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, 20162017

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

For the transition period from ____________to _____________

Commission File Number: 001-37357

Cellceutix CorporationINNOVATION PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)

100 CummingCummings Center, Suite 151-B

Beverly, MA 01915

(Address of principal executive offices, Zip Code)

(978)-921-4125

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

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

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

The number of shares outstanding of each of the issuer’s classes of common equity, as of January 27, 201731, 2018 is as follows:

CELLCEUTIX CORPORATIONINNOVATION PHARMACEUTICALS INC.

FORM 10-Q

For the Quarter Ended December 31 2016, 2017

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

PART II – OTHER INFORMATION

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FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Any statements contained in this report that are not statements of historical fact may be forward-looking statements. When we use the words “intends,“intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will” or the negative of these terms or other comparable terminology, we are identifying forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning our future drug development plans and projected timelines for the initiation and completion of preclinical and clinical trials; the potential for the results of ongoing preclinical or clinical trials; other statements regarding our future product development and regulatory strategies, including with respect to specific indications; any statements regarding our future financial performance, results of operations or sufficiency of capital resources to fund our operating requirements; any statements relating to potential out-licensing, partnership or joint venture agreements with third parties; and any other statements which are other than statements of historical fact. Forward-looking statements involve risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements. These factors include, but are not limited to, our ability to continue to fund and successfully progress internal research and development efforts and to create effective, commercially-viable drugs; our ability to effectively and timely conduct clinical trials; our ability to ultimately distribute our drug candidates; compliance with regulatory requirements; and our capital needs, as well as other factors described elsewhere in this report and our other reports filed with the Securities and Exchange Commission (the “SEC”). Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

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

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

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CELLCEUTIX CORPORATIONINNOVATION PHARMACEUTICALS INC.

CONDENSED BALANCE SHEETS

(Rounded to nearest thousand except for per shareshares data)

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

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CELLCEUTIX CORPORATIONINNOVATION PHARMACEUTICALS INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31 2016, 2017 AND 20152016

(Unaudited)

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

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

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CELLCEUTIX CORPORATIONINNOVATION PHARMACEUTICALS INC.

CONDENSED STATEMENTS OF CASH FLOW

FOR THE SIX MONTHS ENDED DECEMBER 31, 20162017 AND 20152016

(Unaudited)

(Rounded to nearest thousand)

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

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CELLCEUTIX CORPORATIONINNOVATION PHARMACEUTICALS INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

DECEMBER 31 2016, 2017

(Unaudited)

Note 1. Basis of Presentation and Nature of Operations

Unaudited Interim Financial Information

The accompanying unaudited condensed financial statements of Cellceutix CorporationInnovation Pharmaceuticals Inc. 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 (“U.S. GAAP”) have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements for the year ended June 30, 2016,2017, included in our Annual Report on Form 10-K for the year ended June 30, 2016.2017.

In the opinion of the management of the Company,Innovation Pharmaceuticals Inc., all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three monththree-month and six monthsix-month periods have been made. Results for the interim periodperiods 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"“Company”, "we"“we”, "us"“us” or "our"“our” mean Cellceutix Corporation. Innovation Pharmaceuticals Inc.

Basis of Presentation and Name Change

Cellceutix CorporationInnovation Pharmaceuticals Inc. (the “Company”) was incorporated as Econoshare, Inc. on August 1, 2005, in the State of Nevada. On December 6, 2007,Effective June 5, 2017, the Company acquired Cellceutix Pharma, Inc., a privately owned corporation formed under the lawsamended its Articles of the State of Delaware on June 20, 2007. Following the acquisition, the CompanyIncorporation and changed its name from Cellceutix Corporation to Cellceutix Corporation.Innovation Pharmaceuticals Inc. In accordance with Section 92A.180 of the Nevada Revised Statutes, stockholder approval of the name change was not required.

The Company is a clinical stage biopharmaceutical company and has no customers, products or revenues to date. The Company’s Common Stockcommon stock is quoted on OTCQB, symbol “CTIX”“IPIX”.

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 inflammatory diseases, cancer, antibioticsdermatology and inflammatory disease.anti-infectives. 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.

Note 2. Going Concern and Liquidity

As of June 30, 2017, the Company adopted Accounting Standards Codification 205-40. This guidance amended the existing requirements for disclosing information about an entity’s ability to continue as a going concern and explicitly requires management to assess an entity’s ability to continue as a going concern and to provide related disclosure in certain circumstances. This guidance was effective for annual reporting periods ending after December 15, 2016, and for annual and interim reporting periods thereafter. The following information reflects the results of management’s assessment, plans and conclusion of the Company’s ability to continue as a going concern.

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We have incurred recurring losses since inception and expect to continue to incur losses as a result of costs and expenses related to our research and continued development of our compounds and our corporate general and administrative expenses. As of December 31, 2017, the Company has an accumulated deficit of $79 million, representative of recurring losses since inception. The Company is a development stage pharmaceutical company that has no sales as it does not have any products in the market and will continue to not have any revenues until it begins to market its products after it has obtained the necessary Federal Drug Administration (the “FDA”) approval. As a result, the Company expects to continue to incur losses.

At December 31, 2016, we2017, the Company’s cash amounted to $3.2 million and current liabilities amounted to $10.6 million, of which $6.5 million were payables to related parties with no immediate payment terms (See Note 8- Related Party Transactions in the Notes to Condensed Financial Statements section below). The Company had $3.9 million in cash. We have expended substantial funds on theits clinical trials and expects to continue our spending on research and development of our product candidates.expenditures. The Company’s net cash used in operating activities for the six months ended December 31, 2017 was approximately $7.2 million, and current projections indicate that the Company will have continued negative cash flows from operating activities for the foreseeable future. Our net losses incurred for the six months ended December 31, 20162017 and 2015,2016, amounted to $6.4$9.1 million and $5.9$6.4 million, respectively, and we had a working capital deficit ofdeficits was approximately $4.6$7.3 million and $1.9$6.1 million respectively at December 31, 20162017 and June 30, 2016.2017, respectively.

On March 30, 2015,Accordingly, the Company entered intoCompany’s planned operations, including total budgeted expenditures of approximately $12.2 million for the next twelve months, raise doubt about its ability to continue as a going concern. The Company’s plans to alleviate the doubt of its ability to continue as a going concern primarily include controlling the timing and spending on its research and development programs and raising additional funds through equity financings from its common stock purchase agreement with Aspire Capital Fund, LLC, an Illinois limited liability company ("(“Aspire Capital"Capital”) which provides. The Company may consider other plans to fund operations including: (1) raising additional capital through debt financings or from other sources; (2) additional funding through new relationships to help fund future clinical trial costs (i.e. licensing and partnerships); (3) reducing spending on one or more research and development programs by discontinuing development; and/or (4) restructuring operations to change its overhead structure. The Company may issue securities, including shares of common stock, shares of preferred stock and stock purchase contracts through private placement transactions or registered public offerings, pursuant to its registration statement on Form S-3 filed with the SEC on September 11, 2017. The Company’s future liquidity needs, and ability to address those needs, will largely be determined by the success of its product candidates and key development and regulatory events and its decisions in the future.

The Company believes that upon the termsactions discussed above are probable of occurring and subject toalleviating the conditionssubstantial doubt raised by our historical operating results and limitations set forth therein,satisfying our estimated liquidity needs twelve months from the issuance of the accompanying financial statements.

On September 6, 2017, the Company entered into a new $30 million common stock purchase agreement with Aspire Capital is committed(the “2017 Agreement”) to purchase up to an aggregate of $30.0replace the prior 2015 $30 million of the Company's common stock overpurchase agreement with Aspire Capital (the “2015 Agreement”). During the 36-month termperiod from July 1, 2017 to September 5, 2017, the Company generated proceeds of approximately $2.1 million under the Purchase Agreement.2015 Agreement from the sale of approximately 2.6 million shares of its common stock. During the period from September 6, 2017 to December 31, 2017, the Company generated proceeds of approximately $4.4 million under the 2017 Agreement from the sale of approximately 6.6 million shares of its common stock. As of December 31, 2016,2017, the available balance under the 2017 Agreement is approximately $19 million under this stock purchase agreement.

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$25.6 million.

The Company plans to incur expenses of approximately $19 million over the next twelve months, including approximately $15 million for clinical trials. The Company has limited experience with pharmaceutical drug development. As such, the budget estimate may not be accurate. In addition, the actual work to be performed is not known at this time, other than a broad outline, as is normal with any scientific work. As further work is performed, additional work may become necessary or change in plans or workload may occur. Such changes may have an adverse impact on our estimated budget and on our projected timeline of drug development.

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

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

Note 3. Significant Accounting Policies and Recent Accounting Pronouncements

Reclassifications

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

Use of Estimates

The preparation of financial statements in conformity with U.S. 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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Basic Earnings (Loss) perNet Loss Per Share

Basic and diluted earnings (loss)loss per share areis 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.payable underlying shares and unvested restricted stock. Common share equivalents of 46.7 million and 45.1 million shares and 44.0 million sharesof common stock were excluded from the computation of diluted earnings (loss)loss per share for the three months and six months ended December 31, 2017 and 2016, respectively, because we incurred net losses for the six months ended December 31, 2017 and 2016, and 2015, respectively, because theirthe effect is anti-dilutive.of including these potential common shares in the net loss per share calculations would be anti-dilutive and are therefore not included in the calculations.

Treasury Stock

The Company accounts for treasury stock using the cost method. There were 567,184 shares and 262,080 shares of treasury stock outstanding, purchased at a total cumulative cost of $417,000 and $220,000 at December 31, 2017 and June 30, 2017, respectively (see Note 10).

Treasury stock, representing shares of the Company’s common stock that have been acquired for payroll tax withholding on vested stock grants, is recorded at its acquisition cost and these shares are not considered outstanding.

Accounting for Stock Based Compensation

The stock-based compensation expense incurred by Cellceutixthe 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, an 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.

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ASC 505-50-30-11 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:

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

The components of stock basedstock-based compensation related to stock options and stock awardsexpense included in the Company’s StatementCondensed Statements of Operations for the three months and six months ended December 31, 20162017 and 20152016 are as follows (rounded to nearest thousand):

Recent Accounting Pronouncements

Standards Issued Not Yet Adopted

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements—Going Concern—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. ASU 2014-15 is effective for annual periods, and interim periods within those annual periods, starting after December 15, 2016; the Company’s first quarter of fiscal 2018. Management believes that the adoption of this guidance will not have a material impact on our financial statements.

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

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In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. For finance leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; interest on the lease liability will be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income; and repayments of the principal portion of the lease liability will be classified within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; a single lease cost will be recognized, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and all cash payments will be classified within operating activities in the statement of cash flows. Under Topic 842 the accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments in Topic 842 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management has been continuously assessing the impact of this guidance.Recent Adopted Accounting Pronouncements

Stock Compensation -In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (“ASU 2016-09”). Under ASU 2016-09, entities– Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which will be required to recognizesimplify the income tax effects of awards in the income statement when the awards vest or are settled. The guidance on employers’consequences, accounting for an employee’s useforfeitures and classification on the Statement of Cash Flows (i) excess tax benefits be classified as cash inflows provided by operating activities, and (ii) cash paid to taxing authorities arising from the withholding of shares to satisfy the employer’s statutory income tax withholding obligation and for forfeitures is also changing. For public business entities, ASU 2016-09from employees be classified as cash outflows used in financing activities. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. This new pronouncement was adopted on July 1, 2016 and interim periods within those years. Early adoption is permitted, but all of the guidance must be adopted in the same period. Management believes that the adoption of this guidance willdid not have a material impacteffect on ourthe Company’s financial statements.

Standards Issued and Adoptedposition or results of operations, but had an effect of the classification of cash paid to taxing authorities arising from the withholding of shares from employees (treasury stock), classified as cash outflows used in financing activities.

In June 2014, the FASB issued ASU 2014-12, Compensation - “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--StockEITF-13D, “Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period,” which has been deleted. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. Management has adopted2015. The implementation of this guidance and itstandard did not have a material impact on ourthe Company’s accompanying condensed financial statements.

Recently Issued Accounting Guidance

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

In February 2016, FASB issued ASU No. 2016-02, “Leases (Topic 842)”. The guidance requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. The guidance requires the following for finance leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; interest on the lease liability will be recognized separately from amortization of the right-of-use asset in the statement of comprehensive income; and repayments of the principal portion of the lease liability will be classified within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. The guidance requires the following for operating leases: the right-of-use asset and a lease liability will be initially measured at the present value of the lease payments, in the statement of financial position; a single lease cost will be recognized, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and all cash payments will be classified within operating activities in the statement of cash flows. Under Topic 842 the accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. The amendments in Topic 842 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management has determined that based on current accounting and lease contract information the adoption of ASU No. 2016-02 is not expected to have a significant impact on the Company’s financial position, results of operations and disclosures. However, management is continually evaluating the future impact of ASU No. 2016-02 based on changes in the Company’s financial statements through the period of adoption.

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Intangibles, Goodwill and Other —In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment” (“ASU No. 2017-04”). To simplify the subsequent measurement of goodwill, ASU No. 2017-04 eliminates Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, ASU No. 2017-04 requires an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU No. 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU No. 2017-04 is effective for fiscal years beginning after December 15, 2019. The Company will adopt ASU No. 2017-04 commencing in the first quarter of fiscal 2021. The Company does not believe this standard will have a material impact on its financial statements or the related footnote disclosures.

Statement of Cash Flows — In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” (“ASU No. 2016-15”). ASU No. 2016-15 clarifies how certain cash receipts and payments should be presented in the statement of cash flows. ASU No. 2016-15 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company will adopt ASU No. 2016-15 commencing in the first quarter of fiscal 2019. The Company does not believe this standard will have a material impact on its financial statements or the related footnote disclosures.

Note 4. Patents, net

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

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

Amortization expense was approximately $92,000$96,000 and $107,000,$92,000, for the three months ended December 31, 20162017 and 2015,2016, respectively and was approximately $183,000,$192,000, and $204,000$183,000 for the six months ended December 31, 20162017 and 2015,2016, respectively.

As

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At December 31, 2016,2017, the future amortization period for all patents was approximately 97.68 years to 1616.75 years. Future estimated annual amortization expenses are approximately $181,000$191,000 for 2017, $364,000the year ending June 30, 2018, $382,000 for each year from 20182019 to 2025, $354,000$372,000 for the year ending June 30, 2026, $352,000$370,000 for the year ending June 30, 2027, $114,000$132,000 for the year ending June 30, 2028, $61,000$78,000 for the years ending June 30, 2029 tothrough the years ended 2032, $24,000$37,000 for the year ending June 30, 2033, and $1,000$11,000 for the year ending June 30, 2034.2034 and $1,000 for the year ending June 30, 2035.

Note 5. Accounts Payable

Accounts payable consisted of the following (rounded to nearest thousand):

During the second quarter of fiscal year 2017, the Company realized that it had improperly estimated that it owed research and development related expenses resulting from invoices under a specific research vendor contract for upfront start-up fees, amounting to $593,000. Changes in the estimated research and development expenses are accounted for in the current period. As a result, in the second quarter of fiscal 2017, the Company recorded $593,000 into income relating to the reversal of this accounts payable that was recorded as of June 30, 2016. The Company believes that the amounts recorded were not material to the Company's consolidated results of operations or consolidated financial position.

6. Accrued Expenses

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

7.Note 6. Accrued Salaries and Payroll Taxes – Related Parties Andand Other

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

8.Note 7. Commitments and Contingencies

Lease Commitments

Operating Leases – Rental Property

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

As of December 31, 2016,2017, future minimum lease payments to Cummings Properties required under the non-cancelable operating lease are as follows (rounded to nearest thousand):

Rent expense, net of lease income, under this operating lease agreement was approximately $51,000$52,000 and $50,000,$51,000 for the three months ended December 31, 20162017 and 2015,2016, respectively and was approximately $102,000$104,000 and $101,000$102,000 for the six months ended December 31, 2017 and 2016, respectively. Before September 2013, the Company paid rent to Kard Scientific for share of office space and 2015, respectively.details are shown at Note 8 - Related Party Transactions below.

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Operating Leases - Equipment

We lease equipment under a non-cancelable operating lease that expires in April, 2018. The future minimum rental commitment for our operating lease for the next twelve months is $3,000, as of December 31, 2017 and was disclosed under the caption Prepaid expenses in the accompanying balance sheets.

Contractual Commitments

The Company has nototal contractual minimum commitments of approximately $2.7 million to contract research organizations as of December 31, 2016. Services2017. Expenses are billed to Cellceutixrecognized when services are performed by the vendors.

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contract research organizations.

9.Note 8. Related Party Transactions

Office Lease

Dr. Menon, one of the Company’s principal shareholders,shareholder, President of Research, 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. This continued through August 2013 and since September 1, 2013, the Company no longer leases space from KARD. At December 31, 2017 and June 30, 2017, rent payable to KARD or pays rent to KARD.of approximately $15,000 and $21,000, respectively, were included in accrued expenses.

In September 2013, the Company signed a lease extension agreement with Cummings Properties for the Company’scompany’s offices and laboratories at 100 Cummings Center, Suite 151-B Beverly, MA 01915. The lease is for a term of five years from October 1, 2013 to September 30, 2018 and requires monthly payments of approximately $18,000. CellceutixThe Company had taken over the space occupied by KARD. In addition, Innovative Medical Research Inc., (“Innovative Medical”) a company owned by LeoMr. Ehrlich and Dr. Krishna Menon, officers and directors of Cellecutix,the Company, has co-signed the lease and rents approximately 200 square feet of office space, the space previously used by Cellceutixthe Company and pays Cellceutixthe Company $900 per month, the same amount Cellceutixthe Company previously paid KARD. Innovative Medical paid total rent of approximately $3,000 and $6,000 to Cellceutixthe Company for both of the three months and six months ended December 31, 20162017 and 2015, respectively,2016 and the rental payment was offset with the accrued rent owed to KARD.

At December 31, 2016 and June 30, 2016, rent payable to KARD of approximately $26,000 and $32,000, respectively, were included in accrued rent – related party.

Clinical Studies

The Company previously engaged KARD to conduct specified pre-clinical studies. The Company did not have an exclusive arrangement with KARD. 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. As ofAt December 31, 20162017 and June 30, 2016,2017, the accrued research and development expenses payable to KARD was approximately $1,486,000 and this amount was included in accounts payable.

10.Other related party transactions are disclosed in Note 9 below.

Note 9. Convertible 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. 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 Class A 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(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 thethis demand note to approximately $2,022,000.

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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. The optionsOptions are valid for ten (10) years from the date of issuance.

As ofAt December 31, 20162017 and June 30, 2016,2017, approximately $112,000$22,000 and $40,000,$17,000, respectively, wasis the accrued as interest expensepayable on this note.

As ofAt December 31, 20162017 and June 30, 2016,2017, principal balancesbalance of thethis demand note was approximately $2,022,000.

11.Note 10. Equity Incentive Plans, Stock-Based Compensation, Exercise of Options and Warrants Outstanding

Equity Incentive Plans

2009 Stock Option Plan

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

2010Current Equity Incentive Plan

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

2016 Equity Incentive Plan

On June 30, 2016, the Board of Directors adopted the Cellceutix CorporationCompany’s 2016 Equity Incentive Plan (the "2016 Plan"“2016 Plan”). The 2016 Plan became effective upon adoption by the Board of Directors on June 30, 2016.

Up to 20,000,000 shares of the Company'sCompany’s Class A common stock may be issued under the 2016 Plan (subject to adjustment as described in the 2016 Plan); provided that (1) no Outside Director (as defined in the 2016 Plan) may be granted awards covering more than 250,000 shares of common stock in any year and (2) no participant shall be granted, during any one year period, options to purchase common stock and stock appreciation rights with respect to more than 4,000,000 shares of common stock in the aggregate or any other awards with respect to more than 2,500,000 shares of common stock in the aggregate. The 2016 Plan permits the grant of ISOs, non-qualified stock options, stock appreciation rights, restricted awards, performance share awards and performance compensation awards to employees, directors, and consultants of the Company and its affiliates.

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

Stock Options Issued and Outstanding

The following table summarizes all stock option activity under the aboveCompany’s equity incentive plans:

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The fair value of options granted for the six months ended December 31, 20162017 and 20152016 was estimated on the date of grant using the Black Scholes model that uses assumptions noted in the following table.

Stock-Based Compensation

The Company recognized approximately $347,000$1,400,000 and $432,000$690,000 of total stock-based compensation costs related to stock and stock options awards for the three months ended December 31, 2016 and 2015, respectively. The Company recognized approximately $690,000 and $530,000 of total stock-based compensation costs related to stock and stock optionsequity grant awards for the six months ended December 31, 2017 and 2016, respectively. The $1,400,000 of stock- based compensation expense for the six months ended December 31, 2017 included approximately $516,000 of stock options expense and 2015, respectively.$884,000 of restricted stock awards.

For the six months ended December 31, 2017

On September 1, 2017, the Company agreed to grant to Dr. Arthur Bertolino, the President and Chief Medical Officer of the Company, under the 2016 Plan (i) 1,066,667 shares of restricted stock and (ii) a ten-year option to purchase 617,839 shares of the Company’s Class A common stock at an exercise price of $0.705 per share. Both shares and options shall vest upon the earliest to occur of the following: (1) 50% upon the first anniversary of the effective date and the remaining 50% upon the second anniversary of the effective date; (2) shares of the Company’s common stock close above $3.00 per share (as may be adjusted for any stock splits or similar actions); (3) the commencement of trading of shares of the Company’s common stock on a national securities exchange; or (4) upon a change in control of the Company. The $690,0001,066,667 shares were valued at approximately $752,000 and the 617,839 stock options valued at approximately $399,000. Both shares and options will be amortized over 2 years to September 1, 2019 unless the probability of the other above vesting requirements occurring are met at an earlier date. At December 31, 2017, the Company determined that it was not probable that these accelerated vesting provisions would occur earlier than the scheduled vesting date. During the three months and six months ended December 31, 2017, the Company recorded approximately $144,000 and $192,000 of total stock-based compensation, respectively. The $144,000 of stock-based compensation expense for the three months ended December 31, 2017 included approximately $50,000 of stock option expense and $94,000 of stock awards. The $192,000 of stock-based compensation expense for the six months ended December 31, 20162017 included approximately $272,000$67,000 of stock optionsoption expense and $418,000$125,000 of stock awards (see Note 12).

For the six months ended December 31, 2016awards.

On February 16, 2016,September 1, 2017, the Company issued 119,424agreed to grant to Ms. Jane Harness, the Vice President, Clinical Sciences and Portfolio Management of the Company under the 2016 Plan (i) 58,394 shares of restricted stock optionsand (ii) a ten-year option to purchase 172,987 shares of the Company’s Class A common stock par value $0.0001 per share to two consultants for services, valued at approximately $55,000, based on the closing bid price as quoted on the OTC on February 16, 2016 at $1.15 per share. These options were issued with an exercise price of $1.105. One third vested immediately,$0.705 per share. Both shares and options shall vest upon the earliest to occur of the following: (1) one third vested in six months (August 11, 2016),upon the first anniversary of the effective date, one third upon the second anniversary of the effective date, and the balanceremaining one third upon the third anniversary of the effective date; or (2) upon a change in control of the Company. The 58,394 shares were valued at approximately $41,000 and the 172,987 stock options valued at approximately $112,000. Both shares and options will be vested on February 11, 2017, and will be valid for a period of three years. These options have piggyback registration rights. The Company recorded approximately $5,000 and $14,000 of stock options expense duringamortized over 3 years to September 1, 2020 unless the other vesting requirements are met sooner. During the three months and six months ended December 31, 2016,2017, the Company recorded approximately $13,000 and $17,000 of total stock-based compensation, respectively. The $13,000 of stock-based compensation expense for the three months ended December 31, 2017 included approximately $10,000 of stock option expense and $3,000 of stock awards. The $17,000 of stock-based compensation expense for the six months ended December 31, 2017 included approximately $13,000 of stock option expense and $4,000 of stock awards.

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On April 6, 2016,September 1, 2017, the Company issued 25,000 shares and 25,000 stockagreed to grant to Anne Ponugoti, under the 2016 Plan, ten-year options to purchase 5,000 shares of the Company’s common stock par value $0.0001 per share to a consultant for service. The stock options were valued at approximately $14,000, based on the closing bid price as quoted on the OTC on April 6, 2016 at $1.61 per share. These options were issued with an exercise price of $1.77 and$0.705 per share, which shall vest on April 30, 2017, withupon the earliest to occur of the following: (1) one third upon the first anniversary of the effective date, one-third upon the second anniversary of the effective date, and the remaining one-third upon the third anniversary of the effective date; or (2) upon a three year option term. Thesechange in control of the Company. The 5,000 stock options have piggyback registration rights. The Company recordedvalued at approximately $3,000 and $6,000 of stock option expenses forit will be amortized over 3 years to September 1, 2020 unless the other vesting requirements are met sooner. During the three months and six months ended December 31, 2017, the Company recorded approximately $300 and $400 of stock option expense for this option grant.

On January 9, 2017, the Company and Ms. Ponugoti entered into an executive employment agreement as the Company’s Associate Director, Clinical Sciences, effective on February 1, 2017. Pursuant to the employment agreement, the Company issued 10,000 shares of restricted stock and options to purchase 30,000 shares of common stock under the 2016 Plan. During the three months and six months ended December 31, 2017, the Company recorded approximately $4,000 and $7,000 of total stock-based compensation, respectively. The value$4,000 of stock-based compensation expense for the three months ended December 31, 2017 included approximately $3,000 of stock option expense and $1,000 of stock awards. The $7,000 of stock-based compensation expense for the six months ended December 31, 2017 included approximately $5,000 of stock option expense and $2,000 of stock awards.

Purchase of Treasury Stock - cash paid to Federal and State Taxing Authorities arising from the withholding of common shares from an officer’s vested restricted stock grant issuance and issuance of Treasury Stock and the reversal of outstanding stock subscription receivable

On September 1, 2017, 19,465 shares of the Company’s restricted stock vested to Ms. Harness according to Ms. Harness’s employment agreement. The total taxable compensation to Ms. Harness for the 19,465 vested shares was $14,000, which is priced at the closing stock price on September 1, 2017 at $0.705 a share.

The Company issued 12,409 common shares (net share issuance amount), which is approximately 64% of the total vested common share amount of 19,465 common shares due to be issued to Ms. Harness. The remaining 7,056 shares of common stock were withheld from Ms. Harness for the payment of payroll taxes to the Federal and State taxing authorities and these 25,000 shares withheld are being reported by the Company as treasury stock, at $1.61 percost, on the Company’s accompanying balance sheets.

On December 22, 2017, 533,334 shares of the Company’s restricted stock vested to Dr. Arthur P. Bertolino according to Dr. Arthur P. Bertolino’s employment agreement. The total taxable compensation to Dr. Arthur P. Bertolino for the 533,334 vested shares was $373,334, which is priced at the closing stock price on December 21, 2017 at $0.7 a share.

The Company issued 295,286 common shares (net share issuance amount), which is approximately 55% of the total vested common share amount of 533,334 common shares due to be issued to Dr. Arthur P. Bertolino. The remaining 238,048 shares of common stock were withheld from Dr. Arthur P. Bertolino for the payment of payroll taxes to the Federal and State taxing authorities and these shares withheld are being reported by the Company as treasury stock, at cost, on the Company’s accompanying balance sheets.

In addition, the Company reversed an outstanding stock subscription receivable of $26,000 for 60,000 shares of common stock and recorded this amount as the cost of treasury stock.

There were 567,184 shares and 262,080 shares of treasury stock outstanding at December 31, 2017 and June 30, 2017, respectively, purchased at a total cumulative cost of $417,000 and $220,000 at December 31, 2017 and June 30, 2017, respectively.

Restricted Stock Awards Outstanding

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

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Scheduled vesting for outstanding restricted stock awards at December 31, 2017 is as follows:

As of December 31, 2017, there was approximately $40,250.$0.7 million of net unrecognized compensation cost related to unvested restricted stock-based compensation arrangements. This compensation is recognized on a straight-line basis resulting in approximately $0.3 million of compensation expected to be expensed over the next twelve months, and the total unrecognized stock-based compensation expense having a weighted average recognition period of 1.72 years.

For the six months ended December 31, 2016

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

On June 27, 2016, the Company and Dr. Bertolino entered into an executive employment agreement as our President and Chief Medical Officer of the Company, effective on June 27, 2016. Commencing on June 27, 2016 the Company agreed to pay Dr. Bertolino an annual salary of $440,000. In addition,and the Company agreed to grant to Dr. Bertolino under the Cellceutix CorporationCompany’s 2016 Equity Incentive Plan (i) 1,066,667 shares of restricted stock and (ii) a ten-year option to purchase 617,839 shares of the Company'sCompany’s Class A common stock at an exercise price of $1.39 per share. Both shares and options shall vest upon the earliest to occur of the following: (1) 50% upon the first anniversary of the effective date, and the remaining 50% upon the second anniversary of the effective date (2) completion of both a Phase 2b psoriasis study and a Phase 2 oral mucositis study; (3) the Company’s common stock closes above $3.00 per share (as may be adjusted for any stock splits or similar actions); (4) the commencement of trading of the Company’s common stock on a national securities exchange (e.g. Nasdaq or the NYSE); or (5) upon a Change in Control of the Company (as defined in the employment agreement) of the Company. The Company could not conclude that it was probable that these awards will fully vest until the second anniversary of the effective date, because such events listed above are outside the Company’s control. The Company will evaluate the probability of these events occurring for each reporting period.. The 1,066,667 shares were valued at approximately $1.5 million, which will be amortized over two years to June 27, 2018. The 617,839 stock options were valued at approximately $800,000 and will be exercisable for 10 years at an exercise price of $1.39 per share. They will be amortized over 2 years to June 27, 2018 or sooner if the Company determines that it is probable that one of the events listed above will occur. During the three months and six months ended December 31, 2016,2017, the Company recorded approximately $289,000$845,000 and $578,000$1,134,000 of total stock-based compensation, respectively. The $289,000$845,000 of stock basedstock-based compensation expense for the three months ended December 31, 20162017 included approximately $101,000$295,000 of stock option expense and $188,000$550,000 of stock awards. The $578,000$1,134,000 of stock basedstock-based compensation expense for the six months ended December 31, 20162017 included approximately $202,000$396,000 of stock option expense and $376,000$738,000 of stock awards.

 

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TheIn December, 2017 and October, 2017, respectively, the Company may award Dr. Arthur P. Bertolino an annual bonus atwas able to conclude both the sole discretionPhase 2b psoriasis study and a Phase 2 oral mucositis study; therefore the remaining 50% of the Board of Directors ofshares and options vested to Dr. Bertolino, and all remaining shares and options granted on June 27, 2016 were fully amortized and expensed during the Company. The Company may accelerate the amortization of the $1.1 million stock-based compensation expense if there are conditions which will accelerate the vesting, as mentioned above. Atthree-month period ended December 31, 2016, it was determined by management that is was not probable that these accelerated vesting conditions would occur and therefore there was no accrual recorded for the contingent acceleration of this stock-based compensation expense.2017.

On July 18, 2016, the Company issued 7,500 stock options to purchase shares of the Company’s common stock to a consultant for serviceservices rendered, exercisable for 3 years at $1.38 per share of common stock. The value of these 7,500 options was approximately $4,000. During the three months and six months ended December 31,September 30, 2016, the Company recorded approximately $0 and $4,000 of total stock option expense respectively.for this option grant.

On September 1, 2016, the Company and JaneMs. Harness entered into an executive employment agreement as the Company’s VP, Clinical Sciences and ProjectPortfolio Management, effective on September 1, 2016. Commencing on September 1, 2016, the Company agreed to pay Ms. Harness an annual salary of $250,000. In addition, the Company agreed to grant to Ms. Harness, under the Cellceutix Corporation 2016 Equity Incentive Plan (i) 58,394 shares of restricted stock, which shall vest upon the earliest to occur of the following: (1) one third (33 1/3 %) upon the first anniversary of the effective date, one third (33 1/3 %)one-third upon the second anniversary of the effective date, and the remaining one third (33 1/3 %)one-third upon the third anniversary of the effective date; or (2) upon a Change in Control (as defined in the employment agreement) of the Company. Ten-yearCompany, and (ii) ten-year options to purchase 172,987 shares of the Company’s common stock were also granted at an exercise price of $1.37 per share, which shall vest upon the earliest to occur of the following: (1) one third (33 1/3 %)one-third upon the first anniversary of the effective date, and the remaining balance vesting monthly in equal portions over the following 24 months; and (2) upon a Change in Control (as defined in the employment agreement) of the Company. The 58,394 shares were valued at approximately $80,000, which will be amortized over three years to September 1, 2019. The 172,987 stock options were valued at approximately $220,000 and will be exercisable for 10 years at an exercise price of $1.26$1.37 per share. They will be amortized over 3 years to September 1, 2019. During the three months and six months ended December 31, 2016,2017, the Company recorded approximately $25,000 and $33,000$50,000 of total stock-based compensation, respectively. The $25,000 of stock basedstock-based compensation expense for the three months ended December 31, 20162017 included approximately $18,000 of stock option expense and $7,000 of stock awards. The $33,000$50,000 of stock basedstock-based compensation expense for the six months ended December 31, 20162017 included approximately $24,000$36,000 of stock option expense and $9,000$14,000 of stock awards.

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On September 15, 2016, the Company and LaVonneDr. Lang entered into an executive employment agreement as the Company’s VP, Regulatory Affairs, effective on September 15, 2016. Commencing on September 15, 2016, the Company agreed to pay Dr. Lang an annual salary of $250,000. In addition, the Company agreed to grant to Dr. Lang under the Cellceutix Corporation 2016 Equity Incentive Plan (i) 63,492 shares of restricted stock, which shall vest upon the earliest to occur of the following: (1) one third (33 1/3 %)one-third upon the first anniversary of the effective date, one third (33 1/3 %) upon the second anniversary of the effective date, and the remaining one third (33 1/3 %)one-third upon the third anniversary of the effective date; or (2) upon a Change in Control (as defined in the employment agreement) of the Company. Ten-yearCompany, and (ii) ten-year options to purchase 188,262 shares of the Company’s common stock were also granted at an exercise price of $1.26 per share, which shall vest upon the earliest to occur of the following: (1) one third (33 1/3 %)one-third upon the first anniversary of the effective date, and the remaining balance vesting monthly in equal portions over the following 24 months; and (2) upon a Change in Control (as defined in the employment agreement) of the Company. The 63,492 shares were valued at approximately $80,000, which will be amortized over three years to September 15, 2019. The 188,263188,262 stock options were valued at approximately $220,000 and will be exercisable for 10 years at an exercise price of $1.26 per share. They will be amortized over 3 years to September 15, 2019. During the three months and six months ended December 31, 2017 and 2016, the Company recorded approximately $25,000$0 and $29,000$4,000 of total stock-based compensation, respectively. The $25,000 of stock based compensation expense for these equity grants, respectively. There was no stock-based compensation expense for Dr. Lang since she resigned on March 17, 2017 and the three months ended December 31, 201663,492 restricted shares and the 188,262 stock options were forfeited. The $4,000 included approximately $18,000$3,000 of stock option expense and $7,000 of stock awards. The $29,000 of stock based compensation expense$1,000 for the six months ended December 31, 2016 included approximately $21,000 of stock option expense and $8,000 of stock awards.

For the six months ended December 31, 2015

On July 10, 2015, the Company issued 7,028 shares and 50,000 options to a consultant for his one year contract, which options are exercisable for 3 years at $2.49 per share of common stock. The total value of these 50,000 options was approximately $60,000 and we recognized approximately $60,000 of stock based compensation costs that was charged to Research and Development expense as of December 31, 2015. The assumptions we used in the Black Scholes option-pricing model were disclosed as above.

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Stock Warrants

For the six months ended December 31, 2016

During the six months ended December 31, 2016, there were no warrants issued or exercised.

The following table summarizes stock warrants:

12. Equity Transactions

Issuance of Common Stock for Cash

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

On March 30, 2015, the Company entered into a common stock purchase agreement (the "Purchase Agreement") with Aspire Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of the Company's common stock over the 36-month term of the Purchase Agreement. In consideration for entering into the Purchase Agreement, the Company issued to Aspire Capital 160,000 shares of its Class A common stock as a commitment fee. The commitment fee of approximately $499,000 will be amortized as the funding is received. The amortized amount of $48,000 and $44,000 were recorded to additional paid-in capital during the six months ended December 31, 2016 and 2015. The unamortized portion is carried on the balance sheet as deferred offering costs and was $310,000 and $358,000 at December 31, 2016 and June 30, 2016, respectively. During the period from March 30, 2015 to December 31, 2016, the Company had completed sales to Aspire totaling 8.2 million shares of common stock generating gross proceeds of approximately $11 million.

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

During the six months ended December 31, 2016 and 2015, the Company had completed sales to Aspire totaling 2.4 million shares and 1.5 million shares of common stock generating gross proceeds of approximately $2.9 million and $2.6 million, respectively.

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Issuance of Common Stock by Exercise of Common Stock Options

For the six months ended December 31, 2016

During the six months ended December 31, 2016, the Company has no issuance of common stock by exercise of common stock options.

For the six months ended December 31, 2015

During the six months ended December 31, 2015, the Company recorded subscription receivable of $25,400 for the exercise of 60,000 Common Stock options at $0.42 per share.

Issuance of Common Stock to Consultants Forfor Services

For the six months ended December 31, 2016

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

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

Exercise of options

During the three months and six months ended December 31, 2017 and 2016, there were no stock options exercised.

Note 11. Equity Transactions

For the six months ended December 31, 2015

On July 10, 2015, the Company issued 7,028 shares of restricted Class A common shares to a consultant for services rendered. The shares were granted and vested on July 10, 2015. The value of these 7,028 shares at $2.49 per share was approximately $17,500.

Issuances of Common Stock and Stock Options – Pursuant to Employment Agreements2017

For$30 million Class A Common Stock Purchase Agreement with Aspire Capital

On September 6, 2017, the Company entered into a common stock purchase agreement with Aspire Capital, which replaced the prior 2015 $30 million Aspire Capital stock purchase agreement and provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of the Company’s common stock over the 36-month term of the Stock Purchase Agreement. The Company issued 300,000 shares of its Class A common stock to Aspire Capital as a commitment fee. The commitment fee of approximately $215,000 is amortized pro-rata as the funding is received. The amortized amount of $31,000 was recorded to additional paid-in capital for the six months ended December 31, 20162017. The unamortized portion is carried on the balance sheet as deferred offering costs and was $183,000 at December 31, 2017. The Company registered the resale of all shares that Aspire Capital will purchase under this common stock purchase agreement. To the extent Aspire Capital purchases shares under this Purchase Agreement and subsequently sells those shares purchased, the other holders of shares of our Class A common stock may experience dilution, which may be substantial. In addition, 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 price that we might otherwise wish to effect sales.

OnDuring the period from September 1, 2016,6, 2017 to December 31, 2017, the Company and Jane Harness entered into an executive employmentgenerated proceeds of approximately $4.4 million under the new 2017 agreement aswith Aspire Capital from the Company’s VP, Clinical Sciences and Project Management, effective on September 1, 2016. Pursuant to the employment agreement, the Company issued 58,394sale of approximately 6.6 million shares of restricted stock and options to purchase 172,987 sharesits common stock. As of common stock to Ms. HarnessDecember 31, 2017, the available balance under the Cellceutix Corporation 2016 Equity Incentive Plan. See Note 11 for additional information concerning the restricted stock and stock options granted to Ms. Harness.

On September 15, 2016, the Company and LaVonne Lang entered into an executive employmentnew equity line agreement as the Company’s VP, Regulatory Affairs, effective on September 15, 2016. Pursuant to the employment agreement, the Company issued 63,492 shares of restricted stock and options to purchase 188,263 shares of common stock to Dr. Lang under the Cellceutix Corporation 2016 Equity Incentive Plan. See Note 11 for additional information concerning the restricted stock and stock options granted to Dr. Lang.was approximately $25.6 million.

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