Tonix Pharmaceuticals (TNXP) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Presents unaudited condensed consolidated financial statements and detailed notes for periods ended September 30, 2022, and December 31, 2021 Condensed Consolidated Balance Sheets Summarizes the company's financial position, detailing changes in cash, property, and equity from December 2021 to September 2022 Key Balance Sheet Metrics | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $139,978 | $178,660 | | Total current assets | $151,139 | $189,049 | | Property and equipment, net | $90,307 | $50,558 | | Total assets | $242,646 | $240,900 | | Total current liabilities | $13,340 | $21,716 | | Total liabilities | $13,722 | $22,183 | | Common stock shares outstanding | 53,321,511 | 15,638,274 | | Additional paid in capital | $667,389 | $578,613 | | Accumulated deficit | $(438,358) | $(359,820) | | Total stockholders' equity | $228,924 | $218,717 | Condensed Consolidated Statements of Operations Highlights increased R&D and G&A expenses, resulting in a higher net loss for the three and nine months ended September 30, 2022 Key Operating Results | Metric (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $22,201 | $13,082 | $57,202 | $46,542 | | General and administrative | $7,390 | $5,453 | $22,161 | $16,291 | | Operating loss | $(29,591) | $(18,535) | $(79,363) | $(62,833) | | Net loss | $(28,981) | $(18,528) | $(78,538) | $(62,734) | | Net loss per common share, basic and diluted | $(0.69) | $(1.60) | $(3.06) | $(6.02) | - Net loss available to common stockholders increased to $(29.0) million for the three months ended September 30, 2022, from $(18.5) million in the prior year, and to $(82.8) million for the nine months ended September 30, 2022, from $(62.7) million in the prior year[10] Condensed Consolidated Statements of Comprehensive Loss Shows increased comprehensive loss for the three and nine months ended September 30, 2022, driven by net loss and foreign currency translation Comprehensive Loss Summary | Metric (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss | $(28,981) | $(18,528) | $(78,538) | $(62,734) | | Foreign currency translation loss | $(17) | $(10) | $(68) | $(19) | | Comprehensive loss | $(28,998) | $(18,538) | $(78,606) | $(62,753) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased from December 2021 to September 2022, driven by common stock issuances, offset by net losses and preferred dividends Stockholders' Equity Changes | Metric (in thousands) | Dec 31, 2021 | Sep 30, 2022 | | :-------------------- | :----------- | :----------- | | Common stock shares | 15,638,274 | 53,321,511 | | Common stock amount | $16 | $53 | | Additional Paid in Capital | $578,613 | $667,389 | | Accumulated Deficit | $(359,820) | $(438,358) | | Total Stockholders' Equity | $218,717 | $228,924 | - Issuance of common stock under At-the-market offerings and 2021/2022 Purchase agreements significantly increased Additional Paid in Capital[14] - A preferred stock dividend of $(4,255) thousand was recorded during the nine months ended September 30, 2022[14] Condensed Consolidated Statements of Cash Flows Details increased cash usage in operating and investing activities, with decreased financing cash, leading to a net cash decrease for 9M 2022 Cash Flow Summary | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(75,752) | $(53,112) | | Net cash used in investing activities | $(43,476) | $(9,685) |\ | Net cash provided by financing activities | $80,615 | $168,720 | | Net (decrease) increase in cash | $(38,682) | $105,902 | | Cash, cash equivalents and restricted cash end of period | $140,218 | $183,210 | - Operating cash outflows increased by $22.64 million, primarily due to higher research and development activities[19] - Investing cash outflows significantly increased by $33.79 million, mainly due to purchases of property and equipment[19] Notes to Condensed Consolidated Financial Statements Provides detailed information on the company's business, accounting policies, and specific financial statement line items, including going concern uncertainty and equity transactions NOTE 1 – BUSINESS Tonix Pharmaceuticals Holding Corp. is a clinical-stage biopharmaceutical company facing going concern uncertainty due to recurring losses, despite having cash for operations into Q3 2023 - Tonix is a clinical-stage biopharmaceutical company developing therapeutics and vaccines[21] - The company has suffered recurring losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern[23][25] Key Financial Metrics | Metric | Sep 30, 2022 (in millions) | | :---------------- | :------------------------- | | Working capital | $137.8 | | Accumulated deficit | $(438.4) | | Cash and cash equivalents | $140.0 | - Current cash resources, plus $2.1 million from equity offerings post-Q3 2022, are expected to fund operations into Q3 2023, but not beyond[24] NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES Details significant accounting policies, including a 1-for-32 reverse stock split, interim financial statement preparation, and policies for cash, R&D, and stock-based compensation - A 1-for-32 reverse stock split was effected on May 17, 2022, and applied retrospectively to all periods presented[26] - Interim financial statements are prepared in accordance with GAAP for interim information and do not include all footnotes required for complete financial statements[27] - Cash equivalents primarily consist of money market funds, totaling $121.2 million at September 30, 2022[33] - Research and development costs, including manufacturing for testing and licensing fees, are expensed as incurred[39] - Stock-based payments are measured at fair value on the grant date and recognized as compensation expense over the service period[43] Potentially Dilutive Securities | Potentially Dilutive Securities | Sep 30, 2022 | Sep 30, 2021 | | :------------------------------ | :----------- | :----------- | | Warrants to purchase common stock | 19,970 | 20,156 | | Options to purchase common stock | 2,455,280 | 805,742 | | Totals | 2,475,250 | 825,898 | NOTE 3 – PROPERTY AND EQUIPMENT, NET Property and equipment, net, significantly increased to $90.3 million at September 30, 2022, driven by investments in R&D facilities in Frederick, MD, Dartmouth, MA, and Hamilton, MT Property and Equipment Breakdown | Asset Category (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :---------------------------- | :----------- | :----------- | | Land | $8,011 | $7,911 | | Buildings | $15,030 | — | | Construction in progress | $58,723 | $41,921 | | Laboratory equipment | $8,313 | $347 | | Total Property and equipment, net | $90,307 | $50,558 | - The Frederick, MD R&D facility (acquired Oct 2021 for $17.5 million) and Dartmouth, MA Advanced Development Center (acquired Sep 2020 for $4.0 million, with $32.6 million additional costs in 9M 2022) were placed in service during or subsequent to Q3 2022[53][54] - A 44-acre site in Hamilton, MT, purchased for $4.5 million for a vaccine facility, was not yet ready for its intended use as of September 30, 2022[55] NOTE 4 – FAIR VALUE MEASUREMENTS The company uses Level 1 quoted prices to value its cash equivalents, totaling $121.2 million at September 30, 2022, with no Level 2 or Level 3 assets or liabilities - Cash equivalents of $121.2 million (Sep 30, 2022) and $120.4 million (Dec 31, 2021) are valued using Level 1 quoted prices[56] - The company had no Level 2 or Level 3 assets or liabilities at September 30, 2022, or December 31, 2021[56] NOTE 5 – STOCKHOLDERS' EQUITY A 1-for-32 reverse stock split was effective May 17, 2022, reducing authorized common stock to 50 million shares, later increased to 150 million shares on August 5, 2022 - A 1-for-32 reverse stock split was effective May 17, 2022, reducing outstanding shares and authorized common stock from 800 million to 50 million[58] - On August 5, 2022, authorized common stock was increased from 50 million to 150 million shares[58] - The reverse stock split helped regain compliance with NASDAQ's minimum bid price requirement[58] NOTE 6 – TEMPORARY EQUITY In June 2022, the company issued Series A and B Convertible Redeemable Preferred Stock for $28.5 million gross proceeds, classified as temporary equity, and subsequently redeemed in August 2022 for $31.5 million - Issued 2.5 million Series A and 0.5 million Series B Convertible Redeemable Preferred Stock in June 2022 for $28.5 million gross proceeds[59] - Preferred Stock was classified as temporary equity due to a holder redemption feature[64] - All outstanding Preferred Stock was redeemed in August 2022 at 105% of stated value, totaling $31.5 million[64] NOTE 7 – ASSET PURCHASE AGREEMENT WITH KATANA In December 2020, Tonix acquired assets related to insulin resistance and obesity from Katana Pharmaceuticals for $0.7 million, expensed as R&D costs, with no milestone payments accrued or paid as of September 30, 2022 - Acquired Katana assets for insulin resistance and obesity for $0.7 million in December 2020, expensed as R&D[65] - Secured an exclusive license from the University of Geneva for related patents[66] - No milestone payments have been accrued or paid under this agreement as of September 30, 2022[67] NOTE 8 – ASSET PURCHASE AGREEMENT WITH TRIGEMINA In June 2020, Tonix acquired Trigemina's migraine and pain treatment assets for $0.82 million cash and 62,500 common shares (totaling $2.4 million), expensed as R&D, with only annual maintenance fees paid as of September 30, 2022 - Acquired Trigemina assets for migraine and pain treatment in June 2020 for $0.82 million cash and 62,500 common shares (totaling $2.4 million), expensed as R&D[68][69] - Obtained an exclusive license from Stanford University for related patents[71] - Only annual maintenance fees have been paid; no milestone payments accrued or paid as of September 30, 2022[72] NOTE 9 – ASSET PURCHASE AGREEMENT WITH TRIMARAN In August 2019, Tonix acquired TRImaran's pyran-based compound assets for $0.1 million cash and assumed $68.5 thousand in liabilities, expensed as R&D, with potential milestone payments of $3.4 million - Acquired TRImaran assets for pyran-based compounds in August 2019 for $0.1 million cash and assumed $68.5 thousand liabilities, expensed as R&D[73] - Potential future payments include $3.4 million in development, regulatory, and sales milestones to TRImaran and Selling Shareholders[73] - Secured an exclusive license from Wayne State University (WSU) for related technology, with potential milestone payments totaling $3.4 million and single-digit royalties on net sales[74][75] - No milestone payments have been accrued or paid under this agreement as of September 30, 2022[75] NOTE 10 – LICENSE AGREEMENT WITH UNIVERSITY OF ALBERTA In May 2022, Tonix entered an exclusive license agreement with the University of Alberta for broad-spectrum antiviral drugs, paying a low-five digit license fee, with no milestone payments accrued or paid as of September 30, 2022 - Entered exclusive license with University of Alberta in May 2022 for broad-spectrum antiviral drugs[77] - Paid a low-five digit license fee upfront; no milestone payments accrued or paid as of September 30, 2022[77][78] NOTE 11 – LICENSE AGREEMENT WITH OYAGEN In April 2021, Tonix licensed antiviral technology for SARS-CoV-2 from OyaGen, paying a low-seven digit fee and issuing $3.0 million in common stock; the agreement was terminated effective September 20, 2022 - Licensed antiviral inhibitor technology from OyaGen in April 2021 for a low-seven digit fee and $3.0 million in common stock[79][80] - The license agreement was terminated effective September 20, 2022[81] - No milestone payments were accrued or paid under this agreement[81] NOTE 12 – LICENSE AGREEMENT WITH INSERM In February 2021, Tonix licensed oxytocin-based therapeutics for Prader-Willi syndrome from Inserm, with potential milestone payments totaling $0.4 million, none accrued or paid as of September 30, 2022 - Licensed oxytocin-based therapeutics from Inserm in February 2021 for Prader-Willi syndrome[82] - Agreement includes annual fees, potential milestone payments of approximately $0.4 million, and royalties[82] - No milestone payments have been accrued or paid as of September 30, 2022[83] NOTE 13 – LICENSE AGREEMENTS WITH COLUMBIA UNIVERSITY Tonix holds two exclusive license agreements with Columbia University for TFF2 Technology and a double-mutant cocaine esterase, involving upfront fees, commercial development obligations, royalties, and contingent milestone payments totaling $4.1 million and $3 million respectively, with no milestone payments accrued or paid as of September 30, 2022 - Exclusive license for TFF2 Technology (recombinant Trefoil Family Factor 2) from Columbia University, with a five-digit license fee paid[83][84] - TFF2 agreement includes potential milestone payments of $4.1 million and single-digit royalties on net sales[88] - Exclusive license for double-mutant cocaine esterase from Columbia University, with a six-digit license fee paid[90][91] - Cocaine esterase agreement includes potential milestone payments of $3 million and single-digit royalties on net sales[93] - No milestone payments have been accrued or paid under either Columbia agreement as of September 30, 2022[89][94] NOTE 14 – SALE OF COMMON STOCK Tonix engaged in multiple common stock sales agreements and ATM offerings, generating significant net proceeds but also facing NASDAQ restrictions on further sales without shareholder approval - Entered a $50 million purchase agreement with Lincoln Park in August 2022, issuing 625,000 commitment shares valued at $1 million[95][96] - Sold 1.0 million shares under the 2022 Purchase Agreement for $0.5 million net proceeds subsequent to September 30, 2022[98] - Under a December 2021 agreement with Lincoln Park, sold 2.9 million shares for $8.7 million net proceeds during the nine months ended September 30, 2022; further sales are restricted without shareholder approval[99][101][102] - Under a May 2021 agreement with Lincoln Park, sold 1.3 million shares for $29.5 million gross proceeds during the nine months ended September 30, 2021; further sales are restricted without shareholder approval[103][105][106] - ATM offerings generated $76.2 million net proceeds from 34.2 million shares sold during the nine months ended September 30, 2022, and $37.2 million from 1.3 million shares in the same 2021 period[110] NOTE 15 – STOCK-BASED COMPENSATION Tonix operates stock incentive and employee stock purchase plans, with stock-based compensation expense increasing to $8.1 million for the nine months ended September 30, 2022, and $14.3 million in unrecognized compensation cost remaining - The Amended and Restated 2020 Stock Incentive Plan allows for various equity awards and includes an 'evergreen provision' for annual share increases[115] Stock Option Activity | Stock Option Activity | Shares Outstanding (Dec 31, 2021) | Shares Outstanding (Sep 30, 2022) | | :-------------------- | :-------------------------------- | :-------------------------------- | | Outstanding | 805,762 | 2,455,280 | | Grants | - | 1,695,608 | | Forfeitures or expirations | - | (46,090) | Stock-Based Compensation Expense | Stock-Based Compensation Expense (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total | $2,700 | $2,300 | $8,100 | $5,600 | | General and Administration | $2,000 | $1,600 | $5,900 | $3,900 | | Research and Development | $700 | $700 | $2,200 | $1,700 | - As of September 30, 2022, $14.3 million of unrecognized compensation cost remains, to be recognized over a weighted average period of 1.9 years[123] NOTE 16 – STOCK WARRANTS As of September 30, 2022, Tonix had 19,970 outstanding warrants to purchase common stock with exercise prices ranging from $16.00 to $1,120.00, with no exercises during the nine months ended September 30, 2022 Outstanding Stock Warrants | Exercise Price | Number Outstanding (Sep 30, 2022) | Expiration Date | | :------------- | :-------------------------------- | :-------------- | | $16.00 | 779 | November 2024 | | $18.24 | 3,860 | February 2025 | | $1,120.00 | 15,331 | December 2023 | | Total | 19,970 | | - No warrants were exercised during the nine months ended September 30, 2022[131] NOTE 17 – LEASES Tonix holds operating lease agreements, primarily for office space, with right-of-use assets of $0.8 million and total lease liabilities of $0.9 million as of September 30, 2022, and decreased operating lease expense - As of September 30, 2022, operating lease ROU assets were $0.8 million and total lease liabilities were $0.9 million[132] Future Minimum Lease Payments | Year Ending December 31 (in thousands) | Future Minimum Lease Payments | | :------------------------------------- | :---------------------------- | | 2022 | $135 | | 2023 | $438 | | 2024 | $163 | | 2025 | $159 | | 2026 and beyond | $11 | | Total | $906 | | Included interest | $(20) | | Present Value of Lease Liabilities | $886 | Operating Lease Expense | Operating Lease Expense (in millions) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease expense | $0.1 | $0.2 | $0.4 | $0.5 | NOTE 18 – COMMITMENTS Tonix has significant outstanding commitments, including $61.4 million for contract research organizations and $3.3 million for a construction contract as of September 30, 2022, and contributes to a 401(k) plan - Outstanding commitments of approximately $61.4 million for contract research organizations as of September 30, 2022[138] - Outstanding commitments of approximately $3.3 million for a construction contract as of September 30, 2022[138] 401(k) Contributions | 401(k) Contributions (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Company contributions | $122 | $38 | $428 | $149 | NOTE 19 – SUBSEQUENT EVENTS Subsequent to September 30, 2022, Tonix raised $2.1 million net proceeds from common stock sales, entered a new private placement for $14.3 million in preferred stock, and received a NASDAQ non-compliance notice - Subsequent to September 30, 2022, sold 3.2 million common shares under ATM for $1.6 million net proceeds and 1.0 million shares under 2022 Purchase Agreement for $0.5 million net proceeds[140] - On October 25, 2022, entered a private placement for $14.3 million gross proceeds from Series A and B Convertible Redeemable Preferred Stock, expected to be redeemed in 2022[141] - Received a NASDAQ notice on October 25, 2022, for non-compliance with the $1 minimum bid price requirement, with 180 calendar days to regain compliance[142][143] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Provides management's perspective on the company's financial condition, operational results, liquidity, capital resources, and critical accounting policies for the three and nine months ended September 30, 2022 Business Overview Tonix is a clinical-stage biopharmaceutical company with a diverse portfolio across CNS, rare disease, immunology, and infectious disease, including lead candidates TNX-102 SL, TNX-1300, and TNX-801 - Tonix is a clinical-stage biopharmaceutical company focused on CNS, rare disease, immunology, and infectious disease product candidates[147] - Lead CNS candidate, TNX-102 SL, is in mid-Phase 3 for fibromyalgia and Phase 2 for Long COVID, with interim data expected in Q2 2023 for both[148] - TNX-1300 (cocaine esterase) has FDA Breakthrough Therapy designation, with a Phase 2 study expected in Q1 2023, supported by a NIDA grant[148] - Infectious disease pipeline includes TNX-801 (smallpox/monkeypox vaccine, Phase 1 in H1 2023) and next-generation COVID-19 vaccines[151] Results of Operations The company's operating results for the three and nine months ended September 30, 2022, show increased research and development and general and administrative expenses, leading to a higher net loss compared to the same periods in 2021 Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021 Research and development expenses increased by 69% to $22.2 million, and general and administrative expenses rose by 35% to $7.4 million, leading to a $29.0 million net loss Operating Results - 3 Months | Expense Category (in millions) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change (in millions) | Change (%) | | :----------------------------- | :-------------------------- | :-------------------------- | :------------------- | :--------- | | Research and development | $22.2 | $13.1 | $9.1 | 69% | | General and administrative | $7.4 | $5.5 | $1.9 | 35% | | Net loss | $(29.0) | $(18.5) | $(10.5) | 57% | - R&D increase primarily due to increased clinical expenses ($2.4 million), manufacturing expenses ($1.0 million), non-clinical expenses ($1.4 million), employee-related expenses ($2.5 million), and laboratory expenses ($0.9 million)[154] - G&A increase primarily due to employee-related expenses ($0.9 million), legal fees ($0.3 million), and financial reporting expenses ($0.7 million)[157] Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021 Research and development expenses increased by 23% to $57.2 million, and general and administrative expenses rose by 36% to $22.2 million, resulting in a $78.5 million net loss Operating Results - 9 Months | Expense Category (in millions) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (in millions) | Change (%) | | :----------------------------- | :-------------------------- | :-------------------------- | :------------------- | :--------- | | Research and development | $57.2 | $46.5 | $10.7 | 23% | | General and administrative | $22.2 | $16.3 | $5.9 | 36% | | Net loss | $(78.5) | $(62.7) | $(15.8) | 25% | - R&D increase primarily due to employee-related expenses ($6.7 million), clinical expenses ($1.0 million), lab supplies ($1.9 million), and rent/office expenses ($1.0 million)[159] - G&A increase primarily due to employee-related expenses ($3.8 million), technology/software expenses ($0.5 million), travel/entertainment ($0.3 million), and financial reporting expenses ($0.6 million)[163] License Agreements Details various license agreements, including those with the University of Alberta, OyaGen (terminated), Inserm, and Columbia University, all involving upfront fees, potential milestones, and royalties, with no milestone payments accrued or paid as of September 30, 2022 - Exclusive License Agreement with University of Alberta (May 2022) for antiviral drugs, with a low-five digit upfront fee[166] - Exclusive License Agreement with OyaGen (April 2021) for SARS-CoV-2 antiviral, terminated effective September 20, 2022[167][168] - License agreement with Inserm (February 2021) for oxytocin-based therapeutics, with potential milestone payments of $0.4 million[169] - Two exclusive License Agreements with Columbia University for TFF2 Technology (potential $4.1 million milestones) and double-mutant cocaine esterase (potential $3 million milestones)[170][173][174][177] - No milestone payments have been accrued or paid for any of these license agreements as of September 30, 2022[166][168][169][173][177] Asset Purchase Agreements Details asset purchase agreements with Katana, Trigemina, and TRImaran, involving cash/stock consideration, exclusive university licenses, and potential future milestone payments, none accrued or paid as of September 30, 2022 - Katana Asset Purchase Agreement (Dec 2020) for insulin resistance assets, $0.7 million cash consideration, expensed as R&D[178] - Trigemina Asset Purchase Agreement (June 2020) for migraine/pain treatment assets, $0.82 million cash and 62,500 common shares (total $2.4 million), expensed as R&D[180][181] - TRImaran Asset Purchase Agreement (Aug 2019) for pyran-based compounds, $0.1 million cash and $68.5 thousand assumed liabilities, expensed as R&D, with potential $3.4 million milestone payments[183] - All asset acquisitions included exclusive licenses from universities (Geneva, Stanford, Wayne State), with obligations for commercial development and potential royalties/milestones[179][182][184] - No milestone payments have been accrued or paid for any of these asset purchase agreements as of September 30, 2022, other than annual maintenance fees where applicable[179][182][185] Liquidity and Capital Resources Tonix's working capital was $137.8 million at September 30, 2022, with $140.0 million in cash; the company used $75.8 million in operating and $43.5 million in investing activities, while financing provided $80.6 million, raising substantial doubt about its ability to continue as a going concern beyond Q3 2023 Working Capital and Cash | Metric (in millions) | Sep 30, 2022 | | :------------------- | :----------- | | Working capital | $137.8 | | Cash and cash equivalents | $140.0 | Cash Flow Summary | Cash Flow Activity (in millions) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(75.8) | $(53.1) | | Net cash used in investing activities | $(43.5) | $(9.7) | | Net cash provided by financing activities | $80.6 | $168.7 | - Cash resources are expected to meet operating and capital expenditure requirements into Q3 2023, but not beyond, raising substantial doubt about going concern[188][189] - Future capital requirements depend on R&D progress, regulatory approvals, intellectual property costs, competition, and financing availability[191] Future Liquidity Requirements Tonix expects continued losses and increasing R&D expenses, requiring additional capital beyond the current year, which may involve equity, debt, or collaborative arrangements, potentially leading to shareholder dilution or loss of product rights - Expects losses and increasing R&D expenses, including facility build-outs, and will not have enough resources for one year from the filing date[190] - Future capital requirements are dependent on R&D progress, regulatory approvals, IP costs, competitive landscape, and financing availability[191] - May need to issue equity or debt, obtain credit facilities, or enter collaborative arrangements, which could lead to shareholder dilution or loss of product rights[192][193] Convertible Redeemable Preferred Stock In June 2022, Tonix issued Series A and B Preferred Stock for $28.5 million gross proceeds, held in escrow, and fully redeemed in August 2022 for $31.5 million - Issued 2.5 million Series A and 0.5 million Series B Preferred Stock in June 2022 for $28.5 million gross proceeds[195] - All outstanding Preferred Stock was redeemed in August 2022 at 105% of stated value, totaling $31.5 million[196] 2022 Lincoln Park Transaction In August 2022, Tonix entered a purchase agreement with Lincoln Park Capital Fund, LLC to sell up to $50 million of common stock, issuing 625,000 commitment shares valued at $1 million, with $0.5 million net proceeds raised subsequently - Entered a $50 million purchase agreement with Lincoln Park in August 2022[197] - Issued 625,000 common shares as commitment consideration, valued at $1 million[198] - No shares sold under this agreement during 9M 2022; $0.5 million net proceeds from 1.0 million shares sold subsequent to Sep 30, 2022[199] Purchase Agreement with Lincoln Park Under a December 2021 purchase agreement with Lincoln Park, Tonix sold 2.9 million shares of common stock for $8.7 million net proceeds during the nine months ended September 30, 2022, with further sales restricted without shareholder approval due to NASDAQ rules - Sold 2.9 million common shares for $8.7 million net proceeds under a December 2021 purchase agreement with Lincoln Park during 9M 2022[202] - Further sales under this agreement are restricted without shareholder approval due to NASDAQ rules, having reached the 19.99% threshold at less than the required average price[203] 2021 Lincoln Park Transaction Under a May 2021 purchase agreement with Lincoln Park, Tonix sold 1.3 million shares of common stock for $29.5 million gross proceeds during the nine months ended September 30, 2021, with further sales restricted without shareholder approval due to NASDAQ rules - Sold 1.3 million common shares for $29.5 million gross proceeds under a May 2021 purchase agreement with Lincoln Park during 9M 2021[206] - Further sales under this agreement are restricted without shareholder approval due to NASDAQ rules, having reached the 19.99% threshold at less than the required average price[207] February 2021 Financing In February 2021, Tonix completed a registered direct public offering, selling 1.8 million shares of common stock at $38.40 per share, generating $65.0 million in net proceeds - Sold 1.8 million common shares at $38.40 per share in a February 2021 registered direct public offering[208] - Generated $65.0 million in net proceeds after deducting $4.9 million in agent fees and $0.1 million in other expenses[208] January 2021 Financing In January 2021, Tonix completed a registered direct public offering, selling 1.6 million shares of common stock at $25.60 per share, generating $36.9 million in net proceeds - Sold 1.6 million common shares at $25.60 per share in a January 2021 registered direct public offering[209] - Generated $36.9 million in net proceeds after deducting $2.8 million in agent fees and $0.3 million in other expenses[209] At-the-Market Offerings Through ATM sales, Tonix sold 34.2 million common shares for $76.2 million net proceeds during 9M 2022, and 1.3 million shares for $37.2 million net proceeds in 9M 2021, with an additional $1.6 million net proceeds raised post-Q3 2022 - Sold 34.2 million common shares for $76.2 million net proceeds via ATM during 9M 2022[210] - Sold 1.3 million common shares for $37.2 million net proceeds via ATM during 9M 2021[210] - Subsequent to September 30, 2022, sold 3.2 million common shares for $1.6 million net proceeds via ATM[210] Critical Accounting Policies and Estimates Outlines critical accounting policies and estimates requiring significant management judgment, including those for research and development expenses, stock-based compensation, and redeemable convertible preferred stock, which impact financial statement preparation - Research and development costs are expensed as incurred, including manufacturing for testing, licensing fees, and clinical trial costs[228] - Accrued R&D expenses are estimated based on contract terms, trial progress, and services completed, with adjustments made if actual results differ[229] - Stock-based payments are measured at fair value on the grant date and recognized as compensation expense over the vesting period[230] - Conditionally redeemable preferred shares are classified as temporary equity until redemption conditions are removed or lapse[231] Off-Balance Sheet Arrangements Tonix has no off-balance sheet financing arrangements, liabilities, guarantee contracts, or contingent interests in transferred assets, other than contractual obligations incurred in the normal course of business - The company has no off-balance sheet financing arrangements or liabilities, guarantee contracts, or contingent interests in transferred assets[233] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This item is not required for smaller reporting companies under Regulation S-K - Not required under Regulation S-K for 'smaller reporting companies'[235] ITEM 4. CONTROLS AND PROCEDURES Management concluded that Tonix's disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2022, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of September 30, 2022[236] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2022[237] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Tonix Pharmaceuticals Holding Corp. is not currently a party to any material legal proceedings or claims - The company is not a party to any material legal proceedings or claims[239] ITEM 1A. RISK FACTORS There were no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - No material changes from the risk factors set forth in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021[240] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS On October 25, 2022, Tonix issued 1.4 million Series A and 0.1 million Series B Preferred Stock in a private placement for $14.3 million gross proceeds, held in escrow and expected to fund redemption - On October 25, 2022, issued 1.4 million Series A and 0.1 million Series B Preferred Stock in a private placement[242] - Gross proceeds of $14.3 million from the sale are held in escrow, expected to fund the redemption of the Preferred Stock in 2022[242] ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities - None[243] ITEM 4. MINE SAFETY DISCLOSURES There are no mine safety disclosures - None[244] ITEM 5. OTHER INFORMATION Tonix received a NASDAQ notice on October 25, 2022, for non-compliance with the $1 minimum bid price requirement, with 180 calendar days to regain compliance - Received NASDAQ notice on October 25, 2022, for non-compliance with the $1 minimum bid price requirement[245] - Has 180 calendar days (until April 24, 2023) to regain compliance, potentially eligible for an additional 180-day period[245] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including various agreements, corporate documents, certifications, and XBRL interactive data files - Includes forms of Securities Purchase Agreements, Registration Rights Agreements, and Side Letters[246][247][248] - Contains corporate documents such as Articles of Incorporation, Bylaws, and Certificates of Change/Amendment[246][247] - Certifications from the Chief Executive Officer and Chief Financial Officer are included[248] SIGNATURES The report is duly signed on behalf of Tonix Pharmaceuticals Holding Corp. by Seth Lederman, Chief Executive Officer, and Bradley Saenger, Chief Financial Officer, on November 7, 2022 - Report signed by Seth Lederman (CEO) and Bradley Saenger (CFO) on November 7, 2022[252]