Table of Contents

Table of Contents

Table of Contents

Table of Contents

~~Table~~UNITED ofSTATES ~~Contents~~

~~UNITED~~SECURITIES ~~STATES~~AND EXCHANGE COMMISSION

~~SECURITIES~~WASHINGTON, ~~AND~~DC ~~EXCHANGE COMMISSION~~ 20549

~~WASHINGTON,~~FORM ~~DC 20549~~ 10-Q

~~FORM~~(Mark ~~10-Q~~ One)

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

xFor ~~QUARTERLY~~the ~~REPORT~~quarterly ~~PURSUANT~~period TOended ~~SECTION~~September 30, 132015 ~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~OR ~~the quarterly period ended June 30, 2015~~

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

¨For ~~TRANSITION~~the ~~REPORT~~transition ~~PURSUANT~~period ~~TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~from to

~~For~~Commission ~~the~~file ~~transition~~number: ~~period~~000-52062 ~~from to~~

~~Commission file number:~~Q ~~000-52062~~THERAPEUTICS, INC.

Q(Exact ~~THERAPEUTICS,~~Name ~~INC.~~of Registrant as Specified in Its Charter)

(Exact Name of Registrant as Specified in Its Charter)


Delaware		20-3708500
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

615 Arapeen Drive, Suite 102 Salt Lake City, UT		84108
(Address of Principal Executive Offices)		(Zip Code)

Delaware		20-3708500
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)
615 Arapeen Drive, Suite 102 Salt Lake City, UT		84108
(Address of Principal Executive Offices)		(Zip Code)

(801) 582-5400

(~~801)~~Registrant’s ~~582-5400~~Telephone Number, Including Area Code)

~~(Registrant’s~~N/A ~~Telephone Number, Including Area Code)~~

~~N/A~~(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

~~(Former~~Indicate ~~Name,~~by ~~Former~~check mark whether ~~Address~~the ~~and~~registrant ~~Former~~(1) has ~~Fiscal~~filed ~~Year,~~all Ifreports ~~Changed~~required ~~Since~~to ~~Last~~be ~~Report~~filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant ~~(1)~~ has ~~filed~~submitted ~~all~~electronically ~~reports~~and ~~required~~posted on its corporate Web site, if any, every Interactive Data File required to be ~~filed~~submitted byand ~~Section 13~~posted orpursuant ~~15(d)~~to ofRule ~~the~~405 ~~Securities~~of ~~Exchange~~Regulation ~~Act~~S-T (§232.405 of ~~1934~~this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to ~~file~~submit ~~such reports),~~ and ~~(2) has~~post ~~been subject to~~ such ~~filing requirements for the past 90~~ ~~days~~files). Yes x No ¨

Indicate by check mark whether the registrant ~~has~~is ~~submitted~~a ~~electronically~~large ~~and~~accelerated ~~posted~~filer, onan ~~its~~accelerated ~~corporate Web site~~filer, ifa ~~any~~non-accelerated filer, ~~every~~or ~~Interactive~~a ~~Data~~smaller ~~File~~reporting ~~required~~company. See tothe bedefinitions ~~submitted~~of ~~and~~“large ~~posted~~accelerated ~~pursuant~~filer,” to“accelerated ~~Rule~~filer,” ~~405 of Regulation S~~“non-Taccelerated ~~(§232.405~~filer” ofand ~~this~~“smaller ~~chapter)~~reporting ~~during~~company” ~~the~~in ~~preceding~~Rule 1212b-2 ~~months~~of ~~(or for such shorter period that~~ the ~~registrant~~Exchange ~~was~~Act. ~~required~~(Check ~~to submit and post such files~~one)~~. Yes x No ¨~~:

~~Indicate~~Large ~~by check mark whether the registrant is a large~~ accelerated filer, an¨ ~~accelerated~~Accelerated filer, a¨ ~~non~~Non-accelerated filer, or¨ a(Do ~~smaller~~not ~~reporting~~check ~~company.~~if ~~See the~~a ~~definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “~~smaller reporting company”) inSmaller ~~Rule~~reporting ~~12b-2~~company ~~of the Exchange Act. (Check one):~~ x

~~Large~~Indicate ~~accelerated~~by ~~filer~~check ¨mark ~~Accelerated~~whether ~~filer~~the ¨registrant ~~Non-accelerated~~is ~~filer~~a ¨shell company (Doas ~~not~~defined ~~check~~in ifRule a12b-2 ~~smaller~~of ~~reporting~~the ~~company~~Exchange Act) ~~Smaller reporting company~~ . Yes ¨ No x

~~Indicate~~As byof ~~check~~November 13, ~~mark~~2015, ~~whether~~there ~~the~~were ~~registrant~~30,826,549 isshares aof ~~shell~~Common ~~company~~Stock, ~~(as~~$0.0001 ~~defined~~par invalue ~~Rule~~per ~~12b-2~~share, ofissued ~~the~~and ~~Exchange Act)~~outstanding. ~~Yes ¨ No x~~

AsTABLE ofOF ~~August 14,~~CONTENTS ~~2015, there were 30,826,549 shares of Common Stock, $0.0001 par value per share, issued and outstanding.~~


PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)			1

Condensed Consolidated Statements of Operations (Unaudited)			2

Condensed Consolidated Statements of Cash Flows (Unaudited)			3

Notes to Condensed Consolidated Financial Statements (Unaudited)			4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			11

Item 3. Quantitative and Qualitative Disclosures about Market Risk			13

Item 4. Controls and Procedures			14

PART II – OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			14

Item 5. Other Information			14

Item 6. Exhibits			14

Signatures			15

~~TABLE~~Q OFTherapeutics, ~~CONTENTS~~Inc.

PART 1 – FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)			1
Condensed Consolidated Statements of Operations (Unaudited)			2
Condensed Consolidated Statements of Cash Flows (Unaudited)			3
Notes to Condensed Consolidated Financial Statements (Unaudited)			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			10
Item 3. Quantitative and Qualitative Disclosures about Market Risk			13
Item 4. Controls and Procedures			13
PART II – OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			13
Item 5. Other Information			13
Item 6. Exhibits			14
Signatures			14

PART I

Q Therapeutics, Inc.

PART I

Item 1. Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)

	June 30,2015			December 31,2014
	September 30,2015			December 31,2014
Assets
Current assets:
Cash	$	~~111~~23,~~429~~218		$	707,011
Receivables		—			4,136
Prepaid expenses and other		4438,~~056~~063			10,596
Total current assets		~~155~~61,~~485~~281			721,743
Property and equipment, net		2220,~~894~~316			26,568
Total assets	$	~~178~~81,~~379~~597		$	748,311
Liabilities and Stockholders’ Deficit
Current liabilities:
Accrued compensation	$	1,~~031~~013,~~926~~148		$	705,753
Accounts payable		~~302~~369,~~101~~798			263,728
Notes payable		~~125~~275,000			—
Accrued liabilities		98107,~~764~~486			42,507
Derivative liabilities		—			32,175
Total current liabilities		1,~~557~~765,~~791~~432			1,044,163
Commitments and contingencies (Notes 2, 5, 8 and 9)
Long-term accrued liabilities		325,247			—
Total liabilities		2,090,679			1,044,163
Stockholders’ deficit:
Common stock, $0.0001 par value: 100,000,000 shares authorized; 30,826,549 and 30,477,460 shares outstanding as of June 30, 2015 and December 31, 2014, respectively		3,083			3,048
Common stock, $0.0001 par value: 100,000,000 shares authorized; 30,826,549 and 30,477,460 shares outstanding as of September 30, 2015 and December 31, 2014, respectively		3,083			3,048
Additional paid-in capital		27,~~419~~793,~~343~~118			26,933,171
Accumulated deficit		(2829,~~801~~805,~~838~~283	)		(27,232,071	)
Total stockholders’ deficit		(12,~~379~~009,~~412~~082	)		(295,852	)
Total liabilities and stockholders’ deficit	$	~~178~~81,~~379~~597		$	748,311

See accompanying notes to condensed consolidated financial statements.

~~Table~~Q ofTherapeutics, ~~Contents~~Inc.

QCondensed ~~Therapeutics,~~Consolidated ~~Inc.~~Statements of Operations (Unaudited)

Condensed Consolidated Statements of Operations (Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Grant revenues	$	—		$	167,240		$	—		$	667,456
License fees and other revenues		—			—			—			2,400

Total operating revenues		—			167,240			—			669,856
Cost of revenues		—			—			—			800

Gross profit		—			167,240			—			669,056

Operating expenses:
General and administrative		742,078			429,539			1,843,777			1,482,271
Research and development		243,053			374,944			731,234			1,642,027

Total operating expenses		985,131			804,483			2,575,011			3,124,298

Operating loss		(985,131	)		(637,243	)		(2,575,011	)		(2,455,242	)

Other income (expense):
Other income, net		828			4,583			2,416			5,808
Gain on derivative liabilities		—			13,057			32,175			35,617
Interest expense		(19,142	)		(143	)		(32,792	)		(110,864	)

Total other income (expense)		(18,314	)		17,497			1,799			(69,439	)

Loss before provision (benefit) for income taxes		(1,003,445	)		(619,746	)		(2,573,212	)		(2,524,681	)
Provision (benefit) for income taxes		—			—			—			—

Net loss	$	(1,003,445	)	$	(619,746	)	$	(2,573,212	)	$	(2,524,681	)

Weighted average number of common shares outstanding – basic and diluted		30,826,549			30,352,605			30,780,209			28,440,705

Net loss per common share – basic and diluted	$	(0.03	)	$	(0.02	)	$	(0.08	)	$	(0.09	)

	For the Three Months EndedJune 30,						For the Six Months EndedJune 30,
	2015			2014			2015			2014
Grant revenues	$	—		$	500,216		$	—		$	500,216
License fees and other revenues		—			2,400			—			2,400
Total operating revenues		—			502,616			—			502,616
Cost of revenues		—			800			—			800
Gross profit		—			501,816			—			501,816
Operating expenses:
General and administrative		541,371			468,871			1,101,699			1,052,732
Research and development		261,024			782,939			488,181			1,267,083
Total operating expenses		802,395			1,251,810			1,589,880			2,319,815
Operating loss		(802,395	)		(749,994	)		(1,589,880	)		(1,817,999	)
Other income (expense):
Gain on derivative liabilities		7,461			22,560			32,175			22,560
Interest expense		(13,234	)		(8,304	)		(13,649	)		(110,722	)
Other income, net		1,488			710			1,587			1,226
Total other income (expense)		(4,285	)		14,966			20,113			(86,936	)
Loss before provision (benefit) for income taxes		(806,680	)		(735,028	)		(1,569,767	)		(1,904,935	)
Provision (benefit) for income taxes		—			—			—			—
Net loss	$	(806,680	)	$	(735,028	)	$	(1,569,767	)	$	(1,904,935	)
Weighted average number of common shares outstanding - basic and diluted		30,826,549			29,182,858			30,756,656			27,468,910
Net loss per common share - basic and diluted	$	(0.03	)	$	(0.03	)	$	(0.05	)	$	(0.07	)

See accompanying notes to condensed consolidated financial statements.

~~See~~2 ~~accompanying notes to condensed consolidated financial statements.~~

2Q Therapeutics, Inc.

~~Table~~Condensed Consolidated Statements of ~~Contents~~Cash Flows (Unaudited)

Q Therapeutics, Inc.


	For the Nine Months Ended September 30,
	2015			2014
Cash flows from operating activities:
Net loss	$	(2,573,212	)	$	(2,524,681	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		745,851			527,307
Gain on derivative liabilities		(32,175	)		(35,617	)
Depreciation and amortization		7,640			7,157
Original debt discount		—			63,333
Common stock issued for services		—			59,500
Decrease (increase) in:
Receivables		4,136			(159,748	)
Prepaid expenses and other assets		(27,467	)		13,258
Increase in:
Accrued compensation		307,395			677,965
Accounts payable and accrued liabilities		496,296			294,032

Net cash used in operating activities		(1,071,536	)		(1,077,494	)

Cash flows from investing activities:
Purchase of property and equipment		(1,388	)		(5,615	)

Cash flows from financing activities:
Proceeds from issuance of notes payable		275,000			—
Proceeds from exercise of common stock warrants		110,831			—
Proceeds from exercise of common stock options		3,300			15,367
Issuance of common stock for cash		—			2,016,000

Net cash provided by financing activities		389,131			2,031,367

Net increase (decrease) in cash		(683,793	)		948,258
Cash as of beginning of the period		707,011			142,532

Cash as of end of the period	$	23,218		$	1,090,790

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,062		$	572

~~Condensed~~Supplemental ~~Consolidated~~disclosure ~~Statements~~ of ~~Cash~~noncash ~~Flows~~investing ~~(Unaudited)~~and financing activities:

	For the Six Months Ended
	June 30,
	2015			2014
Cash flows from operating activities:
Net loss	$	(1,569,767	)	$	(1,904,935	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		372,076			388,257
Gain on derivative liabilities		(32,175	)		(22,560	)
Depreciation and amortization		5,062			4,779
Original debt discount		—			63,333
Common stock issued for services		—			42,001
Decrease (increase) in:
Receivables		4,136			(494,660	)
Prepaid expenses and other assets		(33,460	)		6,366
Increase in:
Accrued compensation		326,173			195,674
Accounts payable and accrued liabilities		94,630			969,695
Net cash used in operating activities		(833,325	)		(752,050	)
Cash flows from investing activities:
Purchase of property and equipment		(1,388	)		(5,615	)
Cash flows from financing activities:
Proceeds from issuance of notes payable		125,000			—
Proceeds from exercise of common stock warrants		110,831			—
Proceeds from exercise of common stock options		3,300			—
Issuance of common stock for cash		—			2,016,000
Net cash provided by financing activities		239,131			2,016,000
Net increase (decrease) in cash		(595,582	)		1,258,335
Cash as of beginning of the period		707,011			142,532
Cash as of end of the period	$	111,429		$	1,400,867
Supplemental disclosure of cash flow information:
Cash paid for interest	$	792		$	429

The Company settled $2,727,030 of accounts payable and $531,863 of notes payable by issuing 3,258,893 shares of common stock during the nine months ended September 30, 2014.

~~Supplemental~~See ~~disclosure~~accompanying ofnotes ~~noncash~~to ~~investing~~condensed ~~and~~consolidated ~~financing~~financial ~~activities:~~statements.

~~The Company settled $2,727,030 of accounts payable and $531,863 of notes payable by issuing~~ 3~~,258,893~~ ~~shares of common stock during the six months ended June 30, 2014.~~

~~See~~Q ~~accompanying~~Therapeutics, ~~notes to condensed consolidated financial statements~~Inc.

3Notes to Condensed Consolidated Financial Statements (Unaudited)

~~Table~~1. ofOrganization ~~Contents~~

Q Therapeutics, Inc. (Q Therapeutics) conducts its operations through its wholly owned subsidiary, Q Therapeutic Products, Inc. (Q Products), and Q Products’ wholly owned subsidiary, NeuroQ Research, Inc. (collectively, the Company). Q Therapeutics is a Salt Lake City, Utah-based clinical stage biopharmaceutical company that is developing human cell-based therapies intended to treat degenerative diseases of the brain and spinal cord, the primary components of the central nervous system (CNS).

~~Notes~~These potential therapies are based on technology developed by Q Products’ co-founder Mahendra Rao, M.D., Ph.D., a leader in glial stem cell biology, during his tenure at the University of Utah and as Head of the Stem Cell Section in the Laboratory of Neuroscience at the National Institutes of Health (NIH) Institute of Aging. Dr. Rao was one of the first scientists to ~~Condensed~~identify ~~Consolidated~~and ~~Financial~~seek ~~Statements~~patent coverage on stem cells and their progeny cells found in the CNS. After licensing Dr. Rao’s technology from the University of Utah and NIH, Q Products commenced operations in the spring of 2004 to develop cell-based therapeutics that can be sold as “off-the-shelf” pharmaceuticals. In June 2015, the Company announced that the U.S. Food and Drug Administration (~~Unaudited~~FDA) had cleared its Investigational New Drug Application (IND) for the initiation of Phase 1/2a clinical trials with its Q-Cells® product in patients with Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig’s disease).

12. ~~Organization~~Significant Accounting Policies

QThe ~~Therapeutics,~~following ~~Inc.~~significant (Qaccounting ~~Therapeutics) conducts~~policies ~~its~~are ~~operations~~followed ~~through~~by ~~its wholly owned subsidiary, Q Therapeutic Products, Inc. (Q Products), and Q Products’ wholly owned subsidiary, NeuroQ Research, Inc. (collectively,~~ the Company). Qin ~~Therapeutics~~preparing isits acondensed ~~Salt~~consolidated ~~Lake~~financial ~~City,~~statements: Utah-based clinical stage biopharmaceutical company that is developing human cell-based therapies intended to treat degenerative diseases of the brain and spinal cord, the primary components of the central nervous system (CNS).

~~These~~Basis ~~potential therapies are based on technology developed by Q Products’ co-founder Mahendra Rao, M.D., Ph.D., a leader in glial stem cell biology, during his tenure at the University~~ of ~~Utah~~Presentation and asConsolidation Head of the Stem Cell Section in the Laboratory of Neuroscience at the National Institutes of Health (NIH) Institute of Aging. Dr. Rao was one of the first scientists to identify and seek patent coverage on stem cells and their progeny cells found in the CNS. After licensing Dr. Rao’s technology from the University of Utah and NIH, Q Products commenced operations in the spring of 2004 to develop cell-based therapeutics that can be sold as “off-the-shelf” pharmaceuticals. In June 2015, the Company announced that the U.S. Food and Drug Administration (FDA) had cleared its Investigational New Drug Application (IND) for the initiation of Phase 1/2a clinical trials with its Q-Cells® product in patients with Amyotrophic Lateral Sclerosis (Lou Gehrig’s disease or ALS).

2These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Form 10-K filed with the Securities and Exchange Commission (SEC) on March 31, 2015. ~~Significant~~The ~~Accounting~~results ~~Policies~~of operations for the three-month and nine-month periods ended September 30, 2015 are not necessarily indicative of the results to be expected for the full year ending December 31, 2015. In the opinion of management, all adjustments that are necessary for a fair presentation of the financial information for the interim periods reported have been made. All such adjustments are of a normal recurring nature.

The ~~following~~accompanying ~~significant~~unaudited ~~accounting~~condensed ~~policies~~consolidated ~~are~~financial ~~followed~~statements byhave ~~the~~been ~~Company~~prepared by management in ~~preparing~~accordance with U.S. generally accepted accounting principles (US GAAP), and include all assets and liabilities of Q Therapeutics and its ~~condensed~~wholly ~~consolidated~~owned ~~financial~~subsidiary, ~~statements:~~Q Products. All material transactions and balances have been eliminated.

~~Basis~~Going ofConcern ~~Presentation~~Assumption and ~~Consolidation~~Liquidity

~~These~~The ~~unaudited~~Company has ~~interim~~not ~~condensed~~generated ~~consolidated~~significant ~~financial~~revenues ~~statements~~and ~~should~~is bein ~~read~~the inprocess ~~conjunction~~of ~~with~~developing ~~the~~its ~~consolidated~~products. ~~financial~~The ~~statements~~Company’s products have not been approved by the U.S. Food and ~~related~~Drug ~~notes~~Administration ~~included~~(FDA) infor commercial sale; therefore, the Company’s ~~Form~~has ~~10-K~~not ~~filed~~generated revenues ~~with~~from commercial therapeutic product sales. Historically, the ~~Securities~~Company has been dependent on government grants and ~~Exchange~~debt ~~Commission~~and ~~(SEC)~~equity ~~on March 31,~~raised ~~2015~~from individual investors to sustain its operations. The ~~results~~Company’s ofcontinued operations ~~for~~will depend on its ability to raise funds through similar sources. There can be no assurance that such capital will be available on favorable terms or at all. If it is unable to raise additional capital, the ~~three-month~~Company ~~and~~will ~~six-month~~be ~~periods~~forced ~~ended~~to ~~June 30~~curtail development activities, ~~2015~~which ~~are~~will ~~not~~delay ~~necessarily~~the ~~indicative~~development of its product candidates, including the ~~results~~initiation toof beits ~~expected~~1/2a ~~for~~clinical ~~the~~trials ~~full~~with ~~year~~its ~~ending~~Q-Cells® ~~December~~product in patients with ALS or cease its operations. As of September 3130, 2015., In the ~~opinion~~Company had an accumulated deficit of ~~management~~ $29,805,283, ~~all~~a ~~adjustments~~stockholders’ ~~that~~deficit ~~are~~of ~~necessary~~$2,009,082 ~~for~~and anegative ~~fair~~working ~~presentation~~capital of ~~the~~$1,704,151. ~~financial~~These ~~information~~matters, ~~for~~among others, raise substantial doubt about the Company’s ~~interim~~ability ~~periods~~to ~~reported~~continue as a going concern through at least September 30, 2016. No adjustments have been made. ~~All~~to ~~such~~the ~~adjustments~~Company’s ~~are~~financial ofstatements as a ~~normal~~result ~~recurring~~of ~~nature~~this uncertainty.

~~The~~2015 ~~accompanying~~Financing ~~unaudited~~Transactions condensed consolidated financial statements have been prepared by management in accordance with U.S. generally accepted accounting principles (US GAAP), and include all assets and liabilities of Q Therapeutics and its wholly owned subsidiary, Q Products. All material transactions and balances have been eliminated.

~~Going~~Between ~~Concern~~January 26, 2015 ~~Assumption~~and February 23, 2015, 327,455 common stock warrants and ~~Liquidity~~21,634 common stock options, were exercised resulting in cash proceeds to the Company of $114,131.

~~The~~Between ~~Company~~June 11, ~~has not~~2015 ~~generated significant revenues~~ and isSeptember 8, in2015, the ~~process of developing its products. The~~ Company’s ~~products~~received ~~have~~$275,000 ~~not~~in ~~been~~cash ~~approved~~proceeds byas ~~the~~a ~~U.S.~~result ~~Food~~of ~~and~~certain ~~Drug~~noteholders ~~Administration~~ (~~FDA)~~one ~~for~~of ~~commercial~~which ~~sale;~~is ~~therefore, the Company has not generated~~an ~~revenues~~affiliate) ~~from~~issuing ~~commercial~~bridge ~~therapeutic~~loans ~~product~~to ~~sales. Historically,~~ the Company ~~has been dependent on government grants and debt and equity raised from individual investors to sustain its operations~~. ~~The~~These ~~Company’s~~promissory ~~continued~~notes ~~operations~~were ~~will~~issued ~~depend on~~with ~~its~~a ~~ability~~maturity topremium ~~raise~~equal ~~funds through similar sources. There can be no assurance that such capital will be available on favorable terms or at all. If it is unable~~ to ~~raise~~110% ~~additional~~of ~~capital,~~ the ~~Company~~loan ~~will~~face beamount ~~forced~~(the toMaturity ~~curtail development activities~~Premium), ~~which~~irrespective ~~will~~of ~~delay~~whether the ~~development~~notes ofare ~~its~~paid ~~product~~on ~~candidates,~~ or ~~cease~~before ~~its operations. As of June 30, 2015,~~ the ~~Company~~maturity ~~had~~date anand bear ~~accumulated deficit of $28,801,838,~~ a ~~stockholders~~simple ~~deficit~~interest rate of ~~$1,379,412~~5% per ~~and negative working capital of $1,402,306~~year. ~~These~~The ~~matters,~~notes ~~among~~are ~~others,~~due ~~raise~~and ~~substantial~~payable ~~doubt~~in ~~about~~full ~~the~~on ~~Company’s ability to continue as a going concern through at least June 30~~December 31, ~~2016.~~2015 ~~No adjustments have been made to~~ (the ~~Company’s~~Maturity ~~financial statements as a result of this uncertainty~~Date). The

~~2015~~4 ~~Financing Transactions~~

~~In June~~Q ~~2015~~Therapeutics, ~~the Company received $125,000 in cash proceeds through bridge loans from certain noteholders~~Inc. These promissory notes were issued with a maturity premium equal to 110% of the loan face amount (the Maturity Premium), irrespective of whether the notes are paid on or before the maturity date and bear a simple interest rate of 5% per year. The notes are due and payable in full on December 31, 2015 (the Maturity Date). The Company may, at its sole option, extend the Maturity Date by 180 days. Such extension of the Maturity Date will trigger an increase in the Maturity Premium from 110% to 120%. Additionally, under certain circumstances, the noteholders may elect to convert their notes into equity (see Note 5).

4Notes to Condensed Consolidated Financial Statements (Unaudited) Continued

~~Table~~ Company may, at its sole option, extend the Maturity Date by 180 days. Such extension of ~~Contents~~the Maturity Date will trigger an increase in the Maturity Premium from 110% to 120%. Additionally, under certain circumstances, the noteholders may elect to convert their notes into equity (see Note 5).

Q2014 ~~Therapeutics,~~Financing ~~Inc.~~Transactions

~~Notes~~Between March 7 and April 14, 2014, the Company issued an aggregate of 4,420,530 units, each unit consisting of one share of the Company’s common stock and one warrant to ~~Condensed~~purchase ~~Consolidated~~one ~~Financial~~share ~~Statements~~of the Company’s common stock for which the Company received cash consideration of $2,012,500 and settled indebtedness of $2,408,030 (~~Unaudited~~2014 Financing Transactions). ~~Continued~~The warrants have an initial exercise price of $1.00 per share, are immediately exercisable, and expire in no more than four years from the date of issuance. Both the shares of common stock and the warrants issued in the 2014 Financing Transactions have a “down-round” protection provision provided to the investors in the financing. As of September 30, 2015, the down-round protection rights had expired. With respect to the common shares and warrants issued, with certain exceptions, if the Company subsequently issues or sells any shares of common stock or any common stock equivalents pursuant to which shares of common stock may be acquired at a price less than $1.00 per share, then the Company shall promptly issue additional shares of common stock to the investor in an amount such that the subscription price paid when divided by the total number of shares issued will result in an actual price paid per share of common stock equal to such lower price and with respect to warrants, the warrant exercise prices shall be reduced to the lesser price at which the common stock or common stock equivalents were issued.

~~Between~~On ~~January~~June 2630, ~~2015~~2014, ~~and~~the ~~February 23,~~Company ~~2015~~issued 854,363 ~~327,455~~shares of common stock and warrants ~~and~~to 21purchase 1,~~634~~277,363 shares of common stock ~~options,~~resulting ~~were~~from ~~exercised~~an additional tranche of financing for which the Company received cash ~~proceeds~~consideration of $~~114~~3,~~131~~500 and a settlement of indebtedness of $850,863. The common stock and warrants have terms similar to the 2014 Financing Transactions. As of September 30, 2015, the warrants have an average remaining life of 2.57 years.

~~2014~~Use ~~Financing~~of ~~Transactions~~Estimates

~~Between~~The ~~March 7~~preparation ~~and April 14, 2014, the Company issued an aggregate~~ of ~~4,420,530~~financial ~~units,~~statements in ~~each~~conformity ~~unit~~with ~~consisting~~US GAAP ofrequires ~~one~~management ~~share~~to ofmake ~~the~~estimates ~~Company’s common stock~~ and ~~one~~assumptions ~~warrant~~that toaffect ~~purchase one share of~~ the ~~Company’s~~reported ~~common~~amounts ~~stock for which the Company received cash consideration~~ of ~~$2,012,500~~assets and ~~settled~~liabilities ~~indebtedness~~and ofthe ~~$2,408,030~~disclosures ~~(2014 Financing Transactions). The warrants have an initial exercise price~~ of ~~$1.00~~contingent ~~per~~assets ~~share, are immediately exercisable,~~ and ~~expire~~liabilities inas ~~no more than four years from the date~~ of ~~issuance. Both~~ the ~~shares~~dates of ~~common stock and~~ the ~~warrants~~financial ~~issued~~statements ~~in the 2014 Financing Transactions have a “down-round”~~and ~~protection provision provided to~~ the ~~investors~~reported inamounts ~~the~~of ~~financing.~~revenues ~~With respect to the common shares~~ and ~~warrants~~expenses ~~issued,~~for ~~with certain exceptions, if~~ the ~~Company~~reporting ~~subsequently issues or sells any shares of common stock or any common stock equivalents pursuant to which shares of common stock may be acquired at a price less than $1~~periods.00 ~~per share~~Accordingly, ~~then~~actual ~~the~~results ~~Company~~could ~~shall~~differ ~~promptly~~from ~~issue~~those ~~additional~~estimates. ~~shares~~Key ofestimates ~~common~~include ~~stock~~allowances tofor ~~the~~doubtful ~~investor~~accounts inreceivable, anuseful ~~amount~~lives ~~such~~for ~~that~~property ~~the~~and ~~subscription price paid~~equipment, ~~when divided~~ byvaluation ~~the~~allowances ~~total~~for ~~number~~net ofdeferred ~~shares~~income ~~issued~~tax ~~will~~assets ~~result in an actual price paid per share of common stock equal to such lower price~~ and ~~with~~valuations ~~respect~~for ~~to warrants, the warrant exercise prices shall be reduced to the lesser price at which the common~~ stock-based ~~or common~~compensation ~~stock equivalents were issued~~awards. The ~~down-round~~Company ~~provisions~~bases ~~expire~~its ~~upon~~estimates ~~the~~on ~~earlier~~historical ofexperience ~~(1) the effectiveness of a registration statement with the Securities~~ and ~~Exchange~~on ~~Commission~~various ~~(SEC)~~other ~~registering~~assumptions ~~the~~that ~~shares~~are ofbelieved ~~common~~to ~~stock~~be ~~issued~~reasonable ~~and~~under the ~~common shares underlying warrants issued in the 2014 Financing Transactions, or (2) one year after the issuance date~~circumstances.

OnRevenue ~~June 30,~~Recognition ~~2014, the Company issued 854,363 shares of common stock~~ and ~~warrants~~Grants toReceivable purchase 1,277,363 shares of common stock resulting from an additional tranche of financing for which the Company received cash consideration of $3,500 and a settlement of indebtedness of $850,863. The common stock and warrants have terms similar to the 2014 Financing Transactions.

AsThe ofCompany ~~June 30,~~periodically ~~2015~~applies for research grants, ~~the~~including ~~down~~as a sub-~~round~~recipient ~~protection~~to ~~rights~~grants funded by government agencies through research universities. Grant ~~had~~revenues ~~expired~~are recognized as the associated expenses are incurred and are billed in conjunction with the terms of the grants. The ~~warrants~~Company ~~have~~records anits ~~average~~grants ~~remaining~~receivable ~~life~~in accordance with the provisions of 2the grant agreements.82 ~~years~~The Company’s grants receivable are considered past due when payment has not been received within 30 days of the invoice date, although certain institutions customarily do not pay within these terms. The amounts of the specific allowances are estimated by management based on various assumptions including the age of the individual receivable, as well as changes in payment schedules and histories. Receivable balances are charged off against the allowance for doubtful accounts when management determines the potential for recovery is remote. Recoveries of receivables previously charged off are recorded when payment is received.

~~Use~~The Company was the recipient of ~~Estimates~~a sub-award as part of the fourth and final year of grant funding awarded to The Johns Hopkins University from the National Institute of Neurological Diseases and Stroke (NINDS) of the National Institutes of Health in the amount of $677,864. As of September 30, 2015, all funds derived from that grant have been received.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses for the reporting periods. Accordingly, actual results could differ from those estimates. Key estimates include allowances for doubtful accounts receivable, useful lives for property and equipment, valuation allowances for net deferred income tax assets and valuations for stockStock-~~based~~Based ~~compensation~~Compensation ~~awards. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.~~

~~Revenue~~The Company calculates the estimated fair value of its stock options and warrants on the grant date using the Black-Scholes option-pricing model. The Company ~~Recognition~~recognizes stock-based compensation expense as services are provided, which is generally over the vesting period of the individual equity instruments. Expense related to stock options issued in lieu of cash to non-employees for services performed are measured at the fair value of the options on the date they are earned and ~~Grants~~the ~~Receivable~~related expense is recognized as services are provided.

~~The~~5 Company periodically applies for research grants, including as a sub-recipient to grants funded by government agencies through research universities. Grant revenues are recognized as the associated expenses are incurred and are billed in conjunction with the terms of the grants. The Company records its grants receivable in accordance with the provisions of the grant agreements. The Company’s grants receivable are considered past due when payment has not been received within 30 days of the invoice date, although certain institutions customarily do not pay within these terms. The amounts of the specific allowances are estimated by management based on various assumptions including the age of the individual receivable, as well as changes in payment schedules and histories. Receivable balances are charged off against the allowance for doubtful accounts when management determines the potential for recovery is remote. Recoveries of receivables previously charged off are recorded when payment is received.

~~The~~Q Company was the recipient of a sub-award as part of the fourth and final year of grant funding awarded to The John Hopkins University from the National Institute of Neurological Diseases and Stroke (NINDS) of the National Institutes of Health in the amount of $677Therapeutics,~~864.~~ ~~As of June 30, 2015, all funds derived from that grant have been received~~Inc.

~~Stock-Based~~Notes ~~Compensation~~to Condensed Consolidated Financial Statements (Unaudited) Continued

The ~~Company~~volatility ~~calculates~~assumption ~~the estimated~~used ~~fair~~in ~~value~~the ofBlack-Scholes ~~its~~option-pricing ~~stock~~model ~~options~~is ~~and~~based ~~warrants~~ on the ~~grant~~volatility ~~date~~of publicly ~~using~~traded companies in the ~~Black-Scholes~~same ~~option-pricing~~industry ~~model~~segment as the Company. The ~~Company~~expected ~~recognizes~~lives ~~stock-based~~of ~~compensation~~the ~~expense~~options asand ~~services~~warrants ~~are~~granted ~~provided,~~represent ~~which~~the isperiods ~~generally~~of ~~over~~time that the ~~vesting~~options ~~period~~granted ~~of the~~are ~~individual~~expected ~~equity~~to ~~instruments~~be outstanding. ~~Expense~~The ~~related~~risk tofree ~~stock~~rates ~~options~~for ~~issued~~periods within inthe ~~lieu~~contractual lives of ~~cash~~the tooptions ~~non-employees~~and ~~for~~warrants ~~services performed~~ are ~~measured~~based aton the ~~fair~~U.S. ~~value~~Treasury ofsecurities ~~the~~constant ~~options~~maturity onrate that corresponds to the ~~date~~expected ~~they~~terms ~~are~~in ~~earned~~effect ~~and~~at the ~~related~~time ~~expense~~of grant. Stock-based compensation is ~~recognized~~included asin general and ~~services~~administrative ~~are~~expenses ~~provided~~in the condensed consolidated statements of operations.

5Net Loss Per Common Share

~~Table~~Basic net income or loss per common share (Basic EPS) is computed by dividing net income or loss by the weighted average number of ~~Contents~~common shares outstanding. Diluted net income or loss per common share (Diluted EPS) is computed by dividing net income or loss by the sum of the weighted average number of common shares outstanding and the dilutive potential common share equivalents then outstanding. Potential dilutive common share equivalents consist of shares issuable upon the exercise of outstanding stock options and warrants to acquire common stock.

QDue ~~Therapeutics~~to the fact that for all periods presented the Company has incurred net losses, ~~Inc~~potential dilutive common share equivalents as of September 30, 2015 and 2014, totaling 27,060,608 and 25,152,288, respectively, are not included in the calculation of Diluted EPS because they are anti-dilutive. Therefore, basic net loss per common share is the same as diluted net loss per common share for the three and nine months ended September 30, 2015 and 2014.

~~Notes~~Recent toAccounting ~~Condensed~~Pronouncements ~~Consolidated Financial Statements (Unaudited) Continued~~

~~The~~In ~~volatility~~April ~~assumption~~2015, ~~used~~the inFinancial ~~the~~Accounting ~~Black-Scholes~~Standards ~~option-pricing~~Board ~~model~~(FASB) isissued ~~based~~ASU onNo. 2015-03, ~~the~~Interest ~~volatility~~– Imputation of ~~publicly~~ ~~traded~~Interest ~~companies~~(Subtopic in835-30), Simplifying the ~~same~~Presentation ~~industry~~of ~~segment~~Debt asIssuance ~~the Company~~Costs. ~~The~~To ~~expected~~simplify ~~lives~~presentation of debt issuance costs, the ~~options~~amendments ~~and~~require ~~warrants~~that ~~granted~~debt ~~represent~~issuance costs related to a recognized debt liability be presented in the ~~periods~~balance ofsheet ~~time~~as ~~that~~a direct deduction from the ~~options~~carrying ~~granted~~amount ~~are~~of ~~expected~~that todebt beliability, ~~outstanding~~consistent with debt discounts. The ~~risk~~recognition ~~free~~and ~~rates~~measurement guidance for ~~periods within~~debt ~~the~~issuance ~~contractual~~costs ~~lives~~are ofnot affected by the ~~options~~amendments ~~and~~in ~~warrants~~ASU ~~are~~2015-03. ~~based~~For onpublic companies, the ~~U.S.~~amendments ~~Treasury~~are ~~securities~~effective for ~~constant~~financial ~~maturity~~statements ~~rate~~issued ~~that~~for ~~corresponds~~fiscal toyears ~~the~~beginning ~~expected~~after ~~terms~~December 15, in2015, ~~effect~~and atinterim ~~the~~periods ~~time~~within ofthose ~~grant~~fiscal years. ~~Stock-based~~Early ~~compensation~~adoption of the amendments is ~~included~~permitted infor ~~general~~financial ~~and~~statements that have not been previously issued. The ~~administrative~~Company ~~expenses~~is inevaluating the ~~condensed~~potential impact of adopting this guidance on its consolidated financial statements ofand ~~operations~~related disclosures.

~~Net~~In ~~Loss~~August ~~Per~~2014, the ~~Common~~FASB ~~Share~~issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 310-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 provides guidance in US GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related disclosures. In doing so, this is intended to reduce diversity in the timing and content of disclosures. This is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements and related disclosures.

~~Basic net income or loss per common share (Basic EPS) is computed by dividing net income or loss by the weighted average number of common shares outstanding~~3. ~~Diluted~~ ~~net~~Accrued ~~income~~Liabilities or loss per common share (Diluted EPS) is computed by dividing net income or loss by the sum of the weighted average number of common shares outstanding and the dilutive potential common share equivalents then outstanding. Potential dilutive common share equivalents consist of shares issuable upon the exercise of outstanding stock options and warrants to acquire common stock.

~~Due~~Accrued toliabilities ~~the~~consist ~~fact that for all periods presented the Company has incurred net losses, potential dilutive common share equivalents as~~ of ~~June 30, 2015 and 2014, totaling 26,599,069 and 25,238,364, respectively, are not included in~~ the ~~calculation~~following: ~~of Diluted EPS because they are anti-dilutive. Therefore, basic net loss per common share is the same as diluted net loss per common share for the three and six months ended June 30, 2015 and 2014.~~

Recent Accounting Pronouncements


	September 30, 2015		December 31, 2014
Accrued legal fees	$	42,500	$	42,500
Accrued interest		30,495		—
Accrued 401(k) contributions		23,603		—
Other accrued liabilities		10,888		7

Accrued liabilities, current portion		107,486		42,507
Long-term accrued liabilities		325,247		—

Total accrued liabilities	$	432,733	$	42,507

In6 April 2015, the Financial Accounting Standards Board (FASB) issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs. To simplify presentation of debt issuance costs, the amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments by ASU 2015-03. For public companies, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the amendments is permitted for financial statements that have not been previously issued. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements and related disclosures.

InQ ~~August 2014~~Therapeutics, ~~the~~ Financial Accounting Standards Board (FASB) issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 310-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going ConcernInc. ~~ASU~~ 2014-15 provides guidance in US GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related disclosures. In doing so, this is intended to reduce diversity in the timing and content of disclosures. This is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements and related disclosures.

3.Notes ~~Accrued~~to ~~Liabilities~~Condensed Consolidated Financial Statements (Unaudited) Continued

~~Accrued~~Long-term accrued liabilities consist of the ~~following:~~former Chief Executive Officer’s accrued compensation of $289,540 (see Note 4) and other long-term accrued liabilities $35,707.

	June 30, 2015		December 31, 2014
Accrued 401(k) contributions	$	43,332	$	—
Accrued legal fees		42,500		42,500
Accrued interest		12,858		—
Other accrued liabilities		74		7
Total accrued liabilities	$	98,764	$	42,507

4. Accrued Compensation

4. Accrued Compensation


	September 30, 2015		December 31, 2014
Accrued wages	$	644,741	$	621,072
Accrued termination costs		293,772		—
Accrued vacation		74,635		84,681

Total accrued compensation	$	1,013,148	$	705,753

~~Accrued~~Historically, ~~compensation~~accrued ~~consists~~wages consisted of salaries and related employment taxes resulting from the ~~following:~~former Chief Executive Officer, the current Chief Executive Officer, and the current Chief Strategy Officer agreeing to defer payment of their salaries until additional funding was obtained.

6On September 8, 2015, as part of a planned retirement, Ms. Deborah Eppstein retired as the Company’s President and Chief Executive Officer. The Company and Ms. Eppstein entered into a Separation and Release of Claims Agreement (the Separation Agreement). The Separation Agreement provides that Ms. Eppstein (1) will receive accrued salary of $523,020 and accrued vacation of $25,229 to be paid in increments of $22,500 monthly until paid in full; (2) is eligible to receive a special bonus of up to $320,932 to be determined by the Board after the Company completes a financing in excess of $10,000,000; and (3) will receive up to eight months insurance benefits totaling approximately $12,480. In connection with the Separation Agreement, the Company has recorded estimated employer payroll taxes of $22,583 with respect to Ms. Eppstein. The accrued salary and bonus payments are contingent upon the occurrence of certain events set forth in the Separation Agreement and are expected to be paid within five years from the date of separation. The special bonus has not been accrued as the amount has not yet been determined by the Board and will not be determined until the completion of a significant financing. As of September 30, 2015, the Company had recorded accrued termination costs of $293,772 and long-term accrued liabilities of $289,540 resulting from Ms. Eppstein’s separation. As of September 30, 2015, no payments had been made under this agreement.

~~Table~~As of ~~Contents~~September 30, 2015, accrued wages specific to the other two officers who agreed to defer receipt of salaries totaled $554,947. The remaining $89,794 of accrued wages consists of bonuses, deferred salary for one additional employee, and payroll for days worked in September 2015 that were not paid until October 2015. For the nine months ended September 30, 2015 and 2014, salary expense incurred but not paid for the Company’s current officers totaled $298,831 and $128,326, respectively.

Q5. ~~Therapeutics,~~Notes ~~Inc.~~Payable

~~Notes~~Between June and September 2015, the Company received $275,000 in cash proceeds as a result of certain noteholders (one of which is an affiliate) issuing bridge loans to ~~Condensed~~the ~~Consolidated~~Company. ~~Financial~~These ~~Statements~~promissory notes were issued with a maturity premium (~~Unaudited~~Maturity Premium) ~~Continued~~equal to 110% of the loan face amount, irrespective of whether the notes are paid on or before the maturity date and bear a simple interest rate of 5% per year. The notes are due and payable in full on December 31, 2015 (Maturity Date). The Company may, at its sole option, extend the Maturity Date by 180 days. Such extension of the Maturity Date will trigger an increase in the Maturity Premium from 110% to 120%. Additionally, under certain circumstances, the noteholders may elect to convert their notes into equity.

	June 30, 2015		December 31, 2014
Accrued wages	$	941,731	$	621,072
Accrued vacation		90,195		84,681
Total accrued compensation	$	1,031,926	$	705,753

As of September 30, 2015, no payments had been made on the notes and interest of $30,495.

Accrued wages consist primarily of salaries and related employment taxes resulting from our Chief Executive Officer, Chief Financial Officer, and Chief Strategy Officer agreeing to defer payment of their salaries until additional funding is obtained6. AsDerivative ofLiabilities June 30, 2015, accrued wages specific to these officers totaled $894,068. The remaining $47,663 of accrued wages is comprised of bonuses, deferred salary for one additional employee, and payroll for days worked in June 2015 that were not paid until July 2015. For the six months ended June 30, 2015 and 2014, salary expense incurred but not paid for these officers totaled $292,217 and $187,122, respectively.

5In connection with the 2014 Financing Transactions, the Company recorded derivative liabilities related to down-round protection provided to stockholders in the event that the Company issued additional units, similar to those issued in the 2014 Financing Transactions, at a price below $1.00 ~~Notes~~per ~~Payable~~share. The down-round provision was designed to expire upon the earlier of the effectiveness of a registration statement with the SEC or one year after the issuance date. As of September 30, 2015, the down-round protection provisions have all expired. In prior quarters, with the assistance of a third-party valuation specialist, the Company valued the derivative liabilities pursuant to the accounting guidance of Accounting Standards Codification 820-10, Fair Value Measurements.

In7 June 2015, the Company received $125,000 in cash proceeds through bridge loans from certain noteholders. These promissory notes were issued with a maturity premium (Maturity Premium) equal to 110% of the loan face amount, irrespective of whether the notes are paid on or before the maturity date and bear a simple interest rate of 5% per year. The notes are due and payable in full on December 31, 2015 (Maturity Date). The Company may, at its sole option, extend the Maturity Date by 180 days. Such extension of the Maturity Date will trigger an increase in the Maturity Premium from 110% to 120%. Additionally, under certain circumstances, the noteholders may elect to convert their notes into equity.

AsQ ~~of June 30~~Therapeutics, ~~2015, no payments had been made on the notes~~Inc. ~~Interest~~ ~~of $12,858, which includes the 10% note premium, has been accrued and expensed.~~

6.Notes ~~Derivative~~to ~~Liabilities~~Condensed Consolidated Financial Statements (Unaudited) Continued

InFair ~~connection~~values ~~with~~of the ~~2014 Financing Transactions, the Company recorded derivative liabilities related to~~ down-round ~~protection~~provision ~~provided~~of ~~to stockholders in~~ the ~~event~~warrants ~~that~~and ~~the~~common ~~Company~~stock ~~issued~~were ~~additional~~determined ~~units,~~using ~~similar to those issued in~~ the Monte-Carlo ~~2014~~Simulation ~~Financing~~Model ~~Transactions,~~valuation ~~at a price below $1~~technique.00 ~~per share.~~ The ~~down~~Monte-~~round~~Carlo ~~provision~~Simulation ~~was~~Model ~~designed~~provides tofor ~~expire~~dynamic ~~upon~~assumptions ~~the~~regarding ~~earlier~~volatility ofand ~~the~~risk-free ~~effectiveness of~~interest arates ~~registration~~within ~~statement with~~ the ~~SEC~~total orperiod ~~one~~to ~~year~~expected ~~after the issuance date~~conversion. ~~As of June 30, 2015, the down-round protection provision expired.~~ In ~~prior quarters~~addition, ~~with~~management ~~the assistance of a third-party valuation specialist, the Company valued the~~assessed ~~derivative liabilities pursuant to~~ the ~~accounting~~probabilities ~~guidance~~ of ~~Accounting~~future ~~Standards~~financing ~~Codification 820-10, Fair Value Measurements~~assumptions.

Fair ~~values~~value of is based on the ~~down-round~~price ~~provision~~that ofwould ~~the~~be ~~warrants~~received ~~and~~to ~~common~~sell ~~stock~~an ~~were~~asset ~~determined~~or ~~using~~paid ~~the~~to ~~Monte-Carlo~~transfer ~~Simulation~~a liability ~~Model~~in ~~valuation~~an ~~technique.~~orderly ~~The~~transaction ~~Monte-Carlo~~between ~~Simulation~~market ~~Model~~participants ~~provides~~at ~~for~~the ~~dynamic~~measurement ~~assumptions~~date. ~~regarding~~In ~~volatility~~order to increase consistency and ~~risk-free~~comparability ~~interest~~in ~~rates within~~fair ~~the~~value ~~total~~measurements, ~~period~~US toGAAP ~~expected~~established ~~conversion.~~a Infair ~~addition,~~value ~~management~~hierarchy ~~assessed~~that ~~the~~prioritizes ~~probabilities~~observable ofand unobservable ~~future~~inputs ~~financing~~used ~~assumptions.~~to measure fair value into three broad levels, which are described below:

Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, US GAAP established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:


Level 1		Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

Level 2		Other inputs that are observable directly or indirectly, such as quoted prices for similar assets and liabilities or market corroborated inputs.

Level 3		Unobservable inputs that are used when little or no market data is available, which require the Company to develop its own assumptions about how market participants would value the assets or liabilities.

Level 1		Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.
Level 2		Other inputs that are observable directly or indirectly, such as quoted prices for similar assets and liabilities or market corroborated inputs.
Level 3		Unobservable inputs that are used when little or no market data is available, which require the Company to develop its own assumptions about how market participants would value the assets or liabilities.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. There were no assets or liabilities measured at fair value on a recurring basis as of September 30, 2015.

~~Determining~~The ~~which~~following ~~category~~table anpresents ~~asset or liability falls within~~ the ~~hierarchy~~fair ~~requires~~value reconciliation ~~significant~~of ~~judgment.~~Level ~~There~~3 ~~were no assets or~~ liabilities measured at fair value on a recurring basis asduring ofthe ~~June~~nine months ended September 30, 2015.

The following table presents the fair value reconciliation of Level 3 liabilities measured at fair value on a recurring basis during the six months ended June 30, 2015.


	Fair Value Measurements Using Significant Unobservable Inputs
	Derivatives
Beginning balance, as of December 31, 2014	$	32,175
Gain on derivative liabilities		(32,175	)

Ending balance, as of September 30, 2015	$	—

7The derivative liabilities were settled through the expiration of the down-round protection provisions of the 2014 Financing Transactions. The carrying amount of zero as of September 30, 2015 was derived from Level 3 inputs and represents management’s best estimate of fair value.

~~Table~~7. ofStockholders’ ~~Contents~~Equity

QCommon ~~Therapeutics,~~Stock ~~Inc.~~

~~Notes~~As of September 30, 2015, the Company is authorized to ~~Condensed~~issue ~~Consolidated~~100,000,000 ~~Financial~~shares ~~Statements~~of ~~(Unaudited)~~common ~~Continued~~stock, of which 30,826,549 shares are outstanding. Holders of shares of common stock are entitled to cast one vote for each share held at all stockholders meetings for all purposes, including the election of directors. The common stock does not have cumulative voting rights.

	Fair ValueMeasurementsUsing SignificantUnobservable Inputs
	Derivatives
Beginning balance, as of December 31, 2014	$	32,175
Gain on derivative liabilities		(32,175	)
Ending balance, as of June 30, 2015	$	—

Preferred Stock

~~The~~As ~~derivative liabilities were settled through the expiration~~ of ~~the~~September 30, ~~down-round~~2015, ~~protection provisions of~~ the ~~2014~~Company ~~Financing Transactions~~was ~~and~~authorized ~~the~~to ~~carrying~~issue ~~amount~~10,000,000 shares of ~~zero~~preferred asstock; ~~of June 30~~however, ~~2015~~no ~~was~~shares ~~derived~~of ~~from~~preferred ~~Level~~stock 3have ~~inputs~~been ~~and~~issued to ~~represent management’s best estimate of fair value~~date.

7.8 ~~Stockholders’ Equity~~

~~Common~~Q ~~Stock~~Therapeutics, Inc.

AsNotes ~~of June 30, 2015, the Company is authorized~~ to ~~issue~~Condensed ~~100,000,000~~Consolidated ~~shares~~Financial ofStatements ~~common~~(Unaudited) ~~stock,~~Continued of which 30,826,549 shares are outstanding. Holders of shares of common stock are entitled to cast one vote for each share held at all stockholders’ meetings for all purposes, including the election of directors. The common stock does not have cumulative voting rights.

~~Preferred~~ Stock Options

AsThe offollowing ~~June 30,~~summarizes ~~2015,~~ the ~~Company~~outstanding ~~was~~common ~~authorized to issue 10,000,000 shares of preferred~~ stock; ~~however,~~options noand ~~shares~~related ofactivity ~~preferred~~for ~~stock~~the ~~have~~nine ~~been~~months ~~issued~~ended ~~to date.~~September 30, 2015:

Stock Options


	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Life (Years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2014		8,952,927		$	0.52		7.61	$	1,601,845
Granted		1,556,251			0.70		—		—
Exercised		(21,634	)		0.15		—		—
Forfeited		(135,211	)		0.07		—		—

Outstanding as of September 30, 2015		10,352,333			0.55		7.36		1,504,728

Exercisable as of September 30, 2015		7,403,791			0.50		6.82		1,504,728

~~The~~For ~~following summarizes~~ the ~~outstanding~~ ~~common~~nine ~~stock~~months ~~options~~ended ~~and~~September 30, ~~related~~2015, ~~activity~~21,634 ~~for~~options ~~the~~were ~~six~~exercised ~~months~~for ~~ended~~proceeds ~~June 30~~of $3,300. ~~2015:~~

	Number ofOptions			WeightedAverage ExercisePrice Per Share		WeightedAverageRemaining Life(Years)		AggregateIntrinsicValue
Outstanding as of December 31, 2014		8,952,927		$	0.52		7.61	$	1,601,845
Granted		900,000			0.70		—		—
Exercised		(21,634	)		0.15		—		—
Forfeited		(135,211	)		0.07		—		—
Outstanding as of June 30, 2015		9,696,082			0.54		7.44		1,504,728
Exercisable as of June 30, 2015		6,515,665			0.47		6.83		1,504,728

As of September 30, 2015, options to purchase 3,628,268 shares of common stock under the Plan were available for future grant. As part of the former CEO’s separation agreement, all of Ms. Eppstein’s options immediately vested upon her separation date and the Company incurred a one-time charge of $191,605 to stock-based compensation expense.

~~For~~Stock-based compensation for the ~~six~~three months ended ~~June~~September 30, 2015 and 2014 was $373,775 21and $139,~~634~~050, ~~options~~respectively. ~~were~~Stock-based ~~exercised~~compensation for ~~proceeds~~the nine ofmonths ended September 30, 2015 and 2014 was $3745,~~300~~851 and $527,307, respectively.

As of ~~June~~September 30, 2015, ~~options to purchase 4,284,519 shares of common stock under~~ the Plan were available for future grant. Stock-based compensation for the three months ended June 30, 2015 and 2014 was $191,133 and $139,437, respectively. Stock-based compensation for the six months ended June 30, 2015 and 2014 was $372,076 and $388,257, respectively. As of June 30, 2015, the Company had $1968,~~275,741~~552 of unrecognized stock-based compensation expense related to non-vested awards that will be recognized over a weighted-average period of 2.6954 years.

8Warrants

~~Table~~In January 2015, the Company issued a warrant to purchase 50,000 shares of ~~Contents~~common stock to a consulting firm pursuant to the terms of a business consulting agreement which is effective through December 31, 2015. Between January 26, 2015 and February 13, 2015, 327,455 warrants were exercised for total cash proceeds of $110,831. During the nine months ended September 30, 2015, 1,008,431 warrants expired.

QAs ~~Therapeutics~~of September 30, ~~Inc~~2015, 16,705,275 warrants to purchase common stock had been issued with exercise prices ranging from $1.00 to $2.00 per share and terms ranging from four to seven years. The weighted average warrant exercise price is $1.30 and the weighted average remaining life is 2.91 years.

~~Notes~~8. toCommitments ~~Condensed Consolidated Financial Statements (Unaudited) Continued~~

~~Warrants~~Advisory Agreement

In ~~January~~July 2013, the Company entered into a consulting services agreement that terminates December 31, 2015. In connection with the agreement, the Company issued a warrant to purchase 5075,000 shares of common stock toat a ~~consulting~~strike ~~firm~~price ~~pursuant~~of to$1.01 ~~the~~per ~~terms~~share. ofThe warrant has a ~~business~~five-year ~~consulting agreement~~life ~~which~~and isa ~~effective~~cashless ~~through~~exercise ~~December 31, 2015~~option. ~~Between~~In January ~~26,~~ ~~2015~~2014 and ~~February 13,~~January 2015, ~~327,455~~the ~~warrants~~Company ~~were~~issued ~~exercised~~two ~~for~~additional ~~total~~warrants ~~cash~~each ~~proceeds~~ of ~~$110,831.~~which ~~During~~allowed the ~~six~~warrant ~~months~~holder ~~ended~~to ~~June 30,~~purchase ~~2015~~50,000 ~~945~~shares of common stock with similar terms to the 75,~~931~~000 issuance. The consulting firm has received all the warrants ~~expired~~earned under the agreement.

~~As of June 30, 2015, 16,767,775 warrants to purchase common stock had been issued with exercise prices ranging from $1~~9.00 toSubsequent ~~$2.75 per~~Events ~~share and terms ranging from two to seven years. The weighted average warrant exercise price is $1.30 and the weighted average remaining life is 3.16 years.~~

8In October 2015, the Company received $35,000 in cash proceeds as a result of a certain noteholder (which is an affiliate of the Company) issuing a bridge loan to the Company. ~~Commitments~~The promissory note was issued with a maturity premium (Maturity Premium) equal

~~Advisory~~9 ~~Agreement~~

InQ ~~July 2013~~Therapeutics, ~~the Company entered into a consulting services agreement effective through December 31, 2015~~Inc. In connection with the agreement, the Company issued a warrant to purchase 75,000 shares of common stock at a strike price of $1.01 per share. The warrant has a five-year life and a cashless exercise option. In January 2014 and January 2015, the Company issued two additional warrants each of which allowed the warrant holder to purchase of 50,000 shares of common stock with similar terms to the 75,000 issuance. The consulting firm has received all the warrants earned under the agreement.

9.Notes ~~Subsequent~~to ~~Events~~Condensed Consolidated Financial Statements (Unaudited) Continued

~~In August 2015, the Company received $100,000 in cash proceeds through a bridge loan from a noteholder, who is also an affiliate. The~~ ~~promissory note was issued with a maturity premium (Maturity Premium) equal~~ to 110% of the loan face amount, irrespective of whether the note is paid on or before the maturity date and bears a simple interest rate of 5% per year. The note is due and payable in full on December 31, 2015 (the Maturity Date). The Company may, at its sole option, extend the Maturity Date by 180 days. Such extension of the Maturity Date will trigger an increase in the Maturity Premium from 110% to 120%. Additionally, under certain circumstances, the noteholder may elect to convert ~~their~~its note into equity.

9In November 2015, the Company received $475,000 in cash proceeds as a result of the Company issuing promissory notes to certain noteholders (one of which is an affiliate of the Company). The promissory notes were issued with a repayment premium equal to 35% of the loan face amount (Repayment Premium), irrespective of whether the notes are paid on or before the Maturity Date, and bear a simple interest rate of 5% per year. Unless the entire outstanding principal amount of these promissory notes, plus all accrued but unpaid interest, plus the Repayment Premium, is converted into equity in accordance with the provisions of the promissory notes, the promissory notes will become due and payable in full on the first to occur of (a) March 31, 2017 (Maturity Date) or (b) demand of written notice following an event of default.

~~Table~~Notwithstanding an event of ~~Contents~~default, the Company may, at its sole option, extend the Maturity Date by 180 days. Such extension of the Maturity Date will trigger an increase in the Repayment Premium from 35% to 40%. Additionally, the noteholders have agreed to mandatory conversion of the notes into equity as part of a qualified financing.

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Our actual results and the timing of events could differ materially from those anticipated as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in our 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The following discussion of our financial condition and results of operations should be read with our unaudited consolidated financial statements and the related notes included elsewhere in this Form 10-Q. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Company Overview

Q Therapeutics, Inc. (hereinafter Q Therapeutics, Q, we, us, our and similar expressions) is a Salt Lake City, Utah-based clinical-stage biopharmaceutical company that is developing human cell-based therapies that can be sold as “off-the-shelf” pharmaceuticals intended to treat neurodegenerative diseases of the brain and spinal cord, the primary components of the central nervous system or CNS.

The technology upon which these potential therapies are based was developed by Q’s co-founder Mahendra Rao, M.D., Ph.D., a leader in glial stem cell biology, during Dr. Rao’s tenure as a Professor at the University of Utah and as Head of the Stem Cell Section in the Laboratory of Neuroscience at the National Institutes of Health (NIH) Institute of Aging. Dr. Rao was one of the first scientists to identify and seek patent coverage on stem cells and their progeny cells found in the CNS.

Every year, millions of people suffer from debilitating and often fatal neurodegenerative diseases of the brain and spinal cord. Despite much effort by the pharmaceutical/biotechnology industry, current approaches to treating these diseases have not been effective. A new approach is needed for treating the multimodal nature of neurodegenerative disease.

Q has identified and patented a new treatment modality that provides a multi-factorial approach, bypassing the need to address individual pathways. Specifically, Q is developing a cell-based therapeutic that employs a natural cell type found in the healthy CNS: human glial restricted progenitors and their progeny cells. We call them, Q-Cells®. Q-Cells produce astrocytes and oligodendrocytes, the support cells that enable the normal function of neurons. We believe that Q-Cells may provide multiple and ~~complementary~~ complementary mechanisms of action in the treatment of many neurodegenerative diseases. An advantage of this approach is that one need not fully understand all of the mechanistic aspects of these diseases, as we are tapping into the natural cellular ~~machinery~~ machinery that enables healthy systems to function. We believe this is a more realistic approach than seeking a drug that affects a single disease pathway (although the addition of Q-Cell therapy may enhance benefits seen with such single drugs). Based on data in animal models, we believe that repairing damaged neurons is a faster, more realistic and easier approach than trying to replace them. In June 2015, the Company announced that the U.S. Food and Drug Administration (FDA) had cleared ~~its~~ its Investigational New Drug Application (IND) for the initiation of Phase 1/2a clinical trials with its Q-Cells® product in patients with Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig’s disease ~~or ALS~~).

Initially, Q is targeting orphan diseases, where the FDA can allow fast-track approvals and market exclusivity, and for which smaller, less-expensive clinical trials may be warranted. This approach may result in accelerated commercialization efforts while maintaining a financing approach focused on capital efficiency. Q is advancing its initial product candidate, trademarked “Q-Cells^®” as a potential treatment for ALS, and eventually other indications, potentially including Multiple Sclerosis (MS), Transverse Myelitis (TM), Spinal Cord Injury (SCI), Stroke, Huntington’s disease, Parkinson’s disease and Alzheimer’s disease.

Results of Operations for the Three Months Ended ~~June~~September 30, 2015 compared to the Three Months Ended ~~June~~September 30, 2014

To date, we have not generated significant revenues ($0 and $~~502~~167,~~616~~240, respectively, for the three months ended ~~June~~September 30, 2015 and 2014) and have been focused on developing our products for therapeutic use for commercial sale.

We have not generated revenues in excess of expenses and have been dependent on government grants and debt and equity funding raised from investors to sustain our operations. Our products have not yet been approved by the FDA for commercial sale, and as a result we have not generated revenues from commercial therapeutic product sales. We have incurred losses and used cash in operating activities since inception. As of ~~June~~September 30, 2015, the Company had an accumulated deficit of $2829,~~801~~805,~~838~~283, a ~~stockholders~~stockholder’s deficit of $12,~~379~~009,~~412~~082, and negative working capital of $1,~~402~~704,~~306~~151.

1011

~~Table~~Grant ofRevenues ~~Contents~~

Grant ~~Revenues~~revenues for the three months ended September 30, 2015 and 2014 were $0 and $167,240, respectively. The decrease was due to an NIH grant issued to The Johns Hopkins University (of which we received $677,864 in 2014) coming to an end. While we intend to apply for grants in 2015 and beyond for additional indications, there is no assurance that we will be awarded future grants.

~~Grant~~General ~~revenues for the three months ended June 30, 2015~~ and ~~2014~~Administrative ~~were~~Expenses $0 and $500,216, respectively. The decrease was primarily due to approval for the fourth and final year of an NIH grant issued to The Johns Hopkins University, of which we received a sub- were of $677,864.

~~Other~~General ~~Revenue~~and administrative expenses for the three months ended September 30, 2015 were $742,078, an increase of $312,539, or 72.8%, from $429,539 for the three months ended September 30, 2014. The increase results from payroll-related expenses associated with the hiring of additional personnel and the accelerated vesting of the former CEO’s stock options, offset in part, by a decrease in legal and professional fees.

~~Other~~Research ~~revenue for the three months ended June 30, 2015~~ and ~~2014~~Development ~~was~~Expenses ~~$0 and $2,400, respectively. The 2014 revenue was due to a one-time sale of non-commercial products to a collaborative research partner.~~

~~Cost~~Research and development expenses for the three months ended September 30, 2015, were $243,053, a decrease of ~~Revenue~~$131,891, or 35.2%, from $374,944 for the three months ended September 30, 2014. The decrease is primarily due to the costs incurred in 2014 associated with our large animal safety study and cell manufacturing, offset, in part, by the increase in clinical consulting fees related to our IND submission and the increase in payroll associated with hiring additional personnel. We anticipate research and development expenses to decrease until additional financing has been obtained. Once additional financing has been obtained, we anticipate significant increases in research and development expenses as we commence our first in-human clinical trial of Q-Cells for treatment of ALS.

~~Cost~~Results of ~~revenue~~Operations for the ~~three~~Nine ~~months~~Months ~~ended~~Ended ~~June~~September 30, 2015 ~~and~~compared ~~2014~~to ~~was~~the $0Nine ~~and~~Months Ended ~~$800~~September 30, ~~respectively. The~~ 2014 ~~cost of revenue was due the cost of materials related to a one-time sale of non-commercial products to a collaborative research partner.~~

~~General~~Grant ~~and~~Revenues ~~Administrative Expenses~~

~~General~~Grant ~~and~~revenues ~~administrative expenses~~ for the ~~three~~nine months ended ~~June~~September 30, 2015 and 2014 were $~~541,371,~~0 anand ~~increase of~~ $72667,~~500~~456, ~~or 15~~respectively.~~5 %,~~ ~~from~~The ~~$468,871~~decrease ~~for~~was ~~the three~~due ~~months~~to ~~ended~~an ~~June 30,~~NIH ~~2014.~~grant issued to The ~~increase~~Johns isHopkins ~~primarily~~University ~~for~~(of ~~payroll-related~~which ~~expenses~~we ~~associated~~received ~~with~~$677,864 ~~additional~~in ~~personnel,~~2014) ~~stock-based~~coming ~~compensation~~to ~~expense~~an ~~related~~end. toWhile ~~certain~~we ~~stock~~intend ~~option~~to apply for grants ~~issued~~in ~~during~~2015 ~~the~~and ~~quarter,~~beyond ~~offset~~for inadditional ~~part~~indications, ~~by a~~there ~~decrease~~is inno ~~legal~~assurance ~~and~~that ~~professional~~we ~~fees~~will be awarded future grants.

~~Research~~Other ~~and~~Revenue ~~Development Expenses~~

~~Research~~Other ~~and~~revenue ~~development expenses~~ for the ~~three~~nine months ended ~~June~~September 30, 2015, ~~were~~and ~~$261,024,~~2014 awas ~~decrease of~~ $~~521,915,~~0 orand ~~66.7%, from~~ $~~782~~2,~~939 for the three months ended June 30~~400, ~~2014~~respectively. The ~~decrease~~2014 isrevenue ~~primarily~~was due to ~~the~~a ~~costs~~one-time ~~incurred~~sale inof ~~2014~~non-commercial ~~associated~~products ~~with our large animal safety study and cell manufacturing, offset, in part, by the increase in clinical consulting fees related~~ to ~~the preparation~~a ofcollaborative ~~our~~research ~~IND submission and the increase in payroll associated with hiring additional personnel~~partner. We ~~anticipate~~do ~~research~~not ~~and development expenses to remain at approximately the same levels until additional financing has been obtained. Once additional financing has been obtained, we~~ anticipate any significant ~~increases~~other inrevenue ~~research and development expenses as we commence our first~~ in~~-human~~ ~~clinical trial of Q-Cells for treatment of ALS~~2015.

~~Results~~Cost of ~~Operations~~Revenue ~~for the Six Months Ended June 30, 2015 compared to the Six Months Ended June 30, 2014~~

~~Grant~~Cost ~~Revenues~~of revenue for the nine months ended September 30, 2015 and 2014 was $0 and $800, respectively. The 2014 cost of revenue was cost of materials related to a one-time sale of non-commercial products to a collaborative research partner. We do not anticipate any significant other cost of revenue in 2015.

~~Grant~~General ~~revenues for the six months ended June 30, 2015~~ and ~~2014~~Administrative ~~were~~Expenses $0 and $500,216, respectively. The decrease was primarily due to approval for the fourth and final year of an NIH grant issued to The Johns Hopkins University, of which we received a sub-award were of $677,864. While we intend to apply for grants in 2015 and beyond for additional indications, there is no assurance that we will be awarded future grant opportunities.

~~Other~~General ~~Revenue~~and administrative expenses for the nine months ended September 30, 2015 were $1,843,777, an increase of $361,506, or 24.4%, from $1,482,271 for the nine months ended September 30, 2014. The increase results from payroll-related expenses associated with the hiring of additional personnel and the accelerated vesting of the former CEO’s stock options, offset in part, by a decrease in legal and professional fees.

~~Other~~Research ~~revenue for the six months ended June 30, 2015~~ and ~~2014~~Development ~~was~~Expenses ~~$0 and $2,400, respectively. The 2014 revenue was due to a one-time sale of non-commercial products to a collaborative research partner. We do not anticipate any significant other revenues in 2015.~~

~~Cost~~Research and development expenses for the nine months ended September 30, 2015 were $731,234, a decrease of ~~Revenue~~$910,793, or 55.5%, from $1,642,027 for the nine months ended September 30, 2014. The decrease is primarily due to the costs incurred in 2014 associated with our large animal safety study and cell manufacturing, offset, in part, by the increase in clinical consulting fees related to the preparation of our IND submission and salaries. We do not expect to incur additional significant research and development expenses until additional financing has been obtained. Once additional financing has been obtained, we anticipate significant increases in research and development expenses as we commence our first in-human clinical trial of Q-Cells for treatment of ALS.

~~Cost~~12 of revenue for the six months ended June 30, 2015 and 2014 was $0 and $800, respectively. The 2014 cost of revenue was due the cost of materials related to a one-time sale of non-commercial products to a collaborative research partner. We do not anticipate any significant other cost of revenues in 2015.

11Liquidity and Capital Resources

~~Table~~For ofthe ~~Contents~~nine months ended September 30, 2015, net cash used in operating activities totaled $1,071,536 compared to $1,077,494, for the nine months ended September 30, 2014.

~~General~~For the nine months ended September 30, 2015, net cash used in investing activities to purchase lab and ~~Administrative~~computer ~~Expenses~~equipment was $1,388 compared to $5,615 for the nine months ended September 30, 2014.

~~General~~For ~~and administrative expenses for~~ the ~~six~~nine months ended ~~June~~September 30, 2015, ~~were~~net ~~$1,101,699,~~cash anprovided ~~increase~~by financing ofactivities was $48389,~~967,~~191 orcompared ~~4.7%,~~to ~~from~~ $12,~~052~~031,~~732~~367 for the ~~six~~ nine months ended ~~June~~September 30, 2014. ~~The~~Cash ~~increase~~provided isby ~~primarily~~financing ~~for~~activities ~~payroll-related~~in ~~expenses~~2015 ~~resulting~~was sourced from the ~~hiring~~exercise of ~~additional~~common ~~personnel~~stock warrants and ~~our~~common ~~efforts~~stock tooptions ~~obtain additional financing, offset, in part, by a decrease in legal~~ and ~~professional fees~~the ~~and~~issuance ~~stock-based~~of ~~compensation~~notes payable.

~~Research~~As ~~and~~of ~~Development~~September 30, ~~Expenses~~2015, the Company had negative working capital of $1,704,151.

~~Research~~In ~~and~~order ~~development~~for ~~expenses~~us ~~for~~to ~~the~~continue ~~six~~to ~~months~~meet ~~ended~~our ~~June 30,~~operational ~~2015~~and ~~were~~liquidity ~~$488~~needs,~~181,~~ awe ~~decrease~~must ofobtain ~~$778~~additional financing. Any additional equity financing,~~902~~ if available, may ornot 61be available on favorable terms and may be dilutive to current stockholders.5% Debt financing, ~~from~~if $1available,~~267,083~~ ~~for~~may ~~the~~involve ~~six months~~more ~~ended~~restrictive ~~June 30,~~covenants ~~2014.~~that ~~The~~may ~~decrease~~potentially isimpair ~~primarily~~our ~~due~~ability to operate the ~~costs~~Company. ~~incurred~~Our inability ~~2014~~to ~~associated~~access ~~with~~capital when ~~our~~needed ~~large~~is ~~animal~~not ~~safety~~assured ~~study~~ and, ~~cell~~if ~~manufacturing,~~not ~~offset~~achieved on a timely basis, inwill ~~part~~materially harm our business, byfinancial ~~the~~position ~~increase~~and inresults ~~clinical~~of ~~consulting~~operations. ~~fees~~These ~~related~~uncertainties create substantial doubt about our ability to ~~the~~continue as going concern. There ~~preparation~~can ofbe ~~our~~no ~~IND~~assurance ~~submission~~that ~~and~~such ~~salaries~~capital will be available on favorable terms or at all. WeIf dothe ~~not~~Company ~~expect~~is unable to ~~incur~~raise additional ~~significant~~capital, ~~research~~the ~~and~~Company will be forced to (1) curtail development ~~expenses~~activities, ~~until~~which ~~additional~~will ~~financing~~delay ~~has~~the ~~been~~development ~~obtained~~of is product candidates, including the initiation of its 1/2a clinical trials with its Q-Cells® product in patients with ALS or (2) cease its operations. ~~Once~~As ~~additional~~of ~~financing~~September 30, ~~has~~2015, ~~been~~the Company ~~obtained~~had an accumulated deficit of $29,805,283, wea ~~anticipate~~stockholders’ ~~significant increases~~deficit inof ~~research~~$2,009,082 and ~~development~~negative ~~expenses~~working capital of $1,704,151. These matters, among others, raise substantial doubt about the Company’s ability to continue as wea ~~commence~~going concern ~~our~~through ~~first~~at ~~in-human~~least ~~clinical~~September 30, ~~trial~~2016. ofNo ~~Q-Cells~~adjustments ~~for~~have ~~treatment~~been made to our financial statements as a result of ~~ALS~~this uncertainty.

~~Liquidity and Capital~~Recent ~~Resources~~Accounting Pronouncements

~~For~~In April 2015, the ~~six~~Financial ~~months~~Accounting ~~ended~~Standards ~~June~~Board (FASB) issued ASU No. 302015-03, ~~2015~~Interest – Imputation of Interest (Subtopic 835-30), ~~net~~Simplifying ~~cash~~the ~~used~~Presentation inof ~~operating~~Debt ~~activities~~Issuance ~~totaled~~Costs. ~~$833~~To simplify presentation of debt issuance costs,~~325~~ ~~compared~~the amendments require that debt issuance costs related to ~~$752,050~~a ~~for~~recognized ~~the~~debt ~~six~~liability ~~months~~be presented in the balance ~~ended~~sheet ~~June 30~~as a direct deduction from the carrying amount of that debt liability, ~~2014~~consistent with debt discounts. ~~Cash~~The ~~outflows~~recognition ~~increased~~and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. asFor public companies, the ~~decrease~~amendments inare effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the ~~net~~amendments ~~loss~~is ~~was~~permitted ~~more~~for ~~than~~financial ~~offset~~statements bythat have not been previously issued. The Company is evaluating the ~~change~~potential inimpact ~~accounts~~of ~~receivable~~adopting ~~and~~this ~~accounts~~guidance ~~payable~~on ~~and~~its ~~accrued~~consolidated ~~liabilities~~financial ~~balances~~statements and related disclosures.

~~For~~In August 2014, the ~~six~~FASB ~~months~~issued ~~ended~~ASU ~~June 30~~2014-15, ~~2015,~~Presentation ~~net~~of ~~cash~~Financial ~~used~~Statements – Going Concern (Subtopic 310-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 provides guidance in ~~investing~~US GAAP ~~activities~~about ~~related~~management’s responsibility to ~~the~~evaluate ~~purchase~~whether ofthere ~~lab~~is ~~and~~substantial ~~computer~~doubt ~~equipment~~about ~~was~~an ~~$1,388~~entity’s ~~compared~~ability to continue as a going concern and to ~~$5,615~~provide related disclosures. This pronouncement is intended to reduce diversity in the timing and content of disclosures. ASU 2014-15 is effective for the ~~six~~annual ~~months~~period ~~ended~~ending ~~June~~after December 3015, ~~2014~~2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements and related disclosures.

~~For~~Off-Balance ~~the~~Sheet ~~six~~Arrangements months ended June 30, 2015, net cash provided by financing activities was $239,131 compared to $2,016,000 for the six months ended June 30, 2014. Cash provided by financing activities in 2015 was sourced from the exercise of common stock warrants and common stock options and notes payable.

AsWe ofdo ~~June 30,~~not ~~2015,~~have ~~the~~any off-balance ~~Company~~sheet ~~had negative working capital of $1,402,306~~arrangements.

InSignificant ~~order~~Accounting ~~for~~Policies us to continue to meet our operational and liquidity needs, we must obtain additional funding. Any additional equity financing, if available, may not be available on favorable terms and may be dilutive to current stockholders. Debt financing, if available, may involve more restrictive covenants that may potentially impair our ability to operate the Company. Our ability to access capital when needed is not assured and, if not achieved on a timely basis, will materially harm our business, financial position and results of operations. These uncertainties create substantial doubt about our ability to continue as going concern. No adjustments have been made to our financial statements as a result of this uncertainty.

~~Subsequent~~Significant ~~Events~~accounting policies are those policies which are both important to the presentation of a company’s financial condition and results of operations and require management’s most subjective or complex judgments. Often estimates are required to be made about matters that are inherently uncertain. No significant changes to our accounting policies occurred during the periods presented. For a further discussion of our significant accounting policies, see our Annual Report on Form 10-K for the year ended December 31, 2014.

In August 2015, the Company received $100,000 in cash proceeds through a bridge loan from a noteholder, who is also an affiliate. The promissory note was issued with a maturity premium (Maturity Premium) equal to 110% of the loan face amount, irrespective of whether the note is paid on or before the maturity date and bears a simple interest rate of 5% per year. The note is due and payable in full on December 31, 2015 (Maturity Date). The Company may, at its sole option, extend the Maturity Date by 180 days. Such extension of the Maturity Date will trigger an increase in the Maturity Premium from 110% to 120%. Additionally, under certain circumstances, the noteholder may elect to convert their note into equity.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (FASB) issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs. To simplify presentation of debt issuance costs, the amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments by ASU 2015-03. For public companies, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the amendments is permitted for financial statements that have not been previously issued. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements and related disclosures.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 310-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 provides guidance in US GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related disclosures. This pronouncement is intended to reduce diversity in the timing and content of disclosures. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements and related disclosures.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Significant Accounting Policies

Significant accounting policies are those policies which are both important to the presentation of a company’s financial condition and results of operations and require management’s most subjective or complex judgments. Often estimates are required to be made about matters that are inherently uncertain. No significant changes to our accounting policies occurred during the periods presented. For a further discussion of our significant accounting policies, see our Annual Report on Form 10-K for the year ended December 31, 2014.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

None.

Item 4. Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated and communicated to our executive officers to allow timely decisions ~~regarding~~ regarding required disclosure. Our Chief Executive Officer, President and Chief Financial Officer ~~have~~has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer, President and ~~our~~ Chief Financial Officer ~~have~~has concluded that our disclosure controls and procedures were effective as of ~~June~~September 30, 2015.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) occurred during the quarter ended ~~June~~September 30, 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

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

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Index to Exhibits

Exhibit		Description
4.1		Form of Promissory Note
31.1(1)		Certification of the Company’s Principal Executive Officer pursuant to 15d-15(e) under the Securities and Exchange Act of 1934, as amended, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015.
10.1		Form of Convertible Securities Purchase Agreement
31.2(1)		Certification of the Company’s Principal Financial and Accounting Officer pursuant to 15d-15(e) under the Securities and Exchange Act of 1934, as amended, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015.
31.1(1)		Certification of the Company’s Principal Executive Officer pursuant to 15d-15(e) under the Securities Exchange Act of 1934, as amended, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.
32.1*		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Principal Executive Officer).
31.2(1)		Certification of the Company’s Principal Financial and Accounting Officer pursuant to 15d-15(e) under the Securities Exchange Act of 1934, as amended, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.
32.2*		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Principal Financial and Accounting Officer).
32.1*		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Principal Executive Officer ) and (Principal Financial and Accounting Officer).
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Presentation Linkbase

(1)	Filed herewith.

*	Furnished herewith.

SIGNATURES

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

Date: November 13, 2015

By: /s/ STEVEN J. BORST

Name: Steven J. Borst

Title: Chief Executive Officer and President (Principal Executive Officer and Principal Financial and Accounting Officer)

1415

Date: August 14, 2015

By: /s/ DEBORAH A. EPPSTEIN

Name: Deborah A. Eppstein, PhD Title: Chief Executive Officer, President (Principal Executive Officer)

Date: August 14, 2015

By: /s/ STEVEN J. BORST

Name: Steven J. Borst Title: Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)

Filing Compare · Q Therapeutics, Inc.