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: December 31, 2014

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

For the transition period from ____________to _____________

Cellceutix Corporation

(Exact name of registrant as specified in its charter)

Commission File Number: 000-52321

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

100 Cumming Center, Suite 151-B

Beverly, MA 01915

(Address of principal executive offices, Zip Code)

(978)-236-8717

(Registrant’s telephone number, including area code)

 __________________________________________________________________

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

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

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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	¨	Accelerated Filer	x
Non-Accelerated Filer	¨	Smaller reporting company	¨
(Do not check if a smaller reporting company)

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

The number of shares outstanding of each of the issuer’s classes of common equity, as of February 5, 2015 is as follows:

Class of Securities	Shares Outstanding
Common Stock Class A, $0.0001 par value	116,638,129
Common Stock Class B, $0.0001 par value	None

CELLCEUTIX CORPORATION

 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	4
	Condensed Consolidated Balance Sheets as of December 31, 2014 (unaudited) and June 30, 2014 (audited)		4
	Condensed Consolidated Statements of Operations (unaudited) for the three months and six months ended December 31, 2014 and 2013		5
	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended December 31, 2014 and 2013		6
	Notes to Condensed Consolidated Financial Statements (unaudited)		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		30
Item 4.	Controls and Procedures		30

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors		31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		48
Item 3.	Defaults Upon Senior Securities		48

Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	48
SIGNATURES		51

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FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, and Section 27A of the Securities Act of 1933. Any statements contained in this report that are not statements of historical fact may be forward-looking statements. When we use the words “ intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will” or the negative of these terms or other comparable terminology, we are identifying forward-looking statements. Forward-looking statements involve risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements. These factors include our; research and development activities, distributor channel; compliance with regulatory impositions; and our capital needs. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Except as may be required by applicable law, we do not undertake or intend to update or revise our forward-looking statements, and we assume no obligation to update any forward-looking statements contained in this report as a result of new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. You should carefully review and consider the various disclosures we make in this report and our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business.

For further information about these and other risks, uncertainties and factors, please review the disclosure included in this report under “Part II, Item 1A, Description of Business - Risk Factors”.

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PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CELLCEUTIX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Rounded to nearest thousand except for per share data)

	December 31,			June 30,
	2014			2014
	(unaudited)
ASSETS
Current Assets:
Cash	$	9,469,000		$	4,988,000
Prepaid expenses and security deposits		98,000			568,000
Total Current Assets		9,567,000			5,556,000
Other Assets:
Patent costs - net		5,151,000			4,962,000
Property, plant and equipment - net		43,000			39,000
Deferred offering costs		94,000			295,000
Total Other Assets		5,288,000			5,296,000
Total Assets	$	14,855,000		$	10,852,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable - (including related party payables of approx. $1,686,000 and $1,708,000, respectively)	$	2,085,000		$	2,664,000
Accrued expenses - (including related party accruals of approx. $49,000 and  $290,000, respectively)		204,000			336,000
Accrued salaries and payroll taxes - (including related party accrued salaries of approx. $3,364,000 and $3,210,000, respectively)		3,428,000			3,224,000
Note payable - related party		2,022,000			2,022,000
Redeemable Common Stock		-			1,400,000
Total Current Liabilities		7,739,000			9,646,000
Total Liabilities		7,739,000			9,646,000
Commitments and contingencies (Note 7)
Stockholders' Equity
Preferred stock, $0.001 par value, 500,000 designated shares, no shares issued and outstanding		-			-
Common Stock - Class A, $.0001 par value, 300,000,000 shares authorized, 115,838,129 issued and  115,838,129 outstanding as of December 31, 2014 and 109,787,129 issued and  109,787,129 outstanding as of June 30, 2014		12,000			11,000
Common Stock - Class B, (10 votes per share); $.0001 par value, 100,000,000 shares authorized, no shares issued and outstanding as of December 31, 2014 and June 30, 2014, respectively		-			-
Additional paid-in capital		42,273,000			29,215,000
Accumulated deficit		(35,169,000	)		(28,020,000	)
Total Stockholders' Equity		7,116,000			1,206,000
Total Liabilities and Stockholders' Equity		14,855,000		$	10,852,000

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

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CELLCEUTIX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(Rounded to nearest thousand except for per share data)

	For the Three Months Ended						For the Six Months Ended
	December 31,						December 31,
	2014			2013			2014			2013
Revenues	$	-		$	-		$	-		$	-
Operating expenses:
Research and development expenses		1,943,000			1,014,000			5,798,000			1,586,000
General and administrative expenses		244,000			330,000			473,000			435,000
Officers' payroll and payroll tax expenses		412,000			119,000			542,000			237,000
Professional fees		105,000			83,000			245,000			207,000
Total operating expenses		2,704,000			1,546,000			7,058,000			2,465,000
Loss from operations		(2,704,000	)		(1,546,000	)		(7,058,000	)		(2,465,000	)
Other expenses
Interest income		1,000			-			2,000			-
Interest expense		(51,000	)		(51,000	)		(101,000	)		(109,000	)
Sundry income		-			-			9,000			-
Total other expenses		(50,000	)		(51,000	)		(90,000	)		(109,000	)
Loss before provision for income taxes		(2,754,000	)		(1,597,000	)		(7,148,000	)		(2,574,000	)
Provision for income taxes		-			-			-			-
Net loss	$	(2,754,000	)	$	(1,597,000	)	$	(7,148,000	)	$	(2,574,000	)
Deemed dividends		-			(1,980,000	)		-			(1,980,000	)
Net loss attributable to common stockholders	$	(2,754,000	)	$	(3,577,000	)		(7,148,000	)	$	(4,554,000	)
Basic and diluted loss per share attributable to common stockholders	$	(0.02	)	$	(0.03	)	$	(0.06	)	$	(0.04	)
Weighted average number of common shares		114,716,009			104,640,788			112,918,961			102,659,696

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

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CELLCEUTIX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(Rounded to nearest thousand)

		For the Six Months Ended
		December 31,
		2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(7,148,000	)	$	(2,574,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of fixed assets			-			73,000
Common stock and stock options issued as payment for services  compensation, services rendered and financing costs			307,000			255,000
Amortization of patent costs			197,000			102,000
Depreciation of equipment			5,000			-
Changes in operating assets and liabilities:
	Prepaid expenses and security deposits		470,000			(160,000	)
	Accounts payable		(580,000	)		(72,000	)
	Accrued expenses		(132,000	)		342,000
	Accrued officers' salaries and payroll taxes		204,000			(193,000	)
Net cash used in operating activities			(6,677,000	)		(2,227,000	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of fixed assets			-			24,000
Additions to property, plant and equipment			(9,000	)		-
Patent costs			(386,000	)		(2,135,000	)
Net cash used in investing activities			(395,000	)		(2,111,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock			10,780,000			5,618,000
Payment of settlement liabilities			-			(285,000	)
Exercise of stock options and warrants			773,000			1,025,000
Net cash provided by financing activities			11,553,000			6,358,000
NET INCREASE IN CASH AND CASH
EQUIVALENTS		$	4,481,000		$	2,020,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD			4,988,000			2,955,000
CASH AND CASH EQUIVALENTS,
END OF PERIOD		$	9,469,000		$	4,975,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest		$	336,000		$	37,000
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW
INVESTING AND FINANCING ACTIVITIES
Cancellation of treasury stock		$	-		$	(275,000	)
Deemed dividend - warrants		$	-		$	1,980,000
Shares issued as deferred offering costs		$	-		$	373,000
Shares issued for acquisition of patent and equipment		$	-		$	2,702,000
Redeemable common stock		$	(1,400,000	)	$	1,400,000
Stock subscription receivable		$	-		$	400,000

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

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CELLCEUTIX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014

(Unaudited)

1. Basis of Presentation and Nature of Operations

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements of Cellceutix Corporation have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with our audited financial statements for the year ended June 30, 2014, included in our Annual Report on Form 10-K for the year ended June 30, 2014.

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

Cellceutix Corporation, formerly known as EconoShare, Inc., (“Cellceutix” or the “Company”) was incorporated on August 1, 2005. On December 6, 2007, the Company acquired Cellceutix Pharma, Inc. which was incorporated in the State of Delaware on June 20, 2007, in exchange for newly issued shares of the Company’s common stock. As a result of the exchange, Cellceutix Pharma, Inc. became a wholly-owned subsidiary of the Company. The Company is a clinical stage biopharmaceutical company and has no customers, products or revenues to date.

The Company’s Common Stock is quoted on the Over the Counter market (OTC), symbol “CTIX”.

All amounts, where it is designated in these notes to the financial statements as an approximate amount, are rounded to the nearest thousand dollars.

Nature of Operations

Overview

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

We currently own all development and marketing rights to our products. In order to successfully develop and market our products, we may have to partner with other companies. Prospective partners may require that we grant them significant development and/or commercialization rights in return for agreeing to share the risk of development and/or commercialization.

2. Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. At December 31, 2014, we had $9,469,000 in cash and cash equivalents. We have expended substantial funds on the research and development of our product candidates. Our net losses incurred for the six months ended December 31, 2014 and 2013, amounted to $7,148,000 and $4,554,000, respectively, and we have a working capital of approximately $1,828,000 at December 31, 2014 and a working capital (deficit) of approximately $(4,090,000) at June 30, 2014. In view of these matters, the ability of the Company to continue as a going concern is dependent upon the Company’s ability to generate additional financing. Since inception, the Company has financed its activities principally from the use of equity securities, debt issuance and loans from an officer to pay for its operations. The Company intends on financing its future development activities and its working capital needs largely from the issuance of debt and the sale of equity securities, until such time that funds provided by operations are sufficient to fund working capital requirements. On October 25, 2013, we terminated a previous agreement with Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire Capital”), and entered into a new stock purchase agreement (the “Purchase Agreement”) with Aspire Capital.

7

The Purchase Agreement provides that upon meeting the terms of the agreement, Aspire Capital is committed to purchase up to an aggregate of $20,000,000 of our shares of Class A Common Stock over the approximately 36-month term of the Purchase Agreement. In consideration for entering into the Purchase Agreement, the Company issued to Aspire Capital 210,523 shares of its Class A Common Stock as a commitment fee. The commitment fee will be amortized as the funding is received. The unamortized portion is carried on the balance sheet as deferred offering costs. Concurrently with entering into the Purchase Agreement, the Company agreed to file one or more registration statements as permissible and necessary under the Securities Act of 1933, as amended, or the Securities Act, for the sale of shares of our Class A Common Stock that have been and may be issued to Aspire Capital under the Purchase Agreement. On November 4, 2013, the Company filed a Form S-3 registration statement and the registration statement was declared effective by the SEC on November 15, 2013.

These factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities that may be necessary should the Company be unable to continue as a going concern.

3. Significant Accounting Policies and Recent Accounting Pronouncements

Use of Estimates

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

Concentration of Credit Risk

The Company maintains its cash in bank deposit accounts (checking) that at times exceed federally insured limits. Approximately $9.5 million is subject to credit risk at December 31, 2014. However, these cash balances are maintained at creditworthy financial institutions. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.

Basic Earnings (Loss) per Share

Basic and diluted earnings (loss) per share are computed based on the weighted-average common shares and common share equivalents outstanding during the period. Common share equivalents consist of stock options, warrants and convertible notes payable. Common share equivalents of 44.6 million and 47.6 million were excluded from the computation of diluted earnings (loss) per share for the three months and six months ended December 31, 2014 and 2013, respectively, because their effect is anti-dilutive.

Accounting for Stock Based Compensation

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

8

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

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

We have elected to use the Black-Scholes-Merton pricing model to determine the fair value of stock options on the dates of grant. Restricted stock units are measured based on the fair market values of the underlying stock on the dates of grant. We recognize stock-based compensation using the straight-line method.

The components of share-based compensation related to stock options in the Company’s Statement of Operations for the three and six months ended December 31, 2014 and 2013 are as follows (rounded to nearest thousand):

		Three Months Ended December 31, 2014		Three Months Ended December 31, 2013		Six Months Ended December 31, 2014		Six Months Ended December 31, 2013
Payroll expenses – under General and administrative expenses		$	12,000	$	105,000	$	12,000	$	105,000
Professional fee – separately disclosed at statement of operations			-		20,000		-		46,000
Officers share-based compensation – under Research and development expenses			199,000		-		199,000		-
Employee share-based compensation – under Research and development expenses			96,000		-		96,000		-
Professional fee – under Research and development expenses			-		104,000		-		104,000
	Total share-based compensation expense	$	307,000	$	229,000	$	307,000	$	255,000

Recent Accounting Pronouncements

Recently Adopted Standards

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation." This ASU removes the definition of a development stage entity from the ASC, thereby removing the financial reporting distinction between development stage entities and other reporting entities from GAAP. In addition, the ASU eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of operations, cash flows, and stockholders’ equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. This ASU is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The Company has adopted this ASU effective with our Annual Report on Form 10-K and its adoption resulted in the removal of previously required development stage disclosures.

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

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Standards Issued Not Yet Adopted

In April 2014, the FASB issued guidance for the reporting of discontinued operations, which also contains new disclosure requirements for both discontinued operations and other disposals that do not meet the definition of a discontinued operation. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Management believes that the adoption of this guidance will not have a material impact on our financial statements.

In May 2014, the FASB issued guidance on the accounting for revenue from contracts with customers that will supersede most existing revenue recognition guidance, including industry-specific guidance. The core principle requires an entity to recognize revenue to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the guidance requires enhanced disclosures regarding the nature, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. This guidance is effective for interim and annual reporting periods beginning on or after December 15, 2016. Entities can choose to apply the guidance using either the full retrospective approach or a modified retrospective approach. Management believes that the adoption of this guidance will not have a material impact on our financial statements.

In June 2014, the FASB issued guidance that clarifies the accounting for share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. In this case, the performance target would be required to be treated as a performance condition, and should not be reflected in estimating the grant-date fair value of the award. The guidance also addresses when to recognize the related compensation cost. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Management is currently reviewing this guidance to determine the impact it may have, if any, on our financial statements.

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

4. Patents, net

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

	Useful life	December 31, 2014		June 30, 2014
Purchased Patent Rights– Brilacidin, and related compounds	14	$	4,082,000	$	4,082,000
Purchased Patent Rights–Delparantag and related compounds	12		480,000		480,000
Purchased Patent Rights–Anti-microbial- surfactants and related compounds	12		144,000		144,000
Patents – Kevetrin and related compounds	17		927,000		542,000
		$	5,633,000	$	5,248,000
Accumulated amortization			482,000		286,000
		$	5,151,000	$	4,962,000

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

Amortization expense for the three and six months ended December 31, 2014 and 2013 and was approximately $100,000, $80,000, $197,000, and $102,000, respectively.

At December 31, 2014, the future amortization period for all patents was approximately 11 to 16.45 years. Future estimated annual amortization expenses are approximately $199,000 for year ending June 30, 2015, approximately $398,000 for each year from 2016 to 2025, $356,000 for the year 2026, $346,000 for the year 2027, $108,000 for the year 2028, $55,000 for Years 2029 and 2030 and $52,000 for Year 2031.

5. Accrued Expenses

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

	December 31, 2014		June 30, 2014
Accrued research and development consulting fees	$	155,000	$	46,000
Accrued rent (Note 8) – related parties		48,000		53,000
Accrued interest – related parties		1,000		237,000
Total	$	204,000	$	336,000

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

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

	December 31, 2014		June 30, 2014
Accrued salaries – related parties	$	2,840,000	$	3,032,000
Accrued payroll taxes – related parties		149,000		149,000
Withholding tax – related parties		375,000		29,000
Other		64,000		14,000
Total	$	3,428,000	$	3,224,000

On December 29, 2010, the Company entered into employment agreements with its two executive officers, Leo Ehrlich, the Company’s Chief Executive Officer, and Krishna Menon, Chief Scientific Officer. Both agreements provide for a three year term with each executive receiving an annual base salary of $350,000 per year commencing January 1, 2011, with an annual increase of 10% for each year commencing January 2012. The Board, at its discretion, may increase the base salary based upon relevant circumstances. On each of January 1, 2014, and on February 2015 the Board approved one year extensions of the employment agreements with a 10% increase in salaries. The annual salary for each of these officers for 2015 is $512,435.

On October 20, 2014 the Board of Directors approved the appointment of Dr. William James Alexander as the Chief Operations Officer of the Company for the term of one year effective October 27, 2014 (“the Effective Date”). Commencing on the Effective Date and ending on the six month anniversary of the Effective Date (the "Six Month Anniversary"), the Company shall pay Dr. Alexander at the per annum rate of $350,000. Commencing on the Six Month Anniversary and ending on the one year anniversary of the Effective Date (the "One Year Anniversary"), the Company shall pay the Executive at the per annum rate of $400,000.

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7. Commitments and Contingencies

Lease Commitments

Operating Leases

The Company signed a lease extension agreement with Cummings Properties which began on October 1, 2013. The lease is for a term of five years ending on September 30, 2018, and requires monthly payments of $17,000. Innovative Medical Research Inc., a company owned by Leo Ehrlich and Dr. Krishna Menon, officers of the Company, have co-signed the lease and will sublease 200 square feet of space previously used by the Company and pay the Company $900 per month.

As of December 31, 2014, future minimum lease payments required under the non-cancelable operating lease are as follows (rounded to nearest thousand):

Year ending June 30,
2015	$	105,000
2016		209,000
2017		209,000
2018		209,000
2019		53,000
Total minimum payments	$	785,000

Rental expense, net of lease income, under this operating lease agreement for the three and six months ended December 31, 2014 and 2013 was approximately $55,000, $71,000, $106,000, and $80,000, respectively. Before September, 2013, the Company paid rent to KARD for share of office space and details are shown at Note 8.

Contractual Commitments

The Company has no contractual minimum commitments to Contract Research Organizations as of December 31, 2014. Services are billed to Cellceutix, when performed by the vendors.

8. Related Party Transactions

Office Lease

Dr. Menon, the Company’s principal shareholder, President, and Director, also serves as the Chief Operating Officer and Director of Kard Scientific (“KARD”). On December 7, 2007, the Company began renting office space from KARD, on a month to month basis for $900 per month.

In September 2013, the Company signed a lease agreement with Cummings Properties for the company’s offices and laboratories at 100 Cummings Center, Suite 151-B Beverly, MA 01915. The lease is for a term of five years from October 1, 2013 to September 30, 2018 and requires monthly payments of approximately $17,000. The Company had taken over the space occupied by KARD. In addition, Innovative Medical Research Inc., (“Innovative Medical”) a company owned by Leo Ehrlich and Dr. Krishna Menon, officers of the Company has co-signed the lease and will rent approximately 200 square feet of office space, the space previously used by the Company and will pay the Company $900 per month, the same amount the Company previously paid KARD. Innovative Medical paid total rent of $6,000 and $2,000 to the Company for the six months ended December 31, 2014 and 2013, respectively, and the rental payment was offset with the accrued rent owed to KARD.

At December 31, 2014 and June 30, 2014, rent payables to KARD of approximately $48,000 and $53,000, respectively, were included in accrued expenses.

Clinical Studies

The Company previously engaged KARD to conduct specified pre-clinical studies. The Company did not have an exclusive arrangement with KARD. All work performed by KARD needed prior approval by the executive officers of the Company, and the Company retained all intellectual property resulting from the services by KARD. The Company now has its own research study capabilities and no longer uses KARD. At December 31, 2014 and June 30, 2014, the accrued research and development expenses to KARD was approximately $1,686,000 and this amount was included in accounts payable.

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9. Note Payable – Related Party

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

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

At December 31, 2014 and June 30, 2014, approximately $1,000 and $237,000 was accrued as interest expense on this note.

At December 31, 2014 and June 30, 2014, principal balances of the demand note was approximately $2,022,000.

10. Stock Options and Warrants Outstanding

Stock Options

The fair value of each option for the six months ended December 31, 2014 was estimated on the date of grant using the Black Scholes model that uses assumptions noted in the following table.

	Six Months Ended December 31, 2014
Expected term (in years)		3
Expected stock price volatility		62.79% to 63.26%
Risk-free interest rate		0.76% to 1.19%
Expected dividend yield		0

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

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

On April 1, 2014 the Board of Directors approved a stock option grant, for services rendered from January 7, 2014 to July 6, 2014, to a consultant to purchase 40,000 shares of common stock exercisable at $1.64 per share. The option was vested on April 1, 2014, the option life is 5 years and will expire on March 31, 2019. In addition, the Company will pay the consultant $20,000 per month during the six month period from January 7, 2014 to July 6, 2014. The total value of these 40,000 shares of stock option was $55,396 and charged to additional paid-in capital on April 1, 2014.

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On October 20, 2014 the Board of Directors approved the appointment of Dr. William James Alexander as the Chief Operations Officer of Cellceutix Corporation for the term of one year effective October 27, 2014 (“the Effective Date”). Pursuant to his employment agreement, Dr. Alexander received immediately 50,000 shares of the Company's common stock, par value $0.0001 per share ("Common Stock") as a sign on bonus and 50,000 stock options to purchase shares of the Company’s common stock, par value $0.0001 per share, at $2.93 per share. Such options vest in equal installments on July 27, 2015 and October 27, 2015 and the option life is 3 years and expires on July 27, 2018 and October 27, 2018, respectively.

On December 26, 2014 the Board of Directors approved the cash and option bonus payments to officers and employees, including cash of $250,000 each to Mr. Leo Ehrlich, our CEO and Dr. Krishna Menon, our President, and 25,000 options exercisable for 3 years at $4.71 per share of common stock to Dr. William James Alexander, our COO and 65,000 options exercisable for 3 years at $4.29 per share of common stock, to our employees.

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

		Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at June 30, 2014			39,007,500		$	0.14		6.50	$	59,613,000
	Granted		140,000			4.07
	Exercised		(60,000	)		0.29
	Forfeited/expired		(30,000	)		0.35
Outstanding at December 31, 2014			39,057,500		$	0.16		5.99	$	165,416,000
Exercisable at December 31, 2014			39,007,500		$	0.15		6.00	$	165,343,000

The Company recognized approximately $307,000, $229,000, $307,000 and $255,000 of stock based compensation costs related to stock and stock options awards for the three months and six months ended December 31, 2014 and 2013, respectively.

Stock Warrants

For the six months ended December 31, 2014

From July 1, 2014 to September 30, 2014, the Company issued 200,000 Class A common shares par value $.0001 to a warrant holder upon exercise of Common Stock Purchase Warrants exercisable at $1 per share. The Company received an aggregate of $200,000 in total for the exercise of 200,000 warrants. The issuance was exempt from registration under Section 4(2) of the Securities Act.

From October 1, 2014 to December 31, 2014, the Company issued 370,500 Class A common shares par value $.0001 to a warrant holder upon exercise of Common Stock Purchase Warrants exercisable at $1 per share and 370,500 Class A common shares par value $.0001 to a warrant holder upon exercise of Common Stock Purchase Warrants exercisable at $0.50 per share. The Company received an aggregate of $556,000 in total for the exercise of 741,000 warrants. The issuance was exempt from registration under Section 4(2) of the Securities Act.

The following table summarizes stock warrants:

		Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at June 30, 2014			2,448,000		$	1.01		1.43	$	1,623,000
	Extended		-			-		-
	Granted		-			-		-
	Exercised		(941,000	)		0.8		-
	Expired		-			-		-
Outstanding at December 31, 2014			1,507,000		$	1.14		1.02	$	4,839,000
Exercisable at December 31, 2014			1,507,000		$	1.14		1.02	$	4,839,000

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11. Equity Transactions

(1) Issuance of Common Stock for Cash

For the period from October 25, 2013 to December 31, 2014,

$20 million Class A Common Stock Purchase Agreement with Aspire Capital Fund, LLC – (“New Agreement’ or “October 2013 Agreement”)

On October 25, 2013, we terminated a previous agreement with Aspire Capital Fund, LLC, an Illinois limited liability company (Aspire Capital), and entered into a new Class A Common Stock Purchase Agreement (the “Purchase Agreement”) with Aspire Capital, which provides that upon meeting the terms of the agreement, Aspire Capital is committed to purchase up to an aggregate of $20,000,000 of our shares of Class A Common Stock over the approximately 36-month term of the Purchase Agreement. In consideration for entering into the Purchase Agreement, the Company issued to Aspire Capital 210,523 shares of our Class A Common Stock as a commitment fee. The commitment fee of $373,000 will be amortized as the funding is received. The amortized amount of $84,000 and $201,000 was debited to additional paid-in capital for the three months and six months ended December 31, 2014. The unamortized portion is carried on the balance sheet as deferred offering costs and was $94,000 at December 31, 2014.

Concurrently with entering into the Purchase Agreement, the Company agreed to file one or more registration statements as permissible and necessary under the Securities Act of 1933, as amended, or the Securities Act, for the sale of shares of our Class A Common Stock that have been and may be issued to Aspire Capital under the Purchase Agreement. On November 4, 2013, the Company filed a Form S-3 registration statement and the registration statement was declared effective by the SEC on November 15, 2013.

Under the Purchase Agreement, on any trading day selected by the Company which the closing sale price of our Class A Common Stock exceeds $0.25 per share, we may direct Aspire Capital to purchase up to 200,000 shares of our Class A Common Stock per trading day. The Purchase Price of such shares is equal to the lesser of a) the lowest sale price of our Class A Common Stock on the purchase date; or b) the arithmetic average of the three lowest closing sale prices for our Class A Common Stock during the twelve consecutive trading days ending on the trading day immediately preceding the purchase date.

In addition, on any date on which we submit a Purchase Notice to Aspire Capital for purchase of at least 100,000 Purchase Shares and the closing sale price of our stock is equal to or greater than $0.50 per share, we also have the right to direct Aspire Capital to purchase an amount of stock equal to up to 30% of the aggregate shares of the our Class A Common Stock traded on the OTC Bulletin Board on the next trading day, subject to the VWAP Purchase Share Volume Maximum and the VWAP Minimum Price Threshold, which is equal to the greater of (a) 90% of the closing price of our Class A Common Stock on the business day immediately preceding the VWAP Purchase Date or (b) such higher price as set forth by the Company in the VWAP Purchase Notice. The VWAP Purchase Price of such shares is the lower of (a) the Closing Sale Price on the VWAP Purchase Date; or 95% of the volume-weighted average price for our Class A Common Stock traded on the OTC Bulletin Board; and (b)on the VWAP Purchase Date, if the aggregate shares to be purchased on that date have not exceeded the VWAP Purchase Share Volume Maximum or during that portion of the VWAP Purchase Date until such time as the sooner to occur of (i) the time at which the aggregate shares traded on the OTC Bulletin Board exceed the VWAP Purchase Share Volume Maximum or (ii) the time at which the sale price of our Class A Common Stock falls below the VWAP Minimum Price Threshold.

The purchase price will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the trading day(s) used to compute the purchase price. We may deliver multiple Purchase Notices and VWAP Purchase Notices to Aspire Capital from time to time during the term of the Purchase Agreement, so long as the most recent purchase has been completed.

Under the Purchase Agreement, we and Aspire Capital may not affect any sales of shares of our Class A Common Stock under the Purchase Agreement on any trading day that the closing sale price of our Class A Common Stock is less than $0.25 per share.

The Company is never under any obligation to sell shares to Aspire Capital Fund. Aspire Capital Fund has no rights to require the Company to sell shares.

During the period from October 25, 2013 to December 31, 2014, the Company had completed sales to Aspire totaling 7,500,000 shares of common stock generating gross proceeds of approximately $14.9 million. As of December 31, 2014, a balance of $5.1 million remains and is available under the financing arrangement.

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(2) Issuance of Common Stock by Exercise of Common Stock Purchase Warrants

For the six months ended December 31, 2014

From July 1, 2014 to September 30, 2014, the Company issued 200,000 Class A common shares par value $.0001 to a warrant holder upon exercise of Common Stock Purchase Warrants exercisable at $1 per share. The Company received an aggregate of $200,000 in total for the exercise of 200,000 warrants. The issuance was exempt from registration under Section 4(2) of the Securities Act.

From October 1, 2014 to December 31, 2014, the Company issued 370,500 Class A common shares par value $.0001 to a warrant holder upon exercise of Common Stock Purchase Warrants exercisable at $1 per share and 370,500 Class A common shares par value $.0001 to a warrant holder upon exercise of Common Stock Purchase Warrants exercisable at $0.5 per share. The Company received an aggregate of $556,000 in total for the exercise of 741,000 warrants. The issuance was exempt from registration under Section 4(2) of the Securities Act.

(3) Issuance of Common Stock by Exercise of Common Stock Options

For the six months ended December 31, 2014

The Board of Directors approved the exercise of 30,000 Common Stock options at $0.20 per share for $6,000 on November 24, 2014 and the exercise of another 30,000 Common Stock options at a range of $0.32 – $0.43 per share for $11,200 from October 2014 to December, 2014.

(4) Issuance of Common Stock to Consultants and Employees

On October 20, 2014 the Board of Directors approved the appointment of Dr. William James Alexander as the Chief Operations Officer of Cellceutix Corporation for the term of one year effective October 27, 2014 (“the Effective Date”). Commencing on the Effective Date and ending on the six month anniversary of the Effective Date (the "Six Month Anniversary"), the Company shall pay Dr. Alexander at the per annum rate of $350,000. Commencing on the Six Month Anniversary and ending on the one year anniversary of the Effective Date (the "One Year Anniversary"), the Company shall pay Dr. Alexander at the per annum rate of $400,000. Pursuant to his employment agreement, Dr. Alexander received immediately 50,000 shares of the Company's common stock, par value $0.0001 per share ("Common Stock") as a sign on bonus and 50,000 stock options vesting during the next 12 months. The Company may award Dr. Alexander an annual bonus at the sole discretion of the Board of Directors of the Company.

12. Subsequent Events

Equity Transactions

From January 1, 2015 to February 5, 2015, the Company has generated additional proceeds of approximately $3,031,000 under the Common Stock Purchase Agreement with Aspire from the sale 800,000 shares of its common stock.

In January 2015, the Company submitted a request to the Food and Drug Administration (FDA) Division of Gastroenterology and Inborn Errors Products for a pre-Investigational New Drug (IND) meeting to discuss development of a topical defensin-mimetic compound for the indication of induction of remission of ulcerative proctitis and ulcerative proctosigmoiditis.

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

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

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that in addition to the description of historical facts contained herein, this report contains certain forward-looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company’s other filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those, described in the forward-looking statements. These factors include, among others: (a) the Company’s fluctuations in sales and operating results; (b) risks associated with international operations; (c) regulatory, competitive and contractual risks; (d) product development risks; (e) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; and (f) pending litigation.

Management’s Plan of Operation

Overview

Research and Development Activities

In addition to the pharmaceutical compounds already acquired, we seek to acquire exclusive rights to other pharmaceutical compound candidates intended for prevention and/or treatment of diseases. The Company devotes most of its efforts and resources on its compounds already in clinical trials. These trials are evaluating our drug Kevetrin for the treatment of cancers, Prurisol for the treatment of psoriasis, and Brilacidin for the treatment of skin infections and prevention of oral mucositis complicating chemoradiation treatment for cancer. We anticipate using our expertise to manage and perform what we believe are the most critical aspects of the product development process which include: (i) design and oversight of clinical trials; (ii) development and execution of strategies for the protection and maintenance of intellectual property rights; and (iii) interactions with regulatory authorities domestically and internationally. We expect to concentrate on product development and engage in a limited way in product discovery, avoiding the significant investment of time and financial resources that is generally required for a promising compound to be identified and brought into clinical trials. At this time the Company is focusing its research and development efforts on Kevetrin, Prurisol, Brilacidin, and to a lesser extent on our other anti-bacterial and anti-fungal compounds.

We are a clinical stage company. We have no product sales to date and we will not receive any product revenue until we receive approval from the FDA or equivalent foreign regulatory agencies to begin marketing a pharmaceutical product. Developing pharmaceutical products, however, is a lengthy and very expensive process. Assuming we do not encounter any unforeseen safety or efficacy issues during the course of developing our product candidates, we do not expect to complete the development of a product candidate for several years, if ever.

As of December 31, 2014, we had approximately $9.5 million in cash and cash equivalents compared to $5.0 million as of June 30, 2014. We anticipate that future cash expenditures will be approximately $15.7 million over the next 12 months. We do not presently have established collaborative agreements to assist us in providing funding for the development of our drugs. We can give no assurances that such collaborative agreement funding will, in fact, be entered into in the future. Should we not enter into any collaboration agreements in the future, we may be required to secure alternative financing arrangements, find additional partners and/or defer or limit some or all of our research, development and/or clinical projects. However, we cannot provide assurance that any such opportunities presented by additional partners or alternative financing arrangements will be entirely available to us, if at all.

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Polymedix Asset Acquisition

On September 4, 2013, the Company purchased substantially all of the assets of Polymedix Inc, and Polymedix Pharmaceuticals, Inc. from the U.S. Bankruptcy Court. PolyMedix Inc. was founded in 2002 based on technology licensed from the University of Pennsylvania (Penn). The purchased bankruptcy estate included two license agreements from Penn, an exclusive patent license agreement and a nonexclusive software license agreement. The list of material intellectual property, patents, and licenses acquired and their expiration dates was disclosed at “Part I, Item 1. Intellectual Property, Patents and Licenses Acquired” of our Annual Report for the year ended June 30, 2014.

Status of Active Programs in Clinical Development

Kevetrin

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

The Phase 1 trial for Kevetrin is being conducted at Harvard Cancer Center's Dana-Farber Cancer Institute and its partner institution Beth Israel Deaconess Medical Center. The clinical trial, presently enrolling its 10th cohort, is evaluating the safety and potential efficacy of Kevetrin in patients with advanced-stage solid tumors of various types. The primary endpoints for the study are safety, determining the maximum tolerated dose and establishing the dose for a future Phase 2 clinical trials. Presently, we believe we are at the latter stage of the trial as one patient in the 9^th cohort experienced a dose limiting toxicity (DLT). Within this 9^th cohort, the Company reported the near complete disappearance of a presumed metastatic splenic lesion in a Stage 4 ovarian cancer patient who had received two cycles of Kevetrin treatment. The trial is registered on www.clinicaltrials.gov.

http://clinicaltrials.gov/ct2/show/NCT01664000?term=Kevetrin&rank=1

The expression of p21 is tightly controlled by p53. In the laboratory, Kevetrin increased the expression of p21; therefore, expression of p21 in peripheral blood lymphocytes was included as a biomarker in the Phase 1 study. Among patients enrolled in the 8^th cohort of the ongoing Kevetrin trial, results showed significant enhancement of p21 expression in 50% of these patients. These findings represents a positive signal for the potential efficacy of Kevetrin in the treatment of cancer.

University of Bologna

The University of Bologna (Italy) and The Italian Cooperative Study Group on Chronic Myeloid Leukemia (ICSG on CML) and Acute Leukemia (GIMEMA Group) plan to evaluate Kevetrin in patients with Acute Myelogenous Leukemia (AML). The planned study, a Phase 1b trial, will be titled “A Multi-Center, Open-Label, Phase 1B Study of Escalating Doses of Kevetrin (Thioureidobutyronitrile) Administered Intravenously, with Cytarabine Administered A) Subcutaneously, or B) Intravenously, in Patients with Acute Myelogenous Leukemia (AML).” The protocol has not been finalized because the dosing regimen of Kevetrin has not yet been decided pending results from the ongoing U.S. Phase 1 study. We anticipate that the trial will start when the initial Kevetrin dosing regimen is decided. The study will be conducted and managed by the Principal Investigator at the University of Bologna.

MDAnderson Cancer Center

In June 2013, we signed a Material Transfer Agreement with the University of Texas, MDAnderson Cancer Center. MDAnderson intends to utilize in vivo and in vitro methods to research specific pathways, gene expression, mechanism of action and apoptotic activity of our cancer drugs in a range of concentrations and time points in both mutant and wild-type p53 Myeloma and Lymphoma cell lines. They also wish to study our cancer compounds against a broad array of Multiple Myeloma cell lines that are resistant to today’s FDA-approved chemotherapies. MDAnderson is covering the expenses of the research, with Cellceutix only supplying the drugs. Limited work has been done under this agreement. We believe this agreement will be more beneficial once we are further advanced in our Kevetrin clinical trial.

Prurisol

In June 2012, we participated in a pre IND meeting with the U.S. Food and Drug Administration ("FDA") pertaining to Prurisol - our compound targeting psoriasis. Cellceutix had requested the meeting for guidance on its initiatives to seek a section 505(b)(2) designation for Prurisol, which would allow the us to forgo certain early-stage studies and advance Prurisol into later-stage clinical trials. Cellceutix was advised by the FDA that a 505(b)(2) application would be an acceptable approach for Prurisol. In June 2014, we completed a Phase 1 trial as recommended by FDA that documented the relative bioavailability of the active component of Prurisol compared to a related marketed drug – Ziagen. We met with the FDA in December 2014 and received permission to move forward and begin a Phase 2 study in patients with psoriasis. We are presently manufacturing and packaging the drug supplies for the study.

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Brilacidin for Acute Bacterial Skin and Skin Structure Infections (“ABSSSI”)

The intravenous formulation of our lead antibiotic candidate, Brilacidin, has the potential to treat a variety of infections, including Acute Bacterial Skin and Skin Structure Infections (“ABSSSI”), caused by drug-sensitive or drug-resistant strains of Staphylococcus aureus, including Methicillin-Resistant Staphylococcus aureus (MRSA), and by other Gram-positive bacteria..

The Phase 2b trial entitled “A Randomized, Double-Blind Study Comparing Three Dosing Regimens of Brilacidin to Daptomycin in the Treatment of Acute Bacterial Skin and Skin Structure Infections (ABSSSI)” completed enrollment in August 2014. On October 23, 2014, we announced positive top-line efficacy data from this Phase 2b ABSSSI trial, and on January 5, 2015, we reported the corresponding 95% confidence intervals.

The trial, which began in February 2014, enrolled 215 total subjects, with approximately 25% in each of the four treatment arms. The primary endpoint was clinical success, defined as reduction of at least 20% in area of ABSSSI lesion, relative to baseline, when observed 48-72 hours after the first dose of study drug, and no rescue antibiotics administered. This is consistent with the 2013 Food and Drug Administration (FDA) guidance for ABSSSI studies and is the same endpoint used in recent approvals for ABSSSI drugs.

In treated patients assessed at 48-72 hours, 47/51 (92.2%), 46/48 (95.8%), 51/52 (98.1%), and 45/48 (93.8%) achieved clinical success in the Brilacidin 0.6 mg/kg single-dose group, Brilacidin 0.8 mg/kg single-dose group, Brilacidin 1.2 mg/kg 3-day group, and daptomycin 7-day group, respectively. The corresponding 95% confidence intervals around the clinical success rates were 85-100%, 90-100%, 94-100%, and 87-100%, respectively. Although this Phase 2b study was not powered for statistical comparisons, the 95% confidence intervals overlap, which indicates similar efficacy across all treatment groups. All Brilacidin treatment regimens were well tolerated. There were six severe adverse events (SAE) reported across the study, none of which were considered related to Brilacidin by the principal investigator. The Company believes that the trial met the Company’s clinical goals and that Brilacidin shows the potential to be a first in class drug.

In December 2014, the U.S. Food and Drug Administration (FDA) granted Qualified Infectious Disease Product (QIDP) designation for Brilacidin as a new treatment for Acute Bacterial Skin and Skin Structure Infections (ABSSSI). The QIDP designation was established as part of the Generating Antibiotic Incentives Now (GAIN) Act, passed by the U.S. Congress in July 2012, for the purpose of encouraging pharmaceutical companies to develop new antimicrobial drugs to treat serious and life-threatening infections. Receiving QIDP designation means that Brilacidin is now eligible for additional FDA incentives in the approval and marketing path, including Fast Track designation and Priority Review for development and a five-year extension of market exclusivity.

In December 2014 we submitted our end-of-Phase 2 briefing book to the FDA for discussion of our planned Phase 3 ABSSSI protocol. The FDA requested pharmacokinetic (PK) data and other reports, which we are now preparing. Upon FDA acceptance of our protocol, we can start the Phase 3 study.

Brilacidin for Oral Mucositis

In animal models of oral mucositis induced by chemoradiation, topically applied Brilacidin was shown to significantly reduce the occurrence of severe ulcerative oral mucositis by more than 90% compared to placebo. Brilacidin and related compounds have shown antibacterial, anti-biofilm and anti-inflammatory properties in various pre-clinical studies. We believe that the combination of these attributes contributed to the efficacy of Brilacidin in these animal studies. In December 2013, the Company filed an application with the U.S. Food and Drug Administration requesting Orphan Drug designation for Brilacidin as a drug candidate for the prevention of oral mucositis in patients with head and neck cancer undergoing chemoradiation treatment. FDA advised the company that the data indicate that Brilacidin could not only treat patients to prevent and/or lessen the severity radiation-induced OM but potentially also be efficacious in patients with chemotherapy-induced OM. Therefore the target population for Brilacidin-OM would exceed the number of patients qualifying for orphan drug designation.

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In September 2014, Cellceutix filed an IND (Investigative New Drug) application for a planned clinical trial titled “Phase 2, Multi-center, Randomized, Double-blind, Placebo-controlled Study to Evaluate the Efficacy and Safety of Brilacidin Oral Rinse Administered Daily for 7 Weeks in Attenuating Oral Mucositis in Patients with Head and Neck Cancer Receiving Concurrent Chemotherapy and Radiotherapy”. On October 13, 2014 Cellceutix announced the acceptance of its IND (Investigational New Drug Application) by the Food and Drug Administration for the treatment of Oral Mucositis with Brilacidin. At present, sites in the US are being identified, evaluated for participation and trained.

Brilacidin for Diabetic Foot Ulcer, Ophthalmic, and Otitic Infections and Related Formulation Work

Cellceutix is formulating and conducting preclinical experiments on topical Brilacidin for use in diabetic foot ulcer infections, ophthalmic (eye) infections, including keratitis and conjunctivitis; and for ear-related infections, such as otitis externa or draining otitis media. On July 14, 2014, the Company announced that a significant breakthrough had been made in the formulation of Brilacidin. Previously, Brilacidin was stored in a refrigerated state. The Company has now developed the formulation of Brilacidin to be stable at room temperature. However, further formulation work is still needed for each indication. Upon developing optimal formulations, the Company plans to advance these drugs into the clinic. The Company believes this work, though challenging, will be completed in the first half of 2015.

Delparantag

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

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

The Company is presently evaluating this drug for other diseases.

Compounds with Activity Against Gram-Negative Bacteria

We are evaluating several host defense protein (HDP) mimics as novel antibiotic compounds, with activity against specific strains of Enterobacteriaceae, including multi-drug resistant Klebsiella pneumoniae. The research, which is government-funded through existing grants to research institutions, is being conducted at a major university in Texas. In December 2014 a key Cellceutix collaborator, Fox Chase Chemical Diversity Center, received a 1-year extension on a subcontract from the University of Massachusetts (Amherst) under a UO1 National Institute of Health grant. The subcontract of $565,440 will be used to continue research on the development of the our platform technology of host defense protein mimics (HDP mimics or defensin-mimetics) to combat serious and life-threatening infections caused by multi-drug resistant Gram-negative bacteria. We expect to advance a lead compound toward a possible IND filing in 2015.

Compounds with Activity Against Fungal Pathogens

We have entered into a research collaboration with Fox Chase Chemical Diversity Center (FCCDC) which has led to an award of a Phase 2b Small Business Innovation Research (SBIR) grant from the National Institute of Allergy and Infectious Disease (NIAID). This $1.5 million dollar grant (over 2 years) will be directed into developing this technology platform on host defense protein (HDP) mimics for treatment of disseminated fungal infections, particularly those caused by azole-resistant Candida species. We expect to advance a lead compound toward a possible IND filing in 2015.

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Other

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

In January 2015, the Company submitted a request to the Food and Drug Administration (FDA) Division of Gastroenterology and Inborn Errors Products for a pre-Investigational New Drug (IND) meeting to discuss development of a topical defensin-mimetic compound for the indication of induction of remission of ulcerative proctitis and ulcerative proctosigmoiditis.

Results of Operations for the three months ended December 31, 2014 and 2013

Revenue

We generated no revenue and incurred operating expenses of $2.7 million and $1.6 million for the three months ended December 31, 2014 and 2013, respectively. 

Research and Development

The following table presents the research and development expenses for the three months presented, (Rounded to nearest thousands):

	Three Months Ended December 31,				%Change Increase/
	2014		2013		(decrease)
Research and development expenses – other	$	1,040,000	$	812,000		28	%
Officers payroll		401,000		95,000		322	%
Stock-based compensation – Officer		199,000		-		N/A
Employees payroll		208,000		107,000		94	%
Stock-based compensation – employees		95,000		-		N/A
Research and development expenses	$	1,943,000	$	1,014,000		92	%

Research and development expenses consist mostly of compensation and related costs for clinical trials and consultants. The increase of $929,000 in 2014 was primarily due to; an increase in stock-based compensation to our newly hired Chief Operations Officer (“COO”) of $199,000; an increase in stock-based compensation to employees of $95,000; an increase in payroll due to the year end bonus paid to our executive officers and the hiring of our COO of $306,000; and an increase in other Research and development expenses of $228,000.

Research and development expenses will increase in future periods as we expect to continue to invest an additional $15.7 million in Research and development. See Requirement for Additional Working Capital below.

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General and Administrative Expenses

The following table presents the components of general and administrative expenses for the three months presented, (Rounded to nearest thousands):

	Three Months Ended December 31,				%Change Increase/
	2014		2013		(decrease)
Advertising expenses	$	16,000	$	20,000	(20	)
Insurance expenses		33,000		32,000	3	%
Rent expenses		55,000		71,000	(23	)
Payroll expenses and payroll tax		30,000		19,000	58	%
Stock based compensation – administrative employees		12,000		105,000	(89	)
Travel expenses		47,000		17,000	176	%
Other operating expenses		51,000		66,000	(23	)
Total general and administrative expenses	$	244,000	$	330,000	(26	)

The decrease in general and administrative expenses of $85,000 was mostly related to the decrease in stock based compensation of $93,000 and offset by an increase in employee payroll expenses of $11,000.

Officers' payroll and payroll tax expenses

The following table presents the components of officers' payroll and payroll tax expenses for the three months presented, (Rounded to nearest thousands):

	Three Months Ended December 31,				%Change Increase/
	2014		2013		(decrease)
Officers' payroll and payroll tax expense
- Officers' payroll - Mr. Leo Ehrlich, CEO	$	366,000	$	106,000
- Officers' payroll - Mr. Krishna Menon, President (representing 10% of his payroll and approximately $329,000 and $95,000, representing 90 % of payroll expense paid to Mr. Krishna Menon included in research and development expense)		37,000		11,000
	$	403,000	$	117,000	244	%
Payroll tax expense		9,000		2,000	350	%
		412,000		119,000	246	%

The increase was mainly due to the bonus of $250,000 paid to each of the two officers of the end pf calendar year 2014 and the 10% increase in salary from the calendar year 2013 annual salary of $423,500, to the calendar year 2014 annual salary of $465,850.

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Other Income/Other Expenses

The following table other income/other expenses for the three months ended December 31, 2014 and 2013, respectively (rounded to nearest thousand):

	Three Months Ended December 31,						%Change Increase/
	2014			2013			(decrease)
Interest income	$	1,000		$	-		N/A	%
Interest expense		(51,000	)		(51,000	)	0	%
Other income/(expense), net	$	(50,000	)	$	(51,000	)	(2	)

Net Losses

We incurred net losses of $2.76 million and $1.60 million for the three months ended December 31, 2014 and 2013 because of above factors. 

Net Losses Attributable to Common Stockholders

We have net losses attributable to common stockholders of $2.76 million and $3.58 million for the three months ended December 31, 2014 and 2013. 

Results of Operations for the six months ended December 31, 2014 and 2013

Revenue

We generated no revenue and incurred operating expenses of $7.1 million and $2.5 million for the six months ended December 31, 2014 and 2013, respectively. 

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Research and Development

The following table presents the research and development expenses for the six months presented, (Rounded to nearest thousands):

	Six Months Ended December 31,				%Change Increase/
	2014		2013		(decrease)
Research and development expenses – other	$	1,764,000	$	1,127,000	57	%
Clinical trial payments paid for ABSSSI Trial		2,488,000		78,000	3,090	%
Study on Brilacidin		420,000		1,000	41,900	%
Officers payroll		507,000		191,000	165	%
Stock-based compensation – Officers		199,000		-	N/A	%
Employees payroll		325,000		189,000	72	%
Stock-based compensation – employees		95,000		-	N/A	%
Research and development expenses	$	5,798,000	$	1,586,000	266	%

The increase in research and development of $4.21 million in 2014 was primarily due to formulation costs and an increase in clinical trial costs for ABSSSI, psoriasis, cancer and start up costs for a oral mucositis trial.

Research and development expenses will increase in future periods because we expect to continue to invest an additional $15.7 million in the Research and development expenses. See Requirement for Additional Working Capital.

General and Administrative Expenses

The following table presents the components of general and administrative expenses for the six months presented, (Rounded to nearest thousands):

	Six Months Ended December 31,				%Change Increase/
	2014		2013		(decrease)
Advertising expenses	$	32,000	$	32,000	0	%
Insurance expenses		67,000		46,000	46	%
Rent expenses		106,000		80,000	33	%
Payroll expenses and payroll tax		48,000		32,000	50	%
Stock based compensation		12,000		105,000	(89)	%
Travel expenses		80,000		27,000	196	%
Other operating expenses		128,000		113,000	13	%
Total general and administrative expenses	$	473,000	$	435,000	9	%

The increase in general and administrative expenses of $38,000 was mostly related to the increase in rent expenses of $26,000, an increase in other operating expenses of $15,000, an increase of travel expenses of $53,000, and offset by the decrease in stock based compensation of $93,000.

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Officers' payroll and payroll tax expenses

The following table presents the components of officers' payroll and payroll tax expenses for the six months presented, (Rounded to nearest thousands):

	Six Months Ended December 31,				%Change Increase/
	2014		2013		(decrease)
Officers' payroll and payroll tax expense
-  Officers' payroll - Mr. Leo Ehrlich, CEO	$	483,000	$	212,000
- Officers' payroll - Mr. Krishna Menon, President(representing 10% of his payroll and approximately $435,000 and $191,000, representing 90% of payroll expense paid to Mr. Krishna Menon included in research and development expense)		48,000		21,000
	$	531,000	$	233,000	128	%
Payroll tax expense		11,000		4,000	175	%
		542,000		237,000	129	%

The increase was mainly due to a 10% increase in annual salary for calendar year 2014 and a bonus of $250,000 paid to each of the two officers at the end of calendar year 2014.

Other Income/Other Expenses

The following table other income/other expenses for the six months ended December 31, 2014 and 2013, respectively (rounded to nearest thousand):

	Six Months Ended December 31,						%Change Increase/
	2014			2013			(decrease)
Sundry income	$	9,000			-		N/A	%
Interest income		2,000			-		N/A	%
Interest expense		(101,000	)		(109,000	)	(7)	%
Other income/(expense), net	$	(90,000	)	$	(109,000	)	(17)	%

Net Losses

We incurred net losses of $7.2 million and $2.6 million for the six months ended December 31, 2014 and 2013 because of above factors. 

Net Losses Attributable to Common Stockholders

We have net losses attributable to common stockholders of $7.2 million and $4.6 million for the six months ended December 31, 2014 and 2013. 

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Liquidity and Capital Resources

Cash Flows

The following table provides information regarding our cash position, cash flows and capital expenditures for the six months ended December 31, 2014 and 2013, respectively (rounded to nearest thousand):

	Six Months Ended December 31,						%Change Increase/
	2014			2013			(decrease)
Net cash used in operating activities	$	(6,677,000	)	$	(2,227,000	)	200	%
Net cash used in investing activities		(395,000	)		(2,111,000	)	(81)	%
Net cash provided by financing activities		11,553,000			6,358,000		82	%
Net increase in cash and cash equivalents	$	4,481,000		$	2,020,000		122	%

The increase in net cash used in operating activities of $4.5 million versus the prior-year six-month period was mainly due to an increase in our losses from operations of $4.5 million.

Our operating activities used cash of $6.7 million, and $2.2 million for the six months ended December 31, 2014 and 2013, respectively. The use of cash in these periods principally resulted from our losses from operations, as adjusted for non-cash charges for stock-based compensation and depreciation, and changes in our working capital accounts.

Investing activities

The decrease in net cash used in investing activities of $1.7 million versus the prior-year six-month period was due to a decrease in acquiring patents of $1.8 million.

During the six months ended December 31, 2014, our investing activities used cash of $0.4 million, including the purchases of property and equipment of $ 0.01 million and patents of $0.4 million. During the six months ended December 31, 2013, our investing activities used cash of $2.1 million, including the purchases of patents of $2.1 million, offset by the proceeds of disposals from fixed assets of $0.02 million.

The increase in net cash provided by financing activities of $5.2 million versus the prior-year six-month period was due to an increase in sales of our common stock to Aspire.

During the six months ended December 31, 2014, we raised approximately $11.6 million in net cash proceeds, including $10.8 million in net proceeds from the sale of 5.0 million shares of our common stock to Aspire and $0.8 million from the exercise of warrants.

During the six months ended December 31, 2013, we raised approximately $6.4 million in net cash proceeds, including $5.6 million in net proceeds from the sale of 3.2 million shares of our common stock to Aspire and $1.0 million from the exercise of warrants, offset by payment of settlement liabilities of $0.3 million.

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Liquidity Sources

As of December 31, 2014 the Company had a cash balance of approximately $9.5 million.

Aspire Capital Agreement

On October 25, 2013, we terminated a previous agreement with Aspire Capital Fund, LLC, an Illinois limited liability company (Aspire Capital), and entered into a new stock purchase agreement (the “Purchase Agreement”) with Aspire Capital. See Note 11 of the Notes to our Consolidated Financial Statements included in Item 1 of this Quarterly Report for additional information regarding this Purchase Agreement.

During the period from October 25, 2013 to December 31, 2014, the Company had completed sales to Aspire totaling 7,500,000 shares of common stock generating gross proceeds of approximately $14.9 million. As of December 31, 2014, a balance of $5.1 million remains and is available under the financing arrangement.

From January 1, 2015 to February 5, 2015, the Company has generated additional proceeds of approximately $3,031,000 under the Common Stock Purchase Agreement with Aspire from the sale 800,000 shares of its common stock.

The Company expects to incur losses from its operations for the next few years. We expect to incur increasing research and development expenses, including expenses related to additional clinical trials. We expect that our general and administrative expenses will increase in the future as we expand our business development, add employees, consultants, infrastructure and incur additional costs related to being a public company, including incremental audit fees for compliance with the provisions of the Sarbanes-Oxley Act, investor relations programs and increased professional services. Based upon our expected rate of expenditures, we currently do not have sufficient cash reserves to meet all of our anticipated obligations through our fiscal year end of June 30, 2015. 

Requirement for Additional Working Capital

Research and Development Costs. We intend to use the net proceeds from the above Aspire transaction to fund our product development programs and for general corporate purposes, and therefore anticipate having sufficient funds to meet our planned drug development for the next twelve months. We plan to incur the following expenses of approximately $15.7 million over the next twelve months: 

1. Research and Development: $1.5 million in preclinical development costs including testing Kevetrin on additional tumors, and advancement of our anti- infective, anti- inflammatory and anti-fungal compounds towards clinical trials.

2. Clinical trials - $10.0 million: We have budgeted $0.5 million for our Phase 1 Kevetrin trials; $2.5 million for the Prurisol phase 2/3 trials; $3.5 million during 2015 for Brilicidin ABSSSI Phase 3 trials. We expect the total cost of the ABSSSI clinical trial to range between $6 million-$12 million (depending upon the final directives from the FDA as to the needed patient population). The trial is expected to take one year with the bulk of trial costs in 2016; $3.0 million for the planned Brilicidin Oral Mucositis Phase 2 trials, and $0.5 million Phase 2 pilot study on Ulcerative Proctitis.

3. Corporate overhead of $4.0 million: Budgeted office salaries, legal, accounting and other costs expected to be incurred.

4. Capital costs of $0.2 million: Estimated cost for equipment and laboratory improvements.

The Company will be unable to proceed with its full planned drug development programs, meet its administrative expense requirements, capital costs, or staffing costs without accessing approximately $5 million (as per current management’s budgets) of our remaining financing available with Aspire Capital.

Management intends to obtain capital or debt financing, as required, to fund the Company's operations for the next 12 months. There can be no assurance that the Company will be able to obtain the additional capital resources on terms and conditions acceptable to the Company to fund its anticipated obligations for the next twelve months. 

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Contractual Obligations

Below is a table that presents our contractual obligations and commercial commitments as of December 31, 2014 (rounded to the nearest thousand):

	Payments Due by Period
	Total		Less than One Year		2-3 Years		4-5 Years		More than 5 Years
Lease obligations(1)	$	785,000	$	105,000	$	418,000	$	262,000	$	-
Total	$	785,000	$	105,000		418,000	$	262,000	$	-

(1) The Company signed a lease extension agreement with Cummings Properties which began on October 1, 2013. The lease is for a term of five years ending on September 30, 2018, and requires monthly payments of $17,000. We will receive $900 per month from the sublease of 200 square feet of space to Innovative Medical Research Inc., a company owned by Leo Ehrlich and Dr. Krishna Menon, officers of our Company, which is not included in the table above.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements, as defined in Item 304(a)(4)(ii) of Regulation S-K under the Securities Exchange Act of 1934, as amended.

Critical Accounting Policies and Estimates

Use of Estimates

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

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Accounting for Stock Based Compensation

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

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

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

We have elected to use the Black-Scholes-Merton pricing model to determine the fair value of stock options on the dates of grant. Restricted stock units are measured based on the fair market values of the underlying stock on the dates of grant. We recognize stock-based compensation using the straight-line method.

Intangible Assets

Intangible assets primarily consist of legal and filing costs associated with obtaining patents and licenses and are amortized on a straight-line basis over their remaining useful lives which are estimated to be 12-17 years from the effective dates of the patent filing.

Management has reviewed its long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset might not be recoverable and its carrying amount exceeds its fair value, which is based upon estimated undiscounted future cash flows. Net assets are recorded on the balance sheet for patents. However, if a competitor were to gain FDA approval for a treatment before us or if future clinical trials fail to meet the targeted endpoints, the Company would likely record an impairment related to these assets. In addition, if an application is rejected or fails to be issued, the Company would record an impairment of its estimated book value.

Contingencies

Management assesses the probability of loss for certain contingencies and accrues a liability and/or discloses the relevant circumstances, as appropriate. Management discloses any liability which, taken as a whole, may have a material adverse effect on the financial condition of the Company.

Recent Accounting Pronouncements

As disclosed in Note 3 of the Notes to our Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report Form on 10-Q.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company's "disclosure controls and procedures" (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of December 31, 2014.

Changes in Internal Control Over Financial Reporting

During the quarter ended December 31, 2014, we have taken certain actions to remediate the material weakness related to our prior lack of analysis of certain research and development expenses incurred. Management reviewed its research and development costs this quarter to insure all research and development costs are expensed in the proper accounting period.

We believe the measures described above remediated the material weakness identified above and will continue to strengthen our internal controls over financial reporting.

Other than as described above, there were no changes in our internal control over financial reporting during the quarter ended December 31, 2014, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A. RISK FACTORS

Investing in the Company's common stock involves a high degree of risk. Prospective investors should carefully consider the risks described below, together with all of the other information included or referred to in our Annual Report on Form 10-K, before purchasing shares of the Company's common stock. There are numerous and varied risks, known and unknown, that may prevent the Company from achieving its goals. The risks described below are not the only ones the Company will face. If any of these risks actually occur, the Company's business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of the Company's common stock could decline and investors in the Company's common stock could lose all or part of their investment.

Risks Specific to Us

We need to raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds when needed and on acceptable terms, which could prevent us from fully implementing our business, operating and development plans.

We currently have an approximate $9.5 million cash balance in the bank but that is insufficient to complete the development and commercialization of any of our proposed products. We expect to incur costs of approximately $15.7 million in the upcoming twelve months to operate our business in accordance with our business plans and budgets.

If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences, which are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, our business, operating results, financial condition and prospects could be materially and adversely affected and we may be unable to continue our operations.

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We may be unable to secure this amount of financing on terms and conditions acceptable to the Company. In the event that we cannot obtain acceptable financing, we would be unable to complete preclinical development projects, and clinical trials for Kevetrin, Prurisol, and Brilacidin. This will delay:

· research and development programs;

· preclinical studies and clinical trials; material characterization studies, regulatory processes;

· establishment of our own laboratory or a search for third party marketing partners to market our products for us.

The amount of capital we may require will depend on many factors, including the:

· progress, timing and scope of our research and development programs;

· progress, timing and scope of our preclinical studies and clinical trials;

· time and cost necessary to obtain regulatory approvals;

· time and cost necessary to establish our own marketing capabilities or to seek marketing partners;

· time and cost necessary to respond to technological and market developments;

· changes made or new developments in our existing collaborative, licensing and

· other commercial relationships; and

· new collaborative, licensing and other commercial relationships that we may establish.

Our fixed expenses, such as rent and other contractual commitments, may increase in the future, as we may:

· enter into leases for new facilities and capital equipment;

· enter into additional licenses and collaborative agreements; and

· incur additional expenses associated with being a public company.

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The report of our independent registered public accounting firm includes a going concern opinion, and we may not be profitable in the future, if ever. 

As of December 31, 2014, we had approximately $9.5 million of cash available to support operations or our business plan. Our operating cash needs, cash consumption, and doubt as to whether we will ever become profitable, are factors which raise substantial doubt as to our ability to continue as a going concern. Consequently, our independent registered public accounting firm has included a going concern paragraph in its audit report which is included in our Annual Report on Form 10-K for our fiscal year ended June 30, 2014. It is uncertain at this time how the going concern language by our independent registered public accounting firm will affect our ability to raise capital. If we are unable to achieve revenues or obtain financing on terms and conditions acceptable to the Company, then we may not be able to commence revenue-generating operations or continue as an on-going concern. 

The sale of our Class A Common Stock to Aspire Capital may cause substantial dilution to our existing stockholders and the sale of the shares of Class A Common Stock acquired by Aspire Capital could cause the price of our Class A Common Stock to decline, which could have a materially adverse effect on our business.

We have registered for sale the Commitment Shares that we have issued to Aspire Capital, and an additional 13,789,477 shares of Class A Common stock that we may sell to Aspire Capital under the Purchase Agreement. It is anticipated that shares registered in the Aspire offering will be sold over a period of up to approximately 36 months from October 25, 2013, the date of the signing of the Purchase Agreement. The number of shares ultimately offered for sale by Aspire Capital under the prospectus is dependent upon the number of shares we elect to sell to Aspire Capital under the Purchase Agreement. Depending upon market liquidity at the time, sales of shares of our Class A Common Stock under the Purchase Agreement may cause the trading price of our Class A Common Stock to decline.

During the period from October 25, 2013 to December 31, 2014, the Company completed sales to Aspire totaling 7,500,000 shares of common stock generating gross proceeds of approximately $14.9 million. As of December 31, 2014, a balance of $5.1 million remains and is available under the financing arrangement. From January 1, 2015 to February 5, 2015, the Company has generated additional proceeds of approximately $3,031,000 under the Common Stock Purchase Agreement with Aspire from the sale 800,000 shares of its common stock.

Aspire Capital may ultimately purchase all, some or none of the Class A Common Stock that, together with the Commitment Shares, is the subject of the prospectus. Aspire Capital may sell all, some or none of its shares that it holds or comes to hold under the Purchase Agreement. Sales by Aspire Capital of shares acquired pursuant to the Purchase Agreement under the registration statement, may result in dilution to the interests of other holders of our Class A Common Stock. The sale of a substantial number of shares of our Class A Common Stock by Aspire Capital, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. However, we have the right to control the timing and amount of sales of our shares to Aspire Capital, and the Purchase Agreement may be terminated by us at any time at our discretion without any penalty or cost to us.

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All of our Polymedix drug product candidates are licensed from or based upon licenses from the University of Pennsylvania. Upon our purchase of the Polymedix Assets we assumed all contractual rights and obligations of the licenses. If any of these license agreements are terminated, our ability to advance our Polymedix product candidates or develop new product candidates will be materially adversely affected which could have a materially adverse effect on our business.

We now depend, and will continue to depend, on our Polymedix licenses and potentially on other licensing arrangements and/or strategic relationships with third parties for the research, development, manufacturing and commercialization of our Polymedix product candidates. If any of our licenses or relationships are terminated or breached, we may:

· lose our rights to develop and market our Polymedix product candidates;

· lose patent and/or trade secret protection for our Polymedix product candidates;

· experience significant delays in the development or commercialization of our Polymedix product candidates;

· not be able to obtain any other licenses on acceptable terms, if at all; and/or

· incur liability for damages.

If we experience any of the foregoing, it could have a materially adverse effect on our business and could force us to cease operations which could cause you to lose all of your investment.

We have no products approved for commercial sale, have never generated any revenues, and may never achieve revenues or profitability.

We are a biopharmaceutical company. Currently, we have no products approved for commercial sale and, to date, we have not generated any revenues. Our ability to generate revenue depends heavily on:  

successful demonstration in clinical trials that our drug candidates, Kevetrin, Prurisol, and Brilacidin are safe and effective;

· our ability to seek and obtain regulatory approvals, including with respect to the indications we are seeking;

· the successful commercialization of our product candidates; and

· market acceptance of our products.

If we do not successfully develop and commercialize at least one of our compounds, we will not achieve revenues or profitability in the foreseeable future, if at all. If we are unable to generate revenues or achieve profitability, we may be unable to continue our operations. 

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We have a limited operating history, making it difficult for you to evaluate our business and your investment, and we may never generate any revenue which could cause us to cease operations.

The development of our proposed products are subject to all of the risks inherent in the establishment of a new business enterprise, including but not limited to: 

· the absence of an operating history;

· the lack of commercialized products;

· insufficient capital;

· expected substantial and continual losses for the foreseeable future;

· limited experience in dealing with regulatory issues;

· the lack of manufacturing experience and limited marketing experience;

· possible reliance on third parties for the development and commercialization of our proposed products;

· a competitive environment characterized by numerous, well-established and well capitalized competitors; and

· reliance on key personnel.

Because we are subject to these risks, you may have a difficult time evaluating our business and your investment in our Company. Our ability to become profitable depends primarily on the following factors:

· our ability to develop drugs, obtain approval for such drugs, and if approved, to successfully commercialize our drugs;

· our R&D efforts, including the timing and cost of clinical trials; and

· our ability to enter into favorable alliances with third-parties who can provide substantial capabilities in clinical development, regulatory affairs, sales, marketing and distribution.

Even if we successfully develop and market our drug candidates, we may not generate sufficient or sustainable revenue to achieve or sustain profitability, which could cause us to cease operations.

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We have limited experience in drug development and may not be able to successfully develop any drugs. 

We have limited experience in drug development and may not be able to successfully develop any drugs. Our ability to achieve revenues and profitability in our business will depend, among other things, on our ability to:

· develop products internally or obtain rights to them from others on favorable terms; 

· complete laboratory testing and human studies; 

· obtain and maintain necessary intellectual property rights to our products; 

· successfully complete regulatory review to obtain requisite governmental agency approvals 

· enter into arrangements with third parties to manufacture our products on our behalf; and 

· enter into arrangements with third parties to provide sales and marketing functions. 

If we are unable to achieve revenues and profitability, then we will be forced to cease operations which could cause you to lose all of your investment.

Development of pharmaceutical products is a time-consuming process, subject to a number of factors, many of which are outside of our control. Consequently, we can provide no assurance of the successful and timely development of new drugs, and the failure to do so could cause us to cease operations.

Our drug candidates are in developmental stages, or in phase 1, and phase 2 clinical stages, but have not yet reached the most important clinical phase 3 stage. Further development and extensive testing will be required to determine their technical feasibility and commercial viability. Our success will depend on our ability to achieve scientific and technological advances and to translate such advances into reliable, commercially competitive drugs on a timely basis. Drugs that we may develop are not likely to be commercially available for several years, if ever. The proposed development schedules for our drug candidates may be affected by a variety of factors, including technological difficulties, proprietary technology of others, and changes in government regulation, many of which will not be within our control. Any delay in the development, introduction or marketing of our drug candidates could result either in such drugs being marketed at a time when their cost and performance characteristics would not be competitive in the marketplace or in the shortening of their commercial lives. In light of the long-term nature of our projects, the unproven technology involved and the other factors described elsewhere in “Risk Factors”, we may not be able to complete successfully the development or marketing of any of our drug candidates. 

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We may fail to successfully develop and commercialize our drug candidates because they:

· are found to be unsafe or ineffective in clinical trials; 

· do not receive necessary approval from the FDA or foreign regulatory agencies; 

· fail to conform to a changing standard of care for the diseases they seek to treat; or 

· are less effective or more expensive than current or alternative treatment methods.

Drug development failure can occur at any stage of clinical trials and as a result of many factors and there can be no assurance that we will reach our anticipated clinical targets. Even if we complete our clinical trials, we do not know what the long-term effects of exposure to our drug candidates will be. Furthermore, our drug candidates may be used in combination with other treatments and there can be no assurance that such use will not lead to unique safety issues. Failure to complete clinical trials or to prove that our drug candidates are safe and effective would have a material adverse effect on our ability to generate revenue and could require us to reduce the scope of or discontinue our operations, which could cause you to lose all of your investment.

We must comply with significant and complex government regulations, compliance with which may delay or prevent the commercialization of our drug candidates which could have a materially adverse effect on our business.

The R&D, manufacture and marketing of drug candidates are subject to regulation, primarily by the FDA in the United States, and by comparable authorities in other countries. These national agencies and other federal, state, local and foreign entities regulate, among other things, R&D activities (including testing in animals and in humans) and the testing, manufacturing, handling, labeling, storage, record keeping, approval, advertising and promotion of the products that we are developing. Noncompliance with applicable requirements can result in various adverse consequences, including approval delays or refusals to approve drug licenses or other applications, suspension or termination of clinical investigations, revocation of approvals previously granted, fines, criminal prosecution, recalls or seizures of products, injunctions against shipping drugs and total or partial suspension of production and/or refusal to allow a company to enter into governmental supply contracts. 

The process of obtaining FDA approval for a drug has historically been costly and time consuming. Current FDA requirements for a new human drug or biological product to be marketed in the United States include: (i) the successful conclusion of pre-clinical laboratory and animal tests, if appropriate, to gain preliminary information on the product's safety; (ii) filing with the FDA of an IND application to conduct human clinical trials for drugs or biologics; (iii) the successful completion of adequate and well-controlled human clinical investigations to establish the safety and efficacy of the product for its recommended use; and (iv) filing by a company and acceptance and approval by the FDA of a New Drug Application (“NDA”), for a drug product or a biological license application (“BLA”), for a biological product to allow commercial distribution of the drug or biologic. A delay in one or more of the procedural steps outlined above could be harmful to the Company in terms of getting our drug candidates through clinical testing and to market. 

The FDA reviews the results of the clinical trials and may order the temporary or permanent discontinuation of clinical trials at any time if it believes the drug candidate exposes clinical subjects to an unacceptable health risk. Investigational drugs used in clinical studies must be produced in compliance with current good manufacturing practice (“cGMP”) rules pursuant to FDA regulations. 

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Sales outside the United States of products that we develop will also be subject to additional regulatory requirements governing human clinical trials and marketing for drugs and biological products and devices. The requirements vary widely from country to country, but typically the registration and approval process takes several years and requires significant resources.

We also are subject to the following risks and obligations, related to the approval of our products:

· The FDA or foreign regulators may interpret data from pre-clinical testing and clinical trials in different ways than we interpret them.

· If regulatory approval of a product is granted, the approval may be limited to specific indications or limited with respect to its distribution. In addition, many foreign countries control pricing and coverage under their respective national social security systems.

· The FDA or foreign regulators may not approve our manufacturing processes or manufacturing facilities.

· The FDA or foreign regulators may change their approval policies or adopt new regulations.

· Even if regulatory approval for any of our product is obtained, the corresponding marketing license will be subject to continual review, and newly discovered or developed safety or effectiveness data may result in suspension or revocation of the marketing license.

· If regulatory approval of the product candidate is granted, the marketing of that product would be subject to adverse event reporting requirements and a general prohibition against promoting products for unapproved uses.

· In some foreign countries, we may be subject to official release requirements that require each batch of the product we produce to be officially released by regulatory authorities prior to its distribution by us.

· We will be subject to continual regulatory review and periodic inspection and approval of manufacturing modifications, including compliance with cGMP regulations.

If we do not have the requisite resources to comply with all applicable regulations, then we could be forced to cease operations which could cause you to lose all of your investment.

Even if we were to successfully develop approvable drugs, we will not be able to sell these drugs if we or our third party manufacturers fail to comply with manufacturing regulations. 

If we were to successfully develop approvable drugs, before we can begin selling these drugs, we must obtain regulatory approval of our cGMP manufacturing facility and process or the cGMP manufacturing facility and process of the third party or parties with whom we may outsource our manufacturing activities. The cGMP regulations govern quality control and documentation policies and procedures. Our manufacturing facilities, if any in the future, and the manufacturing facilities of our third party manufacturers will be continually subject to inspection by the FDA and other state, local and foreign regulatory authorities, before and after product approval. We cannot guarantee that we, or any potential third party manufacturer of our products, will be able to comply with the cGMP regulations or other applicable manufacturing regulations, and any failure to comply could have a materially adverse effect on our business.

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We can provide no assurance that our drug candidates will obtain regulatory approval or that the results of clinical studies will be favorable, and if we fail to obtain such approval or if clinical studies are not favorable, we could be forced to cease operations.

Presently, we are in a Phase 1 clinical trial for Kevetrin, our anti-cancer drug; preparing for a Phase 2 study for Prurisol (anti-psoriasis); commencing a Phase 2 for Brilacidin-OM (oral mucositis); and plan a Phase 3 for Brilacidin (ABSSSI). The work-plan we have developed for the next twelve months should enable us to advance Kevetrin’s clinical trial to Phase 2; commence Phase 2 clinical trials for Prurisol and Brilacidin-OM; and commence Phase 3 clinical trials for Brilacidin (ABSSSI).

The testing, marketing and manufacturing of any product for use in the United States will require approval from the FDA. We cannot predict with any certainty the amount of time necessary to obtain such FDA approval and whether any such approval will ultimately be granted. Preclinical and clinical trials may reveal that one or more products are ineffective or unsafe, in which event further development of such products could be seriously delayed or terminated. Moreover, obtaining approval for certain products may require testing on human subjects of substances whose effects on humans are not fully understood or documented. Delays in obtaining FDA or any other necessary regulatory approvals of any proposed drugs, and failure to receive such approvals, would have an adverse effect on the drug's potential commercial success and on our business, prospects, financial condition and results of operations. In addition, it is possible that a proposed drug may be found to be ineffective or unsafe due to conditions or facts that arise after development has been completed and regulatory approvals have been obtained. In this event, we may be required to withdraw such proposed drug from the market. To the extent that our success will depend on any regulatory approvals from government authorities outside of the United States that perform roles similar to that of the FDA, uncertainties similar to those stated above will also exist.

Even if our product candidate Prurisol receives regulatory approval, commercialization may be adversely affected by regulatory actions requiring a boxed warning, which could have a materially adverse effect on our business.

Even if we receive regulatory approval for our psoriasis product candidate Prurisol, we expect an approval to include a boxed warning regarding possible severe health risks and side effects. Products with boxed warnings are subject to more restrictive regulations than products without such warnings. Boxed restrictions would make it more difficult to market Prurisol, and the added regulation could require us to expend resources that we may not have which could delay or prevent commercialization of that product which could have a materially adverse effect on our business.

Even if we obtain regulatory approvals, our marketed drug candidates will be subject to ongoing regulatory review. If we fail to comply with continuing U.S. and foreign regulations, we could lose our approvals to market these drugs and our business would be seriously harmed.

Following any initial regulatory approval of any drugs we may develop, we will also be subject to continuing regulatory review, including the review of adverse experiences and clinical results that are reported after our drug candidates are made commercially available. This would include results from any post-marketing tests or vigilance required as a condition of approval. The manufacturer and manufacturing facilities we contract with to make any of our drug candidates will also be subject to periodic review and inspection by the FDA. The discovery of any previously unknown problems with the drug, manufacturer or facility may result in restrictions on the drug or manufacturer or facility, including withdrawal of the drug from the market. We do not have, and currently do not intend to develop, the ability to manufacture material for our clinical trials or on a commercial scale. Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured drugs ourselves, including reliance on the third-party manufacturer for regulatory compliance. Our drug promotion and advertising is also subject to regulatory requirements and continuing FDA review. If we are required to withdraw all or more of our drugs from the market as a result of actions or inactions on the part of the Company or a third party, we may be unable to continue revenue generating operations which could cause you to lose all of your investment.

We have limited experience in conducting or supervising clinical trials and must outsource all clinical trials which expose us to risks which could have a materially adverse effect on our business.

We have limited experience in conducting and supervising clinical trials that must be performed to obtain data to submit in concert with applications for approval by the FDA. The regulatory process to obtain approval for drugs for commercial sale involves numerous steps. Drugs are subjected to clinical trials that allow development of case studies to examine safety, efficacy, and other issues to ensure that sale of drugs meets the requirements set forth by various governmental agencies, including the FDA. In the event that our protocols do not meet standards set forth by the FDA, or that our data is not sufficient to allow such trials to validate our drugs in the face of such examination, we might not be able to meet the requirements that allow our drugs to be approved for sale, which could have a materially adverse effect on our business.

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Because we have limited experience in conducting or supervising clinical trials, we outsource a significant amount of the work relating to our clinical trials to third parties. We have no control over their compliance with procedures and protocols used to complete clinical trials in accordance with standards required by the agencies that approve drugs for sale. If these subcontractors fail to meet these standards, the validation of our drugs would be adversely affected, causing a delay in our ability to engage in revenue-generating operations which could have a materially adverse effect on our business.

We are subject to risks inherent in conducting clinical trials. The risk of non compliance with FDA-approved good clinical practices by clinical investigators, clinical sites, or data management services could delay or prevent us from developing or ever commercializing our drug candidates, which could cause us to cease operations.

Agreements with clinical investigators and medical institutions for clinical testing and with other third parties for data management services place substantial responsibilities on these parties, which could result in delays in, or termination of, our clinical trials if these parties fail to perform as expected. For example, if any of our clinical trial sites fail to comply with FDA-approved good clinical practices, we may be unable to use the data gathered at those sites. If these clinical investigators, medical institutions or other third parties do not carry out their contractual duties or obligations or fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols or for other reasons, our clinical trials may be extended, delayed or terminated, and we may be unable to obtain regulatory approval for or successfully commercialize our drug candidates. 

We or regulators may suspend or terminate our clinical trials for a number of reasons. We may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to the patients enrolled in our clinical trials. In addition, regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk to the patients enrolled in our clinical trials. In addition, clinical trials may have independent monitoring boards composed of experts in the field. These boards may also have the authority to suspend or terminate clinical trials. 

Our clinical trial operations will be subject to regulatory inspections at any time. If regulatory inspectors conclude that we or our clinical trial sites are not in compliance with applicable regulatory requirements for conducting clinical trials, we may receive reports of observations or warning letters detailing deficiencies, and we will be required to implement corrective actions. If regulatory agencies deem our responses to be inadequate, or are dissatisfied with the corrective actions that we or our clinical trial sites have implemented, our clinical trials may be temporarily or permanently discontinued, we may be fined, we or our investigators may be precluded from conducting any ongoing or any future clinical trials, the government may refuse to approve our marketing applications or allow us to manufacture or market our drug candidates or we may be criminally prosecuted. If we are unable to complete clinical trials and have our products approved due to our failure to comply with regulatory requirements, we will be unable to commence revenue generating operations which could force us to cease operations.

The Company is exposed to product liability, clinical and preclinical liability risks which could place a substantial financial burden upon the Company should it be sued. 

The Company could be exposed to potential product liability and other liability risks that are inherent in the testing, manufacturing and marketing of pharmaceutical products. In addition, the use in the Company's clinical trials of pharmaceutical products that it may develop and the subsequent sale of these products by the Company or its potential collaborators may cause the Company to bear a portion of or all product liability risks. A successful liability claim or series of claims brought against the Company could have a material adverse effect on its business, financial condition and results of operations.

The Company has $5,000,000 in liability insurance for our clinical trials. The Company cannot assure that such insurance will provide adequate coverage against the Company's potential liabilities. Claims or losses in excess of any product liability insurance coverage that may be obtained by the Company could have a material adverse effect on our business, financial condition and results of operations.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information. Disclosure of our trade secrets or proprietary information could compromise any competitive advantage that we have, which could have a materially adverse effect on our business.

We depend upon confidentiality agreements with our officers, employees, consultants, and subcontractors to maintain the proprietary nature of the technology. These measures may not afford us sufficient or complete protection, and may not afford an adequate remedy in the event of an unauthorized disclosure of confidential information. In addition, others may independently develop technology similar to ours, otherwise avoiding the confidentiality agreements, or produce patents that would materially and adversely affect our business, prospects, financial condition, and results of operations.

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We may be unable to obtain or protect intellectual property rights relating to our products, and we may be liable for infringing upon the intellectual property rights of others, which could have a materially adverse effect on our business.

Our ability to compete effectively will depend on our ability to maintain the proprietary nature of our compounds and the proprietary compounds of others with which we have entered into licensing agreements. We have filed two patent applications and expect to file a number of additional patent applications in the coming years. There can be no assurance that any of these patent applications will ultimately result in the issuance of a patent with respect to the proprietary compounds owned by us or licensed to us. The patent position of pharmaceutical or biotechnology companies, including ours, is generally uncertain and involves complex legal and factual considerations. The standards that the United States Patent and Trademark Office use to grant patents are not always applied predictably or uniformly and can change. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in pharmaceutical or biotechnology patents. Accordingly, we do not know the degree of future protection for our proprietary rights or the breadth of claims that will be allowed in any patents issued to us or to others. Further, we rely on a combination of trade secrets, know-how, technology and nondisclosure, and other contractual agreements and technical measures to protect our rights in the proprietary compounds. If any trade secret, know-how or other proprietary information and/or compounds not protected by a patent were to be disclosed to or independently developed by a competitor, our business and financial condition could be materially adversely affected.

We do not believe that any of the drug candidates we are currently developing infringe upon the rights of any third parties nor are they infringed upon by third parties; however, there can be no assurance that our proprietary compounds will not be found in the future to infringe upon the rights of others or be infringed upon by others. In such a case, others may assert infringement claims against us, and should we be found to infringe upon their patents, or otherwise impermissibly utilize their intellectual property, we might be forced to pay damages, potentially including treble damages, if we are found to have willfully infringed on such parties' patent rights. In addition to any damages we might have to pay, we may be required to obtain licenses from the holders of this intellectual property, enter into royalty agreements, or redesign our drug candidates so as not to utilize this intellectual property, each of which may prove to be uneconomical or otherwise impossible. Conversely, we may not always be able to successfully pursue our claims against others that infringe upon our proprietary compounds. Thus, the proprietary nature of our technology or technology licensed by us may not provide adequate protection against competitors. 

Moreover, the cost to us of any litigation or other proceeding relating to our patents and other intellectual property rights, even if resolved in our favor, could be substantial, and the litigation would divert our management's efforts. Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue our operations.

Our potential collaborative relationships with third parties could cause us to expend significant resources and incur substantial business risk with no assurance of financial return, which could have a materially adverse effect on our business. 

We may have to rely substantially upon strategic collaborations for marketing and the commercialization of our drug candidates, and we may rely even more on strategic collaborations for R&D of our other drug candidates. Our business will depend on our ability to sell drugs to both government agencies and to the general pharmaceutical market. We may have to sell our drugs through strategic partnerships with pharmaceutical companies. If we are unable to establish or manage such strategic collaborations on terms favorable to us in the future, our revenue and drug development may be limited. To date, we have not entered into any strategic collaboration with third parties capable of providing these services. In addition, we have not yet marketed or sold any of our drug candidates or entered into successful collaborations for these services in order to ultimately commercialize our drug candidates. 

If we determine to enter into R&D collaborations during the early phases of drug development, our success will in part depend on the performance of our research collaborators. We will not directly control the amount or timing of resources devoted by our research collaborators to activities related to our drug candidates. Our research collaborators may not commit sufficient resources to our programs. If any research collaborator fails to commit sufficient resources, our preclinical or clinical development programs related to this collaboration could be delayed or terminated. Also, our collaborators may pursue existing or other development-stage products or alternative technologies in preference to those being developed in collaboration with us. Finally, if we fail to make required milestone or royalty payments to our collaborators, or to observe other obligations in our agreements with them, our collaborators may have the right to terminate those agreements. 

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Management of our relationships with our collaborators will require:

· significant time and effort from our management team; 

· coordination of our marketing and R&D programs with the marketing and R&D priorities of our collaborators; and 

· effective allocation of our resources to multiple projects. 

Establishing strategic collaborations is difficult and time-consuming. Our discussion with potential collaborators may not lead to the establishment of collaborations on favorable terms, if at all. Potential collaborators may reject collaborations based upon their assessment of our financial, regulatory or intellectual property position. Even if we successfully establish new collaborations, these relationships may never result in the successful development or commercialization of our drug candidates or the generation of sales revenue. To the extent that we enter into collaborative arrangements, our drug revenues are likely to be lower than if we directly marketed and sold any drugs that we may develop. 

We may not be able to attract and retain highly skilled personnel or consultants, which could have a materially adverse effect on our business. 

Our ability to attract and retain highly skilled personnel or consultants is critical to our operations and expansion. We face competition for these types of personnel from other pharmaceutical companies and more established organizations, many of which have significantly larger operations and greater financial, technical, human and other resources than us. We may not be successful in attracting and retaining qualified personnel or consultants on a timely basis, on competitive terms, or at all. If we are not successful in attracting and retaining these personnel or consultants, our business, prospects, financial condition and results of operations will be materially adversely affected.

We depend upon our senior management and their loss or unavailability could put us at a competitive disadvantage. 

We depend upon the efforts and abilities of our management team. On December 29, 2010, the Company entered into employment agreements with its two executive officers, Leo Ehrlich, the Company’s Chief Executive and Financial Officer, and Krishna Menon, Chief Scientific Officer for a period of three years ending on December 31, 2013. On January 1, 2014, the Board of Directors of the Company approved an extension of the Employment Agreements with Leo Ehrlich and Krishna Menon for a one year period with a 10% increase in salary from the previous annual salary of $423,500 each, to an annual salary of $465,850. On October 20, 2014 the Board of Directors approved the appointment of Dr. William James Alexander as the Chief Operations Officer of the Company for the term of one year effective October 27, 2014.

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There are conflicts of interest among our officers, directors and stockholders. 

Certain of our executive officers and directors and their affiliates are engaged in other activities and have interests in other entities on their own behalf or on behalf of other persons. Neither we nor any of our stockholders will have any rights in these ventures or their income or profits. In particular:

· Our executive officers or directors or their affiliates may have an economic interest in, or other business relationship with, partner companies that invest in us or are engaged in competing drug development; and

· Previously, Kard Scientific, a company controlled by Dr. Krishna Menon, President and Director, provided preclinical and manufacturing services to the Company and leased space to the Company. 

·  Innovative Medical Research Inc., a company owned by Leo Ehrlich and Dr. Krishna Menon, leases space from the Company and is engaged in research. 

In either of these cases:

· Our executive officers or directors may have a conflict between our current interests and their personal financial and other interests in another business venture; and

· Our executive officers or directors may have conflicting fiduciary duties to us and the other entity. 

While the Company is not aware of any conflict that has arisen to date, the Company does not have any policy in place to deal with such should such a conflict arise.

The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition. We may be unable to compete with enterprises equipped with more substantial resources than us, which could cause us to cease operations.

The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition based primarily on scientific and technological factors. These factors include the availability of patent and other protection for technology and products, the ability to commercialize technological developments and the ability to obtain government approval for testing, manufacturing and marketing.

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We compete with biopharmaceutical firms in the United States, Europe and elsewhere, as well as a growing number of large pharmaceutical companies that are applying biotechnology to their operations. Many biopharmaceutical companies have focused their development efforts in the human therapeutics area, including cancer. Many major pharmaceutical companies have developed or acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies. These companies, as well as academic institutions, government agencies and private research organizations, also compete with us in recruiting and retaining highly qualified scientific personnel and consultants. Our ability to compete successfully with other companies in the pharmaceutical field will also depend to a considerable degree on the continuing availability of capital on terms and conditions acceptable to us. 

We are aware of numerous products under development or manufactured by competitors that are used for the prevention or treatment of certain diseases we have targeted for drug development. Various companies are developing biopharmaceutical products that potentially directly compete with our drug candidates even though their approach to such treatment is different.

For example, with respect to Kevetrin, our lead compound for cancer, there are many drugs approved to treat various cancers and many more in the publicly disclosed pipeline. Our success depends on our ability to identify tumor types where Kevetrin has an advantage over existing therapies and those in the publicly disclosed pipeline. The same is true for our compounds Prurisol and Brilacidin. Numerous drugs are already FDA approved for the treatment of psoriasis and ABSSSI.

Our competition will be determined in part by the potential indications for which drugs are developed and ultimately approved by regulatory authorities. Additionally, the timing of the market introduction of some of our potential drugs or of competitors' products may be an important competitive factor. Accordingly, the relative speed with which we can develop drugs, complete pre-clinical testing, clinical trials, approval processes and supply commercial quantities to market are important competitive factors. We expect that competition among drugs approved for sale will be based on various factors, including product efficacy, safety, reliability, availability, price and patent protection. 

The successful development of biopharmaceuticals is highly uncertain. A variety of factors including, pre-clinical study results or regulatory approvals, could cause us to abandon development of our drug candidates, which could also cause us to cease operations and you may lose your entire investment.

Successful development of biopharmaceuticals is highly uncertain and is dependent on numerous factors, many of which are beyond our control.

Products that appear promising in the early phases of development may fail to reach the market for several reasons including:

· pre-clinical study results that may show the product to be less effective than desired (e.g., the study failed to meet its primary objectives) or to have harmful or problematic side effects;

· failure to receive the necessary regulatory approvals or a delay in receiving such approvals. Among other things, such delays may be caused by slow enrollment in clinical studies, length of time to achieve study endpoints, additional time requirements for data analysis or a IND and later NDA, preparation, discussions with the FDA, an FDA request for additional pre-clinical or clinical data or unexpected safety or manufacturing issues; 

· manufacturing costs, pricing or reimbursement issues, or other factors that make the product not economical; and 

· the proprietary rights of others and their competing products and technologies that may prevent the product from being commercialized. 

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Success in pre-clinical and early clinical studies does not ensure that large-scale clinical studies will be successful. Clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. The length of time necessary to complete clinical studies and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one product to the next, and may be difficult to predict or control.

Risks Related to the Securities Markets and Investments in Our Class A Common Stock

Because our common stock is quoted on the OTC your ability to sell your shares in the secondary trading market may be limited. 

Our Class A Common Stock is currently quoted on the OTC. Consequently, the liquidity of our Class A Common Stock is impaired, not only in the number of shares that are bought and sold, but also through delays in the timing of transactions, and coverage by security analysts and the news media, if any, of our Company. As a result, prices for shares of our Class A Common Stock may be lower than might otherwise prevail if our Class A Common Stock was quoted and traded on NASDAQ or a national securities exchange. 

Because our Class A Common Stock is considered "penny stock" you may have difficulty selling them in the secondary trading market. 

Federal regulations under the Securities Exchange Act of 1934 (the “Exchange Act”) regulate the trading of so-called "penny stocks," which are generally defined as any security not listed on a national securities exchange or NASDAQ, priced at less than $5.00 per share and offered by an issuer with limited net tangible assets and revenues. Since our Class A Common Stock currently is quoted on the OTC at less than $5.00 per share, our shares are "penny stocks" and may not be traded unless a disclosure schedule explaining the penny stock market and the risks associated therewith is delivered to a potential purchaser prior to any trade. 

In addition, because our Class A Common Stock is not listed on NASDAQ or any national securities exchange and currently is quoted at and trades at less than $5.00 per share, trading in our Class A Common Stock is subject to Rule 15g-9 under the Exchange Act. Under this rule, broker-dealers must take certain steps prior to selling a "penny stock," which steps include:

· obtaining financial and investment information from the investor; 

· obtaining a written suitability questionnaire and purchase agreement signed by the investor; and 

· providing the investor a written identification of the shares being offered and the quantity of the shares. 

If these penny stock rules are not followed by the broker-dealer, the investor has no obligation to purchase the shares. The application of these comprehensive rules will make it more difficult for broker-dealers to sell our Class A Common Stock and our stockholders, therefore, may have difficulty in selling their shares in the secondary trading market. 

45

Our stock price may be volatile and your investment in our Class A Common Stock could suffer a decline in value.

The closing price of our Class A Common Stock, as quoted on the OTC, was $4.39. The price may fluctuate significantly in response to a number of factors, many of which are beyond our control. These factors include:

· progress of our products through the regulatory process; 

· results of preclinical studies and clinical trials;

· announcements of technological innovations or new products by us or our competitors; 

· government regulatory action affecting our products or our competitors' products in both the United States and foreign countries; 

· developments or disputes concerning patent or proprietary rights; 

· general market conditions for emerging growth and pharmaceutical companies; 

· economic conditions in the United States or abroad; 

· actual or anticipated fluctuations in our operating results; 

· broad market fluctuations; and 

· changes in financial estimates by securities analysts. 

Our directors and executive officers own or control a sufficient number of shares of our Class A Common Stock to control our Company, which could discourage or prevent a takeover, even if an acquisition would be beneficial to our stockholders.

At February 5, 2015, our directors and executive officers own or control approximately 28% of our outstanding voting power of Class A Common Stock. Accordingly, these stockholders, individually and as a group, may be able to influence the outcome of stockholder votes, involving votes concerning the election of directors, the adoption or amendment of provisions in our Articles of Incorporation and bylaws and the approval of certain mergers or other similar transactions, such as sales of substantially all of our assets. Such control by existing stockholders could have the effect of delaying, deferring or preventing a change in control of our Company.

46

The dual class structure of our common stock can have the effect of concentrating voting control with Dr. Menon and/ or Mr. Ehrlich, which will limit or preclude your ability to influence corporate matters.

Our Class B common stock entitles holders to ten votes per share on all matters submitted to a vote of our stockholders and our Class A Common Stock entitles holders to one vote per share on all matters submitted to a vote of our stockholders. Dr. Menon and Mr. Ehrlich each have vested options that they can exercise and convert into 18,000,000 shares of Class B common stock. That alone could result in the equivalent of 360,000,000 votes of Class A Common Stock. As of February 5, 2015 we had 116,638,129 shares of Class A Common Stock outstanding and no shares of Class B common stock outstanding. Because of the ten-to-one voting ratio between our Class B common stock and Class A Common Stock, upon exercise and conversion of such options into shares of Class B common stock, the Class B common stock holders can collectively control a majority of the combined voting power of our common stock (i.e. approximately 46.91%) and therefore be able to control all matters submitted to our stockholders for approval. This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future.

We do not intend to pay any cash dividends in the foreseeable future and, therefore, any return on your investment in our Class A Common Stock must come from increases in the fair market value and trading price of the Class A Common Stock. 

We have not paid any cash dividends on our Class A Common Stock and do not intend to pay cash dividends on our Class A Common Stock in the foreseeable future. We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business. Any credit agreements, which we may enter into with institutional lenders, may restrict our ability to pay dividends. Whether we pay cash dividends in the future will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements and any other factors that the board of directors decides is relevant. Therefore, any return on your investment in our Class A Common Stock must come from increases in the fair market value and trading price of the Class A Common Stock. 

We may issue additional equity shares to fund the Company's operational requirements which would dilute your share ownership. 

The Company's continued viability depends on its ability to raise capital. Changes in economic, regulatory or competitive conditions may lead to cost increases. Management may also determine that it is in the best interest of the Company to develop new services or products. In any such case additional financing is required for the Company to meet its operational requirements. There can be no assurances that the Company will be able to obtain such financing on terms acceptable to the Company and at times required by the Company, if at all. In such event, the Company may be required to materially alter its business plan or curtail all or a part of its operational plans. See previous Risk titled, “The sale of our Class A Common Stock to Aspire Capital may cause substantial dilution to our existing stockholders and the sale of the shares of Class A Common Stock acquired by Aspire Capital could cause the price of our Class A Common Stock to decline, which could have a materially adverse effect on our business.”

47

Large amounts of our Class A Common Stock will be eligible for resale under Rule 144.

As of February 5, 2015, 37,680,662 of the 116,638,129 outstanding shares of our Class A Common Stock are restricted securities as defined under Rule 144 of the Securities Act and under certain circumstances may be resold without registration pursuant to Rule 144.

5,295,064 shares of our restricted shares of Class A Common Stock are held by non-affiliates who may avail themselves of the public information requirements and sell their shares in accordance with Rule 144. As a result, some or all of these shares may be sold in accordance with Rule 144 potentially causing the price of the Company's shares to decline.

In general, under Rule 144, a person (or persons whose shares are aggregated) who has satisfied a six-month holding period may, under certain circumstances, sell within any three-month period a number of securities which does not exceed the greater of 1% of the then outstanding shares of Class A Common Stock or the average weekly trading volume of the class during the four calendar weeks prior to such sale. Rule 144 also permits, under certain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate, as such term is defined in Rule 144(a)(1), of the Company and who has satisfied a one-year holding period. Any substantial sale of the Company's Class A Common Stock pursuant to Rule 144 may have an adverse effect on the market price of the Class A Common Stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

(a) Exhibit index

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

48

Exhibit No.	Title	Method of Filing
2.1	Agreement and Plan of Share Exchange, by and among EconoShare, Inc., Cellceutix Pharma, Inc., and the Shareholders of Cellceutix Pharma, Inc. dated as of December 6, 2007	Exhibit 2.1 to the Current Report on Form 8-K of the Company filed December 12, 2007
3.1	Articles of Incorporation of Cellceutix Pharma, Inc.	Exhibit 3.1 to the Current Report on Form 8-K of the Company filed December 12, 2007
3.2	By-laws of Cellceutix Pharma, Inc.	Exhibit 3.2 to the Current Report on Form 8-K of the Company filed December 12, 2007
10.1	Assignment Agreement between Cellceutix Pharma, Inc. and Krishna Menon dated August 2, 2007	Exhibit 10.3 to the Current Report on Form 8-K of the Company filed December 12, 2007
10.2	Assignment Agreement between Cellceutix Pharma, Inc. and Krishna Menon dated August 2, 2007	Exhibit 10.4 to the Current Report on Form 8-K of the Company filed December 12, 2007
10.3	Assignment Agreement between Cellceutix Pharma, Inc. and Krishna Menon dated August 2, 2007	Exhibit 10.5 to the Current Report on Form 8-K of the Company filed December 12, 2007
10.4	Assignment Agreement between Cellceutix Pharma, Inc. and Geetha Kamburath dated August 21, 2007	Exhibit 10.6 to the Current Report on Form 8-K of the Company filed on December 12, 2007
10.5	Assignment Agreement between Cellceutix Pharma, Inc. and Krishna Menon dated October 17, 2007	Exhibit 10.7 to the Current Report on Form 8-K of the Company filed on December 12, 2007
10.6	Assignment Agreement between Cellceutix Pharma, Inc. and Adam Harris dated October 17, 2007	Exhibit 10.8 to the Current Report on Form 8-K of the Company filed on December 12, 2007
10.7	Confidential Disclosure Agreement between Kard Scientific, Inc. and Cellceutix Pharma, Inc. dated September 28, 2007	Exhibit 10.9 to the Current Report on Form 8-K of the Company filed on December 12, 2007
10.8	Asset Purchase Agreement dated July 26, 2013 for the purchase of assets of Polymedix Inc, and Polymedix Pharmaceuticals, Inc. from the U.S. Bankruptcy Court completed on September 4, 2013	Exhibit 2.1 to the Current Report on Form 8-K on Form 8-K of the Company filed on September 9, 2013
10.9	Patent License Agreement, dated January 3, 2003, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the University of Pennsylvania,  Assigned by US Court to Cellceutix	Exhibit 10 to the Form 10-K for the year ended June 30, 2013 filed on September 30, 2013
10.10	Letter Agreement, dated December 23, 2003, amending the Patent License Agreement, dated January 3, 2003, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the University of Pennsylvania, Assigned by US Court to Cellceutix	Exhibit 10 to the Form 10-K for the year ended June 30, 2013 filed on September 30, 2013
10.11	Software License Agreement, dated May 30, 2003, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the University of Pennsylvania, Assigned by US Court to Cellceutix	Exhibit 10 to the Form 10-K for the year ended June 30, 2013 filed on September 30, 2013

49

10.12	Demand Unsecured Note between Cellceutix Corporation and Leo Ehrlich dated November 03, 2009	Exhibit 10.25 to the Form 10-K for the year ended June 30, 2010 filed on March 8, 2011
10.13	Demand Unsecured Note between Cellceutix Corporation and Leo Ehrlich dated May 07, 2009	Exhibit 10.26 to the Form 10-K for the year ended June 30, 2010 filed on March 8, 2011
10.14	Demand Unsecured Note between Cellceutix Corporation and Leo Ehrlich dated August 25, 2010	Exhibit 10.27 to the Form 10-K for the year ended June 30, 2010 filed on March 8, 2011
10.15	Employment Agreement between Cellceutix Corporation and Krishna Menon	Exhibit 99-2 to the Current Report on Form 8-K/A of the Company filed on February 22, 2011
10.16	Employment Agreement between Cellceutix Corporation and Leo Ehrlich	Exhibit 99-1 to the Current Report on Form 8-K/A of the Company filed on February 22, 2011
10.17	Cellceutix Corporation  2010 Equity Incentive Plan filed on Menon	Exhibit 99-3 to the Current Report on Form 8-K/A of the Company filed on February 22, 2011
10.18	First Amendment to Asset Purchase agreement dated August 30, 2013 and completed on September 4, 2013	Exhibit 2.1 to the Current Report on Form 8-K of the Company filed on September 9, 2013
10.19	Registration Rights Agreement, dated as of October 25, 2013 by and between the Company and Aspire Capital Fund, LLC.	Exhibit 10.1 to the Current Report on Form 8-K of the Company filed on October 28, 2013
10.20	Common Stock Purchase Agreement, dated as of October 25, 2013, by and between the Company and Aspire Capital Fund, LLC.	Exhibit 10.2 to the Current Report on Form 8-K of the Company filed on October 28, 2013
10.21	Intellectual Property Acquired From Polymedix	Exhibit 10.37 to the Form 10-Q for the quarterly period ended March 31, 2014 filed on May 12, 2014
10.22	Material Transfer Agreement With Beth Israel Deaconess	Exhibit 10.38 to the Form 10-Q for the quarterly period ended March 31, 2014 filed on May 12, 2014
10.23	Lease Between Cellceutix Corporation And Cummings Properties	Exhibit 10.39 to the Form 10-Q for the quarterly period ended March 31, 2014 filed on May 12, 2014
10.24	Cellceutix Aruda Agreement	Exhibit 10.1 to the Current Report on Form 8-K of the Company filed on September 2, 2014
10.25	Amendment To Menon-Cellceutix Agreement Without Changing The Total Royalties Payable Under The Terms Of The Prior Agreement	Exhibit 10.2 to the Current Report on Form 8-K of the Company filed on September 2, 2014
10.26	Assignment of Patent rights to Cellceutix by Menon	Exhibit 10.3 to the Current Report on Form 8-K of the Company filed on September 2, 2014
10.27	Employment Agreement Dr. William James Alexander dated October 23, 2014	Exhibit 10.1 to the Current Report on Form 8-K of the Company filed on October 23, 2014
10.28	Code of Ethics	Exhibit 10.15 to the Form 10-KSB of the Company for the year ended June 30, 2008 filed on September 24, 2008
31.1	Chairman of the Board and President Certifications required under Section 302 of the Sarbanes Oxley Act of 2002	Furnished herewith
31.2	Chief Executive Officer and Chief Financial Officer Certifications required under Section 302 of the Sarbanes Oxley Act of 2002	Furnished herewith
32.1	Chairman of the Board and President Certifications required under Section 906 of the Sarbanes Oxley Act of 2002	Furnished herewith
32.2	Chief Executive Officer and Chief Financial Officer Certifications required under Section 906 of the Sarbanes Oxley Act of 2002	Furnished herewith
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the six months ended December 31, 2014 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) related notes	Furnished herewith

(b) Reports on Form 8-K

(1)	The Company filed a Form 8-K on October 20, 2014 related to Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers, related to the appointment of Dr. William James Alexander as the Chief Operations Officer of Cellceutix Corporation.
(2)	The Company filed a Form 8-K on December 26, 2014 related to Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers, related to bonus payment to officers.

50

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CELLCEUTIX CORPORATION
Dated: February 9, 2015	By:	/s/ Leo Ehrlich
		Leo Ehrlich Chief Executive Officer and Chief Financial Officer and Chairman of the Board of Directors
		(Principal Executive, Accounting and Financial Officer)

By:	/s/ Krishna Menon
	Krishna Menon
	President and Director

51

EX-31.1

EXHIBIT 31.1 

CERTIFICATION

I, Krishna Menon, certify:

1.	I have reviewed this Quarterly Report on Form 10-Q of Cellceutix Corporation for the quarter ended December 31, 2014;
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 small business issuer as of, and for, the periods presented in this report;

4. The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer 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 small business issuer, 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 small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’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 small business issuer’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 small business issuer’s internal control over financial reporting.

Dated: February 9, 2015	By:	/s/ Krishna Menon
		Krishna Menon President and Director

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Leo Ehrlich, certify:

1.	I have reviewed this Quarterly Report on Form 10-Q of Cellceutix Corporation for the quarter ended December 31, 2014;
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 small business issuer as of, and for, the periods presented in this report;
4.	The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer 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 small business issuer, 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 small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’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 small business issuer’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 small business issuer’s internal control over financial reporting.

Dated: February 9, 2015	By:	/s/ Leo Ehrlich
		Leo Ehrlich, Chief Executive Officer and Chief Financial Officer and Chairman of the Board of Directors (Principal Executive, Accounting and Financial Officer)

EX-32.1

EXHIBIT 32.1 

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

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

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

The Quarterly Report on Form 10-Q for the quarter ended December 31, 2014 of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. 

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

Dated: February 9, 2015	By:	/s/ Krishna Menon
		Krishna Menon
		President and Director

EX-32.2

EXHIBIT 32.2

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

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

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

The Quarterly Report on Form 10-Q for the quarter ended December 31, 2014 of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. 

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

Dated: February 9, 2015	By:	/s/ Leo Ehrlich
		Leo Ehrlich, Chief Executive Officer and Chief Financial Officer and Chairman of the Board of Directors (Principal Executive, Accounting and Financial Officer)

XML

Stock Options and Warrants (Details Narrative) (USD $)	3 Months Ended		6 Months Ended		3 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Sep. 30, 2014	Jun. 30, 2014
Stock based compensation	$ 307,000	$ 307,000	$ 229,000	$ 255,000
Warrants/Options exercise	30,000
Proceed from warrants/Options exercise	11,200
Common Class A [Member]
Common stock, par value	$ 0.0001		$ 0.0001		$ 0.0001	$ 0.0001
Common stock purchase warrant exercisable price	$ 1				$ 1
Common stock to a warrant holder	370,500				200,000
Warrants/Options exercise	741,000				200,000
Proceed from warrants/Options exercise	$ 556,000				$ 200,000
Common Class A One [Member]
Common stock, par value	$ 0.0001		$ 0.0001
Common stock purchase warrant exercisable price	$ 0.5
Common stock to a warrant holder	370,500

XML

Commitments and Contingencies (Details Narrative) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Commitments And Contingencies Details Narrative
Operating leases, rental expense	$ 55,000	$ 106,000	$ 71,000	$ 80,000

XML

Going Concern (Details Narrative) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Jun. 30, 2014	Jun. 30, 2013
Going Concern Details Narrative
Cash and cash equivalents	$ 9,469,000	$ 4,975,000	$ 9,469,000	$ 4,975,000	$ 4,988,000	$ 2,955,000
Net loss	(2,754,000)	(3,577,000)	(7,148,000)	(4,554,000)
Working capital deficit	$ 1,828,000		$ 1,828,000		$ (4,090,000)

XML

Stock Options and Warrants (Details 1) (USD $)	3 Months Ended	6 Months Ended
	Dec. 31, 2014	Dec. 31, 2014
Exercised	(30,000)
Stock Options [Member]
Number of Outstanding, Beginning Balance		39,007,500
Granted		140,000
Exercised		(60,000)
Forfeited/expired		(30,000)
Number of Outstanding, Ending Balance	39,057,500	39,057,500
Number of Outstanding, Exercisable	39,057,500	39,057,500
Weighted Average Exercise Price, Beginning Balance		$ 0.14
Granted		$ 4.07
Exercised		$ 0.29
Forfeited/expired		$ 0.35
Weighted Average Exercise Price, Ending Balance	0.16	$ 0.16
Weighted Average Exercise Price, Exercisable	0.15	$ 0.15
Weighted average remaining contractual life (Years), Outstanding		6 years 6 months
Weighted average remaining contractual life (Years), Outstanding		5 years 11 months 27 days
Weighted average remaining contractual life (Years), Exercisable		6 years
Aggregate intrinsic value, Outstanding		$ 59,613,000
Aggregate intrinsic value, Outstanding	165,416,000	165,416,000
Aggregate intrinsic value, Exercisable	165,343,000	$ 165,343,000

XML

Patents, net

6 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 4 - Patents, net

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

	Useful life	December 31, 2014		June 30, 2014
Purchased Patent Rights– Brilacidin, and related compounds	14	$	4,082,000	$	4,082,000
Purchased Patent Rights–Delparantag and related compounds	12		480,000		480,000
Purchased Patent Rights–Anti-microbial- surfactants and related compounds	12		144,000		144,000
Patents – Kevetrin and related compounds	17		927,000		542,000
		$	5,633,000	$	5,248,000
Accumulated amortization			482,000		286,000
		$	5,151,000	$	4,962,000

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

Amortization expense for the three and six months ended December 31, 2014 and 2013 and was approximately $100,000, $80,000, $197,000, and $102,000, respectively.

At December 31, 2014, the future amortization period for all patents was approximately 11 to 16.45 years. Future estimated annual amortization expenses are approximately $199,000 for year ending June 30, 2015, approximately $398,000 for each year from 2016 to 2025, $356,000 for the year 2026, $346,000 for the year 2027, $108,000 for the year 2028, $55,000 for Years 2029 and 2030 and $52,000 for Year 2031.

XML

Patents, net (Details Narrative) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Amortization expense	$ 100,000	$ 80,000	$ 197,000	$ 102,000
Year Ending June 30, 2015 [Member]
Estimated annual amortization expense			199,000
Year 2016-2025 [Member]
Estimated annual amortization expense			398,000
Year 2026 [Member]
Estimated annual amortization expense			356,000
Year 2027 [Member]
Estimated annual amortization expense			346,000
Year 2028 [Member]
Estimated annual amortization expense			108,000
Year 2029 and 2030 [Member]
Estimated annual amortization expense			55,000
Year 2031 [Member]
Estimated annual amortization expense			$ 52,000
Minimum and Intangible Assets - Patent (Member)
Estimated remaining useful lives of the assets			12 years
Amortization period			11 years
Maxiimum and Intangible Assets - Patent (Member)
Estimated remaining useful lives of the assets			17 years
Amortization period			16 years 5 months 12 days

XML

Patents, net (Details) (USD $)	6 Months Ended
	Dec. 31, 2014	Jun. 30, 2014
Purchased Patent Rights	$ 5,633,000	$ 5,248,000
Accumulated amortization	482,000	286,000
Patent costs - net	5,151,000	4,962,000
Patents [Member]
Useful life	14 years
Purchased Patent Rights	4,082,000	4,082,000
Patents Two [Member]
Useful life	12 years
Purchased Patent Rights	480,000	480,000
Patents Three [Member]
Useful life	12 years
Purchased Patent Rights	144,000	144,000
Patents Four [Member]
Useful life	17 years
Purchased Patent Rights	$ 927,000	$ 542,000

XML

Accrued Expenses (Details) (USD $)	Dec. 31, 2014	Jun. 30, 2014
Accrued Expenses Details
Accrued research and development consulting fees	$ 155,000	$ 46,000
Accrued rent (Note 8) - related parties	48,000	53,000
Accrued interest - related parties	1,000	237,000
Total	$ 204,000	$ 336,000

XML

Accrued Salaries and Payroll Taxes - Related Parties And Other (Details) (USD $)	Dec. 31, 2014	Jun. 30, 2014
Accrued Salaries And Payroll Taxes - Related Parties And Other Details
Accrued salaries - related parties	$ 2,840,000	$ 3,032,000
Accrued payroll taxes - related parties	149,000	149,000
Withholding tax-related parties	375,000	29,000
Other	64,000	14,000
Total	$ 3,428,000	$ 3,224,000

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Significant Accounting Policies and Recent Accounting Pronouncements

6 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 3 - Significant Accounting Policies and Recent Accounting Pronouncements

Use of Estimates

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

Concentration of Credit Risk

The Company maintains its cash in bank deposit accounts (checking) that at times exceed federally insured limits. Approximately $9.5 million is subject to credit risk at December 31, 2014. However, these cash balances are maintained at creditworthy financial institutions. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.

Basic Earnings (Loss) per Share

Basic and diluted earnings (loss) per share are computed based on the weighted-average common shares and common share equivalents outstanding during the period. Common share equivalents consist of stock options, warrants and convertible notes payable. Common share equivalents of 44.6 million and 47.6 million were excluded from the computation of diluted earnings (loss) per share for the three months and six months ended December 31, 2014 and 2013, respectively, because their effect is anti-dilutive.

Accounting for Stock Based Compensation

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

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

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

We have elected to use the Black-Scholes-Merton pricing model to determine the fair value of stock options on the dates of grant. Restricted stock units are measured based on the fair market values of the underlying stock on the dates of grant. We recognize stock-based compensation using the straight-line method.

The components of share-based compensation related to stock options in the Company’s Statement of Operations for the three and six months ended December 31, 2014 and 2013 are as follows (rounded to nearest thousand):

		Three Months Ended December 31, 2014		Three Months Ended December 31, 2013		Six Months Ended December 31, 2014		Six Months Ended December 31, 2013
Payroll expenses – under General and administrative expenses		$	12,000	$	105,000	$	12,000	$	105,000
Professional fee – separately disclosed at statement of operations			-		20,000		-		46,000
Officers share-based compensation – under Research and development expenses			199,000		-		199,000		-
Employee share-based compensation – under Research and development expenses			96,000		-		96,000		-
Professional fee – under Research and development expenses			-		104,000		-		104,000
	Total share-based compensation expense	$	307,000	$	229,000	$	307,000	$	255,000

Recent Accounting Pronouncements

Recently Adopted Standards

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation." This ASU removes the definition of a development stage entity from the ASC, thereby removing the financial reporting distinction between development stage entities and other reporting entities from GAAP. In addition, the ASU eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of operations, cash flows, and stockholders’ equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. This ASU is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The Company has adopted this ASU effective with our Annual Report on Form 10-K and its adoption resulted in the removal of previously required development stage disclosures.

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

Standards Issued Not Yet Adopted

In April 2014, the FASB issued guidance for the reporting of discontinued operations, which also contains new disclosure requirements for both discontinued operations and other disposals that do not meet the definition of a discontinued operation. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Management believes that the adoption of this guidance will not have a material impact on our financial statements.

In May 2014, the FASB issued guidance on the accounting for revenue from contracts with customers that will supersede most existing revenue recognition guidance, including industry-specific guidance. The core principle requires an entity to recognize revenue to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the guidance requires enhanced disclosures regarding the nature, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. This guidance is effective for interim and annual reporting periods beginning on or after December 15, 2016. Entities can choose to apply the guidance using either the full retrospective approach or a modified retrospective approach. Management believes that the adoption of this guidance will not have a material impact on our financial statements.

In June 2014, the FASB issued guidance that clarifies the accounting for share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. In this case, the performance target would be required to be treated as a performance condition, and should not be reflected in estimating the grant-date fair value of the award. The guidance also addresses when to recognize the related compensation cost. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Management is currently reviewing this guidance to determine the impact it may have, if any, on our financial statements.

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

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Commitments and Contingencies (Details) (USD $)	Dec. 31, 2014
Year ending June 30,
2015	$ 105,000
2016	209,000
2017	209,000
2018	209,000
2019	53,000
Total minimum payments	$ 785,000

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Equity Transactions (Details Narrative) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Dec. 31, 2014	Jun. 30, 2014
Warrants/Options exercise	30,000
Proceed from warrants/Options exercise	$ 11,200
Minimum [Member]
Stock options exercise price	$ 0.32
Maximum [Member]
Stock options exercise price	$ 0.43
Common Class A [Member]
Common stock, par value	$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001
Common stock purchase warrant exercisable price	$ 1	$ 1
Common stock to a warrant holder	370,500	200,000
Warrants/Options exercise	741,000	200,000
Proceed from warrants/Options exercise	556,000	200,000
Common Class A [Member] | 20 Million Common Stock Purchase Agreement [Member] | Aspire Capital Fund Llc [Member]
Common stock issued for commitment fee			210,523
Commitment fee			373,000
Amortization amount	84,000		201,000
Deferred offering costs			94,000
Amount available under the financing arrangement			$ 5,100,000
Common Class A One [Member]
Common stock, par value	$ 0.0001		$ 0.0001
Common stock purchase warrant exercisable price	$ 0.5
Common stock to a warrant holder	370,500

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2014	Jun. 30, 2014
Current Assets:
Cash	$ 9,469,000	$ 4,988,000
Prepaid expenses and security deposits	98,000	568,000
Total Current Assets	9,567,000	5,556,000
Other Assets:
Patent costs - net	5,151,000	4,962,000
Property, plant and equipment -net	43,000	39,000
Deferred offering costs	94,000	295,000
Total Other Assets	5,288,000	5,296,000
Total Assets	14,855,000	10,852,000
Current Liabilities:
Accounts payable - (including related party payables of approx. $1,686,000 and $1,708,000, respectively)	2,085,000	2,664,000
Accrued expenses - (including related party accruals of approx. $49,000 and $290,000, respectively)	204,000	336,000
Accrued salaries and payroll taxes -(including related party accrued salaries of approx. $3,364,000 and $3,210,000, respectively)	3,428,000	3,224,000
Note payable - related party	2,022,000	2,022,000
Redeemable Common Stock		1,400,000
Total Current Liabilities	7,739,000	9,646,000
Total Liabilities	7,739,000	9,646,000
Stockholders' Equity
Preferred stock, $0.001 par value, 500,000 designated shares, no shares issued and outstanding
Additional paid-in capital	42,273,000	29,215,000
Accumulated deficit	(35,169,000)	(28,020,000)
Total Stockholders' Equity	7,116,000	1,206,000
Total Liabilities and Stockholders' Equity	14,855,000	10,852,000
Common Class A [Member]
Stockholders' Equity
Common Stock, Value	12,000
Common Class B [Member]
Stockholders' Equity
Common Stock, Value

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Basis of Presentation and Nature of Operations

6 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 1 - Basis of Presentation and Nature of Operations

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements of Cellceutix Corporation have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with our audited financial statements for the year ended June 30, 2014, included in our Annual Report on Form 10-K for the year ended June 30, 2014.

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

Cellceutix Corporation, formerly known as EconoShare, Inc., (“Cellceutix” or the “Company”) was incorporated on August 1, 2005. On December 6, 2007, the Company acquired Cellceutix Pharma, Inc. which was incorporated in the State of Delaware on June 20, 2007, in exchange for newly issued shares of the Company’s common stock. As a result of the exchange, Cellceutix Pharma, Inc. became a wholly-owned subsidiary of the Company. The Company is a clinical stage biopharmaceutical company and has no customers, products or revenues to date.

The Company’s Common Stock is quoted on the Over the Counter market (OTC), symbol “CTIX”.

All amounts, where it is designated in these notes to the financial statements as an approximate amount, are rounded to the nearest thousand dollars.

Nature of Operations

Overview

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

We currently own all development and marketing rights to our products. In order to successfully develop and market our products, we may have to partner with other companies. Prospective partners may require that we grant them significant development and/or commercialization rights in return for agreeing to share the risk of development and/or commercialization.

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Note Payable - Related Party (Details Narrative) (USD $)	Dec. 31, 2014	Jun. 30, 2014
Note Payable - Related Party Details Narrative
Interest expense	$ 1,000	$ 237,000
Principal balances of the demand note	$ 2,022,000	$ 2,022,000

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

6 Months Ended

Dec. 31, 2014

Accrued Salaries And Payroll Taxes - Related Parties And Other Tables

Schedule of accrued salaries and payroll taxes

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

	December 31, 2014		June 30, 2014
Accrued salaries – related parties	$	2,840,000	$	3,032,000
Accrued payroll taxes – related parties		149,000		149,000
Withholding tax – related parties		375,000		29,000
Other		64,000		14,000
Total	$	3,428,000	$	3,224,000

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Stock Options and Warrants (Details)	6 Months Ended
	Dec. 31, 2014
Minimum [Member]
Expected stock price volatility	62.79%
Risk-free interest rate	0.76%
Maximum [Member]
Expected stock price volatility	63.26%
Risk-free interest rate	1.19%
Stock Warrants [Member]
Expected term (in years)	3 years
Expected dividend yield	0.00%

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Stock Options and Warrants (Tables)

6 Months Ended

Dec. 31, 2014

Stock Warrants [Member]

Schedule of stock option activity

The following table summarizes stock warrants:

		Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at June 30, 2014			2,448,000		$	1.01		1.43	$	1,623,000
	Extended		-			-		-
	Granted		-			-		-
	Exercised		(941,000	)		0.8		-
	Expired		-			-		-
Outstanding at December 31, 2014			1,507,000		$	1.14		1.02	$	4,839,000
Exercisable at December 31, 2014			1,507,000		$	1.14		1.02	$	4,839,000

Stock Options [Member]

Valuation assumptions for stock options/warrants and SARs

The fair value of each option for the six months ended December 31, 2014 was estimated on the date of grant using the Black Scholes model that uses assumptions noted in the following table.

	Six Months Ended December 31, 2014
Expected term (in years)		3
Expected stock price volatility		62.79% to 63.26%
Risk-free interest rate		0.76% to 1.19%
Expected dividend yield		0

Schedule of stock option activity

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

		Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at June 30, 2014			39,007,500		$	0.14		6.50	$	59,613,000
	Granted		140,000			4.07
	Exercised		(60,000	)		0.29
	Forfeited/expired		(30,000	)		0.35
Outstanding at December 31, 2014			39,057,500		$	0.16		5.99	$	165,416,000
Exercisable at December 31, 2014			39,007,500		$	0.15		6.00	$	165,343,000

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Going Concern

6 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 2 - Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. At December 31, 2014, we had $9,469,000 in cash and cash equivalents. We have expended substantial funds on the research and development of our product candidates. Our net losses incurred for the six months ended December 31, 2014 and 2013, amounted to $7,148,000 and $4,554,000, respectively, and we have a working capital of approximately $1,828,000 at December 31, 2014 and a working capital (deficit) of approximately $(4,090,000) at June 30, 2014. In view of these matters, the ability of the Company to continue as a going concern is dependent upon the Company’s ability to generate additional financing. Since inception, the Company has financed its activities principally from the use of equity securities, debt issuance and loans from an officer to pay for its operations. The Company intends on financing its future development activities and its working capital needs largely from the issuance of debt and the sale of equity securities, until such time that funds provided by operations are sufficient to fund working capital requirements. On October 25, 2013, we terminated a previous agreement with Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire Capital”), and entered into a new stock purchase agreement (the “Purchase Agreement”) with Aspire Capital.

The Purchase Agreement provides that upon meeting the terms of the agreement, Aspire Capital is committed to purchase up to an aggregate of $20,000,000 of our shares of Class A Common Stock over the approximately 36-month term of the Purchase Agreement. In consideration for entering into the Purchase Agreement, the Company issued to Aspire Capital 210,523 shares of its Class A Common Stock as a commitment fee. The commitment fee will be amortized as the funding is received. The unamortized portion is carried on the balance sheet as deferred offering costs. Concurrently with entering into the Purchase Agreement, the Company agreed to file one or more registration statements as permissible and necessary under the Securities Act of 1933, as amended, or the Securities Act, for the sale of shares of our Class A Common Stock that have been and may be issued to Aspire Capital under the Purchase Agreement. On November 4, 2013, the Company filed a Form S-3 registration statement and the registration statement was declared effective by the SEC on November 15, 2013.

These factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities that may be necessary should the Company be unable to continue as a going concern.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2014	Jun. 30, 2014
Accounts payable, related party payables (in dollars)	$ 1,686,000	$ 1,708,000
Accrued expenses, related party accruals (in dollars)	49,000	290,000
Accrued Salaries, due to related parties (in dollars)	$ 3,364,000	$ 3,210,000
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	500,000	500,000
Preferred stock, shares issued (in shares)
Preferred stock, shares outstanding (in shares)
Common Class A [Member]
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	300,000,000	300,000,000
Common stock, shares issued (in shares)	115,838,129	109,787,129
Common stock, shares outstanding (in shares)	115,838,129	109,787,129
Common Class B [Member]
Number of votes entitled in class of stock (in votes)	10
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)
Common stock, shares outstanding (in shares)

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Subsequent Events

6 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 12 - Subsequent Events

Equity Transactions

From January 1, 2015 to February 5, 2015, the Company has generated additional proceeds of approximately $3,031,000 under the Common Stock Purchase Agreement with Aspire from the sale 800,000 shares of its common stock.

In January 2015, the Company submitted a request to the Food and Drug Administration (FDA) Division of Gastroenterology and Inborn Errors Products for a pre-Investigational New Drug (IND) meeting to discuss development of a topical defensin-mimetic compound for the indication of induction of remission of ulcerative proctitis and ulcerative proctosigmoiditis.

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Document and Entity Information	6 Months Ended
	Dec. 31, 2014	Feb. 05, 2015
Document And Entity Information
Entity Registrant Name	Cellceutix CORP
Entity Central Index Key	0001355250
Document Type	10-Q
Document Period End Date	Dec. 31, 2014
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		116,638,129
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2015

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Significant Accounting Policies and Recent Accounting Pronouncements (Policies)

6 Months Ended

Dec. 31, 2014

Significant Accounting Policies And Recent Accounting Pronouncements Policies

Use of Estimates

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

Concentration of Credit Risk

The Company maintains its cash in bank deposit accounts (checking) that at times exceed federally insured limits. Approximately $9.5 million is subject to credit risk at December 31, 2014. However, these cash balances are maintained at creditworthy financial institutions. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.

Basic Earnings (Loss) per Share

Basic and diluted earnings (loss) per share are computed based on the weighted-average common shares and common share equivalents outstanding during the period. Common share equivalents consist of stock options, warrants and convertible notes payable. Common share equivalents of 44.6 million and 47.6 million were excluded from the computation of diluted earnings (loss) per share for the three months and six months ended December 31, 2014 and 2013, respectively, because their effect is anti-dilutive.

Accounting for Stock Based Compensation

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

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

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

We have elected to use the Black-Scholes-Merton pricing model to determine the fair value of stock options on the dates of grant. Restricted stock units are measured based on the fair market values of the underlying stock on the dates of grant. We recognize stock-based compensation using the straight-line method.

The components of share-based compensation related to stock options in the Company’s Statement of Operations for the three and six months ended December 31, 2014 and 2013 are as follows (rounded to nearest thousand):

		Three Months Ended December 31, 2014		Three Months Ended December 31, 2013		Six Months Ended December 31, 2014		Six Months Ended December 31, 2013
Payroll expenses – under General and administrative expenses		$	12,000	$	105,000	$	12,000	$	105,000
Professional fee – separately disclosed at statement of operations			-		20,000		-		46,000
Officers share-based compensation – under Research and development expenses			199,000		-		199,000		-
Employee share-based compensation – under Research and development expenses			96,000		-		96,000		-
Professional fee – under Research and development expenses			-		104,000		-		104,000
	Total share-based compensation expense	$	307,000	$	229,000	$	307,000	$	255,000

Recent Accounting Pronouncements

Recently Adopted Standards

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation." This ASU removes the definition of a development stage entity from the ASC, thereby removing the financial reporting distinction between development stage entities and other reporting entities from GAAP. In addition, the ASU eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of operations, cash flows, and stockholders’ equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. This ASU is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The Company has adopted this ASU effective with our Annual Report on Form 10-K and its adoption resulted in the removal of previously required development stage disclosures.

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

Standards Issued Not Yet Adopted

In April 2014, the FASB issued guidance for the reporting of discontinued operations, which also contains new disclosure requirements for both discontinued operations and other disposals that do not meet the definition of a discontinued operation. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Management believes that the adoption of this guidance will not have a material impact on our financial statements.

In May 2014, the FASB issued guidance on the accounting for revenue from contracts with customers that will supersede most existing revenue recognition guidance, including industry-specific guidance. The core principle requires an entity to recognize revenue to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the guidance requires enhanced disclosures regarding the nature, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. This guidance is effective for interim and annual reporting periods beginning on or after December 15, 2016. Entities can choose to apply the guidance using either the full retrospective approach or a modified retrospective approach. Management believes that the adoption of this guidance will not have a material impact on our financial statements.

In June 2014, the FASB issued guidance that clarifies the accounting for share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. In this case, the performance target would be required to be treated as a performance condition, and should not be reflected in estimating the grant-date fair value of the award. The guidance also addresses when to recognize the related compensation cost. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Management is currently reviewing this guidance to determine the impact it may have, if any, on our financial statements.

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

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Condensed Consolidated Statements Of Operations
Revenues
Operating expenses:
Research and development expenses	1,943,000	1,014,000	5,798,000	1,586,000
General and administrative expenses	244,000	330,000	473,000	435,000
Officers' payroll and payroll tax expense	412,000	119,000	542,000	237,000
Professional fees	105,000	83,000	245,000	207,000
Total operating expenses	2,704,000	1,546,000	7,058,000	2,465,000
Loss from operations	(2,704,000)	(1,546,000)	(7,058,000)	(2,465,000)
Other expenses
Interest income	1,000		2,000
Interest expense	(51,000)	(51,000)	(101,000)	(109,000)
Sundry income			9,000
Total other expenses	(50,000)	(51,000)	(90,000)	(109,000)
Loss before provision for income taxes	(2,754,000)	(1,597,000)	(7,148,000)	(2,574,000)
Provision for income taxes
Net loss	(2,754,000)	(1,597,000)	(7,148,000)	(2,574,000)
Deemed dividends		(1,980,000)		(1,980,000)
Net loss attributable to common stockholders	$ (2,754,000)	$ (3,577,000)	$ (7,148,000)	$ (4,554,000)
Basic and diluted loss per share attributable to common stockholders	$ (0.02)	$ (0.03)	$ (0.06)	$ (0.04)
Weighted average number of common shares	114,716,009	104,640,788	112,918,961	102,659,696

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Commitments and Contingencies

6 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 7 - Commitments and Contingencies

Lease Commitments

Operating Leases

The Company signed a lease extension agreement with Cummings Properties which began on October 1, 2013. The lease is for a term of five years ending on September 30, 2018, and requires monthly payments of $17,000. Innovative Medical Research Inc., a company owned by Leo Ehrlich and Dr. Krishna Menon, officers of the Company, have co-signed the lease and will sublease 200 square feet of space previously used by the Company and pay the Company $900 per month.

As of December 31, 2014, future minimum lease payments required under the non-cancelable operating lease are as follows (rounded to nearest thousand):

Year ending June 30,
2015	$	105,000
2016		209,000
2017		209,000
2018		209,000
2019		53,000
Total minimum payments	$	785,000

Rental expense, net of lease income, under this operating lease agreement for the three and six months ended December 31, 2014 and 2013 was approximately $55,000, $71,000, $106,000, and $80,000, respectively. Before September, 2013, the Company paid rent to KARD for share of office space and details are shown at Note 8.

Contractual Commitments

The Company has no contractual minimum commitments to Contract Research Organizations as of December 31, 2014. Services are billed to Cellceutix, when performed by the vendors.

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Accrued Salaries and Payroll Taxes - Related Parties And Other

6 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 6 - Accrued Salaries and Payroll Taxes - Related Parties And Other

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

	December 31, 2014		June 30, 2014
Accrued salaries – related parties	$	2,840,000	$	3,032,000
Accrued payroll taxes – related parties		149,000		149,000
Withholding tax – related parties		375,000		29,000
Other		64,000		14,000
Total	$	3,428,000	$	3,224,000

On December 29, 2010, the Company entered into employment agreements with its two executive officers, Leo Ehrlich, the Company’s Chief Executive Officer, and Krishna Menon, Chief Scientific Officer. Both agreements provide for a three year term with each executive receiving an annual base salary of $350,000 per year commencing January 1, 2011, with an annual increase of 10% for each year commencing January 2012. The Board, at its discretion, may increase the base salary based upon relevant circumstances. On each of January 1, 2014, and on February 2015 the Board approved one year extensions of the employment agreements with a 10% increase in salaries. The annual salary for each of these officers for 2015 is $512,435.

On October 20, 2014 the Board of Directors approved the appointment of Dr. William James Alexander as the Chief Operations Officer of the Company for the term of one year effective October 27, 2014 (“the Effective Date”). Commencing on the Effective Date and ending on the six month anniversary of the Effective Date (the "Six Month Anniversary"), the Company shall pay Dr. Alexander at the per annum rate of $350,000. Commencing on the Six Month Anniversary and ending on the one year anniversary of the Effective Date (the "One Year Anniversary"), the Company shall pay the Executive at the per annum rate of $400,000.

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Commitments and Contingencies (Tables)

6 Months Ended

Dec. 31, 2014

Commitments And Contingencies Tables

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

As of December 31, 2014, future minimum lease payments required under the non-cancelable operating lease are as follows (rounded to nearest thousand):

Year ending June 30,
2015	$	105,000
2016		209,000
2017		209,000
2018		209,000
2019		53,000
Total minimum payments	$	785,000

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Significant Accounting Policies and Recent Accounting Pronouncements (Tables)

6 Months Ended

Dec. 31, 2014

Significant Accounting Policies And Recent Accounting Pronouncements Tables

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

The components of share-based compensation related to stock options in the Company’s Statement of Operations for the three and six months ended December 31, 2014 and 2013 are as follows (rounded to nearest thousand):

		Three Months Ended December 31, 2014		Three Months Ended December 31, 2013		Six Months Ended December 31, 2014		Six Months Ended December 31, 2013
Payroll expenses – under General and administrative expenses		$	12,000	$	105,000	$	12,000	$	105,000
Professional fee – separately disclosed at statement of operations			-		20,000		-		46,000
Officers share-based compensation – under Research and development expenses			199,000		-		199,000		-
Employee share-based compensation – under Research and development expenses			96,000		-		96,000		-
Professional fee – under Research and development expenses			-		104,000		-		104,000
	Total share-based compensation expense	$	307,000	$	229,000	$	307,000	$	255,000

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Stock Options and Warrants Outstanding

6 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 10 - Stock Options and Warrants Outstanding

Stock Options

The fair value of each option for the six months ended December 31, 2014 was estimated on the date of grant using the Black Scholes model that uses assumptions noted in the following table.

	Six Months Ended December 31, 2014
Expected term (in years)		3
Expected stock price volatility		62.79% to 63.26%
Risk-free interest rate		0.76% to 1.19%
Expected dividend yield		0

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

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

On April 1, 2014 the Board of Directors approved a stock option grant, for services rendered from January 7, 2014 to July 6, 2014, to a consultant to purchase 40,000 shares of common stock exercisable at $1.64 per share. The option was vested on April 1, 2014, the option life is 5 years and will expire on March 31, 2019. In addition, the Company will pay the consultant $20,000 per month during the six month period from January 7, 2014 to July 6, 2014. The total value of these 40,000 shares of stock option was $55,396 and charged to additional paid-in capital on April 1, 2014.

On October 20, 2014 the Board of Directors approved the appointment of Dr. William James Alexander as the Chief Operations Officer of Cellceutix Corporation for the term of one year effective October 27, 2014 (“the Effective Date”). Pursuant to his employment agreement, Dr. Alexander received immediately 50,000 shares of the Company's common stock, par value $0.0001 per share ("Common Stock") as a sign on bonus and 50,000 stock options to purchase shares of the Company’s common stock, par value $0.0001 per share, at $2.93 per share. Such options vest in equal installments on July 27, 2015 and October 27, 2015 and the option life is 3 years and expires on July 27, 2018 and October 27, 2018, respectively.

On December 26, 2014 the Board of Directors approved the cash and option bonus payments to officers and employees, including cash of $250,000 each to Mr. Leo Ehrlich, our CEO and Dr. Krishna Menon, our President, and 25,000 options exercisable for 3 years at $4.71 per share of common stock to Dr. William James Alexander, our COO and 65,000 options exercisable for 3 years at $4.29 per share of common stock, to our employees.

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

		Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at June 30, 2014			39,007,500		$	0.14		6.50	$	59,613,000
	Granted		140,000			4.07
	Exercised		(60,000	)		0.29
	Forfeited/expired		(30,000	)		0.35
Outstanding at December 31, 2014			39,057,500		$	0.16		5.99	$	165,416,000
Exercisable at December 31, 2014			39,007,500		$	0.15		6.00	$	165,343,000

The Company recognized approximately $307,000, $229,000, $307,000 and $255,000 of stock based compensation costs related to stock and stock options awards for the three months and six months ended December 31, 2014 and 2013, respectively.

Stock Warrants

For the six months ended December 31, 2014

From July 1, 2014 to September 30, 2014, the Company issued 200,000 Class A common shares par value $.0001 to a warrant holder upon exercise of Common Stock Purchase Warrants exercisable at $1 per share. The Company received an aggregate of $200,000 in total for the exercise of 200,000 warrants. The issuance was exempt from registration under Section 4(2) of the Securities Act.

From October 1, 2014 to December 31, 2014, the Company issued 370,500 Class A common shares par value $.0001 to a warrant holder upon exercise of Common Stock Purchase Warrants exercisable at $1 per share and 370,500 Class A common shares par value $.0001 to a warrant holder upon exercise of Common Stock Purchase Warrants exercisable at $0.50 per share. The Company received an aggregate of $556,000 in total for the exercise of 741,000 warrants. The issuance was exempt from registration under Section 4(2) of the Securities Act.

The following table summarizes stock warrants:

		Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at June 30, 2014			2,448,000		$	1.01		1.43	$	1,623,000
	Extended		-			-		-
	Granted		-			-		-
	Exercised		(941,000	)		0.8		-
	Expired		-			-		-
Outstanding at December 31, 2014			1,507,000		$	1.14		1.02	$	4,839,000
Exercisable at December 31, 2014			1,507,000		$	1.14		1.02	$	4,839,000

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Related Party Transactions

6 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 8 - Related Party Transactions

Office Lease

Dr. Menon, the Company’s principal shareholder, President, and Director, also serves as the Chief Operating Officer and Director of Kard Scientific (“KARD”). On December 7, 2007, the Company began renting office space from KARD, on a month to month basis for $900 per month.

In September 2013, the Company signed a lease agreement with Cummings Properties for the company’s offices and laboratories at 100 Cummings Center, Suite 151-B Beverly, MA 01915. The lease is for a term of five years from October 1, 2013 to September 30, 2018 and requires monthly payments of approximately $17,000. The Company had taken over the space occupied by KARD. In addition, Innovative Medical Research Inc., (“Innovative Medical”) a company owned by Leo Ehrlich and Dr. Krishna Menon, officers of the Company has co-signed the lease and will rent approximately 200 square feet of office space, the space previously used by the Company and will pay the Company $900 per month, the same amount the Company previously paid KARD. Innovative Medical paid total rent of $6,000 and $2,000 to the Company for the six months ended December 31, 2014 and 2013, respectively, and the rental payment was offset with the accrued rent owed to KARD.

At December 31, 2014 and June 30, 2014, rent payables to KARD of approximately $48,000 and $53,000, respectively, were included in accrued expenses.

Clinical Studies

The Company previously engaged KARD to conduct specified pre-clinical studies. The Company did not have an exclusive arrangement with KARD. All work performed by KARD needed prior approval by the executive officers of the Company, and the Company retained all intellectual property resulting from the services by KARD. The Company now has its own research study capabilities and no longer uses KARD. At December 31, 2014 and June 30, 2014, the accrued research and development expenses to KARD was approximately $1,686,000 and this amount was included in accounts payable.

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Note Payable-Related Party

6 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 9 - Note Payable - Related Party

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

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

At December 31, 2014 and June 30, 2014, approximately $1,000 and $237,000 was accrued as interest expense on this note.

At December 31, 2014 and June 30, 2014, principal balances of the demand note was approximately $2,022,000.

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Equity Transactions

6 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 11 - Equity Transactions

(1) Issuance of Common Stock for Cash

For the period from October 25, 2013 to December 31, 2014,

$20 million Class A Common Stock Purchase Agreement with Aspire Capital Fund, LLC – (“New Agreement’ or “October 2013 Agreement”)

On October 25, 2013, we terminated a previous agreement with Aspire Capital Fund, LLC, an Illinois limited liability company (Aspire Capital), and entered into a new Class A Common Stock Purchase Agreement (the “Purchase Agreement”) with Aspire Capital, which provides that upon meeting the terms of the agreement, Aspire Capital is committed to purchase up to an aggregate of $20,000,000 of our shares of Class A Common Stock over the approximately 36-month term of the Purchase Agreement. In consideration for entering into the Purchase Agreement, the Company issued to Aspire Capital 210,523 shares of our Class A Common Stock as a commitment fee. The commitment fee of $373,000 will be amortized as the funding is received. The amortized amount of $84,000 and $201,000 was debited to additional paid-in capital for the three months and six months ended December 31, 2014. The unamortized portion is carried on the balance sheet as deferred offering costs and was $94,000 at December 31, 2014.

Concurrently with entering into the Purchase Agreement, the Company agreed to file one or more registration statements as permissible and necessary under the Securities Act of 1933, as amended, or the Securities Act, for the sale of shares of our Class A Common Stock that have been and may be issued to Aspire Capital under the Purchase Agreement. On November 4, 2013, the Company filed a Form S-3 registration statement and the registration statement was declared effective by the SEC on November 15, 2013.

Under the Purchase Agreement, on any trading day selected by the Company which the closing sale price of our Class A Common Stock exceeds $0.25 per share, we may direct Aspire Capital to purchase up to 200,000 shares of our Class A Common Stock per trading day. The Purchase Price of such shares is equal to the lesser of a) the lowest sale price of our Class A Common Stock on the purchase date; or b) the arithmetic average of the three lowest closing sale prices for our Class A Common Stock during the twelve consecutive trading days ending on the trading day immediately preceding the purchase date.

In addition, on any date on which we submit a Purchase Notice to Aspire Capital for purchase of at least 100,000 Purchase Shares and the closing sale price of our stock is equal to or greater than $0.50 per share, we also have the right to direct Aspire Capital to purchase an amount of stock equal to up to 30% of the aggregate shares of the our Class A Common Stock traded on the OTC Bulletin Board on the next trading day, subject to the VWAP Purchase Share Volume Maximum and the VWAP Minimum Price Threshold, which is equal to the greater of (a) 90% of the closing price of our Class A Common Stock on the business day immediately preceding the VWAP Purchase Date or (b) such higher price as set forth by the Company in the VWAP Purchase Notice. The VWAP Purchase Price of such shares is the lower of (a) the Closing Sale Price on the VWAP Purchase Date; or 95% of the volume-weighted average price for our Class A Common Stock traded on the OTC Bulletin Board; and (b)on the VWAP Purchase Date, if the aggregate shares to be purchased on that date have not exceeded the VWAP Purchase Share Volume Maximum or during that portion of the VWAP Purchase Date until such time as the sooner to occur of (i) the time at which the aggregate shares traded on the OTC Bulletin Board exceed the VWAP Purchase Share Volume Maximum or (ii) the time at which the sale price of our Class A Common Stock falls below the VWAP Minimum Price Threshold.

The purchase price will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the trading day(s) used to compute the purchase price. We may deliver multiple Purchase Notices and VWAP Purchase Notices to Aspire Capital from time to time during the term of the Purchase Agreement, so long as the most recent purchase has been completed.

Under the Purchase Agreement, we and Aspire Capital may not affect any sales of shares of our Class A Common Stock under the Purchase Agreement on any trading day that the closing sale price of our Class A Common Stock is less than $0.25 per share.

The Company is never under any obligation to sell shares to Aspire Capital Fund. Aspire Capital Fund has no rights to require the Company to sell shares.

During the period from October 25, 2013 to December 31, 2014, the Company had completed sales to Aspire totaling 7,500,000 shares of common stock generating gross proceeds of approximately $14.9 million. As of December 31, 2014, a balance of $5.1 million remains and is available under the financing arrangement.

(2) Issuance of Common Stock by Exercise of Common Stock Purchase Warrants

For the six months ended December 31, 2014

From July 1, 2014 to September 30, 2014, the Company issued 200,000 Class A common shares par value $.0001 to a warrant holder upon exercise of Common Stock Purchase Warrants exercisable at $1 per share. The Company received an aggregate of $200,000 in total for the exercise of 200,000 warrants. The issuance was exempt from registration under Section 4(2) of the Securities Act.

From October 1, 2014 to December 31, 2014, the Company issued 370,500 Class A common shares par value $.0001 to a warrant holder upon exercise of Common Stock Purchase Warrants exercisable at $1 per share and 370,500 Class A common shares par value $.0001 to a warrant holder upon exercise of Common Stock Purchase Warrants exercisable at $0.5 per share. The Company received an aggregate of $556,000 in total for the exercise of 741,000 warrants. The issuance was exempt from registration under Section 4(2) of the Securities Act.

(3) Issuance of Common Stock by Exercise of Common Stock Options

For the six months ended December 31, 2014

The Board of Directors approved the exercise of 30,000 Common Stock options at $0.20 per share for $6,000 on November 24, 2014 and the exercise of another 30,000 Common Stock options at a range of $0.32 – $0.43 per share for $11,200 from October 2014 to December, 2014.

(4) Issuance of Common Stock to Consultants and Employees

On October 20, 2014 the Board of Directors approved the appointment of Dr. William James Alexander as the Chief Operations Officer of Cellceutix Corporation for the term of one year effective October 27, 2014 (“the Effective Date”). Commencing on the Effective Date and ending on the six month anniversary of the Effective Date (the "Six Month Anniversary"), the Company shall pay Dr. Alexander at the per annum rate of $350,000. Commencing on the Six Month Anniversary and ending on the one year anniversary of the Effective Date (the "One Year Anniversary"), the Company shall pay Dr. Alexander at the per annum rate of $400,000. Pursuant to his employment agreement, Dr. Alexander received immediately 50,000 shares of the Company's common stock, par value $0.0001 per share ("Common Stock") as a sign on bonus and 50,000 stock options vesting during the next 12 months. The Company may award Dr. Alexander an annual bonus at the sole discretion of the Board of Directors of the Company.

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Related Party Transactions (Details Narrative) (USD $)	6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Jun. 30, 2014
Kard Scientific [Member]
Medical paid total rent	$ 6,000	$ 2,000
Rent payables included in accrued expenses	48,000		53,000
Clinical Studies [Member]
Accrued research and development expenses	$ 1,686,000		$ 1,686,000

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Accrued Expenses (Tables)

6 Months Ended

Dec. 31, 2014

Accrued Expenses Tables

Schedule of accrued expenses

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

	December 31, 2014		June 30, 2014
Accrued research and development consulting fees	$	155,000	$	46,000
Accrued rent (Note 8) – related parties		48,000		53,000
Accrued interest – related parties		1,000		237,000
Total	$	204,000	$	336,000

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Significant Accounting Policies and Recent Accounting Pronouncements (Details) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
General and administrative expenses
Payroll expenses	$ 12,000	$ 105,000	$ 12,000	$ 105,000
Professional fees		20,000		46,000
Research and development expenses
Officers share-based compensation	199,000		199,000
Employee share-based compensation	96,000		96,000
Professional fee		104,000		104,000
Total share-based compensation expense	$ 307,000	$ 229,000	$ 307,000	$ 255,000

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (7,148,000)	$ (2,574,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of fixed assets		73,000
Common stock and stock options issued as payment for services compensation, services rendered and financing costs	307,000	255,000
Amortization of patent costs	197,000	102,000
Depreciation of equipment	5,000
Changes in operating assets and liabilities:
Prepaid expenses and security deposits	470,000	(160,000)
Accounts payable	(580,000)	(72,000)
Accrued expenses	(132,000)	342,000
Accrued officers' salaries and payroll taxes	204,000	(193,000)
Net cash used in operating activities	(6,677,000)	(2,227,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of fixed assets		24,000
Additions to property, plant and equipment	(9,000)
Patent Costs	(386,000)	(2,135,000)
Net cash used in investing activities	(395,000)	(2,111,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock	10,780,000	5,618,000
Payment of settlement liabilities		(285,000)
Exercise of stock options and warrants	773,000	1,025,000
Net cash provided by financing activities	11,553,000	6,358,000
NET INCREASE IN CASH AND CASH EQUIVALENTS	4,481,000	2,020,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	4,988,000	2,955,000
CASH AND CASH EQUIVALENTS, END OF PERIOD	9,469,000	4,975,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	336,000	37,000
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INVESTING AND FINANCING ACTIVITIES
Cancellation of treasury stock		(275,000)
Deemed dividend - warrants		1,980,000
Shares issued as deferred offering costs		373,000
Shares issued for acquisition of patent and equipment		2,702,000
Redeemable common stock	(1,400,000)	1,400,000
Stock subscription receivable		$ 400,000

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Accrued Expenses

6 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 5 - Accrued Expenses

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

	December 31, 2014		June 30, 2014
Accrued research and development consulting fees	$	155,000	$	46,000
Accrued rent (Note 8) – related parties		48,000		53,000
Accrued interest – related parties		1,000		237,000
Total	$	204,000	$	336,000

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Significant Accounting Policies and Recent Accounting Pronouncements (Details Narrative) (USD $)	6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Significant Accounting Policies And Recent Accounting Pronouncements Details Narrative
Concentration of Credit Risk	$ 9,500,000
Common share equivalents exclude from the computation of diluted earnings (loss) per share	44,600,000	47,600,000

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Stock Options and Warrants (Details 2) (USD $)	3 Months Ended	6 Months Ended
	Dec. 31, 2014	Dec. 31, 2014
Exercised	30,000
Stock Warrants [Member]
Number of Outstanding, Beginning Balance		2,448,000
Extended
Granted
Exercised		(941,000)
Forfeited/expired
Number of Outstanding, Ending Balance	1,507,000	1,507,000
Number of Outstanding, Exercisable	1,507,000	1,507,000
Weighted Average Exercise Price, Beginning Balance		$ 1.01
Extended
Granted
Exercised		$ 0.8
Forfeited/expired
Weighted Average Exercise Price, Ending Balance	1.14	$ 1.14
Weighted Average Exercise Price, Exercisable	1.14	$ 1.14
Weighted average remaining contractual life (Years), Outstanding		1 year 5 months 5 days
Weighted average remaining contractual life (Years), Outstanding		1 year 7 days
Weighted average remaining contractual life (Years), Exercisable		1 year 7 days
Aggregate intrinsic value, Outstanding		$ 1,623,000
Aggregate intrinsic value, Outstanding	4,839,000	4,839,000
Aggregate intrinsic value, Exercisable	4,839,000	$ 4,839,000

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Patents, net (Tables)

6 Months Ended

Dec. 31, 2014

Patents Net Tables

Schedule of patents

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

	Useful life	December 31, 2014		June 30, 2014
Purchased Patent Rights– Brilacidin, and related compounds	14	$	4,082,000	$	4,082,000
Purchased Patent Rights–Delparantag and related compounds	12		480,000		480,000
Purchased Patent Rights–Anti-microbial- surfactants and related compounds	12		144,000		144,000
Patents – Kevetrin and related compounds	17		927,000		542,000
		$	5,633,000	$	5,248,000
Accumulated amortization			482,000		286,000
		$	5,151,000	$	4,962,000