SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ x QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934:

For the quarterly period ended ~~September 30~~December 31, 2015

☐ ¨ TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934

Commission file number: 333-128226

INTELLECT NEUROSCIENCES, INC. ~~(Exact name of registrant as specified in its charter)~~

Delaware		20-8329066
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
550 Sylvan Ave. Englewood Cliffs, NJ		07632
(Address of principal executive offices)		(Zip Code)

(Exact name of registrant as specified in its charter)

(201) 608 5101 (Registrant’s telephone number, including area code)

Delaware
(State or other jurisdiction of		20-8329066
incorporation or organization)		(I.R.S. Employer Identification No.)

550 Sylvan Ave.
Englewood Cliffs, NJ		07632
(Address of principal executive offices)		(Zip Code)

~~Indicate by check mark whether the Registrant~~ (1201) ~~has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding~~ 12608 ~~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 ☒ No ☐~~5101

~~Indicate by checkmark whether the~~ (Registrant’s ~~has~~telephone ~~submitted electronically and posted on its corporate website~~number, ifincluding ~~any,~~area ~~any Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (Section 232.405~~code) ~~of this chapter during the preceding 12 months or for such shorter period that the Registrant was required to submit and post such files. Yes ☒ No ☐~~

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

Indicate by checkmark whether the Registrant has submitted electronically and posted on its corporate website, if any, any Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (Section 232.405) of this chapter during the preceding 12 months or for such shorter period that the Registrant was required to submit and post such files. Yes x No¨

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

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ☐x ☐ (Do not check if a smaller reporting company) ☒

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

Yes ☐ ¨ No ☒x

The registrant had 56,~~567~~067,037 shares of Common Stock, par value $.001 par value per share, outstanding as of ~~November~~February 118, 2015.

Index			~~Page No.~~	Page No.
PART I	~~FINANCIAL INFORMATION~~	FINANCIAL INFORMATION
Item 1.	~~Financial Statements (Unaudited)~~	Financial Statements (Unaudited)	2
	Consolidated Balance Sheets as of September 30, 2015 and June 30, 2015		2
		Consolidated Balance Sheets as of December 31, 2015 and June 30, 2015		2
	Consolidated Statements of Operations for the three months ended September 30, 2015 and 2014		3
		Consolidated Statements of Operations for the six and three months ended December 31, 2015 and 2014		3
	Consolidated Statements of Cash Flows for the three months ended September 30, 2015 and 2014		4
		Consolidated Statements of Cash Flows for the six months ended December 31, 2015 and 2014		4
	~~Notes to Consolidated Financial Statements~~	Notes to Consolidated Financial Statements	5	5
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	10	10
Item 3.	~~Quantitative and Qualitative Disclosures About Market Risk~~	Quantitative and Qualitative Disclosures About Market Risk	14	16
Item 4.	~~Controls and Procedures~~	Controls and Procedures	14	16
PART II	~~OTHER INFORMATION~~	OTHER INFORMATION	15	17
Item 1.	~~Legal Proceedings~~	Legal Proceedings	15
Item 2.	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	Unregistered Sales of Equity Securities and Use of Proceeds	15	17
Item 3.	~~Defaults Upon Senior Securities~~	Defaults Upon Senior Securities	16	17
Item 4.	~~Mine Safety Disclosures~~	Mine Safety Disclosures	16	17
Item 5.	~~Other~~	Other	16	17
Item 6.	~~Exhibits~~	Exhibits	16	17
SIGNATURES			17	18
CERTIFICATIONS

Intellect Neurosciences Inc. and Subsidiary

Consolidated Balance Sheets

(Unaudited)

	September 30, 2015			June 30, 2015
	December 31, 2015			June 30, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	~~189~~12,~~160~~853		$	23,858
Total current assets		~~189~~12,~~160~~853			23,858
Security deposits		2,250			2,250
Total Assets	$	~~191~~15,~~410~~103		$	26,108
LIABILITIES AND CAPITAL DEFICIENCY
Current Liabilities:
Accounts payable and accrued expenses	$	2,549,010		$	2,599,706
Accrued interest - convertible promissory notes		1,~~402~~523,~~067~~228			1,447,601
Derivative instruments		~~422~~337,~~562~~106			2,682,541
Preferred stock dividend payable		1112,~~762~~666,~~418~~138			11,880,647
Convertible promissory notes - current, net of debt discount of $57,240 and $155,528, respectively		2,227,260			2,166,472
Convertible promissory notes - current, net of debt discount of $166,418 and $155,528, respectively		2,258,582			2,166,472
Total Current liabilities	$	1819,~~363~~334,~~317~~064		$	20,776,967
Long Term Debt
Convertible promissory notes - long term, net of debt discount of $54,822 and $298,368, respectively	$	580,676		$	339,130
Convertible promissory notes - long term, net of debt discount of $41,523 and $296,370, respectively	$	193,477		$	339,130
Total Liabilities	$	1819,~~943~~527,~~993~~541		$	21,116,097
Capital deficiency:
Series B Convertible Preferred Stock, $.001 par value - 459,309 shares designated and 40,686 and 76,887 shares issued and outstanding at September 30, 2015 and June 30, 2015 (liquidation preference at September 30, 2015 of $1,111,551)	$	41		$	77
Series B Convertible Preferred Stock, $.001 par value - 459,309 shares designated and 40,686 and 76,887 shares issued and outstanding at December 31, 2015 and June 30, 2015, respectively (liquidation preference at December 31, 2015 of $1,122,468)	$	41		$	77
Series C Convertible Preferred Stock, $.001 par value - 25,000 shares designated and 14,960 and 16,636 shares issued and outstanding at September 30, 2015 and June 30, 2015, respectively (liquidation preference at September 30, 2015 of $21,401,274)		15			16
Series C Convertible Preferred Stock, $.001 par value - 25,000 shares designated and 14,398 and 16,636 shares issued and outstanding at December 31 and June 30, 2015, respectively (liquidation preference at December 31, 2015 of $21,556,955)		14			16
Series D Convertible Preferred stock, $.001 par value - 25,000 shares designated and 1,054 and 2,729 shares issued and outstanding at September 30, 2015 and June 30, 2015, respectively (liquidation preference at September 30, 2015 of $1,345,626)		1			3
Series D Convertible Preferred stock, $.001 par value - 25,000 shares designated and 1,054 and 2,729 shares issued and outstanding at December 31, 2015 and June 30, 2015, respectively (liquidation preference at December 31, 2015 of $1,378,651)		1			3
Series E Convertible Preferred stock, $.001 par value - 25,000 shares designated and 19,233 shares issued and outstanding at September 30, 2015 and June 30, 2015 (liquidation preference at September 30, 2015 of $23,511,030)		19			19
Series E Convertible Preferred stock, $.001 par value - 25,000 shares designated and 18,633 shares issued and outstanding at December 31, 2015 and June 30, 2015 (liquidation preference at December 31, 2015 of $23,144,633)		19			19
Series F Convertible Preferred stock, $.001 par value - 25,000 shares designated and 1,005 and 1,200 shares issued and outstanding at September 30, 2015 and June 30, 2015, respectively (liquidation preference at September 30, 2015 of $2,219,191)		1			1
Series F Convertible Preferred stock, $.001 par value - 25,000 shares designated and 2,532 and 1,200 shares issued and outstanding at December 31, 2015 and June 30, 2015, respectively (liquidation preference at December 31, 2015 of $5,335,659)		3			1
Series G Convertible Preferred stock, $.001 par value - 10,000 shares designated and 3,489 shares issued and outstanding at September 30, 2015 (liquidation preference $7,119,129)		4			—
Series G Convertible Preferred stock, $.001 par value - 10,000 shares designated and 3,490 and zero shares issued and outstanding at December 31, 2015 and June 30, 2015, respectively (liquidation preference at December 31, 2015 of $7,261,791)		4			-
Series H Convertible Preferred stock, $.001 par value - 2,000 shares designated and 1,081 shares issued and outstanding at September 30, 2015 (liquidation preference $2,194,655)		1			—
Series H Convertible Preferred stock, $.001 par value - 2,000 shares designated and 1,081 and zero shares issued and outstanding at December 31, 2015 and June 30, 2015, respectively (liquidation preference at December 31, 2015 of $2,227,803)		1			-
Common stock, par value $0.001 per share, 2,000,000,000 shares authorized; 5,567,037 and 3,550,336 shares issued and outstanding at September 30, 2015 and June 30, 2015, respectively		5,568			3,550
Common stock, par value $0.001 per share, 2,000,000,000 shares authorized; 6,067,037 and 3,550,336 shares issued and outstanding at December 31, 2015 and June 30, 2015, respectively		6,067			3,550
Additional paid in capital		74,~~248~~825,~~801~~300			72,144,582
Accumulated Deficit		(9394,~~007~~343,~~034~~888	)		(93,238,237	)
Total Capital Deficiency	$	(1819,~~752~~512,~~583~~438	)	$	(21,089,989	)
Total Liabilities and Capital Deficiency	$	~~191~~15,~~410~~103		$	26,108

See notes to consolidated financial statements

Intellect Neurosciences Inc. and Subsidiary

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended
	Six Months Ended						Three Months Ended
	September 30,
	December 31,						December 31,
	2015			2014			2015			2014
Revenues:
License fee	$	—		$	—
License fees		-		$	1,200,000			-		$	1,200,000
Total revenue	$	—-		$	—1,200,000		$	-		$	1,200,000
Costs and Expenses:
Research and development		58,~~605~~104		$	27,~~326~~201			2,500			-
General and administrative		~~491~~765,~~275~~102			~~468~~1,~~041~~257,430			273,827			789,263
Total cost and expenses		~~496~~773,~~880~~206		$	~~495~~1,~~367~~284,631			276,327			789,263
Loss from operations	$	(~~496~~773,~~880~~206	)	$	(~~495~~84,~~367~~631	)	$	(276,327	)	$	410,737
Other income/(expenses):
Interest expense, net	$	(1,531,896	)	$	(1,726,795	)
Interest expense, net of interest income		(2,677,879	)		(3,463,708	)		(1,145,983	)		(1,736,913	)
Changes in fair value of derivative instruments		2,~~259~~345,~~979~~435			56,~~596~~378,~~259~~841			85,456			782,582
Total other income/(expense):	$	~~728~~(332,~~083~~444	)	$	32,~~869~~915,~~464~~133			(1,060,527	)		(954,331	)
Income before provision for taxes	$	231,203		$	3,374,097
Income/ (loss) before provision for taxes	$	(1,105,650	)	$	2,830,502		$	(1,336,854	)	$	(543,594	)
Income tax provision		-			-			-			-
Net income allocable to common shareholders
Net income/ (loss) allocable to common shareholders	$	(1,105,650	)	$	2,830,502		$	(1,336,854	)	$	(543,594	)
	$	231,203		$	3,374,097
Basic and diluted income/ (loss) per share	$	(0.21	)	$	1.42		$	(0.23	)	$	(0.22	)
Income per share
Weighted average number of shares outstanding:		5,306,453			1,996,390			5,715,389			2,494,048
Basic and Diluted	$	0.05		$	2.64
Weighted average number of shares outstanding:
Basic and Diluted		4,899,131			1,279,007

See notes to consolidated financial statements

Intellect Neurosciences Inc. and Subsidiary

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	Six Months Ended
	September 30,
	December 31,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income / (loss)	$	~~231~~(1,~~203~~105,650	)	$	32,~~374~~830,~~097~~502
Adjustments to reconcile net income / (loss) to net cash used in operating activities:
Change in fair value of derivative instruments		(2,~~259~~345,~~979~~435	)		(56,~~596~~378,~~259~~841	)
Non-cash interest expense		12,~~532~~678,~~274~~276			13,~~727~~473,~~352~~981
Change in assets and liabilities
Accounts payable and accrued expenses		(50,697	)		(3,894	)
Due from Licensee		-			(1,200,000	)
Net cash used in operating activities	$	(547,199	)	$	(498,704	)
Accounts payable and accrued expenses		(50,696	)		434,824
Net cash used in operating activities	$	(823,505	)	$	(839,534	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible notes				$	—
Proceeds from issuance of preferred stock	$	860,000			1,200,000
Proceeds from issuance of preferred stock	$	750,000			1,200,000
Repayments of convertible notes		(47,500	)		(300,000	)
Repayments of convertible notes		(37,500	)		(300,000	)
Net cash provided by financing activities	$	812,500		$	900,000
Net cash provided by financing activities	$	712,500		$	900,000
NET INCREASE (DECREASE) IN CASH	$	(11,005	)	$	60,466
NET INCREASE (DECREASE) IN CASH	$	165,301		$	401,296
CASH - BEGINNING OF PERIOD	$	23,858			-
CASH - BEGINNING OF PERIOD	$	23,858			—
CASH - END OF PERIOD	$	12,853		$	60,466
CASH - END OF PERIOD	$	189,159		$	401,296
SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash financing activities
Conversion of convertible notes and interest to common stock	$	—-		$	131,929
Debt discount recognized as derivative liabiltiy	$	—-		$	637,500

See notes to consolidated financial statements

Intellect Neurosciences, Inc.

Notes to Unaudited Consolidated Condensed Financial Statements

~~September~~December 3031, 2015

Note 1. Basis of Presentation

The accompanying unaudited consolidated condensed financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and note disclosures required by accounting principles generally accepted in the United States. The consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2015 filed with the Securities and Exchange Commission (the “SEC”) on October 14, 2015. In the opinion of management, this interim information includes all material adjustments, which are of a normal and recurring nature, necessary for fair presentation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates that are particularly susceptible to change include assumptions used in determining the fair value of securities owned or issued and non-readily marketable securities.

The results of operations for the six and three months ended ~~September~~December 3031, 2015, are not necessarily indicative of the results to be ~~expected~~ expected for the entire year or for any other period.

Note 2. Business Description and Going Concern

Intellect Neurosciences, Inc., a Delaware corporation, (“Intellect”, “our”, “us”, “we” or the “Company” refer to Intellect Neurosciences, Inc. and its subsidiary) is a biopharmaceutical company, which together with its subsidiary, Intellect Neurosciences, USA, Inc. (“Intellect USA”), is engaged in the discovery and development of disease-modifying therapeutic agents for the treatment and prevention of rare neurodegenerative conditions.

Since our inception in 2005, we have devoted all of our efforts and resources to research and development activities and advancing our patent estate. Our losses from operations have been funded with the proceeds of equity and debt financings and fees from license arrangements.

These consolidated financial statements are presented on the basis that we will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business. NoThe ~~adjustment~~accompanying ~~has been~~consolidated ~~made~~financial tostatements ~~the~~have ~~carrying~~been ~~amount~~prepared ~~and~~assuming ~~classification~~that ~~of our assets and~~ the ~~carrying~~Company ~~amount~~will ofcontinue ~~our~~as ~~liabilities~~a ~~based on the~~ going concern ~~uncertainty~~.

The Company has generated losses from operations since its inception in 2005. As of December 31, 2015, the Company had negative working capital of $(19,321,211), an accumulated deficit of $(94,343,888) and a capital deficiency of $(19,512,438). The Company had a loss from operations of $(773,206) for the six months ended December 31, 2015. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from this uncertainty.

The audit report prepared by our independent registered public accounting firm relating to our consolidated financial statements for the year ended June 30, 2015 includes an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.

Note 3. Summary of Significant Accounting Policies

Principles of Consolidation. The consolidated financial statements include the accounts of our wholly owned subsidiary, Intellect USA.

Use of Estimates. The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States involves the use of estimates and assumptions that affect the recorded amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include the fair value of derivative instruments, including stock options and warrants to purchase our common stock, recognition of clinical trial costs, certain consulting expenses and deferred taxes. Actual results may differ substantially from these estimates.

Revenue Recognition. We recognize revenue in accordance with authoritative accounting guidance, which provides that non-refundable upfront and research and development milestone payments and payments for services are recognized as revenue as the related services are performed over the term of the collaboration.

Convertible Instruments We evaluate and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”. Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

We account for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: We record when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. We also record when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares.

Common Stock Purchase Warrants We classify as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC 815-40 (“Contracts in Entity’s Own Equity”). We classify as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). We assess classification of our common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

Preferred Stock. We apply the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity” when determining the classification and measurement of preferred stock. Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. We classify conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control, as temporary equity. At all other times, we classified our preferred shares in stockholders’ equity.

Derivative Instruments. Our derivative financial instruments consist of embedded derivatives related to the convertible debt, warrants and beneficial conversion features embedded within our convertible debt. The accounting treatment of derivative financial instruments requires that we record the derivatives and related warrants at their fair values as of the inception date of the debt agreements and at fair value as of each subsequent balance sheet date. Any change in fair value was recorded as non-operating, non-cash income or expense at each balance sheet date. If the fair value of the derivatives was higher at the subsequent balance sheet date, we recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the subsequent balance sheet date, we recorded non-operating, non-cash income.

During the three month period ended September 30, 2015, we recognized other income (expense) of $2,259,979 relating to recording the derivative instruments at their fair value. At September 30, 2015 and June 30, 2015, there were approximately $423 thousand and $2.7 million of derivative liabilities outstanding, respectively.

~~Our~~During ~~derivative~~the ~~instruments~~six ~~were~~and ~~valued~~three ~~using~~month ~~the~~period ~~Black-Scholes~~ended ~~option~~December ~~pricing~~31, ~~model~~2015, ~~using~~we ~~the~~recognized ~~following~~other ~~assumptions~~income ~~during~~of ~~the~~$2,345,435 ~~quarter~~and $6,378,841, respectively, ~~ended~~relating ~~September~~to recording the derivative instruments fair value. At December 31, 2015 and June 30, 2015:, there were approximately $337 thousand and $2.7 million of derivative liabilities outstanding, respectively.

Estimated dividends		None
Expected volatility		188%
Risk-free interest rate		0.28% - 0.92%
Expected term (years)		1 - 5 years

Our derivative instruments were valued using the Black-Scholes option pricing model, using the following assumptions during the quarter ended December 31, 2015:

Estimated dividends		None
Expected volatility		188%
Risk-free interest rate		0.49% - 1.31%
Expected term (years)		1 month - 5 years

Note 4. Notes Payable

The following table presents the components of Convertible Notes Payable at ~~September~~December 3031, 2015 and June 30, 2015:

	September 30, 2015		June 30, 2015
	December 31, 2015		June 30, 2015
Convertible Notes issued during fiscal year ended June 30, 2010	$	17,500	$	17,500
Convertible Notes issued during fiscal year ended June 30, 2011		~~812~~702,500		850,000
Convertible Notes issued during fiscal year ended June 30, 2012		~~301~~251,500		301,500
Convertible Notes issued during fiscal year ended June 30, 2013		1,116,000		1,116,000
Convertible Notes issued during fiscal year ended June 30, 2014		~~657~~557,500		657,500
Convertible Notes issued during fiscal year ended June 30, 2015		15,000		15,000
Balance at End of Period	$	2,~~920~~660,000	$	2,957,500
Less debt discount:		~~112~~207,~~062~~941		451,898
Convertible Notes Payable, Net	$	2,~~807~~452,~~938~~059	$	2,505,602
Classified as follows on the accompanying consolidated balance sheets:
Current portion of Convertible Notes Payable	$	2,~~227~~258,~~260~~582	$	2,166,472
Long term portion of Convertible Notes Payable		~~580~~193,~~676~~477		339,130
	$	2,~~807~~452,~~936~~059	$	2,505,602

All of the foregoing convertible notes carry interest at 14% annually, mature three years from the issue date and are convertible into the Company’'s common shares at a conversion price of $1.25 per share except for notes with an aggregate principal amount of $420,000 and $~~500~~325,000, ~~whch~~which are convertible into the Company’'s common shares at a conversion price of $0.08 and $0.14 ~~per~~ per share, respectively.

Convertibe Notes Payable are payable as follows:
Past Due	$	1531,~~131,~~500
Fiscal year ended June 30, 2016		1,116,000
Year ending December 31, 2016		1,893,500
Fiscal year ended June 30, 2017		657,500
Year ending December 31, 2017		235,000
Fiscal year ended June 30, 2018		15,000
Total	$	2,660,000
Total	$	2,920,000

Note 5. Convertible Preferred Stock

Series B Convertible Preferred Stock

The Series B Convertible Preferred Stock carries a cumulative dividend of 6% per annum and a stated value of $17.50 per share. ~~Each~~ Each share is convertible into 0.05 common shares based on the current conversion price of $375. During the quarter ended September 30, 2015, 36,201 shares of Series B Convertible Preferred Stock plus accrued dividends were exchanged for 1,081 shares of newly issued Series H Convertible Preferred Stock.

As described more fully below under Series G and Series H Convertible Preferred Shares, on July 1, 2015, 36,201 shares of Series B Convertible Preferred Stock plus accrued dividends thereon were exchange for 1,081 shares of Series H Convertible Preferred Stock. There were no conversions of Series B Convertible Preferred Stock during the six months ended December 31, 2015.

Series C Convertible Preferred Stock

The Series C Convertible Preferred Stock carries a cumulative dividend of 14% per annum and a stated value of $1,000 per share. Each share is convertible into 800 common shares based on the current conversion price of $1.25.

7As described more fully below under Series F Convertible Preferred Shares, during the three months ended December 31, 2015, an aggregate of $1,086,333 Stated Value and accrued dividends of Series C Preferred Stock were exchanged for shares of Series F Convertible Preferred Stock.

During the ~~quarter~~six months ended ~~September~~December 3031, 2015, 700 shares of Series C Convertible Preferred Stock were exchanged for 700 shares of ~~Series~~ ~~G Convertible Preferred Stock. During the quarter ended September 30, 2015 and the fiscal year ended June 30, 2015, 913 and 1,013 shares of~~ Series ~~C Convertible Preferred Stock were converted into 730,400~~ ~~and~~G ~~810,000 common shares, respectively. In addition, during the year ended June 30, 2015, one of our significant shareholders surrendered shares of Series C Convertible~~ Preferred Stock ~~carrying accrued dividends of $7,232,864~~.

During the six months ended December 31, 2015, 1538 shares of Series C Convertible Preferred Stock were converted into 1,066,400 common Dshares. There were no conversions of Series C Convertible Preferred Stock during the quarter ended December 31, 2015.

~~The~~ Series ~~D Convertible Preferred Stock carries a cumulative dividend of 8% per annum and a stated value of $1,000 per share.~~ ~~Each share is convertible into 800 common shares based on the current conversion price of $1.25. During the quarter ended September 30, 2015, 1,675 shares of Series~~ D ~~Convertible~~ ~~Preferred Stock plus accrued dividends thereon were exchanged for 2,039 shares of Series G~~ Convertible Preferred ~~Stock.~~ Shares

~~Series~~The ESeries D Convertible Preferred Stock carries a cumulative dividend of 8% per annum and a stated value of $1,000 per share. Each share is convertible into 800 common shares based on the current conversion price of $1.25.

~~The~~During ~~Series~~the Esix ~~Convertible~~months ~~Preferred~~ended ~~Stock~~December ~~carries~~31, a2015, ~~cumulative~~1,675 ~~dividend~~shares of 8%Series ~~per~~D ~~annum~~Convertible ~~and~~Preferred aStock ~~stated~~plus ~~value~~accrued ofdividends $1thereon were exchanged for 2,~~000~~039 ~~per~~shares ~~share~~of Series G Convertible Preferred Stock. ~~Each~~ ~~share~~There iswere ~~convertible~~no ~~into~~conversions ~~400~~of ~~common~~Series ~~shares~~D ~~based~~Convertible onPreferred Stock during the ~~current~~six ~~conversion~~months ~~price~~ended ofDecember $231, 2015.50.

Series FE Convertible Preferred ~~Stock~~Shares

The Series FE Convertible Preferred Stock ~~(the “Series F Preferred”)~~ carries a cumulative dividend of 8% per annum and a stated value of $1,000 per share. Each share is convertible into ~~10,000~~400 common shares based on the current conversion price of $02.1050. ~~The~~There were no conversions of Series E FConvertible Preferred ~~has~~Stock aduring ~~right~~the tosix amonths ~~liquidation~~ended ~~preference~~December ~~of $2~~31,~~000~~ ~~per share~~2015..

~~The~~ Series ~~F Preferred was issued on July 25, 2014, pursuant to a stock purchase agreement with certain accredited investors whereby~~ ~~we issued 1,200 shares of Series~~ F Convertible Preferred and warrants to purchase an aggregate of 9,600,000 shares of common stock (the “Series F Financing”). The Warrants are exercisable for a period of five (5) years from the date of issuance and are exercisable into shares of common stock at an exercise price of $.10 per share.Shares

InThe ~~connection~~Series ~~with~~F ~~the~~Convertible ~~Series~~Preferred FStock ~~Financing,~~carries wea ~~repaid~~cumulative ~~$300,000~~dividend of ~~principal~~8% onper ~~outstanding~~annum ~~promissory~~and ~~notes~~a stated value of a$1,000 per share. Each ~~certain~~share ~~investor~~is ~~and~~convertible ~~the~~into ~~investor~~10,000 ~~surrendered~~common shares based on the current conversion price of $0.10. The Series C F Convertible Preferred Stock ~~carrying~~has ~~accrued~~a ~~dividends~~ right to a liquidation preference of $72,~~232,864~~000 per share.

~~Based~~On onNovember ~~authoritative~~30, ~~guidance~~2015, we entered into a stock purchase agreement with certain accredited investors (the ~~entire~~“Investors”) whereby ~~proceeds~~we ~~from~~issued to the Investors (i) an aggregate of 1,577 shares of Series F ~~Financing were~~Convertible ~~credited~~Preferred Stock; and (ii) warrants to ~~preferred~~purchase an aggregate of 880,000 shares of common stock, par value $0.001 per share of the Company. We received gross cash proceeds of $110,000 and the financing resulted in the exchange and cancellation of an aggregate of $380,900 of principal and ~~additional~~accrued ~~paid~~interest due with respect to convertible promissory notes owned by the Investors, which were in ~~capital~~default, and an aggregate of $1,086,333 Stated Value and accrued dividends of Series C Preferred Stock. The private placement was conducted pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder.

During the ~~quarter~~six ~~ended~~months ~~September 30, 2015 and the fiscal year~~ ended ~~June~~December 3031, 2015, 95245 ~~and 100~~ shares of Series F Convertible Preferred Stock were converted into ~~950~~1,~~000 and 400~~450,000 common shares~~, respectively~~.

Series G and Series H Convertible Preferred Stock

On July 1, 2015, (the “Closing Date”) we entered into a stock purchase agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”) whereby we issued to the Investors (i) an aggregate of 3,490 shares of Series G Convertible Preferred Stock (the “Series G Preferred”) (ii) an aggregate of 1,117 shares of Series Convertible H Preferred Stock (the “Series H Preferred”) and (iii) warrants to purchase an aggregate of 15,000,000 shares of common stock (the “Series G Financing”). The Warrants are exercisable for a period of five (5) years from the date of issuance and are exercisable into shares of common stock at an exercise price of $.10 per share.

In connection with the Series G Financing, the Board of Directors of the Company approved the filing of Certificates of Designations, Preferences and Rights of Series G Convertible Preferred Stock (the “Series G Certificate of Designation”) and Series H Convertible Preferred Stock (the “Series H Certificate of Designation”) both of which were filed with and accepted by the Secretary of State of the State of Delaware on June 30, 2015. Pursuant to the Series G and Series H Certificates of Designation, we established a new series of 10,000 shares, par value $0.001 per share, and 2,000 shares, par value $0.001 per share of Series G Preferred and Series H Preferred, respectively.

~~The~~ Series G ~~Preferred has a right to a liquidation preference of $2,000 per share~~ and ~~is convertible at any time into shares of our common stock at a conversion price of $.10 per share, subject to adjustment. Each share of~~ Series GH ~~Preferred~~Convertible has a stated value of $1,000 (the “Stated Value”) and accrues a dividend of 8% of the Stated Value per annum, which is payable annually on June 30th in cash or, at the holder’s option, in common stock, or a combination thereof. The Series G Preferred ~~has no voting rights and holders thereof shall vote together with holders of common stock on an as converted basis.~~Shares

~~The Series H Preferred has a~~On ~~right~~July to1, ~~a liquidation preference of $2~~2015,~~000~~ ~~per~~(the ~~share~~“Closing ~~and~~Date”) iswe ~~convertible~~entered into ~~common~~a stock ofpurchase agreement (the ~~Company~~“Purchase ~~at a conversion~~Agreement”) ~~price~~with ~~equal~~certain toaccredited ~~eight times~~investors (the ~~fair~~“Investors”) ~~market~~whereby ~~value~~we ofissued to the ~~underlying~~Investors ~~common~~(i) ~~stock~~an ~~into~~aggregate ~~which~~of ~~the~~3,490 shares of Series HG Convertible Preferred ~~are convertible.~~Stock (the “~~Fair~~Series ~~Market~~G ~~Value~~Preferred”); ~~means~~(ii) ~~the~~an ~~average~~aggregate of ~~the~~1,117 ~~closing~~shares ~~price~~ of ~~the~~Series ~~common stock for the five~~H ~~trading~~Preferred ~~days~~Stock ~~preceding~~ (the ~~exchange~~“Series ~~date~~H ofPreferred”); ~~the~~and ~~Series~~(iii) Bwarrants ~~Convertible~~to ~~Preferred~~purchase ~~Stock~~an ~~for~~aggregate ~~the~~of ~~Series~~15,000,000 Hshares ~~Preferred~~of common stock (the “~~Conversion~~Series ~~Price~~G Financing”). The ~~fair~~Warrants ~~market~~are ~~value~~exercisable ~~conversion~~for ~~price~~a ~~was~~period ~~set~~of atfive ~~$1.92~~(5) ~~per~~years ~~share~~from on the date of ~~the~~issuance ~~exchange. The Series H Preferred has no voting rights~~ and ~~holders~~are ~~thereof~~exercisable ~~vote~~into ~~together~~shares ~~with holders~~ of common stock onat an asexercise ~~converted~~price ~~basis~~of $.10 per share.

~~Pursuant~~In toconnection with the ~~Purchase~~Series ~~Agreement~~G Financing, wethe ~~granted~~Board ~~holders~~ of ~~previously~~Directors ~~issued~~of ~~Series~~the CCompany ~~and~~approved ~~Series D Convertible Preferred Stock~~ the ~~right~~ tofiling ~~exchange~~of ~~their~~a ~~shares~~Certificate of ~~Series~~Designations, Preferences C and ~~Series~~Rights ~~D Convertible Preferred Stock for shares~~ of Series G ~~Preferred and holders of previously issued Series B~~ Convertible Preferred Stock (the ~~right~~“Series toG ~~exchange~~Certificate ~~their shares~~ of ~~Series~~Designation”) Bwhich was ~~Convertible~~filed ~~Preferred~~with ~~Stock~~and ~~for~~accepted ~~shares~~by ofthe ~~Series~~Secretary Hof ~~Preferred.~~State ~~The~~of ~~stated~~the ~~value~~State of ~~each~~Delaware ~~share~~on ofJune ~~exchanged~~30, ~~Series~~2015. B,Pursuant ~~Series~~to ~~C and~~the Series DG ~~Preferred~~Certificate of ~~Stock~~Designation, ~~plus~~we ~~accrued~~established ~~dividends,~~a ~~was~~new ~~treated~~series ~~as the cash value~~ of ~~such~~10,000 shares, ~~for~~par ~~purposes~~value ~~of determining~~$0.001 ~~the~~per ~~number~~share, of ~~shares of~~ Series G ~~and~~Convertible H Preferred Stock ~~to be issued in connection with such exchange.~~

The Series G Preferred Stock has a right to a liquidation preference of $2,000 per share and is convertible at any time into shares of our Common Stock at a conversion price of $0.10 per share, subject to adjustment. Each share of Series G Preferred Stock has a stated value of $1,000 (the “Stated Value”) and accrues a dividend of 8% of the Stated Value per annum, which is payable annually on June 30th in cash or, at the holder’s option, in Common Stock, or a combination thereof. The Series G Preferred Stock has no voting rights and holders thereof shall vote together with holders of Common Stock on an as converted basis.

Pursuant to the Purchase Agreement, we granted holders of previously issued Series C and Series D Preferred Stock the right to exchange their shares of Series C and Series D Preferred Stock for shares of Series G Preferred and holders of previously issued Series B Preferred Stock the right to exchange their shares of Series B Preferred Stock for shares of Series H Preferred. The stated value of each share of exchanged Series B, Series C and Series D Preferred Stock, plus accrued dividends, was treated as the cash value of such shares for purposes of determining the number of shares of Series G and H Preferred Stock to be issued in connection with such exchange. See “Series B Convertible Preferred Shares”, “Series C Convertible Preferred Shares” and “Series D Convertible Preferred Shares” above.

Pursuant to the Series H Certificate of Designations, Preferences and Rights of Series H Convertible Preferred Stock, which was filed on June 30, 2015, we established a new series of 2,000 shares of Series H Preferred Stock. The Series H Preferred Stock has a right to a liquidation preference of $2,000 per share and is convertible into common stock of the Company at a fixed conversion price of $1.92 per share. The Series H Preferred Stock has no voting rights and holders thereof shall vote together with holders of Common Stock on an as converted basis.

Based on authoritative guidance, the entire proceeds from the Series G Financing were credited to preferred stock and additional paid in capital.

There were no conversions of Series G or H Convertible Preferred Stock during the three or six months ended December 31, 2015.

Note 6. Outstanding Warrants

The following table presents the number of ~~warrants~~Warrants outstanding at the periods ended ~~September~~December 3031, 2015 and June 30, 2015. All ~~warrants~~Warrants have a 5 year term and are exercisable at ~~September~~December 3031, 2015. The ~~warrants~~Warrants issued in connection with the Series F and Series G ~~Financings~~Financing described above in Note 5 have an exercise price of $0.10 per share. All other outstanding warrants have an exercise price of $1.25 per common share, except for 44,800 warrants, ~~which~~that have an exercise price of $15.625 per share.

Warrants outstanding at June 30, 2015			12,~~500~~470,327
Issued			15,~~000~~880,000
Exercised			—-
Expired			—-
Warrants outstanding at September 30, 2015			27,500,327
Warrants outstanding at June 30, 2015			28,350,327

Note 7. Capital Deficiency

Common stock

In July 2015, we issued 816,400 and 650,000 shares of our common stock to holders of Series C Convertible Preferred Stock and Series F Convertible Preferred Stock, respectively, upon their exercise of the conversion feature contained in those securities.

In August 2015, we issued 250,000 and 300,000 shares of our common stock to holders of Series C Convertible Preferred Stock and Series F Convertible Preferred Stock, respectively, upon their exercise of the conversion feature contained in those securities.

In August 2015, we issued 301 shares of our common stock in connection with implementation of the reverse stock split on our outstanding common shares that was effective on February 11, 2015.

In November 2015, we issued 500,000 shares of our common stock to holders of Series F Convertible Preferred Stock upon their exercise of the conversion feature contained in those securities.

Note 8. Income Taxes

No provision for income taxes has been recorded due to the utilization of net operating losses for which a 100% valuation allowance had been provided.

Note 9. Subsequent Events

Management has evaluated events occurring after the date of these financial statements through the date these financial statements were issued. There were no material subsequent events as of that date ~~other~~that ~~than~~require ~~disclosed~~adjustment ~~below~~to or disclosure in the Company’s consolidated financial statements.

ITEM 2. MANAGEMENTS’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations contains information that management believes is relevant to an assessment and understanding of our results of operations. You should read this discussion in conjunction with the Financial Statements and Notes included elsewhere in this report and with Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended June 30, ~~2015~~2014 contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on October 14, 2015. Certain statements set forth below constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. See “Special Note Regarding Forward-Looking Statements”. References to “Intellect,” the “Company,” “we,” “us” and “our” refer to Intellect Neurosciences, Inc. and its subsidiaries.

General

We are a biopharmaceutical company engaged in the discovery and development of disease-modifying therapeutic agents for the treatment and prevention of rare neurodegenerative conditions. We have an internal pipeline and have granted licenses related to our patent estate to major pharmaceutical companies.

Since our inception in 2005, we have devoted substantially all of our efforts and resources to advancing our intellectual property portfolio and research and development activities. We have entered into license and other agreements with large pharmaceutical companies related to our patent estate, however, neither we nor any of our licensees have obtained regulatory approval for sales of any product candidates covered by our patents. We operate under a single segment. Our fiscal year end is June 30th.

Our core business strategy is to build a portfolio of compounds with the potential to treat or prevent ~~rare~~ neurodegenerative diseases, develop each compound to pre-determined milestones, and license the compounds to pharmaceutical companies for advanced development and commercialization. We intend to obtain revenues from licensing fees, milestone payments, development fees, royalties and/or sales related to the use of our drug candidates or intellectual property for specific therapeutic indications or applications. As an example, we developed OX1, a small molecule multi-modal antioxidant, completed preclinical and human safety trials, and then licensed the program to ViroPharma Inc. (subsequently merged into Shire plc) for development of a drug to treat Friedreich’'s Ataxia and other neurodegenerative diseases. We could receive up to $120 million in milestone payments from Shire and significant royalties from sales if the resulting drug product is approved for sale by the US Food and Drug Administration (“FDA”). There can be no assurance that we will receive such milestone payments or royalties.

Our research and development activity is subject to change as we develop a better understanding of our projects and their prospects. Total research and development costs from inception through September 30, 2015 were $15,086,730.

Results of Operations

Three Months Ended ~~September~~December 3031, 2015 Compared to Three Months Ended ~~September~~December 3031, 2014:

	Three Months Ended September 30,
	Three Months Ended December 31,
	2015			2014			Change
Revenue	$	—-		$	—1,200,000		$	—(1,200,000	)
Research and Development Costs		5(2,~~605~~500	)		~~27,326~~-		$	(212,~~721~~500	)
General and Administrative		~~491~~(273,~~275~~827	)		~~468~~(789,~~041~~263	)	$	23515,~~234~~436
Income (loss) from operations	$	(~~496~~276,~~880~~327	)	$	~~(495~~410,~~367~~737	)	$	1687,~~513~~064
	Three Months Ended September 30,
	2015			2014			Change
Income (loss) from operations	$	(496,880	)	$	(495,367	)	$	(1,512	)
Other income (expenses):		728,083			3,869,464			(3,141,381	)
Net income (loss)	$	231,203		$	3,374,097		$	(3,142,894	)

Our operating loss increased by $1,513 to a loss of $496,880 for the three months ended September 30, 2015 from an operating loss of $495,367 for the three months ended September 30, 2014. This was due to an increase in our General and Administrative costs of $23,234 offset by reductions in Research and Development costs of $21,721.

	Three Months Ended December 31,

	2015			2014			Change

Income (loss) from operations	$	(276,327	)	$	410,737		$	(687,064	)
Other income (expenses):		(1,060,527	)		(954,331	)	$	(106,196	)

Net income (loss)	$	(1,336,854	)	$	(543,594	)	$	(793,260	)

~~General~~Our ~~and~~operating ~~Administrative~~loss ~~expenses, which includes patent filing and maintenance costs,~~ increased by $23687,~~234,~~064 to a loss of $~~491~~(276,~~275~~327) for the three months ended ~~September~~December 3031, 2015 asfrom ~~compared~~operating toincome of $~~468~~410,~~041~~737 for the three months ended ~~September~~December 3031, 2014. ~~The~~Primarily, ~~increase~~this inchange ~~General and~~was ~~Administrative~~due ~~expenses~~to ~~primarily~~the ~~was~~receipt ~~due~~of toa anone-time ~~increase~~payment from our licensee of $1.2 million in ~~professional~~the ~~fees~~quarter ofended ~~approximately~~December ~~$44~~31,~~000~~ 2014 offset in part by asignificant ~~reduction~~General and Administrative expenses in ~~board~~that quarter, consisting of legal fees of $435,000 and license fees of approximately $2092,000.

~~Research~~General and ~~Development~~Administrative expenses, which includes patent filing and maintenance costs, decreased by $21515,~~721,~~436 to $5(273,~~605~~827) for the three months ended ~~September~~December 3031, 2015 ~~from~~as compared to $27(789,~~326~~263) for the three months ended ~~September~~December 3031, 2014. ~~The~~Primarily, ~~reduction~~the decrease in ~~R&D~~General ~~costs~~and ~~primarily~~Administrative expenses was ~~associated~~due ~~with~~to ~~the completion of~~ a ~~preclinical study~~decrease ~~for~~in ~~our~~legal ~~TauC3~~fees ~~antibody~~and ~~program~~corporate ~~that~~& ~~occurred~~shareholder inexpenses ~~the~~of approximately ~~period~~$460,000 ~~ended~~and ~~September 30~~$41,000, ~~2014~~respectively.

~~Other~~Research ~~income~~and ~~decreased~~Development bycosts ~~$3,141,381,~~increased toby $728,083 for the three months ended September 30, 2015 from $3,869,464 for the three months ended September 30, 2014. This difference primarily is due to the recording of a gain on the change in the fair market value of derivative instruments of $2,~~259,979~~500 for the ~~three~~quarter ~~months~~ ended ~~September~~December 3031, 2015 as compared to ~~a gain of $5,596,259 for~~ the ~~three~~ ~~months~~quarter ended ~~September~~December 3031, ~~2014, a decrease in gain of $3,336,280. This decrease was offset in part by a reduction in interest~~ ~~expense of $194,899, to $1,531,896 for the three months ended September 30, 2015 from an expense of $1,726,795 for the period ended September 30,~~ 2014. ~~The decrease in interest expense for the period ended September 30, 2015~~ as ~~compared to the period ended September 30, 2014 primarily was due to~~ a ~~decrease~~result ~~in interest expense with respect to outstanding convertible preferred stock~~ of ~~approximately~~R&D ~~$300,000~~consulting ~~offset~~fees byincurred anduring ~~increase~~the ~~in interest expense recognized with respect to outstanding convertible promissory notes of approximately $105,000~~quarter.

AsOther aincome/ ~~result~~(loss) ofincreased ~~the~~by ~~foregoing~~$106,196, weto ~~recognized~~$(1,060,527) ~~net~~for ~~income~~the ofthree months ended December 31, 2015 from $~~231~~(954,~~203~~331) for the three months ended ~~September~~December 3031, ~~2015~~2014. asThis ~~compared~~difference is due to a decrease in the gain on change in fair value of derivative instruments of $3697, ~~374~~126,~~097~~ from $782,582 for the ~~comparable~~quarter ~~period~~ended ~~last~~December ~~year~~31, 2014 to $85,456 for the quarter ended December 31, 2015, offset in part by a decrease in ~~income~~interest expense of $3590,~~142~~930,~~894~~ from $(1,736,913) for the quarter ended December 31, 2014 to $(1,145,983) for the quarter ended December 31, 2015. The difference in gain on change in fair value of derivative instruments results from differences in the changes of our stock price during the relevant quarters. The decrease in interest expense for the period ended December 31, 2015 as compared to the period ended December 31, 2014 primarily was due to a decrease in interest expense recognized with respect to outstanding convertible preferred stock.

As a result of the foregoing, we recognized a net loss of $(1,336,854) for the three months ended December 31, 2015 as compared to a net loss of $(543,594) for the three months ended December 31, 2014, an increase in net loss of $793,260.

Six Months Ended December 31, 2015 Compared to Six Months Ended December 31, 2014:

	Six Months Ended December 31,

	2015			2014			Change

Revenue	$	-		$	1,200,000		$	(1,200,000	)
Research and Development Costs		(8,104	)		(27,201	)	$	19,097
General and Administrative		(765,102	)		(1,257,430	)	$	492,328

Income (loss) from operations	$	(773,206	)	$	(84,631	)	$	688,575

	Six Months Ended December 31,

	2015			2014			Change

Income (loss) from operations	$	(773,206	)	$	(84,631	)	$	(688,575	)
Other income (expenses):		(332,444	)		2,915,133		$	(3,247,577	)

Net income (loss)	$	(1,105,650	)	$	2,830,502		$	(3,936,152	)

Our operating loss increased by $688,575 to a loss of $(773,206) for the six months ended December 31, 2015 from a loss of $(84,631) for the six months ended December 31, 2014. Primarily, this change was due to the receipt of a one-time payment from our licensee of $1.2 million in the six months ended December 31, 2014 offset in part by significant related General and Administrative expenses in that period, consisting of legal fees of approximately $435,000 and license fees of approximately $92,000.

General and Administrative expenses, which includes patent filing and maintenance costs, decreased by $492,328 to $(765,102) for the six months ended December 31, 2015 as compared to $(1,257,430) for the six months ended December 31, 2014. Primarily, the decrease in General and Administrative expenses was due to a decrease in professional fees and corporate & shareholder expenses of approximately $460,000 and $41,000, respectively, offset in part by approximately $10,000 of increased G&A expenses.

Research and Development costs decreased by $19,097 for the six months ended December 31, 2015 as compared to the six months ended December 31, 2014 primarily as a result of antibody manufacturing fees incurred during the quarter ended December 31, 2014.

Other income/ (loss) increased by $3,247,577, to a loss of $(332,444) for the six months ended December 31, 2015 as compared to income of $2,915,133 for the six months ended December 31, 2014. This difference is due to a decrease in the gain on change in fair value of derivative instruments of $4,033,406, from $6,378,841 for the six months ended December 31, 2014 to $2,345,435 for the six months ended December 31, 2015, offset in part by a decrease in interest expense of $785,829, from $(3,463,708) for the quarter ended December 31, 2014 to $(2,677,879) for the quarter ended December 31, 2015. The difference in gain on change in fair value of derivative instruments results from differences in the changes of our stock price during the relevant periods. The decrease in interest expense for the period ended December 31, 2015 as compared to the period ended December 31, 2014 primarily was due to a decrease in non-cash interest expense recognized with respect to outstanding convertible preferred stock.

As a result of the foregoing, we recognized a net loss of $(1,105,650) for the six months ended December 31, 2015 as compared to net income of $2,830,502 for the six months ended December 31, 2014, an increase in net loss of $3,936,152.

Liquidity and Capital Resources

Since our inception in 2005, we have mainly generated losses from operations and we anticipate that we will continue to generate significant losses from operations for the foreseeable future. As of ~~September~~December 3031, 2015, our accumulated deficit was $93(94,~~007~~343,~~034~~888). Our net cash used in operations was $~~547~~823,~~198~~505 and $~~498~~839,~~704~~534 for the ~~three~~six months ended ~~September~~December 3031, 2015 and 2014, respectively. Our capital deficiency was $18(19,~~752~~512,~~583~~438) as of ~~September~~December 3031, 2015.

We have limited capital resources and operations since inception have been funded with the proceeds from equity and debt financings and license fee arrangements. As of ~~September~~December 3031, 2015, we had approximately $~~189~~12,~~160~~853 of cash and cash equivalents. We anticipate that our existing capital resources will enable us to continue operations for the next ~~three~~several months. If we fail to raise additional capital or obtain substantial cash inflows from existing or potential partners within the next few months, we may be forced to cease operations. We cannot assure you that financing will be available in a timely manner, on favorable terms or at all.

On November 30, 2015, we entered into a stock purchase agreement with certain accredited investors (the “Investors”) whereby we issued to the Investors (i) an aggregate of 1,577 shares of Series F Convertible Preferred Stock; and (ii) warrants to purchase an aggregate of 880,000 shares of common stock, par value $0.001 per share of the Company. We received gross cash proceeds of $110,000 and the financing resulted in the exchange and cancellation of an aggregate of $380,900 of principal and accrued interest due with respect to convertible promissory notes owned by the Investors, which were in default, and an aggregate of $1,086,333 Stated Value and accrued dividends of Series C Preferred Stock.

Off-Balance Sheet Arrangements

As of ~~September~~December 3031, 2015, our material off-balance sheet arrangements, other than obligations under various agreements, are as follows:

Under Research License Agreements with NYU and SAMSF (“RLA”), we are obligated to make future payments totaling approximately $1.5 million to each of NYU and SAMSF upon achievement of certain milestones based on phases of clinical development and approval of the FDA (or foreign equivalent) and also to pay each of NYU and SAMSF a royalty based on product sales by Intellect or royalty payments received by Intellect. In September 2011, we granted a sublicense of the RLAs to ViroPharma (merged into Shire plc). Pursuant to the terms of the RLAs, we paid SAMSF and NYU $650,000 of the up-front licensing fee and are obligated to pay a portion of future payments we may receive from Shire.

Under a License Agreement with Northwestern University (“NWU”) dated as of May 3, 2012, we are obligated to make future payments totaling approximately $700,000 to NWU upon achievement of certain milestones based on phases of clinical development and also to pay NWU a royalty based on product sales.

Mindset Biopharmaceuticals, Inc. (“Mindset”) acquired from Mayo Foundation for Medical Education and Research (“Mayo”) a non-exclusive license to use certain transgenic mice as models for AD and is obligated to pay Mayo a royalty of 2.5% of any net revenue that Mindset receives from the sale or licensing of a drug product for AD in which the Mayo transgenic mice were used for research purposes. The Mayo transgenic mice were used by SAMSF to conduct research with respect to OX1. Pursuant to an Assignment Agreement dated as of June 23, 2005, which we executed with SAMSF, we agreed to assume Mindset’s obligations to pay royalties to Mayo.

Pursuant to a Letter Agreement with the Institute for the Study of Aging dated as of December 29, 2006, we are obligated to pay a total of $225,500 of milestone payments contingent upon future clinical development of OX1.

Under a Research Agreement with MRCT dated as of September 16, 2012, we are obligated to make future research milestone payments totaling approximately $560,000 to MRCT related to the development of the 82E1 humanized antibody and to pay additional milestones related to the commercialization, and a royalty based on sales, of the resulting drug products.

Under the terms of the IBL Agreement with Immuno-Biological Laboratories Co., Ltd. dated as of December 26, 2006, we agreed to pay IBL a total of $2,125,000 upon the achievement of certain milestones plus a specified royalty based on sales of any pharmaceutical product derived from the 82E1or 1A10 antibodies.

12In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions which, in our judgment, are normal and customary for companies in our industry sector. These agreements are typically with business partners, clinical sites, and suppliers. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to our product candidates, use of such product candidates, or other actions taken or omitted by us. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal. Accordingly, we have no liabilities recorded for these provisions as of June 30, 2014 or 2013.

In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions which, in our judgment, are normal and customary for companies in our industry sector. These agreements are typically with business partners, clinical sites, and suppliers. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to our product candidates, use of such product candidates, or other actions taken or omitted by us. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal. Accordingly, we have no liabilities recorded for these provisions as of September 30, 2015 or June 30, 2015.

In the normal course of business, we may be confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits, claims, environmental actions or the actions of various regulatory agencies. We consult with counsel and other appropriate experts to assess the claim. If, in our opinion, we have incurred a probable loss as set forth by accounting principles generally accepted in the United States, an estimate is made of the loss and the appropriate accounting entries are reflected in our consolidated financial statements. After consultation with legal counsel, we do not anticipate that liabilities arising out of currently pending or threatened lawsuits and claims will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Critical Accounting Estimates and New Accounting Pronouncements

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if it requires assumptions to be made that were uncertain at the time the estimate was made, and changes in the estimate or different estimates that could have been selected could have a material impact on our consolidated results of operations or financial condition.

Convertible Instruments. We evaluate and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”. Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

Common Stock Purchase Warrants. We classify as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC 815-40 (“Contracts in Entity’s Own Equity”). We classify as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). We assess classification of our common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

Research and Development Costs and Clinical Trial Expenses. Research and development costs include costs directly attributable to the conduct of research and development programs, including the cost of salaries, payroll taxes, employee benefits, materials, supplies, maintenance of research equipment, costs related to research collaboration and licensing agreements, the cost of services provided by outside contractors, including services related to our clinical trials, clinical trial expenses, the full cost of manufacturing drugs for use in research, preclinical development, and clinical trials. All costs associated with research and development are expensed as incurred.

New Accounting Pronouncements

In August 2014, the FASB issued authoritative guidance that requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and requires additional disclosures if certain criteria are met. This guidance is effective for fiscal periods ending after December 15, 2016, with early adoption permitted. This accounting standard update is not expected to have any impact on the Company’s financial statements.

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. We have elected to adopt early application of Accounting Standards Update No. 2014-10; accordingly we no longer present or disclose inception-to-date information and other remaining disclosure requirements of Topic 915.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Our CEO and CFO has concluded that, based on such evaluation, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms as of September 30, 2015.

The conclusion was due to the presence of the following material weaknesses in disclosure controls and procedures due to our small size and limited resources: (1) we lack a sufficient number of employees to properly segregate duties and provide adequate review of the preparation of the financial statements and (2) we lack sufficient independent directors on our Board of Directors to maintain Audit and other committees consistent with proper corporate governance standards. We have limited financial resources and only one employee. The lack of personnel is a weakness because it could lead to improper classification of items and other failures to make the entries and adjustments necessary to comply with U.S. GAAP. Accordingly, management’s assessment is that the Company’s internal controls over financial reporting were not effective as of September 30, 2015.

Changes in Internal Controls Over Financial Reporting

No changes in the Company’s internal control over financial reporting have come to management’s attention during the Company’s last fiscal quarter that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings.

We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

ITEM 1A. Risk Factors.

Not required for smaller reporting companies.

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

In July 2015, we issued 3,490 shares of Series G Convertible Preferred Stock; 1,081 shares of Series H ~~Convertible~~ Preferred Stock; and warrants to purchase an aggregate of 15,000,000 shares of common stock to investors ~~who~~in ~~purchased~~ the Series G and Series H Convertible Preferred Share ~~Shares,~~financing astransaction described in Note 5 to the unaudited consolidated financial statements of the Company. ,

In August 2015, we issued 301 shares of our common stock in connection with implementation of the reverse stock split on our outstanding common shares that was effective on February 11, 2015.

In November 2015, we issued 500,000 shares of our common stock to holders of Series F Convertible Preferred Stock upon their exercise of the conversion feature contained in those securities.

ITEM 3. Defaults Upon Senior Securities.

None.

ITEM 4. Mine Safety Disclosures.

Not applicable.

ITEM 5. Other

None

ITEM 6. Exhibits

31.1* Certification of Principal Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1* Certification of Principal Executive Officer and Chief Financial Officer pursuant to Rule 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

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 Extension Presentation Linkbase

* Filed herewith

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

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SIGNATURES

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

November 12, 2015	Intellect Neurosciences, Inc.
February 12, 2016	Intellect Neurosciences, Inc.
	/s/ Elliot Maza
	Elliot Maza
	Chief Executive Officer and Chief Financial Officer

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Filing Compare · Intellect Neurosciences, Inc.