Tonix Pharmaceuticals (TNXP) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Tonix Pharmaceuticals Holding Corp ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements for Tonix Pharmaceuticals Holding Corp., including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, business operations, and various agreements Condensed Consolidated Balance Sheets This section presents the company's financial position, including assets, liabilities, and equity, as of June 30, 2021, and December 31, 2020 Condensed Consolidated Balance Sheets | Metric | June 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $165,719 | $77,068 | | Total current assets | $177,269 | $87,989 | | Total assets | $189,165 | $98,183 | | Total current liabilities | $8,081 | $9,819 | | Total liabilities | $8,672 | $10,535 | | Total stockholders' equity | $180,493 | $87,648 | Condensed Consolidated Statements of Operations This section details the company's revenues, expenses, and net loss for the three and six months ended June 30, 2021 and 2020 Condensed Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Research and development | $18,133 | $10,571 | $33,460 | $15,247 | | General and administrative | $5,429 | $3,621 | $10,838 | $6,242 | | Operating Loss | $(23,562) | $(14,192) | $(44,298) | $(21,489) | | Net loss | $(23,553) | $(14,179) | $(44,206) | $(21,452) | | Net loss per common share, basic and diluted | $(0.07) | $(0.23) | $(0.14) | $(0.54) | | Weighted average common shares outstanding | 331,281,242 | 62,391,006 | 310,807,619 | 43,209,988 | Condensed Consolidated Statements of Comprehensive Loss This section reports the company's net loss and other comprehensive income/loss components for the three and six months ended June 30, 2021 and 2020 Condensed Consolidated Statements of Comprehensive Loss | Metric | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net loss | $(23,553) | $(14,179) | $(44,206) | $(21,452) | | Foreign currency translation loss | $(8) | $(9) | $(9) | $(23) | | Comprehensive loss | $(23,561) | $(14,188) | $(44,215) | $(21,475) | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit, for the periods presented Condensed Consolidated Statements of Stockholders' Equity | Metric | Balance, December 31, 2020 (in thousands) | Balance, June 30, 2021 (in thousands) | | :----------------------------- | :---------------------------------------- | :------------------------------------ | | Common stock shares | 206,008,683 | 346,358,451 | | Common stock amount | $206 | $346 | | Additional paid in capital | $355,037 | $491,957 | | Accumulated deficit | $(267,533) | $(311,739) | | Total stockholders' equity | $87,648 | $180,493 | - The number of authorized common stock shares increased from 400,000,000 to 800,000,000 on March 26, 2021[58] Condensed Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2021 and 2020 Condensed Consolidated Statements of Cash Flows | Metric | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash used in operating activities | $(40,166) | $(19,367) | | Net cash used in investing activities | $(1,934) | $(14) | | Net cash provided by financing activities | $130,759 | $63,177 | | Net increase in cash, cash equivalents and restricted cash | $88,651 | $43,773 | | Cash, cash equivalents and restricted cash end of period | $165,959 | $55,122 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies and specific transactions NOTE 1 – BUSINESS This note describes Tonix Pharmaceuticals Holding Corp.'s business, its focus on biopharmaceutical development, and going concern considerations - Tonix Pharmaceuticals Holding Corp. is a clinical-stage biopharmaceutical company focused on discovering, licensing, acquiring, and developing small molecules and biologics to treat and prevent human disease[21] - The Company has suffered recurring losses from operations and negative cash flows, with an accumulated deficit of approximately $311.7 million at June 30, 2021. Cash resources are expected to meet operating and capital expenditure requirements through June 30, 2022, but not beyond, raising substantial doubt about its ability to continue as a going concern[23][24][25] NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles and methods used in preparing the interim financial statements, including R&D costs and stock-based compensation - Interim financial statements are prepared in accordance with GAAP for interim financial information and do not include all footnotes required for complete financial statements[26] - The Company's primary efforts are devoted to research and development, and it expects net losses and negative cash flows to continue. There is no assurance that product candidates will be approved or commercially viable[29] - Cash equivalents, consisting of money market funds, increased from $40.4 million at December 31, 2020, to $100.4 million at June 30, 2021. Restricted cash remained at $240,000, collateralizing office lease letters of credit[34] - Research and development costs, including manufacturing products for testing and licensing fees, are expensed as incurred. The value of acquired patents and intellectual property is also expensed if there is no alternative future use[41] - Stock-based payments are measured at fair value on the grant date and recognized as compensation expense over the service period[44] Potentially Dilutive Securities Excluded from EPS Calculation | Security Type | 2021 | 2020 | | :-------------------------- | :----- | :--------- | | Warrants to purchase common stock | 644,906 | 5,184,210 | | Options to purchase common stock | 24,972,546 | 10,209,286 | | Totals | 25,617,452 | 15,393,496 | NOTE 3 – PROPERTY AND EQUIPMENT, NET This note details the company's property and equipment, including land and construction in progress for new facilities, as of the reporting dates Property and Equipment, Net | Category | June 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Land | $5,713 | $5,713 | | Construction in progress | $4,700 | $2,800 | | Office furniture and equipment | $419 | $385 | | Leasehold improvements | $23 | $23 | | Less: Accumulated depreciation and amortization | $(363) | $(350) | | Total | $10,492 | $8,571 | - The Company purchased a 4.0 million sq ft facility in Massachusetts for $4.0 million in September 2020 for an Advanced Development Center, with $1.2 million allocated to land and $2.8 million to construction in progress. It was not in service as of June 30, 2021[54] - An approximately 44-acre site in Hamilton, Montana, was purchased for $4.4 million in December 2020 for a vaccine development and manufacturing facility, also not yet in service[55] NOTE 4 – FAIR VALUE MEASUREMENTS This note describes the company's fair value measurements for financial instruments, primarily cash equivalents, using Level 1 inputs - The Company used Level 1 quoted prices in active markets to value cash equivalents of $100.4 million at June 30, 2021, and $40.4 million at December 31, 2020. No Level 2 or Level 3 assets or liabilities were held[57] NOTE 5 – STOCKHOLDERS' EQUITY This note provides information on changes in stockholders' equity, including the increase in authorized common stock shares - On March 26, 2021, the Company increased its authorized common stock from 400,000,000 to 800,000,000 shares[58] NOTE 6 – ASSET PURCHASE AGREEMENT WITH KATANA This note details the acquisition of assets related to insulin resistance and obesity from Katana Pharmaceuticals, expensed as research and development costs - On December 22, 2020, Tonix acquired assets related to insulin resistance and obesity from Katana Pharmaceuticals, Inc. for $0.7 million, which was expensed as R&D costs due to no alternative future use prior to FDA approval[60] - The acquisition included an exclusive license from the University of Geneva for related patents, with obligations for diligent development and an annual maintenance fee. No milestone payments have been accrued or paid as of June 30, 2021[61][62] NOTE 7 – ASSET PURCHASE AGREEMENT WITH TRIGEMINA This note describes the acquisition of Trigemina assets for migraine and pain treatment technologies, including cash and stock consideration - On June 11, 2020, Tonix acquired Trigemina assets for migraine and pain treatment technologies, paying $824,759 cash and issuing 2,000,000 common shares (valued at $0.68/share) to Trigemina, plus $250,241 to Stanford. Total costs of $2.4 million were expensed as R&D[63] - The agreement included an exclusive license from Stanford University, requiring commercially reasonable efforts for development and sales, and an annual maintenance fee. No milestone payments have been accrued or paid as of June 30, 2021[64][65] NOTE 8 – ASSET PURCHASE AGREEMENT WITH TRIMARAN This note outlines the acquisition of TRImaran Pharma's assets for pyran-based compounds, involving cash, assumed liabilities, and contingent milestone payments - On August 19, 2019, Tonix acquired TRImaran Pharma's assets related to pyran-based compounds for $100,000 cash and assumed $68,500 in liabilities. Contingent milestone payments of approximately $3.4 million are due in restricted stock or cash upon achievement of specified milestones[66] - The acquisition included an exclusive license from Wayne State University (WSU), requiring commercially reasonable efforts for regulatory approval and marketing, and an annual maintenance fee. Tonix also agreed to pay WSU single-digit royalties on net sales and additional sublicense fees[69][70] - As of June 30, 2021, no milestone payments have been accrued or paid in relation to this agreement[71] NOTE 9 – LICENSE AGREEMENT WITH OYAGEN This note details the exclusive license agreement with OyaGen for an antiviral inhibitor of SARS-CoV-2, involving a license fee and common stock - On April 14, 2021, Tonix licensed exclusive rights to an antiviral inhibitor of SARS-CoV-2, sangivamycin (TNX-3500), from OyaGen, Inc. Consideration included a low-seven digit license fee and 2,752,294 shares of common stock (valued at $3.0 million), expensed as R&D[72][73] - The agreement also provides for single-digit royalties and contingent milestone payments, none of which have been accrued or paid as of June 30, 2021[73][74] NOTE 10 – LICENSE AGREEMENT WITH INSERM This note describes the license agreement with Inserm for oxytocin-based therapeutics technology, including annual fees and potential milestone payments - On February 11, 2021, Tonix licensed oxytocin-based therapeutics technology for Prader-Willi syndrome and non-organic failure to thrive disease from Inserm. The agreement includes annual fees, milestone payments totaling approximately $0.4 million, and royalties on net sales[74] - As of June 30, 2021, no milestone payments have been accrued or paid under this agreement[75] NOTE 11 – LICENSE AGREEMENTS WITH COLUMBIA UNIVERSITY This note covers two exclusive license agreements with Columbia University for TFF2 Technology and double-mutant cocaine esterase technology, including fees and contingent milestones - On September 16, 2019, Tonix entered an exclusive license agreement with Columbia University for TFF2 Technology, involving a five-digit license fee expensed as R&D. The agreement includes contingent milestone payments totaling $4.1 million and single-digit royalties on net sales[75][76][77][78] - On May 20, 2019, Tonix entered another exclusive license agreement with Columbia University for double-mutant cocaine esterase technology, involving a six-digit license fee expensed as R&D. The agreement includes contingent milestone payments totaling $3 million and single-digit royalties on net sales[82][83][84][85] - As of June 30, 2021, no milestone payments have been accrued or paid for either Columbia University license agreement[79][86] NOTE 12 – SALE OF COMMON STOCK This note details various common stock sales, including agreements with Lincoln Park Capital, public offerings, and At-the-Market offerings, and their proceeds - In May 2021, Tonix entered a purchase agreement with Lincoln Park Capital Fund, LLC to sell up to $80 million of common stock. 1,280,000 commitment shares were issued, valued at $1.6 million. During the six months ended June 30, 2021, approximately 2.8 million shares were sold for gross proceeds of $3.3 million[87][88][89] - In February 2021, the Company completed a registered direct public offering of 58,333,334 common shares at $1.20 per share, generating net proceeds of approximately $65.0 million after deducting fees and expenses[90][91] - In January 2021, the Company completed a registered direct public offering of 50,000,000 common shares at $0.80 per share, generating net proceeds of approximately $36.9 million after deducting fees and expenses[92] - Through At-the-Market (ATM) offerings, the Company sold approximately 25.2 million common shares for gross proceeds of $26.3 million during the six months ended June 30, 2021. Subsequent to June 30, 2021, an additional 11.0 million shares were sold for $8.4 million[93] - In February 2020, the Company sold Class A and Class B Units, including common stock, Series B Convertible Preferred Stock, and warrants, generating net proceeds of approximately $6.5 million. All Series B Preferred Stock was converted to common stock in Q1 2020, and 10.8 million warrants were exercised for $6.2 million[97][98][99][100] - A repricing of November 2019 warrants in February 2020 triggered a one-time non-cash 'deemed dividend' of $0.5 million, charged to additional paid-in capital. 2.3 million warrants were exercised for $1.3 million[102] NOTE 13 – STOCK-BASED COMPENSATION This note describes the company's stock incentive plan, stock option activity, valuation assumptions, and stock-based compensation expense - The Company operates under the Amended and Restated 2020 Stock Incentive Plan, allowing for various stock-based awards. As of June 30, 2021, 16,894,483 shares were available for future grants[112] Stock Option Activity (Six Months Ended June 30, 2021) | Metric | Shares | Weighted Average Exercise Price | | :-------------------------- | :------- | :------------------------------ | | Outstanding at December 31, 2020 | 10,209,286 | $2.93 | | Grants | 14,763,503 | $1.31 | | Forfeitures or expirations | (243) | $2,937.37 | | Outstanding at June 30, 2021 | 24,972,546 | $1.94 | | Exercisable at June 30, 2021 | 4,151,930 | $5.51 | Stock Option Valuation Assumptions | Assumption | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------- | :----------------------------- | :----------------------------- | | Risk-free interest rate | 0.80% to 1.63% | 0.36% to 1.25% | | Expected term of option | 5.5 to 10 years | 5.5 to 6 years | | Expected stock price volatility | 124.40% - 137.74% | 124.11% -130.00% | | Expected dividend yield | 0.0 | 0.0 | Stock-Based Compensation Expense | Period | Total (in millions) | G&A (in millions) | R&D (in millions) | | :-------------------------- | :------------------ | :---------------- | :---------------- | | Q2 2021 | $2.1 | $1.5 | $0.6 | | Q2 2020 | $0.7 | $0.5 | $0.2 | | H1 2021 | $3.3 | $2.3 | $1.0 | | H1 2020 | $1.1 | $0.8 | $0.3 | - As of June 30, 2021, total unrecognized compensation cost related to non-vested awards was approximately $18.2 million, expected to be recognized over a weighted average period of 2.33 years[120] - The 2020 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase up to 300,000 shares. For the six months ended June 30, 2021, $47,000 was expensed for the ESPP[122][123] NOTE 14 – STOCK WARRANTS This note provides details on outstanding stock warrants, including exercise prices, expiration dates, and exercise activity Outstanding Warrants to Purchase Common Stock (June 30, 2021) | Exercise Price | Number Outstanding | Expiration Date | | :------------- | :----------------- | :-------------- | | $0.50 | 24,920 | November 2024 | | $0.57 | 123,500 | February 2025 | | $35.00 | 490,571 | December 2023 | | $630.00 | 5,441 | October 2021 | | $687.50 | 474 | October 2021 | | Total | 644,906 | | - During the six months ended June 30, 2021, 3,400 warrants were exercised for approximately $2,000. In the same period of 2020, 13.1 million warrants were exercised for approximately $7.5 million[127][128] NOTE 15 – LEASES This note outlines the company's operating lease assets and liabilities, including future minimum lease payments and lease expense - As of June 30, 2021, the Company had right-of-use assets of $1.0 million and a total lease liability for operating leases of $1.1 million ($0.6 million long-term, $0.5 million current)[129] Future Minimum Lease Payments for Operating Leases (in thousands) | Year Ending December 31, | Amount | | :----------------------- | :----- | | Remainder of 2021 | $285 | | 2022 | $342 | | 2023 | $158 | | 2024 | $145 | | 2025 | $149 | | Included interest | $(24) | | Total | $1,055 | Operating Lease Expense and Metrics | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Operating lease expense (in millions) | $0.3 | $0.2 | | Cash paid for operating leases (in thousands) | $314 | $233 | | Weighted Average Remaining Lease Term | 3.13 years | 1.43 years | | Weighted Average Discount Rate | 1.36% | 2.44% | NOTE 16 – COMMITMENTS This note details the company's outstanding contractual commitments with contract research organizations and contingent purchase agreements for properties - The Company has outstanding commitments of approximately $39.1 million at June 30, 2021, for future work with various contract research organizations[137] - Contingent non-binding Purchase and Sales Agreements were entered for properties in Maryland ($17.5 million, expected Q4 2021) and Massachusetts ($2.9 million, expected Q3 2021) for process development activities[138][139] - Contributions to the 401(k) Plan were $111,000 for the six months ended June 30, 2021, compared to $79,000 for the same period in 2020[140] NOTE 17 – SUBSEQUENT EVENTS This note reports significant events occurring after the reporting period, including additional common stock sales and property purchase agreements - Subsequent to June 30, 2021, the Company sold an additional 11.0 million shares of common stock under the ATM Sales Agreement, generating gross proceeds of approximately $8.4 million[141] - The $17.5 million contingent non-binding Purchase and Sales Agreement for a property in Maryland was also noted as a subsequent event[141] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and operational results, highlighting business overview, R&D progress, financial performance, liquidity, and critical accounting policies. It emphasizes the Company's clinical-stage focus, ongoing losses, and need for future financing Business Overview This section provides an overview of Tonix's clinical-stage biopharmaceutical focus, lead product candidates, and facility development plans - Tonix is a clinical-stage biopharmaceutical company focused on CNS and immunology product candidates, including small molecules and biologics[145] - Lead CNS candidate TNX-102 SL is in mid-Phase 3 for fibromyalgia (FM), with positive results from the RELIEF study but the RALLY trial unlikely to meet its primary endpoint. It's also in development for PTSD, AAD, AUD, and Long COVID Syndrome[146] - Immunology portfolio includes lead vaccine candidate TNX-1800 (horsepox viral vector) for COVID-19, showing positive animal efficacy data, with a Phase 1 study expected in H1 2022. Other candidates include TNX-801 for smallpox/monkeypox, TNX-2100 skin test for SARS-CoV-2 immunity, TNX-3500 antiviral for COVID-19, and TNX-1500 for organ transplant rejection/autoimmune conditions[151][152][153][154] - The Company is developing three facilities: an Advanced Development Center (ADC) in Massachusetts for clinical-scale vaccine manufacturing (operational H1 2022), a Commercial Manufacturing Center (CMC) in Montana for commercial-scale vaccine manufacturing (construction 2022), and an infectious disease R&D facility (RDF) in Maryland (acquisition expected Q4 2021)[156] Results of Operations This section analyzes the company's financial performance, focusing on changes in research and development, general and administrative expenses, and net loss Research and Development Expenses (YoY Change) | Period | 2021 (in millions) | 2020 (in millions) | Change (in millions) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :------------------- | :--------- | | Three Months Ended June 30, | $18.1 | $10.6 | $7.5 | 71% | | Six Months Ended June 30, | $33.5 | $15.3 | $18.2 | 119% | General and Administrative Expenses (YoY Change) | Period | 2021 (in millions) | 2020 (in millions) | Change (in millions) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :------------------- | :--------- | | Three Months Ended June 30, | $5.4 | $3.6 | $1.8 | 50% | | Six Months Ended June 30, | $10.8 | $6.2 | $4.6 | 74% | Net Loss (YoY Change) | Period | 2021 (in millions) | 2020 (in millions) | Change (in millions) | | :-------------------------- | :----------------- | :----------------- | :------------------- | | Three Months Ended June 30, | $(23.6) | $(14.2) | $(9.4) | | Six Months Ended June 30, | $(44.2) | $(21.5) | $(22.7) | License Agreements This section details recent and ongoing exclusive license agreements for various therapeutic technologies, including associated fees and milestone payments - In April 2021, Tonix licensed an antiviral inhibitor of SARS-CoV-2 (sangivamycin) from OyaGen, Inc., involving a low-seven digit license fee and 2,752,294 common shares (valued at $3.0 million), expensed as R&D[166][167] - In February 2021, Tonix licensed oxytocin-based therapeutics technology from Inserm for Prader-Willi syndrome, with annual fees and potential milestone payments of approximately $0.4 million[168] - Tonix has two exclusive license agreements with Columbia University: one from September 2019 for TFF2 Technology (with $4.1 million in contingent milestones) and another from May 2019 for double-mutant cocaine esterase technology (with $3 million in contingent milestones). Both involve single-digit royalties and license fees expensed as R&D[169][170][173][174][175][177] Asset Purchase Agreements This section describes the company's asset acquisitions related to specific therapeutic areas, including consideration paid and associated R&D expenses - In December 2020, Tonix acquired Katana assets related to insulin resistance for $0.7 million, expensed as R&D. This included an exclusive license from the University of Geneva[178][179] - In June 2020, Tonix acquired Trigemina assets for migraine and pain treatment for $824,759 cash and 2,000,000 common shares, plus $250,241 to Stanford. Total costs of $2.4 million were expensed as R&D. This included an exclusive license from Stanford University[180][181] - In August 2019, Tonix acquired TRImaran assets for pyran-based compounds for $100,000 cash and assumed $68,500 in liabilities, expensed as R&D. Contingent milestone payments of approximately $3.4 million are due. This included an exclusive license from Wayne State University (WSU), with single-digit royalties and additional sublicense fees[182][183][185] Liquidity and Capital Resources This section discusses the company's working capital, cash flows, future capital requirements, and recent financing activities to support operations Working Capital and Cash Flow Summary | Metric | June 30, 2021 (in millions) | June 30, 2020 (in millions) | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Working capital | $169.2 | N/A | | Cash and cash equivalents | $165.7 | N/A | | Net cash used in operating activities (H1) | $(40.2) | $(19.4) | | Net cash used in investing activities (H1) | $(1.9) | $(0.014) | | Net proceeds from financing activities (H1) | $130.8 | $63.2 | - The Company expects to incur losses and increasing R&D expenses, and its current resources are projected to meet operating and capital expenditure requirements only through June 30, 2022, raising substantial doubt about its going concern ability[187][188][189] - Future capital requirements depend on R&D progress, regulatory approvals, intellectual property costs, and market development. Additional financing through equity, debt, or collaborative arrangements will be necessary[190][191][192] - Recent financing activities include: $3.3 million gross proceeds from Lincoln Park in H1 2021, $65.0 million net from February 2021 offering, $36.9 million net from January 2021 offering, and $26.3 million gross from ATM offerings in H1 2021 (plus $8.4 million post-Q2)[195][196][197][198] Stock Compensation This section details the company's stock incentive plan, valuation assumptions for stock options, and the recognition of stock-based compensation expense - The Amended and Restated 2020 Stock Incentive Plan allows for various stock-based awards, with an 'evergreen provision' for annual increases in available shares. As of June 30, 2021, 16,894,483 shares were available for future grants[214] Stock Option Valuation Assumptions (MD&A) | Assumption | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------- | :----------------------------- | :----------------------------- | | Risk-free interest rate | 0.80% to 1.63% | 0.36% to 1.25% | | Expected term of option | 5.5 to 10 years | 5.5 to 6 years | | Expected stock price volatility | 124.40% - 137.74% | 124.11% -130.00% | | Expected dividend yield | 0.0 | 0.0 | Stock-Based Compensation Expense (MD&A) | Period | Total (in millions) | G&A (in millions) | R&D (in millions) | | :-------------------------- | :------------------ | :---------------- | :---------------- | | Q2 2021 | $2.1 | $1.5 | $0.6 | | Q2 2020 | $0.7 | $0.5 | $0.2 | | H1 2021 | $3.3 | $2.3 | $1.0 | | H1 2020 | $1.1 | $0.8 | $0.3 | - The 2020 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase shares at a discount. For the six months ended June 30, 2021, $47,000 was expensed for the ESPP[222][223] Commitments This section outlines the company's contractual obligations, including those with contract research organizations and contingent property purchase agreements - The Company has outstanding contractual commitments of approximately $39.1 million at June 30, 2021, with various contract research organizations[225] - Contingent non-binding Purchase and Sales Agreements were entered for properties in Maryland ($17.5 million, expected Q4 2021) and Massachusetts ($2.9 million, expected Q3 2021) for process development activities[226][227] Future Minimum Lease Payments for Operating Leases (in thousands) | Year Ending December 31, | Amount | | :----------------------- | :----- | | Remainder of 2021 | $285 | | 2022 | $342 | | 2023 | $158 | | 2024 | $145 | | 2025 | $149 | | Included interest | $(24) | | Total | $1,055 | Critical Accounting Policies and Estimates This section highlights key accounting policies requiring significant judgment and estimates, such as research and development costs and stock-based compensation - Key accounting policies involve estimates and judgments, particularly for research and development costs, which are expensed as incurred, including acquired intellectual property with no alternative future use[230][232] Direct Research and Development Expenses by Program (Six Months Ended June 30, in thousands) | Program | 2021 | 2020 | Change | | :-------------------------- | :----- | :----- | :----- | | TNX - 102 SL | $7,454 | $7,967 | $(513) | | TNX - 1800 | $3,476 | $807 | $2,669 | | TNX - 1300 | $4,740 | $402 | $4,338 | | TNX - 1500 | $2,002 | $355 | $1,647 | | TNX - 1900 | $700 | $2,452 | $(1,752) | | TNX - 3500 | $4,991 | $137 | $4,854 | | Other programs | $4,926 | $909 | $4,017 | | Internal staffing, overhead and other | $5,171 | $2,218 | $2,953 | | Total R&D | $33,460 | $15,247 | $18,213 | - Stock-based compensation is measured at fair value on the grant date and expensed over the vesting period. The accounting for the sale of Class B Units in November 2019 and February 2020 involved calculating the relative fair value of instruments and assessing beneficial conversion features, which resulted in 'deemed dividends' impacting EPS[236][237][239] Off-Balance Sheet Arrangements This section confirms the absence of any material off-balance sheet financing arrangements or liabilities beyond normal business operations - The Company does not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, or contingent interests in transferred assets, other than contractual obligations incurred in the normal course of business[240] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk This section states that the Company is not required to provide quantitative and qualitative disclosures about market risk under Regulation S-K for 'smaller reporting companies' - The Company is a 'smaller reporting company' and is not required to provide quantitative and qualitative disclosures about market risk[242] ITEM 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes in internal control over financial reporting during the quarter - As of June 30, 2021, the Company's disclosure controls and procedures were deemed effective at a reasonable assurance level[243] - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2021[244] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other required disclosures ITEM 1. Legal Proceedings The Company is not currently a party to any material legal proceedings or claims - The Company is not currently involved in any material legal proceedings or claims[246] ITEM 1A. Risk Factors There were no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for 2020 and Quarterly Report on Form 10-Q for Q1 2021 - No material changes were reported from the risk factors set forth in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2021[247] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the issuance of unregistered common stock to Lincoln Park Capital Fund LLC and OyaGen, Inc. (and an affiliated entity) in May and April 2021, respectively, as consideration for commitments and license agreements - On May 14, 2021, 1,280,000 shares of common stock were issued to Lincoln Park Capital Fund LLC as consideration for its commitment to purchase shares under the 2021 Purchase Agreement[249] - On April 14, 2021, 2,752,294 shares of common stock (2,614,679 to OyaGen, Inc. and 137,615 to Procela Partners Ltd.) were issued as partial consideration for the OyaGen License Agreement[249] ITEM 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities - No defaults upon senior securities were reported[250] ITEM 4. Mine Safety Disclosures The Company reported no mine safety disclosures - No mine safety disclosures were reported[251] ITEM 5. Other Information The Company reported no other information - No other information was reported[252] ITEM 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including agreements, certifications, and XBRL-related documents - Exhibits include a Purchase and Sale Agreement (July 26, 2021), CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act), and XBRL Instance, Schema, Calculation, Labels, and Presentation Linkbase Documents[253][254] SIGNATURES This section contains the official signatures of the company's executive officers, certifying the report's accuracy - The report was signed by Seth Lederman, Chief Executive Officer, and Bradley Saenger, Chief Financial Officer, on August 9, 2021[258]