UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)





x
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended September 30, 2010.





or





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





For the transition period from to.





Commission File Number: 0-27545





QUICK-MED TECHNOLOGIES, INC.


(Exact Name of Registrant as Specified in its Charter)





Nevada

65-0797243(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer Identification No.)





902 N.W. 4th Street


GAINESVILLE, FLORIDA 32601


(Address of Principal Executive Offices) (Zip Code)





(888) 835-2211


(Registrant’s Telephone Number, Including Area Code)





N/A


(Former Name, Former Address and Former Fiscal Year, If Changes Since Last Report)





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


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





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





Large accelerated filer   ̈                                                                                                   Accelerated filer   ̈


Non-accelerated filer   ̈  (Do not check if a smaller reporting company)       Smaller reporting company   x





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





As of  November 10, 2010, there were 31,357,297 shares of common stock, par value $0.0001 per share, outstanding.











QUICK-MED TECHNOLOGIES, INC.


INDEX TO FORM 10-Q
 
  PART I
FINANCIAL INFORMATIONItem 1.
Financial StatementsCondensed Balance Sheets as of  September 30, 2010 and June 30, 2010  (unaudited)
1Condensed Statements of Operations for thethree months ended September 30, 2010  and 2009 (unaudited)
2Condensed Statement of Changes in Stockholders’ Deficit for the three monthsended September 30, 2010 (unaudited)
3Condensed Statements of Cash Flows for the three months ended September 30, 2010 and 2009 (unaudited)
4Notes to Condensed Financial Statements (unaudited)
5 -13Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
14-19Item 3.
Quantitative and Qualitative Disclosure About Market Risk
20Item 4T.
Controls and Procedures
20PART II
OTHER INFORMATIONItem 1.
Legal Proceedings
20Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
20Item 3.
Defaults Upon Senior Securities
20Item 4.
Removed and Reserved
20Item 5.
Other Information
20Item 6.
Exhibits
21SIGNATURES




Index


PART I
FINANCIAL INFORMATION





ITEM 1.
FINANCIAL STATEMENTS





QUICK-MED TECHNOLOGIES, INC.
 CONDENSEDBALANCE SHEETS
 (UNAUDITED)


ASSETSSeptember 30,


June 30,2010


2010Current assets:Cash and cash equivalents

$
495,347


$
628,026Accounts receivable


295,958



336,077Total current assets


791,305



964,103Property and equipment, net


5,122



7,004Other assets:Prepaid expenses


8,149



9,657Intangible asset, net


370,793



366,282Total other assets


378,942



375,939Total assets

$
1,175,369


$
1,347,046LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilities:Accounts payable

$
643,869


$
611,018Unearned revenue


106,623



117,383Accrued expenses


77,780



73,191Note payable - director


225,952



221,617Convertible note payable - officer


111,490



109,474Total current liabilities


1,165,714



1,132,683License payable


160,000



160,000Long-term liability - convertible note payable


250,000



255,041Long-term liability - convertible note payable - related party


1,095,367



1,074,133Long-term liability - convertible note payable - director


5,098,795



5,018,331Total liabilities


7,769,876



7,640,188Commitments and contingenciesStockholders' deficit:Common stock, $0.0001 par value; 100,000,000authorized shares; 31,357,297 shares issued and outstandingat September 30, 2010 and June 30, 2010


3,136



3,136Additional paid-in capital


13,626,122



13,576,122Outstanding stock options


3,877,377



3,786,351Accumulated deficit


(24,101,142
)


(23,658,751
)Total stockholders' deficit


(6,594,507
)


(6,293,142
)Total liabilities and stockholders' deficit

$
1,175,369


$
1,347,046







See accompanying notes to unaudited condensed financial statements.
 -1-
 Index







QUICK-MED TECHNOLOGIES, INC.
 CONDENSED STATEMENTS OF OPERATIONS
 (UNAUDITED)
    Three Months EndedSeptember 30,2010


2009RevenuesProduct sales

$
257,267


$
7,971Royalty and license fees


67,968



6,360Research and development service


86,250



15,000411,485



29,331Expenses:Cost of sales


14,754



1,159Research and development


274,166



246,691General and administrative expenses


379,762



278,490Licensing and patent expenses


55,307



43,814Depreciation and amortization


17,354



17,976Total expenses


741,343



588,130Income (loss) from operations


(329,858
)


(558,799
)Other income (expense):Interest income


557



7Interest expense:Note payable


(113,090
)


(76,299
)Convertible debt beneficial conversion feature


-



(103,333
)Loss before income taxes


(442,391
)


(738,424
)Provision (benefit) for income taxes


-



-Net loss

$
(442,391
)

$
(738,424
)Net loss per share (basic and diluted)

$
(0.01
)

$
(0.02
)Weighted average commonshares outstanding (basic and diluted)


31,357,297



31,186,613











See accompanying notes to unaudited condensed financial statements.
 -2-
 Index









QUICK-MED TECHNOLOGIES, INC.
 CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
 FOR THREE MONTHS ENDED SEPTEMBER 30, 2010
 (UNAUDITED)







Common Stock


Additional Paid-In


Accumulated


OutstandingShares


Amount


Capital


Deficit


Stock Options


TotalBalance, June 30, 2010


31,357,297


$
3,136


$
13,576,122


$
(23,658,751
)

$
3,786,351


$
(6,293,142
)Stock-based compensation


-



-



-



-



91,026



91,026Debt forgiveness by shareholders


-



-



50,000



-



-



50,000Net loss, July 1, 2010  to September 30, 2010


-



-



-



(442,391
)


-



(442,391
)Balance, September 30, 2010


31,357,297


$
3,136


$
13,626,122


$
(24,101,142
)

$
3,877,377


$
(6,594,507
)











See accompanying notes to unaudited condensed financial statements.
 -3-
 Index





QUICK-MED TECHNOLOGIES, INC.
 CONDENSED STATEMENTS OF CASH FLOWS
 FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 (UNAUDITED)




2010


2009Cash flows from operating activities:Net loss

$
(442,391
)

$
(738,424
)Adjustments to reconcile net loss to netcash used in operating activities:Depreciation and amortization


17,354



17,976Stock granted for services


-



3,000Stock-based compensation


91,026



82,688Interest expense on convertible debt beneficial conversion


-



103,333Contribution of services


50,000



-(Increase) decrease in:Accounts receivable


40,119



6,811Prepaid expenses


1,508



81Increase (decrease) in:Accounts payable


32,851



17,245Accrued interest


103,009



76,299Other current liabilities


(6,171
)


25,737Net cash used in operating activities


(112,695
)


(405,254
)Cash flows from investing activities:Intangible assets


(19,984
)


(7,395
)Net cash used in investing activities


(19,984
)


(7,395
)Cash flows from financing activities:Proceeds from exercise of stock options


-



24,650Increase in notes payable - director


-



395,000Net cash provided by financing activities


-



419,650Net increase (decrease) in cash and cash equivalents


(132,679
)


7,001Cash and cash equivalents at beginning of period


628,026



41,216Cash and cash equivalents at end of period

$
495,347


$
48,217Supplementary Information:Cash paid for:Interest

$
-


$
-Income taxes

$
-


$
-Non-cash disclosures of investing andfinancing activities:Debt forgiveness by shareholders

$
50,000


$
-Stock-based compensation

$
91,026


$
3,000Interest expense on beneficial conversion

$
-


$
103,333










See accompanying notes to unaudited condensed financial statements.
 -4-
 Index
 QUICK-MED TECHNOLOGIES, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 (UNAUDITED)





NOTE 1 - DESCRIPTION OF BUSINESS





The accompanying unaudited condensed financial statements of Quick-Med Technologies, Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of the management of the Company, the accompanying unaudited financial statements contain all the adjustments (which are of a normal recurring nature) necessary for a fair presentation.  Operating results for the three months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending June 30, 2011. For further information, refer to the financial statements and the footnotes thereto contained in the Company’s Annual Report on Form 10-K for the year ended June 30, 2010, as filed with the Securities and Exchange Commission.





The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has continuing losses from operations, negative working capital and an accumulated deficit that raises substantial doubt about its ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.





In May 2009, the Financial Accounting Standards Board (“FASB”) established general accounting standards and disclosure for subsequent events. The Company adopted FASB Accounting Standards Codification (“ASC”) 855, Subsequent Events(formerly referenced as Statement of Financial Accounting Standards (“SFAS”) No. 165, Subsequent Events), on June 30, 2009. The Company has evaluated subsequent events through the date and time the financial statements were issued.





NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES








Cash and Cash Equivalents





All highly liquid investments purchased with maturity of three months or less from the time of purchase are considered to be cash equivalents.





Use of Estimates





The preparation of financial statements in conformity with generally accepted accounting principles 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.





Intangible Assets





The costs of obtaining license agreements along with the costs to defend the patents underlying the license agreements are capitalized and amortized using the straight-line method over the estimated useful lives of the underlying license agreements.  The costs of obtaining and maintaining new patents are capitalized and amortized using the straight-line method over the estimated useful lives of the patents. The cost of patents in process is not amortized until the patent is issued.








-5-
 Index





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued





Property and Equipment





Property and equipment are stated at cost.  Depreciation on property and equipment is computed using the straight-line method over the expected useful lives of the assets.





Accounts Receivable and Allowance for Doubtful Accounts





Accounts receivable as of September 30, 2010 represents amounts due from its customers and is reported on the balance sheet reduced by an allowance for doubtful accounts for estimated losses resulting from receivables not considered to be collectible.





Research and Development Costs





Research and development costs are expensed as incurred.





Earnings Per Share





Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted-average number of common shares outstanding during the period.  Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options and warrants. For the periods ended September 30, 2010 and 2009, 15,164,555 and 12,012,210 diluted common stock equivalents, respectively, have been excluded from the calculation of diluted earnings per share, as their inclusion would have been anti-dilutive.





Fair Value Measurements





During the first quarter of fiscal year 2009, the Company adopted FASB ASC 820, Fair Value Measurements and Disclosures(formerly referenced as SFAS No. 157,Fair Value Measurements),   which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. This new accounting standard does not require any new fair value measurements, but rather eliminates inconsistencies in guidance found in various other accounting pronouncements.





This accounting standard establishes a hierarchy for information and valuations used in measuring fair value, which is broken down into three levels. Level 1 valuations are based on quoted prices in active markets for identical assets or liabilities. Level 2 valuations are based on inputs, other than quoted prices included within Level 1, that are observable, either directly or indirectly. Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement.





The Company also adopted FASB ASC 825, Financial Instruments(formerly referenced as SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115),which allows companies to choose to measure eligible financial instruments and certain other items at fair value that are not required to be measured at fair value. The Company has not elected the fair value option for any eligible financial instruments.





Revenue Recognition





The Company’s revenues consist of the following sources: product sales, royalty fees, research and development service and license fees.





Under the agreement for product development, manufacturing and distribution  (the “Agreement”) with BASF, the Company shares proportionately on the net sales and related expenses in accordance with the terms of the Agreement.  The Company recognizes revenue of its royalties from the sale of products by BASF when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable.




The Company recognizes royalty fee income based on the net sales of Bioguard® product by our licensee, Derma Sciences Inc. in accordance with the specified terms of the license agreement.
 
 The Company recognizes revenue of its research and development service including the small business innovation research program and the US Army medical research program based on the research work performed in accordance with the program requirements or statements of work for the joint development agreements.
 
 The Company also recognizes revenue from the non-refundable exclusivity license fee derived from Derma Sciences Inc. on a pro rata basis over the term of the related exclusive license agreement.  Further, the Company recognizes the exclusive option fee as revenue on a pro rata basis over the term of the related exclusive option agreement.





-6-
 Index





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued





Unearned Revenue





The amount of unearned revenue represents the exclusive option fee, the license fee, and advance royalty fee yet to be earned on a pro rata basis over the exclusive option period of the related option and license agreements.





Stock Compensation





The Company adopted FASB  ASC 718, Compensation - Stock Compensation(formerly referenced as SFAS No. 123R, Share-Based Payment,), which requires companies to expense the value of employee stock options and similar awards. Under this standard, share-based payment awards result in a cost that are measured at fair value on the grant date of the awards, based on the estimated number of awards that are expected to vest. Compensation cost for awards that vest would not be reversed if the  awards expire without being exercised. The Company adopted this standard beginning in the first quarter of the fiscal year 2006 via application of the modified prospective approach to all outstanding and unvested share-based payment awards at the adoption date. The fair value of stock options was determined using the Black-Scholes option-pricing model. The fair value of the restricted stock awards was based on the closing price of the Company's common stock on the date of grant.





Concentration of credit risk of financial instruments





Financial instruments that potentially subject the Company to credit risk consist of cash equivalents and accounts receivable.  As of September 30, 2010, the Company’s cash levels did exceed the federally insured limit by approximately $332,501. As of September 30, 2010, most of the Company’s accounts receivable was derived from BASF and US Army.





The credit risk of the accounts receivable is considered limited given the customers’ credit rating. There were no write-offs of uncollectible receivables during the year ended June 30, 2010.





Income Taxes





The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.




The Company accounts for income taxes under the provisions of FASB Accounting Standards Codification (“ASC”) 740, Income Taxes(formerly referenced as FASB Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an   interpretation of FASB Statement No. 109),which changed the framework for accounting for uncertainty in income taxes.The adoption of this standard does not have an impact on the Company's results of operations or financial position.
 
 Recently Issued Accounting Pronouncements
 
 In January 2010, the FASB issued an amendment to accounting standards addressing fair value measurements and disclosures which requires reporting entities to make new disclosures about recurring and nonrecurring fair-value measurements, including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information about purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. The revised accounting standard also clarifies existing fair-value measurement disclosure guidance about the level of disaggregation, inputs and valuation techniques. The adoption of this new standard in 2010 did not impact the Company's financial position or results of operations as it is disclosure-only in nature.
 
 In June 2009, the FASB issued the FASB Accounting Standards Codification (“Codification”) as the single source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by FASB to be applied by non-governmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of the federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted the Codification in the third quarter of 2009, and the adoption did not have any impact on its results of operations or financial position.





-7-
 Index










NOTE 3 – STOCK OPTIONS AND WARRANTS





The Company adopted a qualified equity incentive plan (the “Plan”) on March 4, 2001. Under the Plan the Company is authorized to grant up to 3,000,000 shares of common stock. On December 13, 2004, the shareholders approved the Plan and ratified the amendment to increase the total number of shares to be granted under the Plan from 3,000,000 to 4,000,000 effective November 1, 2004.  On November 13, 2007 the shareholders ratified the amendment to increase the total number of shares to be granted under the Plan from 4,000,000 to 6,000,000.





On November 17, 2009, the Board of Directors (the "Board') granted 681,785 stock options to the board members, employees, consultants as payments for their services and in recognition of individual performance for the year ended June 30, 2009. In addition, the Board granted 248,564 warrants payments to consultants for payments of their services and incentive performance awards.  Of 681,785 stock options grant, approximately 115,428 were awarded to the board members for their services and were vested on the date of grant. Of 248,564 warrants issued, 99,977 warrants were vested immediately on the grant date. The remainder 566,357 stock options and 148,587 warrants were vested one-third immediately, one-third will be vested on November 17, 2010 and the remaining one-third will be vested on November 17, 2011, assuming the person receiving the equity awards is employed or being utilized by the Company at the time of vesting.   The exercise price of those stock options and warrants is $0.77 per share.  The weighted average grant date fair value of options and warrants was $0.48 per share based on the Black-Scholes option-pricing model.  The options and warrants expire five years from the date of grant.  On March 31, 2010, approximately 23,631 options were forfeited.





On October 27, 2008, the Board granted 1,335,102 stock options to the board members, employees, consultants as payments for their services and in recognition of individual performance for the year ended June 30, 2008. In addition, the Board granted 705,302 warrants payments to consultants for payments of their services and incentive performance awards.  Further, 60,000 shares of restricted common stock were issued to a consultant as payment for services.  Of the 1,335,102 stock options grant, approximately 464,102 were awarded to the board members for their services and were vested on the date of grant. Of  the 705,302 warrants issued, 240,302 warrants were vested immediately on the grant date. The remainder 871,000 stock options and 465,000 warrants were vested one-third immediately, one-third were vested on October 27, 2009 and the remaining one-third will be vested on October 27, 2010, assuming the person receiving the equity awards is employed or being utilized by the Company at the time of vesting.  The exercise price of those stock options and warrants is $0.20 per share, which was the closing price of the common stock on the date of grant.  The weighted average grant date fair value of options and warrants was $0.19 per share based on the Black-Scholes option-pricing model.  The options and warrants expire five years from the date of grant.





On April 18, 2008, the Board granted 148,571 shares of restricted common stock as payment for the services rendered by the board members for the year ended June 30, 2007 for those elected to receive common stocks and all shares were immediately vested.  In addition, the Board granted 1,074,666 stock options to the board members, employees, consultants as payments for their services and in recognition of individual performance for the year ended June 30, 2007.  The stock options were vested one-third immediately, one-third was vested on April 17, 2009 and the remaining one-third was vested on April 17, 2010, assuming the person receiving the equity awards is employed by the Company at the time of vesting.  The exercise price of those stock options is $0.42 per share, which was the closing price of the common stock on the date of grant.  The weighted average grant date fair value of options was $0.32 per share based on the Black-Scholes option-pricing model.  The options and warrants expire five years from the date of grant.





On August 6, 2007, the Board  granted 484,056 non-qualified stock options to the Chief Executive Officer (“CEO”) at an exercise price of $0.75 per share. These options were fully vested and immediately exercisable at the date of grant.  In addition, the Board granted 1,452,167 non- qualified stock options at an exercise price of $0.74 per share on September 25, 2007, as part of the CEO’s employment agreement. The second stock options are vested and become exercisable 1/16th of the total 1,452,167 options on each three-month anniversary beginning on June 11, 2007.  The average grant date fair value of the options was $0.46 per share based on the Black-Scholes option-pricing model.  These options expire five years from the date of grant.





On December 20, 2006, the Company issued 790,770 stock options to board members, management, employees, and consultants for their services.  These options have an exercise price of $1.05 per share. The stock options were vested one-third immediately, one-third was vested on December 20, 2007 and the remaining one-third was vested on December 20, 2008, assuming the person receiving the equity awards is employed by the Company at the time of vesting.  The weighted average grant date fair value of options was $0.69 per share based on the Black-Scholes option-pricing model.  The options expire five years from the date of grant.





On September 9, 2005, the Board granted 130,000 shares of restricted common stock as payment for the services rendered by the board members for the year ended June 30, 2005, and all shares were immediately vested.  In addition, the Board granted 710,000 stock options and 175,000 warrants to the employees and directors and consultants, respectively, in recognition of individual performance for the year ended June 30, 2005.  The stock options and warrants were vested one-third immediately, one-third was vested on July 1, 2006 and the remaining one-third was vested on July 1, 2007.  The exercise price of those stock options and warrants is $0.80 per share, which was the closing price of the common stock on the date of grant.  The weighted average grant date fair value of options was $0.72 per share based on the Black-Scholes option-pricing model.  The options and warrants expire five years from the date of grant. On September 9, 2010, approximately 545,000 options and 175,000  had expired.





During the period ended September 30, 2009, 145,000 options were exercised at $0.17 per share or an aggregate price of approximately $24,650 under the July 2004 stock options agreement.






-8-
 Index





NOTE 3 – STOCK OPTIONS AND WARRANTS, continued





The weighted average grant date fair value of options and warrants granted during the three months ended September 30, 2010 and 2009 were estimated on the date of grant using the Black-Scholes option-pricing model with the assumptions noted in the following table. Expected volatilities are based on historical volatility of common stock.  The expected term of the options and warrants represents the period of time that options and warrants granted are expected to be outstanding and is derived from historical terms.







September 30,2010


2009Risk free interest rate


3
%


3
%Expected life (years)


5



5Expected volatility


91
%


161
%Expected dividends

None


None
  
 A summary of options for the periods ended September 30, 2010 and 2009 is shown below:









September 30, 2010

September 30, 2009Number


Weighted-Average


Number


Weighted-Averageof Shares


Exercise Price


of Shares


Exercise PriceOutstanding at beginning of period


5,389,270


$
0.55



4,966,116


$
0.53Granted


-



-



-



-Exercised


-



-



(145,000
)


0.17Forfeited


-



-



-



-Expired


(545,000
)


0.80



(10,000
)


0.17Outstanding at end of period


4,844,270


$
0.57



4,811,116


$
0.53Exercisable at end of period


4,090,710







3,170,566Available for issuance at end of period


666,318







764,472


The following is a summary of warrants granted, exercised, canceled and outstanding involving the grants in the periods ended September 30, 2010 and 2009:




September 30, 2010


September 30, 2009Number


Weighted-Average


Number


Weighted-Averageof Shares


Exercise Price


of Shares


Exercise PriceOutstanding at beginning of period


1,228,803


$
0.40



980,239


$
0.31Granted


-



-



-



-Exercised


-



-



-



-Expired


(236,393
)


0.80



-



-Outstanding at end of period


992,410


$
0.46



980,239


$
0.31Exercisable at end of period


923,773







812,322







-9-
 Index













NOTE 4 – NOTES PAYABLE





Short-Term Note





Interest


Conversion


September


JuneOfficer
Maturity

Rate


Price



30, 2010



30, 20102008 Convertible Notes
2010


8
%

$
0.20


$
100,000


$
100,000Accrued interest











11,490



9,474Total










$
111,490


$
109,474DirectorNote Payable
2011


8
%


N/A


$
215,000



215,000Accrued interest











10,952



6,617Total










$
225,952


$
221,617


Long-Term Note







Interest


Conversion


September


JuneRelated Party
Maturity

Rate


Price



30, 2010



30, 2010Senior Convertible Note
2013


8
%

$
0.60


$
1,053,000


$
1,053,000Accrued interest











42,367



21,133Total










$
1,095,367


$
1,074,133OthersSenior Convertible Notes
2014


8
%

$
1.00



250,000



250,000Accrued interest











-



5,041Total










$
250,000


$
255,041




-10-
 Index





NOTE 4 – NOTES PAYABLE, continued




Interest


Conversion


September


JuneMaturity

Rate


Price



30, 2010



30, 2010Director2003 Senior Convertible Note
2013


6
%

$
0.38


$
1,268,625


$
1,268,625Senior Convertible Note
2013


8
%

$
0.74



208,955



208,9552007 Senior Convertible Note
2013


8
%

$
0.74



375,000



375,0002007 Senior Convertible Note 2
2013


8
%

$
0.55



50,000



50,0002007 Senior Convertible Note 2
2013


8
%

$
0.51



50,000



50,0002007 Senior Convertible Note 2
2013


8
%

$
0.40



50,000



50,0002007 Senior Convertible Note 2
2013


8
%

$
0.40



50,000



50,0002007 Senior Convertible Note 2
2013


8
%

$
0.34



50,000



50,0002007 Senior Convertible Note 2
2013


8
%

$
0.32



50,000



50,0002008 Senior Convertible Note 1
2013


8
%

$
0.32



50,000



50,0002008 Senior Convertible Note 1
2013


8
%

$
0.45



70,000



70,0002008 Senior Convertible Note 1
2013


8
%

$
0.40



75,000



75,0002008 Senior Convertible Note 1
2013


8
%

$
0.33



50,000



50,0002008 Senior Convertible Note 1
2013


8
%

$
0.42



75,000



75,0002008 Senior Convertible Note 1
2013


8
%

$
0.40



50,000



50,0002008 Senior Convertible Note 2
2013


8
%

$
0.29



50,000



50,0002008 Senior Convertible Note 2
2013


8
%

$
0.20



50,000



50,0002008 Senior Convertible Note 2
2013


8
%

$
0.38



50,000



50,0002008 Senior Convertible Note 2
2013


8
%

$
0.35



135,000



135,0002008 Senior Convertible Note 2
2013


8
%

$
0.25



100,000



100,0002008 Senior Convertible Note 2
2013


8
%

$
0.35



50,000



50,0002008 Senior Convertible Note 2
2013


8
%

$
0.25



50,000



50,0002008 Senior Convertible Note 3
2013


8
%

$
0.36



50,000



50,0002008 Senior Convertible Note 3
2013


8
%

$
0.19



50,000



50,0002008 Senior Convertible Note 3
2013


8
%

$
0.31



50,000



50,0002009 Senior Convertible Note 1
2013


8
%

$
0.18



35,000



35,0002009 Senior Convertible Note 1
2013


8
%

$
0.37



35,000



35,0002009 Senior Convertible Note 1
2013


8
%

$
0.43



35,000



35,0002009 Senior Convertible Note 1
2013


8
%

$
0.43



35,000



35,0002009 Senior Convertible Note 1
2013


8
%

$
0.45



35,000



35,0002009 Senior Convertible Note 2
2013


8
%

$
0.48



35,000



35,0002009 Senior Convertible Note 2
2013


8
%

$
0.47



35,000



35,0002009 Senior Convertible Note 2
2013


8
%

$
0.42



35,000



35,0002009 Senior Convertible Note 2
2013


8
%

$
0.53



35,000



35,0002009 Senior Convertible Note 2
2013


8
%

$
0.58



35,000



35,0002009 Senior Convertible Note 2
2013


8
%

$
0.52



35,000



35,0002009 Senior Convertible Note 2
2013


8
%

$
0.46



35,000



35,0002009 Senior Convertible Note 2
2013


8
%

$
0.55



35,000



35,0002009 Senior Convertible Note 2
2013


8
%

$
0.63



50,000



50,0002009 Senior Convertible Note 2
2013


8
%

$
0.60



45,000



45,0002009 Senior Convertible Note 3
2013


8
%

$
0.60



600,000



600,000Accrued interest











791,215



710,751Total










$
5,098,795


$
5,018,331Total long term note payable









$
6,444,162


$
6,347,505Total debt










$
6,781,604


$
6,678,596
  -11-
 Index


NOTE 4 – NOTES PAYABLE, continued





On March 31, 2010, the Company issued a senior convertible promissory note to a major shareholder for the principal amount of $1,053,000, which consisted of $600,164 in cash, $375,000 principal balance of a prior senior convertible note together with unpaid accrued interest thereon of $77,836.  This senior convertible note is secured by the Company’s revenues and assets with the same priority as the 2009 Note 3 to the Chairman and the senior convertible notes totaling $250,000 as described below.  This note has an annual interest rate of 8%, a maturity date of December 31, 2013.  This note has the conversion price of $0.60 per share of common stock.  The Company has recorded approximately $859,950 as an interest expense as a result of the beneficial conversion feature.





On March 31, 2010, the Company issued two senior convertible promissory notes totaling $250,000 to third parties.  These senior convertible notes are secured by the Company’s revenues and assets with the same priority as the 2009 Note 3 to the Chairman and the senior convertible note to a major shareholder. These notes have an annual interest rate of 8% with a maturity date of June 30, 2014.  The interest is due semi-annually in cash or the Company's common shares at the debt holders discretion with proper notice.  As of September 30, 2010 the Company paid approximately $10,000 in semi-annual interest payment.   These notes have the convertible price of $1.00 per share of common stock.  The Company has recorded approximately $22,500 as an interest expense as a result of the beneficial conversion feature.





Effective March 15, 2010, the Company issued a $215,000 promissory note payable to its Chairman.  The Company received the borrowings (the "Advances") in a series of $50,000 on January 29, February 12 and March 15, 2010, $34,000 on January 13, 2010, $11,000 on January 14, 2010, and $20,000 on February 26, 2010 totaling $215,000. This note is secured by the Company’s revenues and assets.  In addition, the note has a 8% interest rate per annum and has a maturity date of March 12, 2011, which was extended to July 1, 2011.





In November 2009, the Company finalized and issued a $600,000 2009 senior convertible note payable (“2009 Note 3”) to its Chairman.  The Company received the borrowings (the "Advances") in a series of $45,000 on September 8, 2009, $25,000 on September 11, 2009, $125,000 on September 23, 2009, $100,000 on October 14, 2009, $50,000 on October 28, 2009, $175,000 on November 12, 2009,   $50,000 on December 14, 2009, and $30,000 on February 26, 2010 totaling $600,000.   This senior convertible note is secured by the Company’s revenues and assets with the same priority as the 2009 and 2008 senior convertible notes described below with a 8% annual interest rate and has a maturity date of December 31, 2013.  This note has the conversion price of $0.60 per share of common stock.  The Company has recorded approximately $215,500 as an interest expense to date for the Advances received as a result of the beneficial conversion feature.  As part of the terms of this note, the maturity dates of all other outstanding senior convertible notes owed to its Chairman are extended to December 31, 2013.





Effective May 12, 2009, the Company issued a 2009 senior convertible note payable (“2009 Note 2”) to its Chairman to combine the borrowings (the “Advances”) in a series of $35,000 each from May 12, 2009 through August 12, 2009, $50,000 and $45,000 on August 14 and 27, 2009, respectively totaling $375,000.  As of June 30, 2009, the Company received $175,000.  This senior convertible note is secured by the Company’s revenues and assets with the same priority as the 2009 and 2008 senior convertible notes described below and has a maturity date of December 31, 2013.  This note has the conversion prices determined by the closing trading prices of the Company’s common stock on the dates the Advances were received.





Effective February 26, 2009, the Company issued a 2009 senior convertible note payable (“2009 Note 1”) to its Chairman to combine the borrowings (the “Advances”) in a series of $35,000 each from February 26, 2009 through April 30, 2009 totaling $175,000.  This senior convertible note is secured by the Company’s revenues and assets with the same priority as the 2008 senior convertible notes described below and has a maturity date of December 31, 2013.  This note has the conversion prices determined by the closing trading prices of the Company’s common stock on the dates the Advances were received.





Effective November 1, 2008, the Company issued four convertible note payables totaling $100,000 to an officer as part of the terms of the employment contract. These notes have the same conversion price of $0.20, which was the closing trading price of the Company’s common stock on the effective date of the notes.  These notes have the same maturity date of December 15, 2010.





Effective September 15, 2008, the Company issued a 2008 senior convertible note payable (“Note 3”) to its Chairman to combine the borrowings (the “Advances”) in a series of $50,000 each from September 15, 2008 through October 15, 2008 totaling $150,000. This senior convertible note is secured by the Company’s revenues and assets with the same priority as the 2007 senior convertible notes described below and has a maturity date of December 31, 2013.  This note has the conversion prices determined by the closing trading prices of the Company’s common stock on the dates the Advances were received.





Effective May 17, 2008, the Company issued a 2008 senior convertible note payable (“Note 2”) to its Chairman to combine the borrowings (the “Advances”) ranging from $50,000 to $135,000 each from May 17, 2008 through August 28, 2008 totaling $485,000.  This Note 2 is secured by the Company’s revenues and assets with the same priority as the 2007 senior convertible notes described below and has a maturity date of December 31, 2013.  This Note 2 has the conversion prices determined by the closing trading prices of the Company’s common stock on the dates the Advances were received.





Effective February 11, 2008, the Company issued a 2008 senior convertible note payable (“Note 1”) to its Chairman to combine the borrowings (the “Advances”) ranging from $50,000 to $75,000 each from February 11, 2008 through April 29, 2008 totaling $370,000.  This Note 1 is secured by the Company’s revenues and assets with the same priority as the 2007 senior convertible notes described below and has a maturity date of December 31, 2013.  This Note 1 has the conversion prices determined by the closing trading prices of the Company’s common stock on the dates the Advances were received.





Effective October 30, 2007, the Company issued another 2007 senior convertible note payable to its Chairman to combine the borrowings (the “Advances”) in a series of $50,000 each from October 30, 2007 through January 30, 2008 totaling $300,000.  This senior convertible note is secured by the Company’s revenues and assets with the same priority as the 2007 senior convertible notes described below and has a maturity date of December 31, 2013.  This note has the conversion prices determined by the closing trading prices of the Company’s common stock on the dates the Advances were received.





In June 2007, the Company issued two other 2007 senior convertible note payables to its Chairman and a major stockholder for $375,000 each.  These two senior convertible note payables are secured by the Company’s revenues and assets.  The Company may prepay the principal and interest upon meeting certain cash flow requirements and the approval of the board.  As described above, on March 31, 2010, the $375,000 senior convertible note to a major shareholder together with the unpaid accrued interest thereon was combined as part of the new senior convertible note of $1,053,000 principal balance and new terms including a new maturity date of December 31, 2013.





In addition, the Company combined its other outstanding note payables to its Chairman totaling $208,955 into a single note with the same annual interest rate and extended the maturity date to 2010.  This senior convertible note is secured by the Company’s revenues and assets with the same priority as the 2007 senior convertible notes.  Further, the 2003 senior convertible note maturity date was extended until July 13, 2010.  The maturity date is further extended to December 31, 2013.





In September 2003, the Company negotiated a successor agreement with its Chairman regarding the line of credit, which became a single convertible note for up to $1,500,000 excluding accrued interest, at an interest rate of 6% and due July 1, 2004.  The convertible note is secured by the assets and revenues of the Company, which has the same priority as other senior convertible note payables.   The note plus accrued interest will be convertible at a conversion rate of $0.38 per share.  The conversion rate was determined as 15% above the average share price over the prior 20 trading days ($0.33 per share). The note has an anti-dilution provision in the event that the Company sells stock to other investors at less than $0.20 per share.  During the year ended June 30, 2006, the maturity date of the note was extended until October 1, 2007. In January 2007, the Chairman agreed to extend the maturity date of the note until April 1, 2008.  In June 2007, the maturity date of this note was extended to July 2010. The maturity date is further extended to December 31, 2013.





At September 30, 2010, the Company accrued interests of $791,215, $42,367, $11,490, and $0 on the convertible notes with the director, the convertible note with a related party, the convertible note with the officer, and the convertible notes with third parties, respectively






-12-
 Index





NOTE 5  – FAIR VALUE MEASUREMENTS





As discussed in Note 2, “Summary of Significant Accounting Policies,” the Company adopted FASB ASC 820, Fair Value Measurements and Disclosures(formerly referenced as SFAS No. 157,Fair Value Measurements), for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. FASB ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  FASB ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk.





FASB ASC 820 also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is available and significant to the fair value measurement. FASB ASC 820 establishes and prioritizes three levels of inputs that may be used to measure fair value:





Level 1 - Quoted prices in active markets for identical assets or liabilities.





Level 2- Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.





Level 3- Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.





The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of September 30, 2010:







Carrying Value


Level 1


Level 2


Level 3Financial AssetsCash equivalents (1)

$
453,444


$
453,444



-



-Total financial assets

$
453,444


$
453,444



-



-Carrying Value


Level 1


Level 2


Level 3Financial LiabilitiesConvertible notes payable (2)

$
6,037,800



-



-


$
6,037,800Total financial liabilities

$
6,037,800



-



-


$
6,037,800




(1) Cash Equivalents




The Company's cash equivalents include short-term investments, which are money market funds. Since these are short-term highly liquid investments with original maturities of three months or less at the date of purchase, they present negligible risk of changes in value due to changes in interest rates. These short-term investments are recorded at fair value on the Company's balance sheet based on quoted market prices and observable market inputs.




(2) Convertible Notes Payable




As fully described in Note 4, the Company’s convertible notes payable are long-term debts with fixed interest rates and the conversion rates at market at the time the funds were received.  In addition, most of these notes are collateralized by the Company’s assets and revenues.  Further, the debt holders are major shareholders and an officer. The Company is in a start up phase. The Company estimates the fair value of the convertible notes for disclosure purposes by discounting the future cash flows using rates of debts that management believes are similar in terms and maturity.  The Company's short-term convertible note payable is approximate market value.








NOTE 6  – RELATED PARTY TRANSACTIONS





As fully described in Note 4, the Company has several senior convertible note payables with its Chairman, a major stockholder, an officer and third parties during the periods ended September 30, 2010 and June 30, 2010.  In September 2010, the Company recorded approximately $50,000 in additional paid-in capital reflecting waivers by certain officers of their unpaid salaries during the period from July 1, 2010 through September 30, 2010.








NOTE 7  – SUBSEQUENT EVENTS





In  October  2010, Avery Dennison exercised its option under the Joint Development and Exclusive Option Agreement (the "Joint Development Agreement") effective April 17, 2009 to enter into a license agreement with the Company.  The significant terms of the license agreement have been agreed by both parties and were included in an exhibit of the Joint Development Agreement.





In October 2010, the Company was awarded a grant of approximately $244,500 by the U.S. government under Qualifying Therapeutic Discovery Project ("QTDP") to advance the development of the NIMBUS technology for wound dressings and wound drains.  The QTDP grant has been authorized by the U.S. Department of the Treasury for payment in November 2010.





-13-
 Index











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







The following discussion should be read in conjunction with our financial statements and related notes appearing elsewhere in this Form 10-Q and our Annual Report on Form 10-K for our fiscal year ended June 30, 2010.   The terms “Quick-Med”, "the Company," "we," "our" or "us" refer to Quick-Med Technologies, Inc., a Nevada corporation.  This discussion contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements are based on our current expectations, assumptions, and estimates. The words or phrases "believe," "expect," "may," "anticipates," or similar expressions are intended to identify "forward-looking statements."  In addition, any statements that refer to trends in our businesses, future financial results, and our liquidity and business plans are forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties pertaining to our business, including without limitation: (a) because we have a limited operating history and our technologies are still evolving, we may not be able to successfully manage our business or achieve profitability; (b) our technology and product development processes, which include regulatory approvals, are lengthy and expensive and there is no assurance that we will have sufficient resources to complete development related to these processes; (c) our history of losses makes it difficult for you to evaluate our current and future business and prospects and future financial results; (d) we have negative cash flow from operations and an accumulated deficit that raises substantial doubt about our ability to continue as a going concern; (e) our future business is dependent upon third parties to market, manufacture, and distribute our technologies and/or products or jointly developed products;  (f) there is no assurance that our technologies or products  will be accepted in the marketplace; (g) we do not currently carry product liability insurance and, therefore,  should we be subject to a product liability claim, our financial condition may be adversely affected; (h) our operations are currently funded by our revenues and our debt or equity financings, but there are no assurances that these revenues and  financings will be sufficient to ensure our  future financial performance and viability;  (i) we have substantial debt obligations due to our Chairman of the Board and a major shareholder, who have  funded our operations, debt obligations, including those that  are secured by our assets and revenues and  are senior obligations; and (j) there is no assurance that we will be able to attract and retain highly skilled scientific, technical and management personnel, who are critical to our success; and (k) other risk factors discussed in our annual report  for the fiscal year ended June 30, 2010 and other periodic filings, which may be accessed at http://www.sec.gov.  Statements made herein are as of the date of the filing of this Form 10-Q with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.




Overview







Quick-Med is a life sciences company focused on developing proprietary, broad-based technologies in the   consumer and healthcare markets. Our  four core technologies are: (1) Novel Intrinsically Micro-Bonded Utility Substrate (NIMBUS®), a family of advanced polymers bio-engineered to have antimicrobial, hemostatic, and other properties that can be used in a wide range of applications; (2)Stay FreshTM, a unique chemical formulation for textiles with a durable antimicrobial agent effective against an array of bacteria even after numerous laundering cycles; (3) NimbuDermTM, a novel copolymer for application as a persistent hand sanitizer with long lasting protection against germs, and for applications involving medical devices such as catheters, tubing, films and coatings; and (4) MultiStat®, a family of advanced patented methods and compounds shown to be effective in skin therapy applications. Currently, NIMBUS technology has been commercialized in an advanced wound care product by our licensee in the institutional market in late June 2009.  The Company targets NIMBUS technology for additional advanced wound care products, catheters, incontinence products, and other medical devices. MultiStat has been developed in a cosmetic product line with the anti-aging products.  Stay Fresh is currently under development with a broad range of potential applications including the consumer textile market.  NimbuDerm is also a technology currently being developed.






Our strategy is to further develop our core technologies as well as develop future technologies. We will attempt to commercialize these technologies through strategic licensing partnership agreements, joint ventures, or co-development agreements. We do not intend to manufacture or distribute final products; instead, we will seek partnership arrangements and/or license agreements with third parties to develop products that use our technologies and who will perform the manufacturing, marketing, and distribution functions associated with our technologies.






Our business model has been to attempt to develop the following revenue segments:




·
Royalty and license fees;


·
Profit sharing revenues;


·
Research and development fees paid to us in connection with joint development agreements; and


·
Government research and development grants.




Our potential revenues will likely be derived from government agencies and the following types of companies in connection with our NIMBUS, Stay FreshTM,  NimbuDermTM and MultiStat®technologies:




·
Healthcare and medical;


·
Apparel and textile; and


·
Personal care companies.







-14-
 Index




Recent Developments




In November 2010, we completed the Development Agreement (the "Agreement") with KCI USA, Inc., a medical technology company, to develop technology utilizing our proprietary NIMBUS antimicrobial intellectual property in an advanced wound care substrate by achieving the milestone set forth in the statement of work of the Agreement.





In  October  2010, Avery Dennison exercised its option under the Joint Development and Exclusive Option Agreement (the "Joint Development Agreement") effective April 17, 2009 to enter into a license agreement with us.  The significant terms of the license agreement have been agreed by both parties and were included in an exhibit of the Joint Development Agreement.





In October 2010, we were awarded a grant of approximately $244,000 by the U.S. government under the  under the Qualifying Therapeutic Discovery Project ("QTDP") program to advance the development of the NIMBUS technology for wound dressings and wound drains.  The QTDP grant has been authorized by the U.S. Department of the Treasury for payment in November 2010.





In October 2010, we completed our joint development agreement with Foster Corporation, a unit of PolyMedex Discovery Group, in applying our proprietary NIMBUS antimicrobial technologies to thermoplastics for medical applications, particularly catheters.





Overview of Our First Fiscal Quarter 2011





·
Revenues increased $382,154 to $411,485 during the first fiscal quarter of 2011 compared to the same period in 2010. The increase was primarily due to an increase in royalties in the form of revenue share from product sales by BASF, royalty and license fees from the sales of BIOGUARD, and research and development services.





·
Research and development, general and administrative, licensing and patent expenses, and interest expense on notes payable increased 11% to $274,166, 36% to $379,762, 26% to $55,307 and 48% to $113.090, respectively, during the first fiscal quarter of  2011 compared to the same period in 2010 primarily due to higher payroll costs and expenses related to the SBIR phase II program, additional investor relations program costs, larger royalty fees and more regulatory expenses, higher patent related expenses,  and higher interest resulting in larger outstanding notes payable offset by the absence of the interest expense from the convertible debt beneficial conversion feature in the current fiscal quarter.





·
Net loss was $442,391 or $0.01 per share for the first fiscal quarter of 2011 compared to $738,424 or $0.02 per share for the same period in 2010. This decrease is primarily due to an increase in revenue offset by increases in research and development expenses, general and administrative expenses, licensing and patent expenses, cost of revenues, and interest expense on notes payable.





·
As of the  end of the first fiscal quarter of 2011, our cash balance of $495,347, accounts receivable of approximately $295,958, of which approximately $182,208 has been subsequently collected after September 30, 2010,  and approximately $195,000 in government grant (net of related expenses) will satisfy our cash requirements for more than five (5) months assuming no further receipt of revenues and additional debt or equity financing.





Uncertainties and Trends




Our revenues are dependent now and in the future upon the following factors:




·
Acceptance of our products or future products in the marketplace;


·
Our partners’ ability to develop, market and distribute our technologies under a strategic   partnership agreement;


·
Demand for products or future products that utilize our technologies;


·
Our ability to secure license or profit sharing related agreements and secure government research and development grants;


·
Our ability to market our technologies to health care, apparel, cosmetic, and personal care companies;


·
Our ability to successfully conduct laboratory and clinical testing of our potential products; and


·
Our ability to obtain regulatory approval of our future products.




Uncertainties or trends that may affect our business also include the possibility (i) that known or unknown competitors may develop products with similar applications to our proposed products, which may prove to be superior in performance and/or price to our products and (ii) that proposed applications involving our products have collateral effects which render the application undesirable or unmarketable.








-15-
 Index




Government  Regulation




Many of the end-user applications for our technology are regulated in the U.S. as medical devices by the Food and Drug Administration (“FDA”).  The FDA’s regulations govern, among other things: pre-clinical testing; product design and development; pre-market clearance or approval; advertising and promotion; labeling; manufacturing; product import/export; storage; record keeping; reporting of adverse events; corrective actions and removals; recalls; and distribution.





One of the exemptions to the requirement of pre-market clearance is 510(k) pre-market notification, which is submitted to the FDA to demonstrate that the new device is “substantially equivalent” to a previously cleared 510(k) device or a device that was in commercial distribution before May 29, 1976 (or to a pre-1976 Class II device for which the FDA has not yet called for the submission of pre-market approval (“PMA”).  Such devices are deemed to be “predicate devices” for future applications.  A PMA must be submitted if the device cannot be cleared through the 510(k) process.   The PMA process is much more demanding than the 510(k) pre-market notification process.





If a medical device is found NSE (not substantially equivalent) by the FDA and therefore a 510(k) pathway is not available, a second alternative pathway to the lengthy and costly PMA is available for low risk devices. This is called the De Novo application. The FDA Modernization Act of 1997 amended Section 513 (f)(2) of the Federal Food, Drug and Cosmetic Act (the “FFDC Act”) to provide this mechanism to reclassify statutorily classified class III products. This is considered a fairly unique pathway for clearance and typically is only allowed for new technologies of low risk. The FDA allows unlimited responses when on this pathway, different than the three allowed responses under a normal 510(k). A device placed into class I or II in this written order can then be commercially distributed, subject to other applicable provisions of the FFDC Act. A device classified into class I or II under this new provision becomes a predicate device for future pre-market notification submissions, which means that a manufacturer may show that a new device is substantially equivalent to this predicate. This route to clearance is referred to as De Novo because it establishes a new alternative for a new technology.





On February 26, 2009, we received clearance from the FDA for our De Novo application of our patented NIMBUS barrier gauze wound care dressings.This represents the first FDA clearance for NIMBUS – an innovative technology that was put through FDA’s De Novo process, a special clearance program for medical devices that are found to be “not substantially equivalent” to any predicate device.





This section should be read in conjunction with  our annual report on Form 10-K for fiscal year ended June 30, 2009 filed with the SEC for further discussions in the sections entitled, “Government Regulation,”  “510(k) Clearance Pathway” and “De Novo: Alternative Pathway to PMA.”








Capital Expenditures and Requirements





From 2000 to September 2010, we have spent approximately $867,000 on the acquisition of patents and exclusive license agreements.  We owe an additional $160,000 to Dr. Richard Galardy which is due when certain milestones are met in connection with a September 2000 license agreement we have with Dr. Galardy and Dr. Damian Grobelny. This license agreement provided that we compensated approximately 80,000 common shares, 80,000 stock options and $50,000 in cash  each, to  Dr. Galardy and Dr. Grobelny for the exclusive license of the Ilomastat technology, which they invented.





We do not expect any significant additions to property, plant and equipment.








Critical Accounting Policies and Estimates





Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Financial Statements, which we have prepared in accordance with U.S. generally accepted accounting principles.  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. The estimates and assumptions are evaluated on an on-going basis and are based on historical experience and on various other factors that management believes to be reasonable under the circumstances. Estimates and assumptions include, but are not limited to economic useful lives of fixed and intangible assets, income taxes, valuation of options and warrants granted, and contingencies. Actual results may differ from these estimates under different assumptions or conditions.





An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. We believe that the estimates, assumptions and judgments involved in revenue recognition, receivables and allowances for doubtful accounts, accruals including  stock-based compensation, deferred costs, research and development, and impairment of intangible assets  have the greatest potential impact on our condensed financial statements, so we consider these to be our critical accounting policies. Management believes that there have been no significant changes during the three months ended September 30, 2010 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended June 30, 2010.





Recent Accounting Pronouncements





For a description of the new accounting standards that affect us, see Note 2 of notes to our condensed financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.







-16-
 Index








Results of Operations





Comparison of Three Months Ended September 30, 2010 and 2009





Revenues.During the three months ended September 30, 2010 we had $411,485 of revenues, compared to $29,331 of revenues for the three months ended September 30, 2009, representing a 1,303% increase in our revenues.  Our revenues during the three months ended September 30, 2010 consisted of: (a) $257,267, which represented our royalties in the form of revenue share from the product sales by  BASF Beauty Care Solutions, L.L.C., a cosmetic and personal care division of BASF Catalysts, LLC, a wholly-owned subsidiary of BASF (“BASF”),  in connection with a manufacturing and distribution agreement we have with BASF  for product development, manufacturing and distribution (the “BASF Agreement”); (b) $67,968 royalty and license fees  consisting of $63,458 from the sales of BIOGUARDTMadvanced wound care product by Derma Sciences, Inc., our licensee, and $4,510 in license fees representing the earned portion of the license fees from our licenses; and (c) $86,250,which represented the revenueearned from the joint development projects.While we noted that the MultiStat product sales by BASF has improved in the recent quarters,  however, given the current state of the economy,  in particular in the retail cosmetic industry, we cannot anticipate the MultiStat product sales by BASF for the subsequent quarters given economic market uncertainties.





Our revenues during the three months ended September 30, 2009 consisted of (a) $7,971 which represented our royalties from the product sales by BASF Beauty Care Solutions, L.L.C.; (b) $6,360, royalty and license fees consisting of $4,574 from the sales of BIOGUARDTM advanced wound care product by Derma Sciences, Inc., our licensee, This product was launched in late June 2009 and the royalty fees related to the sales of this product were $79,574 from the period from June to September 30, 2009.  However, $75,000 was credited against the advance royalty fees we had previously received in accordance with the terms of the license agreement.  There are no further credits against future royalty fees; and (c) $15,000, which represented the revenue earned from the joint development project.





Effective August 1, 2007, we entered into the manufacturing and distribution agreement with BASF Beauty Care Solutions, L.L.C., a member of the BASF Group (the “BASF Agreement”).  This agreement grants BASF exclusive and non-exclusive licenses to develop and market our Ilomastat product for the field of over-the-counter anti-aging (chronological aging or photoaging) cosmetics. Under the terms of this agreement, we and BASF share the net revenues in each contract calendar year beginning January 1, 2008 until December 31, 2010 in accordance with certain sharing percentages as defined in the agreement.  The BASF Agreement has an expiration date of December 31, 2010.  This Agreement supersedes the Master Agreement for Product Development, Manufacturing and Distribution dated August 15, 2002, the Product Development and Distribution Agreement for Ilomastat dated August 15, 2002, the Tolling Agreement dated October 20, 2005, as amended, and the Letter of Intent with the effective date of February 1, 2006, as amended.  We are currently working with BASF on an extension of the Agreement.








Operating Loss.  Operating loss for the three months ended September 30, 2010 was $329,858 as compared to $558,799 in operating loss for the three months ended September 30, 2009, representing a decrease of 41% or $228,941 in operating loss. The decrease in operating loss was primarily attributable to an increase in revenues of $382,154 offset by an increase in expenses of $153,213 for the three months ended September 30, 2010.   The increase in expenses was primarily due to the following:  (a) an increase in research and development expenses of $27,475 or 11%; (b) an increase of $101,272 or 36% in  general and administrative expenses; (c) an increase of $11,493 or 26% in licensing and patent expenses; and (d) an increase of $13,595 or 1,173% in cost of revenues, as described in more detail below.





Research and Development Expense.  Research and development expense increased by $27,475 or 11% to $274,166 for the three months ended September 30, 2010, from $246,691 for the three months ended September 30, 2009.  The increase in research and development expense is primarily attributable to the remaining subcontractor expenses related to the SBIR phase II program, and higher payroll expenses than in prior year comparable period.





General and Administrative Expense.  General and administrative expense increased by $101,272 or 36% to $379,762  for the three months  ended September 30, 2010, from $278,490 for the three months ended September 30, 2009.  This increase in our general and administrative expenses is mainly attributed to  the implementation of the investor relations programs and larger royalty fees incurred by us.





Licensing and Patent Expense.  Licensing and patent expense increased by $11,493 or 26% to $55,307 for the three months ended September 30, 2010 from $43,814  for the three months ended September 30, 2009.  This increase was primarily due to higher consulting patent legal fees, annual annuity fees for our patents and patent applications and more annuity fees for more patent applications than those of prior comparable period.





Interest Expense.  Interest expense on notes payable for the three months ended September 30, 2010 increased $36,791 or 48% to $113,090 compared to $76,299  the  three months ended September 30, 2009.  The increase was due to  approximately $2,200,000 or 51% increase in the outstanding loan balance due to our Chairman of the Board, a major shareholder, and third parties to approximately $6,500,000, compared to approximately $4,300,000  outstanding balance for the comparable 2009





For the three months ended September 30, 2009, we had an approximately $103,333 non-cash charge to interest expense as a result of a beneficial conversion feature of  a long-term convertible note payable with the Chairman.  We had no similar charge for the three months ended September 30, 2010.





Net Loss.   Net loss for the three months ended September 30, 2010  was $442,391 or $0.01 per share compared to $738,424 or $0.02 per share for the three months ended September 30, 2009.   This decrease is primarily attributable to increases in revenue,  interest expense,  general and administrative expenses, research and development expenses, and licensing and patent expenses, and cost of revenues.







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 Index








Liquidity and Capital Resources





Our auditors have issued a going concern opinion on our audited financial statements for the fiscal years ended June 30, 2010 and 2009 as we have experienced recurring losses and negative cash flows from operations in these periods.  We expect to continue to incur losses in 2010.  In addition, we have a net capital deficiency.  These matters raise substantial doubt about our ability to continue as a going concern.





Total cash on hand at September 30, 2010 was $495,347 as compared with $628,026 at June 30, 2010.    Subsequent to the quarter ended, we collected approximately $182,208 of the outstanding receivable balance as of  November 10, 2010.





In October 2010, we were awarded a grant of approximately $244,000 by the U.S. government  under the Qualifying Therapeutic Discovery Project ("QTDP") program to advance the development of the NIMBUS technology for wound dressings and wound drains.  The QTDP grant has been authorized by the U.S. Department of the Treasury for payment in November 2010.  We expect to pay approximately $49,000 in fees associated with the grant application.





On April 17, 2009, we and Avery Dennison Corporation (“Avery”) entered into a Joint Development and Exclusive Option Agreement (the “Agreement”) effective as of April 17, 2009 with total value of approximately $100,000 between six to twelve months period.  We anticipated the direct expenses related to this project of approximately $20,000. As of  November 10, 2010, we collected payments of $100,000  under the Agreement.





In  October  2010, Avery Dennison exercised its option under the  Agreement to enter into a license agreement with us.  The significant terms of the license agreement have been agreed by both parties and were included in an exhibit of the Joint Development Agreement.





In August 2010, we entered into a Development and Option Agreement (the “Agreement”) with Biosara. The Agreement remains in effect until December 31, 2010 or until superseded by the earlier of a license agreement or another product development agreement.    The parties agree to perform in accordance with the terms as set forth in the statement of work including the initial and subsequent monthly development fees paid or to be paid to the Company.  We anticipate that the development fees are adequate to cover our expenses.  We received the initial payment and performed the work.  As of November 10, 2010, we received certain development fees to continue the work.  We are unable to determine if we will continue to receive the development fees in the future to complete the project at this time.  We will continue the work as long as the development fees are received.





In July 2010, we entered into an exclusive Patent and Technology license agreement (the "Agreement")  with Viridis BioPharma Pvt. Ltd., ("Viridis") an India corporation.  Under the Agreement, Viridis will manufacture, market and sell these wound treatment products in the institutional market in the Republic of India.  The Company will receive royalty payments on the product sales at an agreed royalty rate in addition to certain payment received in March 2010.  We will receive additional payment at the earlier of the first commercial sale or six months from July 26, 2010, the effective date of the Agreement.  We are unable to determine when the first commercial sale will occur and how much, if any, of the royalty fee we will receive in the future at this time.  We expect nominal direct expenses in relation to this license agreement.





In June 2009, our licensee, Derma Sciences, Inc. launched the commercial sale of BIOGUARD® an advance wound care product employing our NIMBUS technology.  From the launch date to September 30, 2010, our royalty fees related to this product were approximately $302,579.  In accordance with the terms of the license agreement, the first $75,000 royalty fees from Derma Sciences were offset against the advance payments we received in 2007, the subsequent royalty fees will be at 20% of the net sales as defined in the license agreement.  We are unable to determine how much, if any, of the royalty fee we will receive in the future at this time.  We expect minimal direct expenses in relation to this license agreement.





In May 2010, we entered into a service agreement (the "Agreement") with a division of a major consumer products company for a certain fee over four months period or when the milestones are completed.  We anticipated the direct expenses related to this project of approximately $10,000 that would be covered by the fee arrangement. We have invoiced and collected payments for the first two milestones under the project to date.





In April 2010, we and KCI USA, Inc. ("KCI") entered intoa Development Agreement (the “Agreement”) for a certain fee over seven months period.  We anticipated the direct expenses related to this project of approximately $15,000 that would be covered by the fee arrangement. We have collected the first payment under the project.




In September 2006, we received the SBIR Phase II grant, which included  the option of SBIR Phase I, totaling approximately $840,000 over the next two years and we expect the cash outflows related to this grant of approximately $390,000 to subcontractors and other direct expenses.  To date, we received approximately $616,000 and incurred approximately $282,000 in expenses to subcontractors and other direct expenses.





While we expect to receive royalties in the next twelve to twenty four months from the license agreement subject to certain contractual terms, we need cash in order to maintain and grow our businesses.  See the section below for further discussion of our cash requirements and related strategies to meet these needs.





Beginning in 2009, we have taken a number of steps to conserve cash and control expenses including a elimination of a $75,000 salary position, a deferred payment on a certain consulting fee of $20,000, and  voluntary  reduction and waiver of salaries and fees of approximately $440,000.  The voluntary salary and fee waiver ended effective October 1, 2010.





Equity Financing and our Cash Requirements





On February 8,  2010, we signed a placement agent agreement with an investment banker on a non exclusive basis to raise up to $5,000,000 in order to meet our current operating cash needs and  to execute our business plan.  We cannot assure you that we will raise a sufficient amount of capital, if any, through this investment banker.





Based on our cash position at September 30, 2010, we cannot continue to satisfy our current cash requirements for a period of twelve (12) months through our existing capital. We anticipate total estimated, operating and research and development expenditures, and patent related legal fees of approximately $182,500 per month or an aggregate of approximately $2,190,000 over the next twelve (12) months, in the following areas:





·
Research and development expenditures of approximately $83,000 per month or an aggregate $996,000 over the next twelve (12) months, which will consist of the following estimated monthly expenditures: (a) $61,000 in payroll for scientists; (b) $5,000 for outside research and development expenditures; and (c) $17,000 for chemical supplies and laboratory operating expenses, including rent expense;





·
Patent related legal fees of approximately $23,334 per month or an aggregate $280,000 annually; and





·
Operating expenses of approximately $76,167 per month or an aggregate $914,000 over the next twelve (12) months, including business developments, personnel costs, investors relations, director and officer insurance, general liability insurance, investors relations, rent, consulting fees, utilities, legal and accounting fees, and travel.







Our current cash balance of $495,347 as of  September 30, 2010, accounts receivable of approximately $295,958,  of which approximately $182,208 has been subsequently collected after September 30, 2010, and approximately $195,000 government grant, net of expenses, will satisfy our cash requirements for approximately no more than five (5) months assuming no further receipt of revenues and additional debt or equity financing.  If we are unable to satisfy the remainder of our obligations by equity and/or debt financings, we will be unable to satisfy our cash requirements beyond approximately more than five (5) months assuming no further receipts of revenues and additional debt or equity financing.





We are attempting to raise additional cash by means of equity and or debt financing. Additionally, we are implementing a cash conservation strategy by extinguishing obligations through share-based payments and reducing our use of consulting services. However, our ability to raise cash through equity or debt financing with third parties will be difficult in the current credit environment.  There are no assurances that any planned equity offering and/or debt financing will be successful or sufficient to meet our cash requirements or that our cash conservation strategy will be successful.  Even if we were able to obtain debt or equity financing, the terms of such financing may be very unfavorable to us.  Further, any sale of newly issued debt or equity securities could result in additional dilution to our current stockholders.





As of September 30, 2010, we have eleven senior convertible notes payable outstanding to our Chairman totaling approximately $5,000,000 including accrued interest with interest rates ranging from 6% to 8% per annum and maturity dates of December 2013.  These notes are convertible at conversion prices ranging from $0.18 to $0.74 per share and are secured by our revenues and assets.  We also have a note payable with our Chairman of $225,952 including accrued interest with a maturity date of July 1, 2011 and an annual interest rate of 8%.  We also have a $1,053,000 senior convertible note payable to a major stockholder.  The senior convertible note has an 8% interest rate per annum with a conversion price of $0.60 per share, a maturity date of  December 31, 2013, and is secured by our revenues and assets.  Further, we have two senior convertible notes totaling $250,000 with third parties.  These notes have an 8% interest rate per annum with a conversion price of $1.00 per share, a maturity date of June 30, 2014.   In addition, we have four convertible notes payable totaling $111,490 including accrued interest with an interest rate of 8% per annum and a maturity date in December 2010.







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 Index




If we are unable to successfully repay our loans to our Chairman and a major stockholder, we may have to liquidate our business and undertake any or all the steps outlined below.




·
Significantly reduce, eliminate or curtail our business, operating and research and development activities so as to reduce operating costs;


·
Sell, assign or otherwise dispose of our assets, if any, to raise cash or to settle claims by creditors, including our Chairman of the Board;


·
Pay our liabilities in order of priority, if we have available cash to pay such liabilities;


·
If any cash remains after we satisfy amounts due to our creditors, distribute any remaining cash to our shareholders in an amount equal to the net market value of our net assets;


·
File a Certificate of Dissolution with the State of Nevada to dissolve our corporation and close our business;


·
Make the appropriate filings with the Securities and Exchange Commission so that we will no longer be required to file periodic and other required reports with the Securities and Exchange Commission, if, in fact, we are a reporting company at that time; and


·
Make the appropriate filings with the National Association of Security Dealers to affect a delisting of our stock.




Based upon our cash requirements for our Plan of Operations and our current dividend policy of investing any available cash to our operations, however, we do not plan to distribute any cash to our stockholders.




At September 30, 2010, we had a negative working capital of $374,409 that primarily consists of: (a) cash of $495,347; (b) accounts receivable of $295,958; (c) accounts payable of $643,869; (d) accrued expenses of $77,780; (e) unearned revenue of $106,623; (d) note payable to director of $225,952 including accrued interest; and (g) convertible note payable with an officer  of $111,490 including accrued interest.  At September 30, 2010, we had a stockholders’ deficit of $6,594,507, a portion of which is due to non-cash share based compensation expense and non-cash interest expense from the notes payable conversions and the beneficial conversion feature of certain convertible notes.





Cash used in operating activities was $112,695 for the three months ended September 30, 2010. Net cash used in investing activities was $19,984.  Net cash provided by financing activities was $0.





During the three months ended September 30, 2009, we received $419,650, of which $395,000 was from   a senior  convertible note with our Chairman, and the proceeds of $24,650 in cash from the exercise of stock options.





Contractual Obligations




The following table summarizes our long-term contractual obligations as of  September 30, 2010:




Total


Less than 1 Year


1-3 Years


3-5 Years


More than 5 YearsLong-term debt obligations (a)

$
6,670,114


$
-


$
225,952 -


$
6,444,162


$
-Operating lease obligations (b)

$
8,000


$
8,000


$
-


$
-


$
-





(a)
The principal and accrued interest on the notes payable owed to the Chairman’s Senior Convertible Notes, to third parties' convertible note payable, and to a major shareholder’s senior note payable as fully discussed in note 4 of the accompanying condensed footnotes to the   financial statements.




(b)
We have an operating lease for our laboratory in Gainesville, Florida with an expiration date in 2011.






Off-balance Sheet Arrangements





We do not have any off-balance sheet arrangement that have, or are reasonably likely to have, a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.








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 Index





ITEM 3.       Quantitative and Qualitative Disclosure About Market Risk





Not applicable.











ITEM 4T.   Controls and Procedures





Evaluation of Disclosure Controls and Procedures




We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 reports is recorded, processed summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.







Based on our management’s evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")), our Chief Executive Officer and our Chief Financial Officer have concluded that as of  September 30, 2010, the end of the period covered by this Quarterly Report on Form 10-Q, such disclosure controls and procedures are effective at a reasonable level.







Changes in Internal Controls over Financial Reporting




As of the end of our quarter ended September 30, 2010, there was no change in the our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.










PART II


OTHER INFORMATION





Item 1.   Legal Proceedings





None.





Item 1A.   Risk Factors





Item 1A is not required to be disclosed by smaller reporting companies such as the Company.





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





None





Item 3.   Defaults Upon Senior Securities





None.





Item 4.   (Removed and Reserved)





None.





Item 5.   Other Information.





None






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 Index





Item 6.  Exhibits





Exhibit Number

Description2.1

Merger Agreement dated March 19, 2001 between Above Average Investments Ltd. and Quick-Med Technologies, Inc. (1)2.2

Amendment to Merger Agreement (1)3.1

Articles of Incorporation (1)3.2

Bylaws (1)10.1

Joint Development and Exclusive Option Agreement by and between Avery Dennison and the Registrant dated as of April 17, 2009(2)10.2

Amendment No. 2 to Patent and Technology License Agreement by and between Quick Med Technologies, Inc. and Derma Sciences, Inc. dated March 23, 2007.  (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.)(3)10.3

License Agreement by and between Quick Med Technologies, Inc. and Johnson & Johnson Consumer and Personal Products Worldwide, a division of Johnson & Johnson Consumer Companies, Inc. effective as of March 5, 2010.  (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.)(4)10.4

Senior Convertible Promissory Note by and between Quick-Med Technologies, Inc. and  Phronesis Partners, L.P. dated March 31, 2010.(5)10.5

Senior Convertible Promissory Note by and between Quick-Med Technologies, Inc. and  2849232 CANADA INC dated March 31, 2010.(5)10.6

Senior Convertible Promissory Note by and between Quick-Med Technologies, Inc. and  Peter L. Berry Holdings, Inc. dated March 31, 2010.(5)10.7

Development Agreement by and between Quick Med Technologies, Inc. and KCI USA, Inc. dated April 2, 2010.  (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.)(6)10.8

Patent and Technology License Agreement by and between Quick Med Technologies, Inc. and Viridis BioPharma Pvt. Ltd., an India corporation, effective as of  July 26, 2010.  (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) (7)10.9

Development and Option Agreement by and between Quick-Med Technologies, Inc. and Biosara Corporation, effective as of August 6, 2010. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.)(8)31.1

Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a), filed herewith.31.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a), filed herewith.32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.


(1)           Incorporated by reference to the Company's registration statement on Form SB-2 (file no. 333-41672)





(2)           Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 23, 2009.





(3)           Incorporated by reference to the Company’s Current Report on Form 8-K filed on February  19, 2010.





(4)           Incorporated by reference to the Company’s Current Report on Form 8-K filed on March 11, 2010.





(5)           Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 6, 2010.





(6)           Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 8, 2010.





(7)           Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 30, 2010.





(8)           Incorporated by reference to the Company’s Current Report on Form 8-K filed on August 12, 2010.




















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 Index











SIGNATURES








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







Quick-Med Technologies, Inc.___________________________(Registrant)





Date
November 15, 2010
By: /s/ J. Ladd GreenoJ. Ladd GreenoChief Executive Officer (Principal Executive Officer)





Date
November 15, 2010
By: /s/ Nam H. NguyenNam H. NguyenChief Financial Officer















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 Index