9 Months Ended
	Mar. 31, 2017 $ / shares shares
Aggregate Number
Beginning Balance | shares	1,917,238
Granted | shares	436,363
Exercised | shares	0
Cancelled | shares	28,140
Expired | shares	5,840
Ending Balance | shares	2,319,621
Options exercisable at end of Period | shares	2,291,436
Weighted Average Exercise Price
Beginning Balance	$ 3.29
Granted	0.22
Exercised	0
Cancelled	0.83
Expired	62.93
Ending Balance	2.59
Options exercisable at end of Period	2.62
Exercise Price Range
Granted	0.22
Exercised	0
Cancelled	0.83
Maximum [Member]
Exercise Price Range
Beginning Balance	108.00
Expired	108.00
Ending Balance	99.00
Minimum [Member]
Exercise Price Range
Beginning Balance	0.22
Expired	22.00
Ending Balance	$ 0.22

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Stock-Based Compensation - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option outstanding intrinsic value	$ 0		$ 0
Option outstanding weighted average remaining term			6 years 7 months 6 days
Shares available for future stock option grant	5,119,079		5,119,079
Stock based compensation	$ 74,333	$ 6,175	$ 79,482	$ 95,008
Stock based compensation expense related to stock options, not yet recognized, period of recognition			20 months
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 16,276		$ 16,276

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Notes Payable - Additional Information (Detail) - USD ($)	1 Months Ended	9 Months Ended
	Feb. 15, 2017	Mar. 31, 2016	Mar. 31, 2017
Debt Instrument [Line Items]
Debt Instrument Unamortized Discount Amortization Period		8 months
Debt Instrument, Unamortized Discount			$ 589,066
OPKO Health, Inc [Member] | Convertible Notes Payable [Member]
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 500,000
Debt Instrument, Interest Rate, Stated Percentage	6.00%
Debt Instrument, Convertible, Conversion Price	$ 0.10
Debt Instrument, Convertible, Terms of Conversion Feature	The Notes provide for mandatory conversion: (a) if the Company enters into a transaction or series of transactions for an aggregate sale price of at least One Million Dollars ($1,000,000) of the Company’s capital stock (referred to as the “Qualified Financing”) then the outstanding principal balance and accrued but unpaid interest on the Notes will automatically convert into such capital stock sold in the Qualified Financing at a conversion price equal to the lesser of (i) the price per share paid by investors at the close of the Qualified Financing or (ii) $0.10 (the “Conversion Price”); or (b) upon a sale of all or substantially all of the Company’s assets, whether by sale, acquisition or merger, the outstanding principal balance and accrued but unpaid interest on the Notes will automatically convert at the Conversion Price into shares of Common Stock or such other securities on terms and conditions agreed upon by the Company and the holders of a majority of the outstanding principal amount of the Notes.
Debt Instrument, Term	6 months
Amended Notes [Member] | OPKO Health, Inc [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			6.00%

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Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016	Jun. 30, 2016
Income Tax [Line Items]
Deferred Tax Liabilities, Net	$ 2,200,000		$ 2,200,000		$ 3,240,000
Increase (Decrease) in Deferred Liabilities			1,040,000
Income tax benefit	$ 0	$ 400,000	$ 1,040,000	$ 400,000

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Assets and Liabilities at Fair Value Measured on Recurring Basis (Detail) - USD ($)	Mar. 31, 2017	Jun. 30, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant Liabilities	$ 0	$ 956,575
Fair Value Measurements Recurring Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash	241,950	810,808
Derivative Liability	533,516
Warrant Liabilities		956,575
Level 1 | Fair Value Measurements Recurring Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash, Fair Value	241,950	810,808
Derivative Liability	0
Warrant Liabilities		0
Level 2 | Fair Value Measurements Recurring Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash, Fair Value	0	0
Derivative Liability	0
Warrant Liabilities		0
Level 3 | Fair Value Measurements Recurring Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash, Fair Value	0	0
Derivative Liability	$ 533,516
Warrant Liabilities		$ 956,575

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Changes in Fair Value of the Company's Financial Instruments (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Beginning Balance			$ 956,575
Allocation of convertible note proceeds to derivative liability			589,066
Change in fair value of derivative liability			(55,550)
Change in fair value of warrant liabilities, net	$ 0	$ (667,639)	(305,091)	$ (1,967,700)
Change in fair value of stock right, net	0	$ (742,253)	(651,484)	$ (315,862)
Ending Balance	$ 0		$ 0

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Warrant and Derivative Liabilities (Detail) - Derivative [Member] - $ / shares		1 Months Ended	9 Months Ended
		Feb. 15, 2017	Mar. 31, 2017
Dividend paid		0.00%	0.00%
Minimum [Member]
Stock Price		$ 0.15	$ 0.15
Estimated life in years		2 months 1 day	2 months 1 day
Risk-free interest rate	[1]	0.54%	0.76%
Volatility		173.50%	160.00%
Maximum [Member]
Stock Price		$ 0.25	$ 0.18
Estimated life in years		9 months	7 months 17 days
Risk-free interest rate	[1]	0.77%	0.94%
Volatility		214.50%	178.00%

[1] Represents the interest rate on a U.S. Treasury security with a maturity date corresponding to that of the term.

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Warrant and Derivative Liabilities - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended	9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Fair Value Adjustment of Warrants	$ 307,774	$ 0	$ 0	$ 307,774	$ 0
Change in Fair Value of Stock Right and Warrant Liability			$ 956,575
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 0.40			$ 0.40
Change in Unrealized Gain (Loss) on Fair Value Hedging Instruments	$ 0	$ 742,253		$ 651,484	$ 315,862
Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 0.75			$ 0.75
Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights	1.50			1.50
Warrant [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share Price	$ 0.25			$ 0.25
Warrant [Member] | Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Estimated life in years				8 months 16 days
Volatility				171.00%
Fair Value Inputs, Discount Rate				0.77%
Warrant [Member] | Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Estimated life in years				11 months 12 days
Volatility				178.00%
Fair Value Inputs, Discount Rate				0.86%

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Common Stock Issuance - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016	Feb. 15, 2017
Shares Issued, Price Per Share					$ 0.40
Issuance of Stock and Warrants for Services or Claims	$ 1,417,922	$ 0	$ 1,417,922	$ 0
Common Stock [Member]
Stock Issued During Period, Shares, New Issues			5,671,689

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Series A Preferred Stock - Additional Information (Detail) - Series Preferred Stock [Member] - $ / shares	Mar. 31, 2017	Feb. 15, 2017	Jun. 30, 2016
Preferred Stock, Shares Outstanding	270	110	270
Convertible Preferred Stock, Shares Issued upon Conversion		440,000
Convertible Preferred Stock Exchange, Conversion Price		$ 0.25

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Series C Preferred Stock - Additional Information (Detail) - shares	9 Months Ended
	Mar. 31, 2017	Feb. 15, 2017	Dec. 31, 2016
Convertible Preferred Stock, Terms of Conversion	Each share of Series C Preferred Stock converted into 10 shares of Common Stock.
Common Stock [Member]
Convertible Preferred Stock, Shares Issued upon Conversion	100,000
Series C Preferred Stock [Member]
Conversion of Preferred Stock, Shares Converted	10,000
Convertible Preferred Stock, Conversion Price		0.40%	0.75%

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Gain on Sale of Patents - Additional Information (Detail) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended
	Jul. 19, 2016	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Proceeds from Sale of Intangible Assets				$ 50,000	$ 0
Business Acquisition, Percentage of Voting Interests Acquired	19.90%
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Noncurrent Liabilities, Other	$ 99,728
Gain (Loss) on Disposition of Intangible Assets		$ 0	$ 0	149,728	$ 0
Intellectual Property [Member]
Proceeds from Sale of Intangible Assets	$ 50,000
Finite-lived Intangible Assets, Fair Value Disclosure		$ 0		0
Gain (Loss) on Disposition of Intangible Assets				$ 149,728

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Subsequent Events - Additional Information (Detail) - Subsequent Event [Member]	1 Months Ended
	May 19, 2017 USD ($) $ / shares
Subsequent Event [Line Items]
Proceeds from Convertible Debt | $	$ 300,000
Convertible Debt [Member]
Subsequent Event [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	6.00%
Debt Instrument, Convertible, Terms of Conversion Feature	The May Note provides for mandatory conversion: (a) if the Company enters into a transaction or series of transactions for an aggregate sale price of at least One Million Dollars ($1,000,000) of the Companys capital stock (referred to as the Qualified Financing) then the outstanding principal balance and accrued but unpaid interest on the May Note will automatically convert into such capital stock sold in the Qualified Financing at a conversion price equal to the lesser of (i) the price per share paid by investors at the close of the Qualified Financing or (ii) $0.10 (the Conversion Price); or (b) upon a sale of all or substantially all of the Companys assets, whether by sale, acquisition or merger, the outstanding principal balance and accrued but unpaid interest on the May Note will automatically convert at the Conversion Price into shares of Common Stock or such other securities on terms and conditions agreed upon by the Company and the holder of the outstanding principal amount of the May Note.
Debt Instrument, Convertible, Conversion Price | $ / shares	$ 0.10