Tonix Pharmaceuticals (TNXP) - 2019 Q3 - Quarterly Report

Part I Financial Statements Tonix Pharmaceuticals reported a $19.9 million net loss and $20.0 million cash used in operations for the nine months ended September 30, 2019, with cash decreasing to $10.0 million, raising going concern doubts and necessitating financing Condensed Consolidated Balance Sheet Data (in thousands) | | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $10,024 | $25,034 | | Total current assets | $11,553 | $26,056 | | Total assets | $12,272 | $26,319 | | Liabilities & Equity | | | | Total current liabilities | $2,366 | $2,655 | | Total liabilities | $2,417 | $2,655 | | Total stockholders' equity | $9,855 | $23,664 | Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended Sep 30 | Nine Months Ended Sep 30 | | :--- | :--- | :--- | | | 2019 | 2018 | 2019 | 2018 | | Research and development | $5,052 | $3,264 | $12,502 | $12,501 | | General and administrative | $2,839 | $2,277 | $7,592 | $6,171 | | Operating Loss | ($7,891) | ($5,541) | ($20,094) | ($18,672) | | Net Loss | ($7,838) | ($5,479) | ($19,911) | ($18,501) | | Net loss per share, basic | ($5.69) | ($54.99) | ($23.93) | ($195.51) | Condensed Consolidated Statements of Cash Flows (in thousands) | | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(19,969) | $(17,147) | | Net cash used by investing activities | $(12) | $(7) | | Net cash provided by financing activities | $4,974 | $6,352 | | Net decrease in cash | $(15,010) | $(10,812) | - The company has suffered recurring losses and negative cash flows, and its current resources are insufficient to meet operating requirements for the next year, raising substantial doubt about its ability to continue as a going concern[24] - In August 2019, the company acquired assets from TRImaran Pharma related to pyran-based compounds for an initial payment of $100,000, assumption of liabilities, and potential future milestone payments of approximately $3.4 million[58] - The company entered into two exclusive license agreements with Columbia University in 2019: one for TFF2 technology (gastric/pancreatic cancer) and another for a double-mutant cocaine esterase (cocaine intoxication), with combined potential milestone payments totaling $6.1 million[63][67][71] - In July 2019, the company raised approximately $4.5 million in net proceeds from an underwritten public offering of 900,000 shares of common stock at $6.00 per share[75][76] - As a subsequent event, the company effected a 1-for-10 reverse stock split of its common stock, effective November 1, 2019. All share and per-share amounts in the financial statements have been retroactively restated[122] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's clinical-stage focus, led by TNX-102 SL for PTSD, noting increased net losses from higher R&D and G&A expenses, and reiterating a critical going concern risk due to insufficient liquidity Business Overview Tonix is a clinical-stage biopharmaceutical company developing treatments for psychiatric, pain, and addiction, with its lead product, TNX-102 SL, in Phase 3 development for PTSD, alongside a diverse pipeline - The company's lead product candidate is TNX-102 SL, a sublingual tablet of cyclobenzaprine, which is in Phase 3 development for PTSD[126] - The development pipeline includes TNX-102 SL for other indications (fibromyalgia, Alzheimer's), TNX-1300 for cocaine intoxication, TNX-601 for PTSD and neurocognitive dysfunction, TNX-801 as a smallpox vaccine, TNX-1500 for organ transplant rejection, and TNX-1700 for cancers[126] Results of Operations Net loss increased to $7.8 million in Q3 2019 due to a 55% rise in R&D, and widened to $19.9 million for nine months due to 23% higher G&A Comparison of Three Months Ended September 30 (in millions) | Expense Category | 2019 | 2018 | Change | Reason | | :--- | :--- | :--- | :--- | :--- | | Research & Development | $5.1 | $3.3 | +$1.8 (55%) | Timing of PTSD RECOVERY study activities | | General & Administrative | $2.8 | $2.3 | +$0.5 (22%) | Increased legal and insurance fees | | Net Loss | $7.8 | $5.5 | +$2.3 | | Comparison of Nine Months Ended September 30 (in millions) | Expense Category | 2019 | 2018 | Change | Reason | | :--- | :--- | :--- | :--- | :--- | | Research & Development | $12.5 | $12.5 | $0 (0%) | Costs shifted from HONOR study (2018) to RECOVERY study (2019) | | General & Administrative | $7.6 | $6.2 | +$1.4 (23%) | Increased legal, IR, and insurance fees | | Net Loss | $19.9 | $18.5 | +$1.4 | | Liquidity and Capital Resources As of September 30, 2019, the company had $9.2 million working capital and $10.0 million cash, with $20.0 million cash used in operations, indicating insufficient resources and a critical need for additional financing - The company had working capital of $9.2 million and cash and cash equivalents of $10.0 million as of September 30, 2019[146] - A critical liquidity issue exists, as the company states it will not have enough resources to meet its operating requirements for the one-year period from the filing date of this report[167] - Net proceeds from financing activities for the nine months ended September 30, 2019, were approximately $5.0 million, primarily from the sale of common stock and warrant exercises[146] - The company will need to obtain additional capital to fund future R&D. Failure to do so may require delaying or reducing the scope of its development programs[169][170] Critical Accounting Policies and Estimates Critical accounting policies include Leases, Research and Development, and Stock-Based Compensation, all requiring significant management estimates and judgments for valuation and accruals - Key accounting policies requiring significant estimates include Leases (determining incremental borrowing rates), Research and Development (accruing clinical trial expenses based on progress), and Stock-Based Compensation (valuing awards)[186][187][188][190] Quantitative and Qualitative Disclosures about Market Risk Disclosure under this item is not required as the company qualifies as a "smaller reporting company" under Regulation S-K - As a "smaller reporting company," the company is not required to provide disclosures about market risk[197] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2019, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of September 30, 2019, the company's disclosure controls and procedures were effective at a reasonable assurance level[198] - No changes occurred during the quarter ended September 30, 2019, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[199] Part II Legal Proceedings The company reports that it is not currently a party to any material legal proceedings or claims - As of the filing date, the company is not involved in any material legal proceedings[202] Risk Factors Disclosure under this item is not required as the company qualifies as a "smaller reporting company" under Regulation S-K - As a "smaller reporting company," the company is not required to provide disclosures for Risk Factors in a 10-Q[203] Unregistered Sales of Equity Securities and Use of Proceeds On August 20, 2019, the company issued 35,529 shares of common stock to Lincoln Park Capital Fund, LLC as a commitment fee related to a Purchase Agreement dated the same day - On August 20, 2019, the company issued 35,529 commitment shares to Lincoln Park Capital Fund, LLC as part of a purchase agreement[203] Other Items The company reported no defaults upon senior securities, no mine safety disclosures, and no other information requiring disclosure under Item 5, with a list of exhibits filed including key asset purchase and license agreements - The company reports "None" for Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[204][205][206] - Exhibits filed with the report include the Asset Purchase Agreement with TRImaran Pharma and two Exclusive License Agreements with Columbia University[207]