0001615774-17-002349.txt : 20170512 0001615774-17-002349.hdr.sgml : 20170512 20170512163125 ACCESSION NUMBER: 0001615774-17-002349 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 54 CONFORMED PERIOD OF REPORT: 20170331 FILED AS OF DATE: 20170512 DATE AS OF CHANGE: 20170512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Tonix Pharmaceuticals Holding Corp. CENTRAL INDEX KEY: 0001430306 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 261434750 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36019 FILM NUMBER: 17839116 BUSINESS ADDRESS: STREET 1: 509 MADISON AVE. - SUITE 306 CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 1-800-849-7894 MAIL ADDRESS: STREET 1: 509 MADISON AVE. - SUITE 306 CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: TAMANDARE EXPLORATIONS INC. DATE OF NAME CHANGE: 20080320 10-Q 1 s106083_10q.htm 10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the Quarterly Period Ended March 31, 2017

 

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: 001-36019

 

TONIX PHARMACEUTICALS HOLDING CORP.

(Exact name of registrant as specified in its charter)

 

Nevada   26-1434750
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)

 

509 Madison Avenue, Suite 306

New York, New York 10022

(Address of principal executive offices) (zip code)

 

(212) 980-9155

(Registrant’s telephone number, including area code)

 

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 x   No ¨

 

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

 

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

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ¨

 

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

 

As of May 10, 2017, there were 7,486,026 shares of registrant’s common stock outstanding.

 

 

 

 

TONIX PHARMACEUTICALS HOLDING CORP.

 

INDEX

  

PART I. FINANCIAL INFORMATION  
       
  ITEM 1. Financial Statements  
       
    Condensed consolidated balance sheets as of March 31, 2017 (unaudited) and December 31, 2016 3
       
    Condensed consolidated statements of operations for the three months ended March 31, 2017 and 2016 (unaudited) 4
       
    Condensed consolidated statements of comprehensive loss for the three months ended March 31, 2017 and 2016 (unaudited) 5
       
    Condensed consolidated statement of stockholders’ equity for the three months ended March 31, 2017 (unaudited) 6
       
    Condensed consolidated statements of cash flows for the three months ended March 31, 2017 and 2016 (unaudited) 7
       
    Notes to condensed consolidated financial statements (unaudited) 8-16
       
  ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17-25
       
  ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 25
       
  ITEM 4. Controls and Procedures 25
       
PART II. OTHER INFORMATION  
       
  ITEM 1. Legal Proceedings 26
  ITEM 1A. Risk Factors 26
  ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
  ITEM 3. Defaults Upon Senior Securities 26
  ITEM 4. Mine Safety Disclosures 26
  ITEM 5. Other Information 26
  ITEM 6. Exhibits 26
       
  SIGNATURES 27

 

 2 

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Par Value and Share Amounts)

 

   March 31,   December 31, 
   2017   2016 
   (unaudited)     
ASSETS          
Current assets:          
Cash and cash equivalents  $19,943   $18,941 
Marketable securities-available for sale, at fair value   2,480    7,180 
Prepaid expenses and other   1,009    1,019 
Total current assets   23,432    27,140 
           
Property and equipment, net   132    150 
           
Restricted cash   89    89 
Intangible asset   120    120 
Security deposits   11    11 
           
Total assets  $23,784   $27,510 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
Accounts payable  $841   $872 
Accrued expenses   939    1,244 
Total current liabilities   1,780    2,116 
           
Deferred rent payable   29    33 
           
Total liabilities   1,809    2,149 
           
Commitments (See Note 8)          
           
Stockholders' equity:          
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued or outstanding   -    - 
Common stock, $0.001 par value; 15,000,000 shares authorized; 4,160,814 and 3,918,147 shares issued and outstanding  as of March 31, 2017 and December 31, 2016, respectively, and 2,496 shares to be issued as of December 31, 2016   4    4 
Additional paid in capital   168,283    166,604 
Accumulated deficit   (146,304)   (141,240)
Accumulated other comprehensive loss   (8)   (7)
           
Total stockholders' equity   21,975    25,361 
           
Total liabilities and stockholders' equity  $23,784   $27,510 

 

See the accompanying notes to the condensed consolidated financial statements

 

 3 

 

 

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Share and Per Share Amounts)

(unaudited)

 

   Three months ended March 31, 
   2017   2016 
COSTS AND EXPENSES:          
Research and development  $2,994   $10,671 
General and administrative   2,097    3,343 
    5,091    14,014 
           
Operating loss   (5,091)   (14,014)
           
Interest income, net   27    38 
           
NET LOSS  $(5,064)  $(13,976)
           
Net loss per common share, basic and diluted  $(1.27)  $(7.41)
           
Weighted average common shares outstanding, basic and diluted   3,985,529    1,886,043 

 

See the accompanying notes to the condensed consolidated financial statements

  

 4 

 

 

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In Thousands)

(unaudited)

 

   Three months ended March 31, 
   2017   2016 
Net loss  $(5,064)  $(13,976)
           
Other comprehensive (loss) gain:          
Foreign currency translation (loss) gain   (1)   18 
Unrealized gain on available for sale securities   -    25 
Total other comprehensive (loss) gain   (1)   43 
           
Comprehensive loss  $(5,065)  $(13,933)

 

See the accompanying notes to the condensed consolidated financial statements

 

 5 

 

 

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

THREE MONTHS ENDED MARCH 31, 2017

(In Thousands, Except Share and Per Share Amounts)

(unaudited)

 

                       Accumulated         
                   Additional   Other         
   Preferred Stock   Common Stock   Paid in   Comprehensive   Accumulated     
   Shares   Amount   Shares   Amount   Capital   Income (Loss)   Deficit   Total 
Balance, December 31, 2016   -   $-    3,918,147   $4   $166,604   $(7)  $(141,240)  $25,361 
Employee stock purchase plan   -    -    2,496    -    10    -    -    10 
Issuance of common stock related to restricted stock units   -    -    5,625    -    -    -    -    - 
Stock-based compensation                       567    -    -    567 
Issuance of common stock in February ($5.09 per share) and March ($4.50 per share), net of transaction expenses of $34   -    -    234,546    -    1,102    -    -    1,102 
Unrealized loss on foreign currency translation   -    -    -    -    -    (1)   -    (1)
Net loss   -    -    -    -    -    -    (5,064)   (5,064)
Balance, March 31, 2017   -   $-    4,160,814   $4   $168,283   $(8)  $(146,304)  $21,975 

 

See the accompanying notes to the condensed consolidated financial statements

 

 6 

 

 

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(unaudited)

  

   Three months ended March 31, 
   2017   2016 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(5,064)  $(13,976)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   24    57 
Stock-based compensation   567    896 
Changes in operating assets and liabilities:          
Prepaid expenses   10    178 
Accounts payable   (31)   (986)
Accrued expenses   (307)   (1,645)
Deferred rent payable   7    (9)
Net cash used in operating activities   (4,794)   (15,485)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of furniture and fixtures   -    (65)
Maturities of marketable securities   4,694    4,783 
Net cash provided by investing activities   4,694    4,718 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds, net of expenses of $34 from sale of common stock   1,102    - 
Net cash provided by financing activities   1,102    - 
           
Effect of currency rate change on cash   -    19 
           
Net increase (decrease) in cash   1,002    (10,748)
Cash, beginning of the period   18,941    19,175 
           
Cash, end of period  $19,943   $8,427 
           
Supplemental disclosures of cash flow information:          
           
Non-cash financing activities:          
Issuance of common stock under employee benefit plan  $10   $113 

  

See the accompanying notes to the condensed consolidated financial statements

 

 7 

 

 

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2017 AND 2016 (UNAUDITED)

 

NOTE 1 – BUSINESS

 

Tonix Pharmaceuticals Holding Corp., through its wholly owned subsidiary Tonix Pharmaceuticals, Inc. (“Tonix Sub”), is a late clinical-stage pharmaceutical company dedicated to the development of innovative pharmaceutical products to address public health challenges. All drug product candidates are still in development.

 

The consolidated financial statements include the accounts of Tonix Pharmaceuticals Holding Corp. and its wholly owned subsidiaries, Tonix Sub, Krele LLC, Tonix Pharmaceuticals (Canada), Inc., Tonix Medicines, Inc., Tonix Pharma Holdings Limited and Tonix Pharma Limited (collectively hereafter referred to as the “Company” or “Tonix”).

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

Interim financial statements

 

The unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

 

The condensed consolidated balance sheet as of December 31, 2016 contained herein has been derived from audited financial statements.

 

Operating results for the three months ended March 31, 2017 are not necessarily indicative of results that may be expected for the year ending December 31, 2017. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on April 13, 2017.

 

Recent accounting pronouncements

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted.  Lessees (for capital and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. The Company is currently evaluating the impact of adopting this guidance.

  

Risks and uncertainties

 

The Company's primary efforts are devoted to conducting research and development of innovative pharmaceutical products to address public health challenges. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. Further, the Company does not have any commercial products available for sale and has not generated revenues and there is no assurance that if its products are approved for sale, that the Company will be able to generate cash flow to fund operations. In addition, there can be no assurance that the Company's research and development will be successfully completed or that any product will be approved or commercially viable.

 

At March 31, 2017, the Company had working capital of approximately $21.7 million, after raising approximately $1.1 million, net of expenses, through the at-the-market (“ATM”) offering during the quarter ended March 31, 2017.

 

At March 31, 2017, the Company had cash and marketable securities of approximately $22.4 million, which together with approximately $16.3 million of net proceeds from the sales of common stock subsequent to March 31, 2017 (see Note 9), constitutes sufficient funds for the Company to meet its research and development and other funding requirements for at least the next 12 months.

 

 8 

 

 

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2017 AND 2016 (UNAUDITED)

 

 Use of estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the useful life of fixed assets, assumptions used in the fair value of stock-based compensation and other equity instruments, and the percent of completion of research and development contracts.

 

Cash equivalents

 

The Company considers cash equivalents to be those investments which are highly liquid, readily convertible to cash and have an original maturity of three months or less when purchased. At March 31, 2017 and December 31, 2016, cash equivalents, which consisted of money market funds, amounted to $14.7 million and $10.0 million, respectively.

 

Marketable securities

 

Marketable securities consist primarily of certificates of deposit, U.S. agency, and U.S. treasury bonds with maturities greater than three months and up to two years at the time of purchase. These securities, which are classified as available for sale, are carried at fair value, with unrealized gains and losses, net of any tax effect, reported in stockholders’ equity as accumulated other comprehensive (loss) income. As investments are available for current operations, they are classified as current irrespective of their maturities. Amortization of premiums is included in interest income. For the quarters ended March 31, 2017 and 2016, the amortization of bond premiums totaled $6,000 and $24,000, respectively. As of March 31, 2017, amortized cost basis of the securities approximated their fair value. The values of these securities may fluctuate as a result of changes in market interest rates and credit risk. Marketable securities with a principal balance aggregating $4.7 million matured during the quarter ended March 31, 2017.

 

The schedule of maturities at March 31, 2017 and December 31, 2016 is as follows (in thousands):

 

   1 Year or Less 
   March 31, 2017   December 31, 2016 
U.S. treasury bonds  $1,500   $2,752 
U.S. agency bonds   -    1,254 
Certificates of deposit   980    3,174 
Total  $2,480   $7,180 

 

Property and equipment

 

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset's estimated useful life, which is three years for computer assets, five years for furniture and all other equipment and term of lease for leasehold improvements. Expenditures for maintenance and repairs are expensed as incurred. Depreciation and amortization expense for the quarters ended March 31, 2017 and 2016 was $18,000 and $33,000, respectively. All property and equipment is located in the United States.

 

Intangible asset with indefinite lives

 

Prior to January 1, 2017, the Company purchased certain internet domain rights, which were determined to have an indefinite life. Identifiable intangibles with indefinite lives are not amortized but are reviewed for impairment annually or whenever events or changes in circumstances indicate that its carrying amount may be less than fair value. As of March 31, 2017, the Company believed that no impairment existed.

 

 9 

 

 

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2017 AND 2016 (UNAUDITED)

  

Research and development costs

 

The Company outsources certain of its research and development efforts and expenses these costs as incurred, including the cost of manufacturing products for testing, as well as licensing fees and costs associated with planning and conducting clinical trials. The value ascribed to patents and other intellectual property acquired has been expensed as research and development costs, as such property related to particular research and development projects and had no alternative future uses.

 

The Company estimates its expenses resulting from its obligations under contracts with vendors, clinical research organizations and consultants and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. The Company accounts for trial expenses according to the timing of various aspects of the trial. The Company determines accrual estimates taking into account discussion with applicable personnel and outside service providers as to the progress or state of consummation of trials, or the services completed.

 

During the course of a clinical trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates. The Company makes estimates of its accrued expenses as of each balance sheet date based on the facts and circumstances known to it at that time. The Company’s clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors.

 

Stock-based compensation

 

All stock-based payments to employees and to nonemployee directors for their services as directors, including grants of restricted stock units (“RSUs”), and stock options, are measured at fair value on the grant date and recognized in the condensed consolidated statements of operations as compensation or other expense over the relevant service period.

 

Stock-based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable, the measurement date is the date the award is issued.

 

Foreign currency translation

 

Operations of the Canadian subsidiary are conducted in local currency which represents its functional currency. The U.S. dollar is the functional currency of the other foreign subsidiaries. Balance sheet accounts of the Canadian subsidiary were translated from foreign currency into U.S. dollars at the exchange rate in effect at the balance sheet date and income statement accounts were translated at the average rate of exchange prevailing during the period. Translation adjustments resulting from this process were included in accumulated other comprehensive income (loss) on the condensed consolidated balance sheets.

 

Comprehensive income (loss)

 

Comprehensive income (loss) is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Other comprehensive income (loss) represents foreign currency translation adjustments and unrealized gains or losses from available for sale securities.

 

The following table summarizes the changes in accumulated other comprehensive income by component:

 

   Foreign Currency Translation
Adjustment
   Unrealized Gains (Losses)
on available for sale
securities
   Total 
Balance at December 31, 2016   (7)   -    (7)
Other Comprehensive Loss   (1)   -    (1)
Balance at March 31, 2017   (8)   -    (8)

 

 10 

 

 

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2017 AND 2016 (UNAUDITED)

  

Income taxes

 

Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized.

 

The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of March 31, 2017, the Company has not recorded any unrecognized tax benefits.

 

Per share data

 

Basic and diluted net loss per common share is calculated by dividing net loss, by the weighted average number of outstanding shares of common stock, adjusted to give effect to the 1-for-10 reverse stock split, which was effected on March 17, 2017 (see Note 4).

 

As of March 31, 2017 and 2016, there were outstanding warrants to purchase an aggregate of 733,444 and 172,922 shares, respectively, of the Company’s common stock. In addition, the Company has issued to employees, directors and consultants, options to acquire shares of the Company’s common stock, of which 307,426 and 223,996 were outstanding at March 31, 2017 and 2016, respectively, and restricted stock units issued to non-employee directors to acquire shares of the Company’s common stock of which 5,625 were outstanding at each of March 31, 2017 and 2016 (see Note 6). In computing diluted net loss per share for the three months ended March 31, 2017 and 2016, no effect has been given to such options, warrants and restricted stock units as their effect would be anti-dilutive.

 

NOTE 3 – FAIR VALUE MEASUREMENTS

 

Fair value measurements affect the Company’s accounting for certain of its financial assets. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy that includes:

 

  Level 1: Observable inputs, such as quoted prices in active markets.

 

  Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly. Level 2 assets and liabilities include debt securities with quoted market prices that are traded less frequently than exchange-traded instruments. This category includes U.S. government agency-backed debt securities and corporate-debt securities.

 

  Level 3: Unobservable inputs in which there is little or no market data.

 

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016 (in thousands):

 

Description  March 31,
2017
   Quoted Prices in
Active Markets
(Level 1)
 
Assets:          
Cash equivalents  $14,749   $14,749 
Marketable securities – available for sale   2,480    2,480 
           
Total assets  $17,229   $17,229 

 

 11 

 

 

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2017 AND 2016 (UNAUDITED)

 

Description  December 31,
2016
   Quoted Prices in
Active Markets
(Level 1)
   Significant Other
Observable Inputs
(Level 2)
 
Assets:               
Cash equivalents  $10,006   $10,006   $ 
Marketable securities – available for sale   7,180    5,926    1,254 
                
Total assets  $17,186   $15,932   $1,254 

 

NOTE 4 – STOCKHOLDERS' EQUITY

 

On March 13, 2017, the Company filed a Certificate of Change with the Nevada Secretary of State, which was effective March 17, 2017. Pursuant to the Certificate of Change, the Company effected a 1-for-10 reverse stock split of its issued and outstanding shares of common stock, $0.001 par value, whereby 41,010,720 outstanding shares of the Company’s common stock were exchanged for 4,101,072 shares of the Company's common stock. In connection with the reverse stock split, the Company issued an additional 1,034 shares of the Company’s common stock due to rounding. Furthermore, pursuant to the Certificate of Change, the number of authorized shares of common stock was reduced from 150 million to 15 million. All per share amounts and number of shares in the condensed consolidated financial statements and related notes have been retroactively restated to reflect the reverse stock split.

 

NOTE 5 – SALE OF COMMON STOCK

 

On April 28, 2016, the Company entered into a sales agreement (“Sales Agreement”) with Cowen and Company, LLC (“Cowen”), as sales agent, pursuant to which the Company may, from time to time, issue and sell common stock with an aggregate value of up to $15.0 million in ATM sales. On the same day, the Company filed a prospectus supplement under its existing shelf registration relating to the Sales Agreement. Cowen is acting as sole sales agent for any sales made under the Sales Agreement for a 3% commission on gross proceeds. The Company’s common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices may vary. Unless otherwise terminated earlier, the Sales Agreement continues until all shares available under the Sales Agreement have been sold. During the quarter ended March 31, 2017, the Company sold an aggregate of 234,546 shares of common stock using the ATM, resulting in net proceeds of $1.1 million, net of expenses of approximately $34,000 of Cowen’s commission.

 

NOTE 6 – STOCK-BASED COMPENSATION 

 

2012 incentive stock option plan

 

In April 2012, the Company’s stockholders approved the 2012 Incentive Stock Option Plan as subsequently amended (the “2012 Plan”). The 2012 Plan provides for the issuance of options to purchase up to 55,000 shares of the Company’s common stock to officers, directors, employees and consultants of the Company. With the adoption of the 2016 Plan (as defined below), no further grants may be made under the 2012 Plan.

 

2014 incentive stock plan

 

On June 9, 2014, the Company’s stockholders approved the Tonix Pharmaceuticals Holding Corp. 2014 Stock Incentive Plan (the “2014 Plan” and together with the 2012 Plan, the “Prior Plans”).

 

Under the terms of the 2014 Plan, the Company may issue (1) stock options (incentive and nonstatutory), (2) restricted stock, (3) stock appreciation rights (“SARs”), (4) RSUs, (5) other stock-based awards, and (6) cash-based awards. The 2014 Plan provides for the issuance of up to 180,000 shares of common stock. With the adoption of the 2016 Plan, no further grants may be made under the 2014 Plan.

  

 12 

 

 

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2017 AND 2016 (UNAUDITED) 

 

2016 stock incentive plan

 

On May 11, 2016, the Company’s stockholders approved the Tonix Pharmaceuticals Holding Corp. 2016 Stock Incentive Plan (the “2016 Plan” and together with the Prior Plans, the “Plans”). As a result of adoption of the 2016 Plan by the stockholders, no further grants may be made under the Prior Plans.

 

Under the terms of the 2016 Plan, the Company may issue (1) stock options (incentive and nonstatutory), (2) restricted stock, (3) SARs, (4) RSUs, (5) other stock-based awards, and (6) cash-based awards. The 2016 Plan provides for the issuance of up to 278,500 shares of common stock, which amount will be (a) reduced by awards granted under the 2014 Plan after December 31, 2015, and (b) increased to the extent that awards granted under the Plans are forfeited, expire or are settled for cash (except as otherwise provided in the 2016 Plan). In terms of calculating how many shares are reduced or increased based on activity under the Prior Plans after December 31, 2015, the calculation shall be based on one share for every one share that was subject to an option or SAR and 1.25 shares for every one share that was subject to an award other than an option or SAR. With respect to awards intended to qualify as performance-based compensation under Section 162(m) of the Code, the 2016 Plan provides that, subject to adjustment as provided in the plan, no participant may, in any 12-month period (i) be granted options or SARs with respect to more than 75,000 shares of the Company’s common stock, (ii) earn more than 50,000 shares of the Company’s common stock under restricted stock awards, restricted stock unit awards, performance awards and/or other share-based awards, or (iii) earn more than $5,000,000 under an award; provided, however, that each of these limitations shall be multiplied by two (2) with respect to awards granted to a participant during the first calendar year in which the participant commences employment with the Company or any of its subsidiaries. The Board of Directors determines the exercise price, vesting and expiration period of the grants under the 2016 Plan. However, the exercise price of an incentive stock option may not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more shareholder and 100% of fair value for a grantee who is not a 10% shareholder. The fair value of the common stock is determined based on quoted market price or in absence of such quoted market price, by the Board of Directors in good faith. Additionally, the vesting period of the grants under the 2016 Plan may not be more than five years and expiration period not more than ten years. The Company reserved 278,500 shares of its common stock for future issuance under the terms of the 2016 Plan. As of March 31, 2017, 122,596 shares were available for future grants under the 2016 Plan.

  

General

 

A summary of the stock option activity and related information for the Plans for the three months ended March 31, 2017 is as follows:

 

   Shares   Weighted-
Average 
Exercise Price
   Weighted-
Average 
Remaining 
Contractual Term
 
Outstanding at January 1, 2017   217,426   $91.33      
Grants   90,000   $5.50      
Exercised   -           
Forfeitures or expirations   -   $-      
Outstanding at March 31, 2017   307,426   $66.21    8.26 
                
Vested and expected to vest at March 31, 2017   307,426   $66.21    8.26 
Exercisable at March 31, 2017   150,506   $108.95    7.11 

 

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s closing stock price at the respective dates.

 

The Company measures the fair value of stock options on the date of grant, based on a Binomial option pricing model using certain assumptions discussed below, and the closing market price of the Company's common stock on the date of the grant. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. Most stock options granted pursuant to the Plans typically vest 1/3rd 12 months from the date of grant and 1/36th each month thereafter for 24 months and expire ten years from the date of grant. In addition, the Company also issues performance-based options to executive officers, which options vest when the target parameters are met, subject to a one year minimum service period prior to vesting. Stock-based compensation expense related to awards is amortized over the applicable vesting period using the straight-line method.

 

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TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2017 AND 2016 (UNAUDITED) 

 

On March 1, 2017, the Company granted options to purchase an aggregate of 61,750 shares of the Company’s common stock to employees with an exercise price of $5.50, exercisable for a period of ten years and a grant date fair value of $3.36, vesting 1/3 on the first anniversary and 1/36th each month thereafter for 24 months. Additionally, the Company granted options to purchase 28,250 shares of the Company’s common stock to employees with an exercise price of $5.50, exercisable for a period of ten years, and vesting 50% upon achieving enrollment of 250 participants in the ongoing HONOR study by December 31, 2017, and the remaining 50% vesting 1% for each participant that is enrolled in the HONOR study by December 31, 2017 in excess of 250, subject to a one year minimum service period prior to vesting.

 

On February 9, 2016, 40,300 options were granted to employees with an exercise price of $50.30, a 10 year life and grant date fair value of $24.91 per share. Additionally, the Company granted options to purchase 20,000 shares of the Company’s common stock to employees with an exercise price of $50.30, exercisable for a period of ten years, vesting 1/3 each upon the Company’s common stock having an average closing sale price equal to or exceeding each of $60.00, $70.00 and $80.00 per share for 20 consecutive trading days, subject to a one year minimum service period prior to vesting.

 

On March 31, 2016, 108, 541 and 1,320 options with exercise prices of $98.70, $66.80 and $59.50, respectively, were forfeited.

 

The assumptions used in the valuation of stock options granted during the three months ended March 31, 2017 and 2016 were as follows:

 

   Three Months Ended 
March 31, 2017
   Three Months Ended 
March 31, 2016
 
Risk-free interest rate   1.99% to 2.29%
   0.85% to 1.86%
Expected term of option   5.00 to 7.91 years    6.00 to 9.06 years 
Expected stock price volatility   76.61% to 76.77%   76.41% to 81.59%
Expected dividend yield  $0.0   $0.0 

 

The risk-free interest rate is based on the yield of Daily U.S. Treasury Yield Curve Rates with terms equal to the expected term of the options as of the grant date. The expected term of options is determined using the simplified method, as provided in an SEC Staff Accounting Bulletin, and the expected stock price volatility is based on comparable companies’ historical stock price volatility since the Company does not have sufficient historical exercise or volatility data because its equity shares have been publicly traded for only a limited period of time.

 

Stock-based compensation expense relating to options granted of $0.5 million and $0.8 million was recognized for the three month periods ended March 31, 2017 and 2016, respectively.

 

As of March 31, 2017, the Company had approximately $1.6 million of total unrecognized compensation cost related to non-vested awards granted under the Plans, which the Company expects to recognize over a weighted average period of 1.39 years.

 

2014 employee stock purchase plan

 

On June 9, 2014, the Company’s stockholders approved the Tonix Pharmaceuticals Holdings Corp. 2014 Employee Stock Purchase Plan (the “2014 ESPP”). The 2014 ESPP allows eligible employees to purchase up to an aggregate of 30,000 shares of the Company’s common stock. Under the 2014 ESPP, on the first day of each offering period, each eligible employee for that offering period has the option to enroll for that offering period, which allows the eligible employees to purchase shares of the Company’s common stock at the end of the offering period. Each offering period under the 2014 ESPP is for six months, which can be modified from time-to-time. Subject to limitations, each participant will be permitted to purchase a number of shares determined by dividing the employee’s accumulated payroll deductions for the offering period by the applicable purchase price, which is equal to 85 percent of the fair market value of our common stock at the beginning or end of each offering period, whichever is less. A participant must designate in his or her enrollment package the percentage (if any) of compensation to be deducted during that offering period for the purchase of stock under the 2014 ESPP, subject to the statutory limit under the Code. As of March 31, 2017, there were 19,449 shares available for future issuance under the 2014 ESPP.

 

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TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2017 AND 2016 (UNAUDITED)

 

The 2014 ESPP is considered a compensatory plan with the related compensation cost written off over the six month offering period. The compensation expense related to the 2014 ESPP for the quarters ended March 31, 2017 and 2016 was $36,000 and $59,000, respectively. As of March 31, 2017, approximately $42,000 of employee payroll deductions, which had been withheld since January 1, 2017, the commencement of the offering period ending June 30, 2017, are included in accrued expenses in the accompanying balance sheet. In January 2017, 2,496 shares that were purchased as of December 31, 2016, were issued under the 2014 ESPP, and approximately $10,000 of employee payroll deductions accumulated at December 31, 2016, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital. 

 

Restricted stock units

 

In February 2017, 5,625 RSUs that were granted to our non-employee directors for board services in 2016, in lieu of cash, with a one year vesting from the grant date and a fair value of $38.10 at the date of grant vested, and 5,625 shares of the Company’s common stock were issued during the three months ended March 31, 2017.

 

The following table summarizes the restricted stock activity for the three months ended March 31, 2017:

 

Restricted stock units as of January 1, 2017   11,250 
Granted   - 
Forfeited   - 
Vested   (5,625)
Unvested restricted stock units as of March 31, 2017   5,625 

 

Stock-based compensation expense related to RSU grants was $50,000 and $79,000 for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, the stock-based compensation relating to RSU’s of $21,000 remains unamortized and is expected to be amortized over the remaining period of two months.       

  

NOTE 7 – STOCK WARRANTS

 

The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at March 31, 2017:

 

Exercise   Number   Expiration
Price   Outstanding   Date
$6.30    546,250   October 2021
$6.90    47,361   October 2021
$42.50    91,898   August 2018
$120.00    45,601   December 2017 to February 2018
$250.00    2,334   January 2019 to February 2019
      733,444    

 

During the quarter ended March 31, 2017, 33,089 warrants with an exercise price of $250.00 expired.

 

NOTE 8 – COMMITMENTS 

 

Research and development contracts

 

The Company has entered into contracts with various contract research organizations with outstanding commitments aggregating approximately $6.1 million at March 31, 2017 for future work to be performed.

 

 15 

 

 

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2017 AND 2016 (UNAUDITED)

 

Operating leases

 

As of March 31, 2017, future minimum lease payments under operating leases for office space were as follows (in thousands):

 

Year Ending December 31,    
2017  $387 
2018   459 
2019   181 
   $1,027 

 

Defined contribution plan

 

Approved by the Company’s Board of Directors on March 3, 2014, effective April 1, 2014, the Company established a qualified defined contribution plan (the “401(k) Plan”) pursuant to Section 401(k) of the Code, whereby all eligible employees may participate. Participants may elect to defer a percentage of their annual pretax compensation to the 401(k) Plan, subject to defined limitations. The Company is required to make contributions to the 401(k) Plan equal to 100 percent of each participant’s pretax contributions of up to three percent of his or her eligible compensation, and the Company is also required to make a contribution equal to three percent of each participant’s salary, on an annual basis, subject to limitations under the Code. For the three months ended March 31, 2017 and 2016, the Company charged operations $16,000 and $133,000, respectively, for contributions under the 401(k) Plan.

 

NOTE 9 – SUBSEQUENT EVENTS

 

April 2017 financing

 

On March 30, 2017, the Company entered into an underwriting agreement with Aegis Capital Corp., as representative of the several underwriters (collectively, the “2017 Underwriters”), relating to the issuance and sale of 1,800,000 shares of the Company’s common stock, in an underwritten public offering (the “April 2017 Financing”). The public offering price for each share of common stock was $4.45. The Company granted the 2017 Underwriters an option to purchase up to an additional 270,000 shares of common stock to cover over-allotments, if any.

   

The April 2017 Financing closed on April 4, 2017. The 2017 Underwriters purchased the shares at a seven percent discount to the public offering price, for an aggregate discount of $0.6 million (or $0.31 per share). The Company also expects to incur offering expenses of approximately $0.2 million. The Company expects to receive net proceeds of approximately $7.2 million. On April 13, 2017, the 2017 Underwriters fully exercised the over-allotment option and purchased 270,000 shares of common stock for net proceeds of approximately $1.1 million, net of an aggregate discount of $0.1 million (or $0.31 per share).

 

At-the-market offering

 

In April 2017, the Company sold an aggregate of 1,251,928 shares of common stock using the ATM, resulting in net proceeds of $8.0 million, net of expenses, which included Cowen’s commission of approximately $0.2 million. With these sales, the Company has sold all $15 million of shares under the Sales Agreement, and the Sales Agreement has been terminated.

 

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

 

This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of its management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

 

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors known to us could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that its assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from its assumptions. Factors that could cause differences include, but are not limited to: substantial competition; our possible need for additional financing; uncertainties of patent protection and litigation; uncertainties of government or third party payor reimbursement; limited research and development efforts and dependence upon third parties; and risks related to failure to obtain clearances or approvals from the United States Food and Drug Administration, or FDA, and noncompliance with FDA regulations.

 

Business Overview

 

We are a late clinical-stage pharmaceutical company dedicated to the development of innovative pharmaceutical products to address public health challenges. Our most advanced drug development program is focused on delivering an efficacious and safe long-term treatment of posttraumatic stress disorder, or PTSD. PTSD is characterized by chronic disability, inadequate treatment options, high utilization of healthcare services, and significant economic burden. We have assembled a management team with significant industry experience to lead the development of our product candidates. We complement our management team with a network of scientific, clinical, and regulatory advisors that includes recognized experts in the fields of PTSD and other central nervous system disorders.

 

Our lead product candidate, TNX-102 SL, a patented low-dose cyclobenzaprine sublingual tablet, designed for bedtime administration, is in Phase 3 clinical development as a potential treatment for PTSD. The FDA has designated TNX-102 SL a Breakthrough Therapy for the treatment of PTSD. TNX-102 SL is an investigational new drug and has not been approved for any indication.

 

Our therapeutic strategy in PTSD is supported by results from a randomized, double-blind, placebo-controlled, 12-week Phase 2 study of TNX-102 SL in participants with military-related PTSD, which we refer to as the AtEase study. We reported topline results from the AtEase study in May 2016. In the AtEase study, participants were randomized in a 2:1:2 ratio to TNX-102 SL 2.8 mg, TNX-102 SL 5.6 mg, or placebo sublingual tablets at bedtime daily for 12 weeks. This study was conducted at 24 U.S. centers and enrolled 231 participants in the modified intent-to-treat population. The primary objective of the AtEase study was to evaluate the efficacy and safety of TNX-102 SL in the treatment of military-related PTSD. The primary efficacy endpoint was the 12-week mean change from baseline in the severity of PTSD symptoms as measured by the Clinician-Administered PTSD Scale for the Diagnostic and Statistical Manual-5, or CAPS-5, between those treated with TNX-102 SL and those receiving placebo. The CAPS-5 scale is a standardized structured clinician interview and is considered the gold standard in clinical research and regulatory approval for measuring the symptom severity of PTSD.

 

AtEase was adequately designed to evaluate whether a 2.8 mg dose would be efficacious, which would have provided an opportunity for this study to be used as one of the two pivotal efficacy studies required to support approval of TNX-102 SL for the treatment of PTSD. Although the 2.8 mg dose trended in the direction of a therapeutic effect, it did not reach statistical significance on the primary endpoint. The 5.6 mg dose had a therapeutic effect as assessed by the CAPS-5 scale, which was statistically significant by Mixed-effect Model Repeated Measures with Multiple Imputation analysis (p-value = 0.031), even though this arm of the study, by design, included only approximately half the number of participants of the 2.8 mg and placebo arms. TNX-102 SL 5.6 mg demonstrated a dose-effect on multiple efficacy and safety measurements in the AtEase study.

 

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In the AtEase study, TNX-102 SL was well tolerated and the participant retention rate was 73% on placebo, 79% on TNX-102 SL 2.8 mg and 84% on TNX-102 SL 5.6 mg. Four distinct serious adverse events were reported in the study; three were in the placebo group, and one (proctitis/peri-rectal abscess,) in the TNX-102 SL arm, which was determined to be unrelated to TNX-102 SL. The most common non-dose related adverse events were mild and transient local administration site conditions and of these oral hypoaesthesia, or numbness, was the most frequent and occurred in 39% of participants treated with the 2.8 mg dose and 36% of the participants treated with the 5.6 mg dose, compared to 2% of the participants receiving placebo. Oral paresthesia, or tingling, occurred in 16% of participants treated with the 2.8 mg dose and 4% of participants treated with the 5.6 mg dose, compared to 3% of the participants receiving placebo. Glossodynia, or a burning or stinging sensation in the mouth, occurred in 3% of participants treated with the 2.8 mg dose and 6% of participants treated with the 5.6 mg dose, compared to 1% of participants receiving placebo.

 

Systemic adverse events that were potentially dose-related and occurred in greater than or equal to 5% of participants treated with the 5.6 mg dose or placebo included: somnolence in 16% versus 6% of the participants receiving placebo; dry mouth in 16% versus 11% of the participants receiving placebo; headache in 12% versus 4% of the participants receiving placebo; insomnia in 6% versus 9% of the participants receiving placebo; sedation in 12% versus 1% of the participants receiving placebo; upper respiratory tract infection in 4% versus 5% of the participants receiving placebo; abnormal dreams in 2% versus 5% of the participants receiving placebo; and weight increase in 2% versus 5% of the participants receiving placebo. For the participants treated with the 2.8 mg dose, the incidence of the most common systemic adverse events reported above were less frequent than participants treated with the 5.6 mg dose with the exception of insomnia, which was 8%.

 

On December 16, 2016, the FDA designated TNX-102 SL a Breakthrough Therapy for the treatment of PTSD based on data derived from a population with military-related PTSD in the AtEase study.

 

We commenced a randomized, double-blind placebo-controlled Phase 3 study of TNX-102 SL in approximately 550 participants with military-related PTSD in the first quarter of 2017. This first Phase 3 study, the “HONOR study,” is an adaptive design study based on the results of the Phase 2 AtEase study. The study design is very similar to the Phase 2 AtEase study, except there will be one planned interim analysis and the involvement of an independent data monitoring committee, or IDMC, to review unblinded interim analysis results. The IDMC will make a recommendation to continue as planned, to continue but increase the number of recruited participants or to stop for success. In addition, there will be one active dose (5.6 mg administered as 2 x 2.8 mg tablets) and the entrance criterion is CAPS-5 ≥ 33 in this Phase 3 study. The interim analysis will be conducted when approximately 50% of the initially planned participants (approximately 275 participants) are randomized. We received FDA clearance of the first Phase 3 study design in January 2017. The HONOR study involves approximately 35 U.S. centers. As in the case of the AtEase study, the primary efficacy endpoint of the HONOR study is the 12-week mean change from baseline in the severity of PTSD symptoms as measured by the CAPS-5 scale between those treated with TNX-102 SL 5.6 mg and those receiving placebo.

 

At the Initial Cross-disciplinary Breakthrough meeting on March 9, 2017, the FDA confirmed that a single-study new drug application approval is possible if the topline data of the Phase 3 HONOR study is statistically persuasive.

 

On May 2, 2017, we were issued U.S. patent 9,636,408 “Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride”, which includes compositions of cyclobenzaprine HCl and methods of manufacturing the eutectic. The Protectic™ protective eutectic and Angstro-Technology™ formulation claimed in the patent are important elements of our proprietary TNX-102 SL composition. The patent is expected to provide us with U.S. market exclusivity until 2034.

 

We also have a pipeline of other drug and biologic candidates, including two pre-IND (Investigational New Drug) candidates, TNX-601 (tianeptine oxalate) for PTSD and TNX-801, a potential smallpox-preventing vaccine, an IND candidate, TNX-301, a potential treatment for alcohol use disorders, or AUD, and TNX-701, a biodefense development program for protection from radiation injury. We hold worldwide development and commercialization rights to all of our product candidates.

  

TNX-601 is a novel oral formulation of tianeptine oxalate in the pre-IND stage of development for the treatment for PTSD. We have discovered a novel salt and polymorph, which we believe may provide improved stability, consistency, and manufacturability relative to the known forms of tianeptine. Leveraging our development expertise in PTSD, TNX-601 is being developed for daytime dosing as a first-line monotherapy for PTSD for daytime dosing. Tianeptine’s reported pro-cognitive and anxiolytic effects as well as its ability to attenuate the neuropathological effects of excessive stress responses suggest that it may be used to treat PTSD by a different mechanism of action than TNX-102 SL. On April 19, 2016, we were issued U.S. patent 9,314,469 B2 “Method for treating neurocognitive dysfunction” which includes using tianeptine for cognitive dysfunction associated with corticosteroid use. We intend to develop TNX-601 under Section 505(b)(1) of the Federal Food, Drug, and Cosmetic Act, or FDCA, as a potential treatment for PTSD and cognitive dysfunction associated with corticosteroid use. Pharmaceutical development work on TNX-601 has been initiated.

 

 18 

 

 

TNX-801 is a novel potential smallpox-preventing vaccine based on a live synthetic version of horsepox virus, or HPXV, grown in cell culture. Professor David Evans and Dr. Ryan Noyce at the University of Alberta, Canada in collaboration with us, synthesized the HPVX, which demonstrated protective vaccine activity in mice, using a model of lethal vaccinia infection. We are developing TNX-801 as a potential smallpox-preventing vaccine for widespread immunization and for the U.S. strategic national stockpile. Though it shares structural characteristics with vaccinia-based vaccines, TNX-801 has unique virulence properties that we believe may suggest lower toxicity and potential safety advantages over existing vaccinia-based vaccines, which have been associated with adverse side effects such as myopericarditis. We intend to develop TNX-801 under 21 CFR 601 Subpart H, pursuant to which the FDA may grant marketing approval for a biological product for which safety has been established in humans and for which the requirements for efficacy are met based on adequate and well-controlled animal studies, where human studies are not ethical or feasible. This approval pathway has been described as the “Animal Rule”. In the 1970s, vaccination against smallpox was discontinued in the U.S.; however, smallpox remains a material threat to national security. We recently filed a patent on the novel virus vaccine. In addition, 12 years of non-patent based exclusivity is provided under the Patient Protection and Affordable Care Act. It is unknown if a replacement bill will contain the 12-year exclusivity provision. Following the recent passage of the 21st Century Cures Act, we believe TNX-801 qualifies as a medical countermeasure, and therefore should be eligible for a Priority Review Voucher upon FDA approval. We are currently working to develop a vaccine that meets current Good Manufacturing Practice quality to support an IND.

 

TNX-301 is a fixed-dose combination drug product, or CDP, containing two FDA-approved drugs, disulfiram and selegiline. We intend to develop TNX-301 CDP under Section 505(b)(2) of the FDCA as a potential treatment for AUD, and we have commenced development work on TNX-301 formulations. A pre-IND meeting was held in February 2016 to discuss the clinical development program of TNX-301 for AUD. At that meeting, the FDA advised us the nonclinical studies required for this CDP IND application to support the initiation of the first-in-man study with TNX-301. IND planning activities are underway.

 

In addition, we own rights to intellectual property on a biodefense technology relating to the development of protective agents against radiation exposure, which we refer to as TNX-701. We have begun nonclinical research and development on TNX-701. Similar to the regulatory pathway intended for TNX-801, we plan to develop TNX-701 under 21 CFR 601 Subpart H, or the “Animal Rule”. We expect significant reduction in development costs and risks compared to the development of other new chemical entities or new biologic candidates.

 

Current Operating Trends

 

 Our current research and development efforts are focused on developing TNX-102 SL for PTSD, but we also expend increasing effort on our other pipeline programs, including TNX-601, TNX-801 and TNX-301. Our research and development expenses consist of manufacturing work and the cost of drug ingredients used in such work, fees paid to consultants for work related to clinical trial design and regulatory activities, fees paid to providers for conducting various clinical studies as well as for the analysis of the results of such studies, and for other medical research addressing the potential efficacy and safety of our drugs. We believe that significant investment in product development is a competitive necessity, and we plan to continue these investments in order to be in a position to realize the potential of our product candidates and proprietary technologies.

  

We expect that all of our research and development expenses in the near-term future will be incurred in support of our current and future preclinical and clinical development programs rather than technology development. These expenditures are subject to numerous uncertainties relating to timing and cost to completion. We test compounds in numerous preclinical studies for safety, toxicology and efficacy. At the appropriate time, subject to the approval of regulatory authorities, we expect to conduct early-stage clinical trials for each drug candidate. We anticipate funding these trials ourselves, and possibly with the assistance of federal grants, contracts or other agreements. As we obtain results from trials, we may elect to discontinue or delay clinical trials for certain products in order to focus our resources on more promising products. Completion of clinical trials may take several years, and the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product candidate.

 

The commencement and completion of clinical trials for our products may be delayed by many factors, including lack of efficacy during clinical trials, unforeseen safety issues, slower than expected participant recruitment, lack of funding or government delays. In addition, we may encounter regulatory delays or rejections as a result of many factors, including results that do not support the intended safety or efficacy of our product candidates, perceived defects in the design of clinical trials and changes in regulatory policy during the period of product development. As a result of these risks and uncertainties, we are unable to accurately estimate the specific timing and costs of our clinical development programs or the timing of material cash inflows, if any, from our product candidates. Our business, financial condition and results of operations may be materially adversely affected by any delays in, or termination of, our clinical trials or a determination by the FDA that the results of our trials are inadequate to justify regulatory approval, insofar as cash in-flows from the relevant drug or program would be delayed or would not occur. 

 

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Results of Operations

 

We anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, such as the progress of our research and development efforts and the timing and outcome of regulatory submissions. Due to these uncertainties, accurate predictions of future operations are difficult or impossible to make.

 

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016

 

Research and Development Expenses. Research and development expenses for the three months ended March 31, 2017 were $3.0 million, a decrease of $7.7 million, or 72%, from $10.7 million for the three months ended March 31, 2016. This decrease is predominately due to the discontinuation of development work related to the episodic tension-type headache and fibromyalgia programs. During the three months ended March 31, 2017, we incurred $1.4 million, $31,000 and $0.3 million in clinical, non-clinical and manufacturing, respectively, as compared to $6.2 million, $0.9 million and $1.3 million for the same period last year, respectively. Costs related to product development were $0.1 million for the three months ended March 31, 2016. There were no product development expenses during the three months ended March 31, 2017. The decrease is primarily due to the reduction in active trials. 

 

Compensation-related expenses were $0.6 million for the three months ended March 31, 2017, down from $1.0 million for the three months ended March 31, 2016, a decrease of $0.4 million, or 40%. Cash compensation-related expenses were $0.5 million for the three months ended March 31, 2017, a decrease of $0.3 million, or 38%, from $0.8 million for the three months ended March 31, 2016. We incurred $0.1 million in stock-based compensation for the three months ended March 31, 2017, a decrease of $0.1 million, or 50%, from $0.2 million for the three months ended March 31, 2016, in connection with the vesting of stock options, which were previously issued to officers and consultants. The decrease in cash compensation-related expenses was primarily a result of a reduction in personnel. Regulatory and legal costs for the three months ended March 31, 2017 were $0.3 million, a decrease of $0.2 million, or 40%, from $0.5 million for the three months ended March 31, 2016. The decrease is primarily due to the reduction in active trials. 

 

Travel, meals and entertainment costs were $0.3 million for both reporting periods. Travel, meals and entertainment costs included travel related to clinical development, including investigator meetings and medical-related conferences. Other research and development costs decreased to $0.1 million for the three months ended March 31, 2017, from $0.4 million for the three months ended March 31, 2016 a decrease of $0.3 million, or 75%. Other research and development costs included rent, insurance and other office-related expenses.

 

General and Administrative Expenses. General and administrative expenses for the three months ended March 31, 2017 were $2.1 million, a decrease of $1.2 million, or 36%, from $3.3 million incurred in the three months ended March 31, 2016. This decrease is primarily due to a reduction in compensation-related expenses.

 

Compensation-related expenses decreased to $1.0 million for the three months ended March 31, 2017, from $1.9 million for the three months ended March 31, 2016, a decrease of $0.9 million, or 47%. Cash compensation-related expenses were $0.5 million for the three months ended March 31, 2017, a decrease of $0.6 million, or 55%, from $1.1 million for the three months ended March 31, 2016. We incurred $0.5 million in stock-based compensation in connection with the employee stock purchase plan and the vesting of restricted stock units and stock options in the three months ended March 31, 2017, which were previously issued to board members, officers, employees and a consultant, as compared to $0.8 million in stock-based compensation for the same period last year. The decrease in cash compensation-related costs of $0.6 million was primarily a result of a reduction in personnel.

 

  Professional services for the three months ended March 31, 2017 totaled $0.8 million, a decrease of $0.1 million, or 11%, over the $0.9 million incurred for the three months ended March 31, 2016. Of professional services, legal fees totaled $0.2 million for the three months ended March 31, 2017, a decrease of $0.1 million, or 33%, from $0.3 million incurred for the three months ended March 31, 2016. The decrease is mainly due to less international legal work. Audit and accounting fees incurred for the three months ended March 31, 2017 and 2016 were both $0.1 million. Investor and public relations fees for the three months ended March 31, 2017 totaled $0.2 million, a decrease of $0.1 million, or 33%, from $0.3 million incurred for the three months ended March 31, 2016. Other professional fees for the three months ended March 31, 2017 totaled $0.3 million, an increase of $0.1 million, or 50%, from $0.2 million incurred for the three months ended March 31, 2016. Other professional fees included human resources and corporate consultants.

 

Travel, meals and entertainment costs for the three months ended March 31, 2017 were $47,000, a decrease of $55,000, or 54%, from $102,000 incurred in the three months ended March 31, 2016, due to reduction in travel-related activities. Office and other administrative expenses totaled $0.3 million for the three months ended March 31, 2017, a decrease of $0.1 million, or 25%, from $0.4 million incurred for the same period last year. Office and other administrative expenses included rent, insurance and other office-related expenses.

 

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Net Loss. As a result of the foregoing, the net loss for the three months ended March 31, 2017 was $5.1 million, compared to a net loss of $14.0 million for the three months ended March 31, 2016, a decrease of $8.9 million, or 64%.

 

Liquidity and Capital Resources

 

As of March 31, 2017, we had working capital of $21.7 million, comprised primarily of cash, cash equivalents and marketable securities of $22.4 million and prepaid expenses and other of $1.0 million, which was offset by $0.8 million of accounts payable and $0.9 million of accrued expenses. Our cash and cash equivalents consisted of bank deposit accounts and money market funds. A significant portion of the accounts payable and accrued expenses are due to work performed in relation to our phase 3 HONOR study of TNX-102 SL in PTSD. For the three months ended March 31, 2017 and 2016, we used approximately $4.8 million and $15.5 million of cash in operating activities, respectively, which represents cash outlays for research and development and general and administrative expenses in such periods. The decrease in cash outlays principally resulted from a reduction in clinical, non-clinical, manufacturing and compensation-related activities. For the three months ended March 31, 2017, approximately $1.1 million was raised through the sale of shares of common stock.

 

Cash provided by investing activities for the quarter ended March 31, 2017 was approximately $4.7 million, all of which related to the maturity of marketable securities. Cash provided by investing activities for the quarter ended March 31, 2016 was approximately $4.7 million, of which $4.8 million related to the maturity of marketable securities offset by $0.1 million related to the purchase of equipment and leasehold improvements.

 

April 2017 Financing

 

On March 30, 2017, we entered into an underwriting agreement with Aegis Capital Corp., as representative of the several underwriters (collectively, the “2017 Underwriters”), relating to the issuance and sale of 1,800,000 shares of our common stock, in an underwritten public offering (the “April 2017 Financing”). The public offering price for each share of common stock was $4.45. We granted the 2017 Underwriters an option to purchase up to an additional 270,000 shares of common stock to cover over-allotments, if any.

 

The April 2017 Financing closed on April 4, 2017. The 2017 Underwriters purchased the shares at a seven percent discount to the public offering price, for an aggregate discount of $0.6 million (or $0.31 per share). We also expect to incur offering expenses of approximately $0.2 million. We expect to receive net proceeds of approximately $7.2 million. On April 13, 2017, the 2017 Underwriters fully exercised the over-allotment option and purchased 270,000 shares of common stock for net proceeds of approximately $1.1 million, net of an aggregate discount of $0.1 million (or $0.31 per share).

 

At-the-Market Offering

 

On April 28, 2016, we entered into a sales agreement (“Sales Agreement”) with Cowen and Company, LLC (“Cowen”), as sales agent, pursuant to which we may, from time to time, issue and sell common stock with an aggregate value of up to $15.0 million in at-the-market (“ATM”) sales. On the same day, we filed a prospectus supplement under its existing shelf registration relating to the Sales Agreement. Cowen is acting as sole sales agent for any sales made under the Sales Agreement for a 3% commission on gross proceeds. Our common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices may vary. Unless otherwise terminated earlier, the Sales Agreement continues until all shares available under the Sales Agreement have been sold. Between February and April 2017, we sold an aggregate of 1,486,474 shares of common stock using the ATM, resulting in net proceeds of $9.1 million, net of expenses, which included Cowen’s commission of approximately $0.3 million. We have sold all $15 million of shares under the Sales Agreement, and the Sales Agreement has been terminated.

 

Future Liquidity Requirements

 

We expect to incur losses from operations for the near future. We expect to incur increasing research and development expenses, including expenses related to additional clinical trials. We expect that our general and administrative expenses will decrease in the near term, as we have taken certain measures to reduce costs in order to preserve cash to fund our activities through at least the end of the ongoing Phase 3 HONOR study in military-related PTSD. Our existing cash and marketable securities are sufficient to fund our operating expenses and planned clinical trial through at least the next 12 months. 

 

Our future capital requirements will depend on a number of factors, including the progress of our research and development of product candidates, the timing and outcome of regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights, the status of competitive products, the availability of financing and our success in developing markets for our product candidates.

 

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We will need to obtain additional capital in order to fund future research and development activities. Future financing may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, shareholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock.

 

If additional financing is not available or is not available on acceptable terms, we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization efforts or obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize independently.

 

Stock Compensation

 

Stock Options

 

In April 2012, our stockholders approved the 2012 Incentive Stock Option Plan, which was amended and restated in February 2013 (“2012 Plan”). The 2012 Plan provided for the issuance of options to purchase up to 55,000 shares of our common stock to officers, directors, employees and consultants. With the adoption of the 2016 Plan (as defined below), no further grants may be made under the 2012 Plan, and the only current activity relates to the administration of existing options under the 2012 Plan.

 

On June 9, 2014, our stockholders approved the Tonix Pharmaceuticals Holding Corp. 2014 Stock Incentive Plan (the “2014 Plan” and together with the 2012 Plan, the “Prior Plans”). Under the terms of the 2014 Plan, we may have issued (1) stock options (incentive and nonstatutory), (2) restricted stock, (3) stock appreciation rights, or SARs, (4) restricted stock units, or RSUs, (5) other stock-based awards, and (6) cash-based awards. The 2014 Plan provided for the issuance of up to 180,000 shares of common stock. With the adoption of the 2016 Plan, no further grants may be made under the 2014 Plan, and the only current activity relates to the administration of existing options under the 2014 Plan.

 

On May 11, 2016, our stockholders approved the Tonix Pharmaceuticals Holding Corp. 2016 Stock Incentive Plan (the “2016 Plan” and together with the Prior Plans, the “Plans”). As a result of adoption of the 2016 Plan, no further grants may be made under the Prior Plans. Under the terms of the 2016 Plan, we may issue (1) stock options (incentive and nonstatutory), (2) restricted stock, (3) SARs, (4) RSUs, (5) other stock-based awards, and (6) cash-based awards. The 2016 Plan provides for the issuance of up to 278,500 shares of common stock, which amount will be (a) reduced by awards granted under the 2014 Plan after December 31, 2015, and (b) increased to the extent that awards granted under the Plans are forfeited, expire or are settled for cash (except as otherwise provided in the 2016 Plan).

 

In terms of calculating how many shares are reduced or increased based on activity under the Prior Plans after December 31, 2015, the calculation shall be based on one share for every one share that was subject to an option or SAR and 1.25 shares for every one share that was subject to an award other than an option or SAR. With respect to awards intended to qualify as performance-based compensation under Section 162(m) of the Code, the 2016 Plan provides that, subject to adjustment as provided in the plan, no participant may, in any 12-month period (i) be granted options or SARs with respect to more than 75,000 shares of our common stock, (ii) earn more than 50,000 shares of our common stock under restricted stock awards, restricted stock unit awards, performance awards and/or other share-based awards, or (iii) earn more than $5,000,000 under an award; provided, however, that each of these limitations shall be multiplied by two (2) with respect to awards granted to a participant during the first calendar year in which the participant commences employment with us or any of our subsidiaries. The Board of Directors determines the exercise price, vesting and expiration period of the grants under the 2016 Plan. However, the exercise price of an incentive stock option may not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more shareholder and 100% of fair value for a grantee who is not a 10% shareholder. The fair value of the common stock is determined based on quoted market price or in absence of such quoted market price, by the Board of Directors in good faith. Additionally, the vesting period of the grants under the 2016 Plan may not be more than five years and the expiration period not more than ten years. We reserved 278,500 shares of our common stock for future issuance under the terms of the 2016 Plan. As of March 31, 2017, 122,596 shares were available for future grants under the 2016 Plan.

 

We measure the fair value of stock options on the date of grant, based on a Binomial option pricing model using certain assumptions discussed in the following paragraph, and the closing market price of our common stock on the date of the grant. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. Most stock options granted pursuant to the Plans typically vest 1/3rd 12 months from the date of grant and 1/36th each month thereafter for 24 months and expire ten years from the date of grant. In addition, we also issue performance-based options to executive officers, which options vest when the target parameters are met, subject to a one year minimum service period prior to vesting. Stock-based compensation expense related to awards is amortized over the applicable vesting period using the straight-line method.

 

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On March 1, 2017, 61,750 options were granted to employees with an exercise price of $5.50, exercisable for a period of ten years and a grant date fair value of $3.36. Additionally, we granted options to purchase 28,250 shares of our common stock to employees with an exercise price of $5.50, exercisable for a period of ten years and vesting 50% upon our achieving enrollment of 250 participants in the ongoing HONOR study by December 31, 2017, and the remaining 50% vesting 1% for each participant that is enrolled in the HONOR study by December 31, 2017 in excess of 250, subject to a one year minimum service period prior to vesting.

 

On February 9, 2016, 40,300 options were granted to employees with an exercise price of $50.30 and exercisable for a period of ten years. Additionally, we granted options to purchase 20,000 shares of our common stock to employees with an exercise price of $50.30, exercisable for a period of ten years, and vesting 1/3 each upon our common stock having an average closing sale price equal to or exceeding each of $60.00, $70.00 and $80.00 per share for 20 consecutive trading days, subject to a one year minimum service period prior to vesting.

 

On March 31, 2016, 108, 541 and 1,320 options with exercise prices of $98.70, $66.80 and $59.50, respectively, were forfeited.

 

Stock-based compensation expense relating to options granted of $0.5 million and $0.8 million was recognized for the three month periods ended March 31, 2017 and 2016, respectively.

 

As of March 31, 2017, we had approximately $1.6 million of total unrecognized compensation cost related to non-vested awards granted under the Plans, which we expect to recognize over a weighted average period of 1.39 years.

 

Employee Stock Purchase Plan

 

On June 9, 2014, we approved the Tonix Pharmaceuticals Holdings Corp. 2014 Employee Stock Purchase Plan (the “2014 ESPP”). The 2014 ESPP allows eligible employees to purchase up to an aggregate of 30,000 shares of our common stock. Under the 2014 ESPP, on the first day of each offering period, each eligible employee for that offering period has the option to enroll for that offering period, which allows the eligible employees to purchase shares of our common stock at the end of the offering period. Each offering period under the 2014 ESPP is for six months, which can be modified from time-to-time. Subject to limitations, each participant will be permitted to purchase a number of shares determined by dividing the employee’s accumulated payroll deductions for the offering period by the applicable purchase price, which is equal to 85 percent of the fair market value of our common stock at the beginning or end of each offering period, whichever is less. A participant must designate in his or her enrollment package the percentage (if any) of compensation to be deducted during that offering period for the purchase of stock under the 2014 ESPP, subject to the statutory limit under the Code. As of March 31, 2017, there were 19,449 shares available for future issuance under the 2014 ESPP.

 

The 2014 ESPP is considered a compensatory plan with the related compensation cost written off over the six month offering period. The compensation expense related to the 2014 ESPP for the quarters ended March 31, 2017 and 2016 was $36,000 and $59,000, respectively. As of March 31, 2017, approximately $42,000 of employee payroll deductions, which had been withheld since January 1, 2017, the commencement of the offering period ending June 30, 2017, are included in accrued expenses in the accompanying balance sheet. In January 2017, 2,496 shares that were purchased as of December 31, 2016, were issued under the 2014 ESPP, and approximately $10,000 of employee payroll deductions accumulated at December 31, 2016, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital. 

 

Restricted Stock Units

 

In February 2017, 5,625 RSUs that were granted to our non-employee directors for board services in 2016, in lieu of cash, with a one year vesting from the grant date and a fair value of $38.10 at the date of grant vested, and 5,625 shares of our common stock were issued during the three months ended March 31, 2017.

 

Stock-based compensation expense related to RSU grants was $50,000 and $79,000 for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, the stock-based compensation relating to RSU’s of $21,000 remains unamortized and is expected to be amortized over the remaining period of two months.    

 

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Lease Commitments

 

As of March 31, 2017, future minimum lease payments under operating leases for office space were as follows (in thousands):

 

Year Ending December 31,    
2017  $387 
2018   459 
2019   181 
   $1,027 

 

Critical Accounting Policies and Estimates

 

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

 

Research and Development. We outsource our research and development efforts and expense the related costs as incurred, including the cost of manufacturing product for testing, licensing fees and costs associated with planning and conducting clinical trials. The value ascribed to patents and other intellectual property acquired was expensed as research and development costs, as it related to particular research and development projects and had no alternative future uses.

 

We estimate our accrued expenses. Our clinical trial accrual process is designed to account for expenses resulting from our obligations under contracts with vendors, consultants and clinical research organizations and clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to us under such contracts. We account for trial expenses according to the progress of the trial as measured by participant progression and the timing of various aspects of the trial. We determine accrual estimates that take into account discussions with applicable personnel and outside service providers as to the progress or state of completion of trials, or the services completed. During the course of a clinical trial, we adjust our clinical expense recognition if actual results differ from our estimates. We make estimates of our accrued expenses as of each balance sheet date based on the facts and circumstances known to us at that time. Our clinical trial accruals and prepaid assets are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors.

 

Stock-Based Compensation. All stock-based payments to employees and to nonemployee directors for their services as directors consisted of grants of restricted stock and stock options, which are measured at fair value on the grant date and recognized in the condensed consolidated statements of operations as compensation expense over the relevant vesting period. Restricted stock payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached or the date performance is completed. In addition, for awards that vest immediately and are nonforfeitable, the measurement date is the date the award is issued.

 

Income Taxes. Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. We record an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized. We recognized a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

 

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Recent Accounting Pronouncements

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. Lessees (for capital and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. We are currently evaluating the impact of adopting this guidance.

 

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required under Regulation S-K for “smaller reporting companies.” 

  

ITEM 4 - CONTROLS AND PROCEDURES

 

Evaluation of disclosure controls and procedures.

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2017, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in internal control over financial reporting.

 

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are currently not a party to any material legal proceedings or claims.

 

Item 1A. Risk Factors

 

Not required under Regulation S-K for “smaller reporting companies.” 

   

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

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

31.01 Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.02 Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.01 Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101 INS XBRL Instance Document
   
101 SCH XBRL Taxonomy Extension Schema Document
   
101 CAL XBRL Taxonomy Calculation Linkbase Document
   
101 LAB XBRL Taxonomy Labels Linkbase Document
   
101 PRE XBRL Taxonomy Presentation Linkbase Document
   
101 DEF XBRL Taxonomy Extension Definition Linkbase Document

 

 26 

 

 

SIGNATURES

 

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

 

  TONIX PHARMACEUTICALS HOLDING CORP.
     
Date: May 12, 2017 By: /s/ SETH LEDERMAN
    Seth Lederman
    Chief Executive Officer (Principal Executive Officer)
     
Date: May 12, 2017 By: /s/ BRADLEY SAENGER
    Bradley Saenger
    Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

 

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EX-31.01 2 s106083_ex31-01.htm EXHIBIT 31.01

 

EXHIBIT 31.01

CERTIFICATION

 

I, Seth Lederman, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Tonix Pharmaceuticals Holding Corp.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Date: May 12, 2017  
   
/s/ SETH LEDERMAN  
Seth Lederman  
Chief Executive Officer  

 

 

 

EX-31.02 3 s106083_ex31-02.htm EXHIBIT 31.02

 

EXHIBIT 31.02

 

CERTIFICATION

 

I, Bradley Saenger, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Tonix Pharmaceuticals Holding Corp.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Date: May 12, 2017  
   
/s/ BRADLEY SAENGER  
Bradley Saenger  
Chief Financial Officer  

 

 

 

EX-32.01 4 s106083_ex32-01.htm EXHIBIT 32.01

 

Exhibit 32.01

 

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Seth Lederman, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Tonix Pharmaceuticals Holding Corp. on Form 10-Q for the fiscal quarter ended March 31, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Tonix Pharmaceuticals Holding Corp.

 

  By:

/s/ SETH LEDERMAN

Date: May 12, 2017 Name: Seth Lederman
  Title: Chief Executive Officer

 

I, Bradley Saenger, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Tonix Pharmaceuticals Holding Corp. on Form 10-Q for the fiscal quarter ended March 31, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Tonix Pharmaceuticals Holding Corp.

 

  By:

/s/ BRADLEY SAENGER

Date: May 12, 2017 Name: Bradley Saenger
  Title: Chief Financial Officer

 

 

 

 

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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2017
May 10, 2017
Document And Entity Information    
Entity Registrant Name Tonix Pharmaceuticals Holding Corp.  
Entity Central Index Key 0001430306  
Document Type 10-Q  
Trading Symbol TNXP  
Document Period End Date Mar. 31, 2017  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity a Well-known Seasoned Issuer No  
Entity a Voluntary Filer No  
Entity's Reporting Status Current Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   7,486,026
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2017  
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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($)
$ in Thousands
Mar. 31, 2017
Dec. 31, 2016
Current assets:    
Cash and cash equivalents $ 19,943 $ 18,941
Marketable securities-available for sale, at fair value 2,480 7,180
Prepaid expenses and other 1,009 1,019
Total current assets 23,432 27,140
Property and equipment, net 132 150
Restricted cash 89 89
Intangible asset 120 120
Security deposits 11 11
Total assets 23,784 27,510
Current liabilities:    
Accounts payable 841 872
Accrued expenses 939 1,244
Total current liabilities 1,780 2,116
Deferred rent payable 29 33
Total liabilities 1,809 2,149
Commitments (See Note 8)
Stockholders' equity:    
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued or outstanding
Common stock, $0.001 par value; 15,000,000 shares authorized; 4,160,814 and 3,918,147 shares issued and outstanding as of March 31, 2017andDecember31,2016, respectively, and 2,496 shares to be issued as of December 31, 2016 4 4
Additional paid in capital 168,283 166,604
Accumulated deficit (146,304) (141,240)
Accumulated other comprehensive loss (8) (7)
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Total liabilities and stockholders' equity $ 23,784 $ 27,510
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Mar. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
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Preferred stock, authorized 5,000,000 5,000,000
Preferred stock, issued 0 0
Preferred stock, outstanding 0 0
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock, authorized 15,000,000 15,000,000
Common stock, issued 4,160,814 3,918,147
Common stock, outstanding 4,160,814 3,918,147
Common stock, to be issued 2,496
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
COSTS AND EXPENSES:    
Research and development $ 2,994 $ 10,671
General and administrative 2,097 3,343
Total costs and expenses 5,091 14,014
Operating loss (5,091) (14,014)
Interest income, net 27 38
NET LOSS $ (5,064) $ (13,976)
Net loss per common share, basic and diluted (in dollars per share) $ (1.27) $ (7.41)
Weighted average common shares outstanding, basic and diluted (in shares) 3,985,529 1,886,043
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Statement of Comprehensive Income [Abstract]    
Net loss $ (5,064) $ (13,976)
Other comprehensive (loss) gain:    
Foreign currency translation (loss) gain (1) 18
Unrealized gain on available for sale securities 25
Total other comprehensive (loss) gain (1) 43
Comprehensive loss $ (5,065) $ (13,933)
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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (unaudited) - 3 months ended Mar. 31, 2017 - USD ($)
$ in Thousands
Preferred Stock [Member]
Common Stock [Member]
Additional Paid in Capital [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Deficit [Member]
Total
Balance, at beginning at Dec. 31, 2016 $ 4 $ 166,604 $ (7) $ (141,240) $ 25,361
Balance, at beginning (in shares) at Dec. 31, 2016 3,918,147        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Employee stock purchase plan 10 10
Employee stock purchase plan (in shares) 2,496        
Issuance of common stock related to restricted stock units
Issuance of common stock related to restricted stock units (in shares) 5,625        
Stock-based compensation     567 567
Issuance of common stock in February ($5.09 per share) and March ($4.50 per share), net of transaction expenses of $34 1,102 1,102
Issuance of common stock in February ($5.09 per share) and March ($4.50 per share), net of transaction expenses of $34 (in shares) 234,546        
Unrealized loss on foreign currency translation (1) (1)
Net loss (5,064) (5,064)
Balance, at end at Mar. 31, 2017 $ 4 $ 168,283 $ (8) $ (146,304) $ 21,975
Balance, at end (in shares) at Mar. 31, 2017 4,160,814        
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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (unaudited) (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Feb. 28, 2017
Statement of Stockholders' Equity [Abstract]    
Share price $ 4.50 $ 5.09
Transaction expenses $ 35  
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (5,064) $ (13,976)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 24 57
Stock-based compensation 567 896
Changes in operating assets and liabilities:    
Prepaid expenses 10 178
Accounts payable (31) (986)
Accrued expenses (307) (1,645)
Deferred rent payable 7 (9)
Net cash used in operating activities (4,794) (15,485)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of furniture and fixtures (65)
Maturities of marketable securities 4,694 4,783
Net cash provided by investing activities 4,694 4,718
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds, net of expenses of $34 from sale of common stock 1,102
Net cash provided by financing activities 1,102
Effect of currency rate change on cash 19
Net increase (decrease) in cash 1,002 (10,748)
Cash, beginning of the period 18,941 19,175
Cash, end of period 19,943 8,427
Non-cash financing activities:    
Issuance of common stock under employee benefit plan $ 10 $ 113
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Statement of Cash Flows [Abstract]    
Expenses from sale of common stock $ 34 $ 34
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BUSINESS
3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
BUSINESS

NOTE 1 – BUSINESS

 

Tonix Pharmaceuticals Holding Corp., through its wholly owned subsidiary Tonix Pharmaceuticals, Inc. (“Tonix Sub”), is a late clinical-stage pharmaceutical company dedicated to the development of innovative pharmaceutical products to address public health challenges. All drug product candidates are still in development.

 

The consolidated financial statements include the accounts of Tonix Pharmaceuticals Holding Corp. and its wholly owned subsidiaries, Tonix Sub, Krele LLC, Tonix Pharmaceuticals (Canada), Inc., Tonix Medicines, Inc., Tonix Pharma Holdings Limited and Tonix Pharma Limited (collectively hereafter referred to as the “Company” or “Tonix”).

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SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES 

 

Interim financial statements 

 

The unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. 

 

The condensed consolidated balance sheet as of December 31, 2016 contained herein has been derived from audited financial statements. 

 

Operating results for the three months ended March 31, 2017 are not necessarily indicative of results that may be expected for the year ending December 31, 2017. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on April 13, 2017. 

 

Recent accounting pronouncements 

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted.  Lessees (for capital and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. The Company is currently evaluating the impact of adopting this guidance.  

 

Risks and uncertainties 

 

The Company's primary efforts are devoted to conducting research and development of innovative pharmaceutical products to address public health challenges. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. Further, the Company does not have any commercial products available for sale and has not generated revenues and there is no assurance that if its products are approved for sale, that the Company will be able to generate cash flow to fund operations. In addition, there can be no assurance that the Company's research and development will be successfully completed or that any product will be approved or commercially viable. 

 

At March 31, 2017, the Company had working capital of approximately $21.7 million, after raising approximately $1.1 million, net of expenses, through the at-the-market (“ATM”) offering during the quarter ended March 31, 2017. 

 

At March 31, 2017, the Company had cash and marketable securities of approximately $22.4 million, which together with approximately $16.3 million of net proceeds from the sales of common stock subsequent to March 31, 2017 (see Note 9), constitutes sufficient funds for the Company to meet its research and development and other funding requirements for at least the next 12 months.  

 

 Use of estimates 

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the useful life of fixed assets, assumptions used in the fair value of stock-based compensation and other equity instruments, and the percent of completion of research and development contracts. 

 

Cash equivalents 

 

The Company considers cash equivalents to be those investments which are highly liquid, readily convertible to cash and have an original maturity of three months or less when purchased. At March 31, 2017 and December 31, 2016, cash equivalents, which consisted of money market funds, amounted to $14.7 million and $10.0 million, respectively. 

 

Marketable securities 

 

Marketable securities consist primarily of certificates of deposit, U.S. agency, and U.S. treasury bonds with maturities greater than three months and up to two years at the time of purchase. These securities, which are classified as available for sale, are carried at fair value, with unrealized gains and losses, net of any tax effect, reported in stockholders’ equity as accumulated other comprehensive (loss) income. As investments are available for current operations, they are classified as current irrespective of their maturities. Amortization of premiums is included in interest income. For the quarters ended March 31, 2017 and 2016, the amortization of bond premiums totaled $6,000 and $24,000, respectively. As of March 31, 2017, amortized cost basis of the securities approximated their fair value. The values of these securities may fluctuate as a result of changes in market interest rates and credit risk. Marketable securities with a principal balance aggregating $4.7 million matured during the quarter ended March 31, 2017. 

 

The schedule of maturities at March 31, 2017 and December 31, 2016 is as follows (in thousands): 

 

    1 Year or Less  
    March 31, 2017     December 31, 2016  
U.S. treasury bonds   $ 1,500     $ 2,752  
U.S. agency bonds     -       1,254  
Certificates of deposit     980       3,174  
Total   $ 2,480     $ 7,180  

  

Property and equipment

 

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset's estimated useful life, which is three years for computer assets, five years for furniture and all other equipment and term of lease for leasehold improvements. Expenditures for maintenance and repairs are expensed as incurred. Depreciation and amortization expense for the quarters ended March 31, 2017 and 2016 was $18,000 and $33,000, respectively. All property and equipment is located in the United States. 

 

Intangible asset with indefinite lives 

 

Prior to January 1, 2017, the Company purchased certain internet domain rights, which were determined to have an indefinite life. Identifiable intangibles with indefinite lives are not amortized but are reviewed for impairment annually or whenever events or changes in circumstances indicate that its carrying amount may be less than fair value. As of March 31, 2017, the Company believed that no impairment existed.  

 

Research and development costs 

 

The Company outsources certain of its research and development efforts and expenses these costs as incurred, including the cost of manufacturing products for testing, as well as licensing fees and costs associated with planning and conducting clinical trials. The value ascribed to patents and other intellectual property acquired has been expensed as research and development costs, as such property related to particular research and development projects and had no alternative future uses. 

 

The Company estimates its expenses resulting from its obligations under contracts with vendors, clinical research organizations and consultants and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. The Company accounts for trial expenses according to the timing of various aspects of the trial. The Company determines accrual estimates taking into account discussion with applicable personnel and outside service providers as to the progress or state of consummation of trials, or the services completed. 

 

During the course of a clinical trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates. The Company makes estimates of its accrued expenses as of each balance sheet date based on the facts and circumstances known to it at that time. The Company’s clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors. 

 

Stock-based compensation 

 

All stock-based payments to employees and to nonemployee directors for their services as directors, including grants of restricted stock units (“RSUs”), and stock options, are measured at fair value on the grant date and recognized in the condensed consolidated statements of operations as compensation or other expense over the relevant service period. 

 

Stock-based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable, the measurement date is the date the award is issued. 

 

Foreign currency translation 

 

Operations of the Canadian subsidiary are conducted in local currency which represents its functional currency. The U.S. dollar is the functional currency of the other foreign subsidiaries. Balance sheet accounts of the Canadian subsidiary were translated from foreign currency into U.S. dollars at the exchange rate in effect at the balance sheet date and income statement accounts were translated at the average rate of exchange prevailing during the period. Translation adjustments resulting from this process were included in accumulated other comprehensive income (loss) on the condensed consolidated balance sheets. 

 

Comprehensive income (loss) 

 

Comprehensive income (loss) is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Other comprehensive income (loss) represents foreign currency translation adjustments and unrealized gains or losses from available for sale securities. 

 

The following table summarizes the changes in accumulated other comprehensive income by component: 

 

    Foreign Currency Translation
Adjustment
    Unrealized Gains (Losses)
on available for sale
securities
    Total  
Balance at December 31, 2016     (7 )     -       (7 )
Other Comprehensive Loss     (1 )     -       (1 )
Balance at March 31, 2017     (8 )     -       (8 )

  

Income taxes 

 

Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized. 

 

The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of March 31, 2017, the Company has not recorded any unrecognized tax benefits. 

 

Per share data 

 

Basic and diluted net loss per common share is calculated by dividing net loss, by the weighted average number of outstanding shares of common stock, adjusted to give effect to the 1-for-10 reverse stock split, which was effected on March 17, 2017 (see Note 4). 

 

As of March 31, 2017 and 2016, there were outstanding warrants to purchase an aggregate of 733,444 and 172,922 shares, respectively, of the Company’s common stock. In addition, the Company has issued to employees, directors and consultants, options to acquire shares of the Company’s common stock, of which 307,426 and 223,996 were outstanding at March 31, 2017 and 2016, respectively, and restricted stock units issued to non-employee directors to acquire shares of the Company’s common stock of which 5,625 were outstanding at each of March 31, 2017 and 2016 (see Note 6). In computing diluted net loss per share for the three months ended March 31, 2017 and 2016, no effect has been given to such options, warrants and restricted stock units as their effect would be anti-dilutive.

 

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FAIR VALUE MEASUREMENTS
3 Months Ended
Mar. 31, 2017
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

NOTE 3 – FAIR VALUE MEASUREMENTS

 

Fair value measurements affect the Company’s accounting for certain of its financial assets. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy that includes:

 

  Level 1: Observable inputs, such as quoted prices in active markets.

 

  Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly. Level 2 assets and liabilities include debt securities with quoted market prices that are traded less frequently than exchange-traded instruments. This category includes U.S. government agency-backed debt securities and corporate-debt securities.

 

  Level 3: Unobservable inputs in which there is little or no market data.

 

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016 (in thousands):

 

Description   March 31,
2017
    Quoted Prices in
Active Markets
(Level 1)
 
Assets:                
Cash equivalents   $ 14,749     $ 14,749  
Marketable securities – available for sale     2,480       2,480  
                 
Total assets   $ 17,229     $ 17,229  

 

Description   December 31,
2016
    Quoted Prices in
Active Markets
(Level 1)
    Significant Other
Observable Inputs
(Level 2)
 
Assets:                        
Cash equivalents   $ 10,006     $ 10,006     $  
Marketable securities – available for sale     7,180       5,926       1,254  
                         
Total assets   $ 17,186     $ 15,932     $ 1,254
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STOCKHOLDERS' EQUITY
3 Months Ended
Mar. 31, 2017
Stockholders' equity:  
STOCKHOLDERS' EQUITY

NOTE 4 – STOCKHOLDERS' EQUITY

 

On March 13, 2017, the Company filed a Certificate of Change with the Nevada Secretary of State, which was effective March 17, 2017. Pursuant to the Certificate of Change, the Company effected a 1-for-10 reverse stock split of its issued and outstanding shares of common stock, $0.001 par value, whereby 41,010,720 outstanding shares of the Company’s common stock were exchanged for 4,101,072 shares of the Company's common stock. In connection with the reverse stock split, the Company issued an additional 1,034 shares of the Company’s common stock due to rounding. Furthermore, pursuant to the Certificate of Change, the number of authorized shares of common stock was reduced from 150 million to 15 million. All per share amounts and number of shares in the condensed consolidated financial statements and related notes have been retroactively restated to reflect the reverse stock split.

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SALE OF COMMON STOCK
3 Months Ended
Mar. 31, 2017
Stockholders' Equity Note [Abstract]  
SALE OF COMMON STOCK

NOTE 5 – SALE OF COMMON STOCK

 

On April 28, 2016, the Company entered into a sales agreement (“Sales Agreement”) with Cowen and Company, LLC (“Cowen”), as sales agent, pursuant to which the Company may, from time to time, issue and sell common stock with an aggregate value of up to $15.0 million in ATM sales. On the same day, the Company filed a prospectus supplement under its existing shelf registration relating to the Sales Agreement. Cowen is acting as sole sales agent for any sales made under the Sales Agreement for a 3% commission on gross proceeds. The Company’s common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices may vary. Unless otherwise terminated earlier, the Sales Agreement continues until all shares available under the Sales Agreement have been sold. During the quarter ended March 31, 2017, the Company sold an aggregate of 234,546 shares of common stock using the ATM, resulting in net proceeds of $1.1 million, net of expenses of approximately $34,000 of Cowen’s commission.

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STOCK-BASED COMPENSATION
3 Months Ended
Mar. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK-BASED COMPENSATION

NOTE 6 – STOCK-BASED COMPENSATION 

 

2012 incentive stock option plan

 

In April 2012, the Company’s stockholders approved the 2012 Incentive Stock Option Plan as subsequently amended (the “2012 Plan”). The 2012 Plan provides for the issuance of options to purchase up to 55,000 shares of the Company’s common stock to officers, directors, employees and consultants of the Company. With the adoption of the 2016 Plan (as defined below), no further grants may be made under the 2012 Plan.

  

2014 incentive stock plan

 

On June 9, 2014, the Company’s stockholders approved the Tonix Pharmaceuticals Holding Corp. 2014 Stock Incentive Plan (the “2014 Plan” and together with the 2012 Plan, the “Prior Plans”).

 

Under the terms of the 2014 Plan, the Company may issue (1) stock options (incentive and nonstatutory), (2) restricted stock, (3) stock appreciation rights (“SARs”), (4) RSUs, (5) other stock-based awards, and (6) cash-based awards. The 2014 Plan provides for the issuance of up to 180,000 shares of common stock. With the adoption of the 2016 Plan, no further grants may be made under the 2014 Plan.

   

2016 stock incentive plan

  

On May 11, 2016, the Company’s stockholders approved the Tonix Pharmaceuticals Holding Corp. 2016 Stock Incentive Plan (the “2016 Plan” and together with the Prior Plans, the “Plans”). As a result of adoption of the 2016 Plan by the stockholders, no further grants may be made under the Prior Plans.

 

Under the terms of the 2016 Plan, the Company may issue (1) stock options (incentive and nonstatutory), (2) restricted stock, (3) SARs, (4) RSUs, (5) other stock-based awards, and (6) cash-based awards. The 2016 Plan provides for the issuance of up to 278,500 shares of common stock, which amount will be (a) reduced by awards granted under the 2014 Plan after December 31, 2015, and (b) increased to the extent that awards granted under the Plans are forfeited, expire or are settled for cash (except as otherwise provided in the 2016 Plan). In terms of calculating how many shares are reduced or increased based on activity under the Prior Plans after December 31, 2015, the calculation shall be based on one share for every one share that was subject to an option or SAR and 1.25 shares for every one share that was subject to an award other than an option or SAR. With respect to awards intended to qualify as performance-based compensation under Section 162(m) of the Code, the 2016 Plan provides that, subject to adjustment as provided in the plan, no participant may, in any 12-month period (i) be granted options or SARs with respect to more than 75,000 shares of the Company’s common stock, (ii) earn more than 50,000 shares of the Company’s common stock under restricted stock awards, restricted stock unit awards, performance awards and/or other share-based awards, or (iii) earn more than $5,000,000 under an award; provided, however, that each of these limitations shall be multiplied by two (2) with respect to awards granted to a participant during the first calendar year in which the participant commences employment with the Company or any of its subsidiaries. The Board of Directors determines the exercise price, vesting and expiration period of the grants under the 2016 Plan. However, the exercise price of an incentive stock option may not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more shareholder and 100% of fair value for a grantee who is not a 10% shareholder. The fair value of the common stock is determined based on quoted market price or in absence of such quoted market price, by the Board of Directors in good faith. Additionally, the vesting period of the grants under the 2016 Plan may not be more than five years and expiration period not more than ten years. The Company reserved 278,500 shares of its common stock for future issuance under the terms of the 2016 Plan. As of March 31, 2017, 122,596 shares were available for future grants under the 2016 Plan.

   

General

 

A summary of the stock option activity and related information for the Plans for the three months ended March 31, 2017 is as follows:

 

    Shares     Weighted-
Average 
Exercise Price
    Weighted-
Average 
Remaining 
Contractual Term
 
Outstanding at January 1, 2017     217,426     $ 91.33          
Grants     90,000     $ 5.50          
Exercised     -                  
Forfeitures or expirations     -     $ -          
Outstanding at March 31, 2017     307,426     $ 66.21       8.26  
                         
Vested and expected to vest at March 31, 2017     307,426     $ 66.21       8.26  
Exercisable at March 31, 2017     150,506     $ 108.95       7.11  

 

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s closing stock price at the respective dates.

 

The Company measures the fair value of stock options on the date of grant, based on a Binomial option pricing model using certain assumptions discussed below, and the closing market price of the Company's common stock on the date of the grant. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. Most stock options granted pursuant to the Plans typically vest 1/3rd 12 months from the date of grant and 1/36th each month thereafter for 24 months and expire ten years from the date of grant. In addition, the Company also issues performance-based options to executive officers, which options vest when the target parameters are met, subject to a one year minimum service period prior to vesting. Stock-based compensation expense related to awards is amortized over the applicable vesting period using the straight-line method.

 

On March 1, 2017, the Company granted options to purchase an aggregate of 61,750 shares of the Company’s common stock to employees with an exercise price of $5.50, exercisable for a period of ten years and a grant date fair value of $3.36, vesting 1/3 on the first anniversary and 1/36th each month thereafter for 24 months. Additionally, the Company granted options to purchase 28,250 shares of the Company’s common stock to employees with an exercise price of $5.50, exercisable for a period of ten years, and vesting 50% upon achieving enrollment of 250 participants in the ongoing HONOR study by December 31, 2017, and the remaining 50% vesting 1% for each participant that is enrolled in the HONOR study by December 31, 2017 in excess of 250, subject to a one year minimum service period prior to vesting.

 

On February 9, 2016, 40,300 options were granted to employees with an exercise price of $50.30, a 10 year life and grant date fair value of $24.91 per share. Additionally, the Company granted options to purchase 20,000 shares of the Company’s common stock to employees with an exercise price of $50.30, exercisable for a period of ten years, vesting 1/3 each upon the Company’s common stock having an average closing sale price equal to or exceeding each of $60.00, $70.00 and $80.00 per share for 20 consecutive trading days, subject to a one year minimum service period prior to vesting.

 

On March 31, 2016, 108, 541 and 1,320 options with exercise prices of $98.70, $66.80 and $59.50, respectively, were forfeited.

 

The assumptions used in the valuation of stock options granted during the three months ended March 31, 2017 and 2016 were as follows:

 

    Three Months Ended 
March 31, 2017
    Three Months Ended 
March 31, 2016
 
Risk-free interest rate     1.99% to 2.29 %
    0.85% to 1.86 %
Expected term of option     5.00 to 7.91 years       6.00 to 9.06 years  
Expected stock price volatility     76.61% to 76.77 %     76.41% to 81.59 %
Expected dividend yield   $ 0.0     $ 0.0  

 

The risk-free interest rate is based on the yield of Daily U.S. Treasury Yield Curve Rates with terms equal to the expected term of the options as of the grant date. The expected term of options is determined using the simplified method, as provided in an SEC Staff Accounting Bulletin, and the expected stock price volatility is based on comparable companies’ historical stock price volatility since the Company does not have sufficient historical exercise or volatility data because its equity shares have been publicly traded for only a limited period of time.

 

Stock-based compensation expense relating to options granted of $0.5 million and $0.8 million was recognized for the three month periods ended March 31, 2017 and 2016, respectively.

 

As of March 31, 2017, the Company had approximately $1.6 million of total unrecognized compensation cost related to non-vested awards granted under the Plans, which the Company expects to recognize over a weighted average period of 1.39 years.

 

2014 employee stock purchase plan

 

On June 9, 2014, the Company’s stockholders approved the Tonix Pharmaceuticals Holdings Corp. 2014 Employee Stock Purchase Plan (the “2014 ESPP”). The 2014 ESPP allows eligible employees to purchase up to an aggregate of 30,000 shares of the Company’s common stock. Under the 2014 ESPP, on the first day of each offering period, each eligible employee for that offering period has the option to enroll for that offering period, which allows the eligible employees to purchase shares of the Company’s common stock at the end of the offering period. Each offering period under the 2014 ESPP is for six months, which can be modified from time-to-time. Subject to limitations, each participant will be permitted to purchase a number of shares determined by dividing the employee’s accumulated payroll deductions for the offering period by the applicable purchase price, which is equal to 85 percent of the fair market value of our common stock at the beginning or end of each offering period, whichever is less. A participant must designate in his or her enrollment package the percentage (if any) of compensation to be deducted during that offering period for the purchase of stock under the 2014 ESPP, subject to the statutory limit under the Code. As of March 31, 2017, there were 19,449 shares available for future issuance under the 2014 ESPP. 

 

The 2014 ESPP is considered a compensatory plan with the related compensation cost written off over the six month offering period. The compensation expense related to the 2014 ESPP for the quarters ended March 31, 2017 and 2016 was $36,000 and $59,000, respectively. As of March 31, 2017, approximately $42,000 of employee payroll deductions, which had been withheld since January 1, 2017, the commencement of the offering period ending June 30, 2017, are included in accrued expenses in the accompanying balance sheet. In January 2017, 2,496 shares that were purchased as of December 31, 2016, were issued under the 2014 ESPP, and approximately $10,000 of employee payroll deductions accumulated at December 31, 2016, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital. 

 

Restricted stock units

 

In February 2017, 5,625 RSUs that were granted to our non-employee directors for board services in 2016, in lieu of cash, with a one year vesting from the grant date and a fair value of $38.10 at the date of grant vested, and 5,625 shares of the Company’s common stock were issued during the three months ended March 31, 2017.

 

The following table summarizes the restricted stock activity for the three months ended March 31, 2017:

 

Restricted stock units as of January 1, 2017     11,250  
Granted     -  
Forfeited     -  
Vested     (5,625 )
Unvested restricted stock units as of March 31, 2017     5,625  

 

Stock-based compensation expense related to RSU grants was $50,000 and $79,000 for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, the stock-based compensation relating to RSU’s of $21,000 remains unamortized and is expected to be amortized over the remaining period of two months.

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STOCK WARRANTS
3 Months Ended
Mar. 31, 2017
Stock Warrants  
STOCK WARRANTS

NOTE 7 – STOCK WARRANTS

 

The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at March 31, 2017:

 

Exercise     Number     Expiration
Price     Outstanding     Date
$ 6.30       546,250     October 2021
$ 6.90       47,361     October 2021
$ 42.50       91,898     August 2018
$ 120.00       45,601     December 2017 to February 2018
$ 250.00       2,334     January 2019 to February 2019
          733,444      

 

During the quarter ended March 31, 2017, 33,089 warrants with an exercise price of $250.00 expired.

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COMMITMENTS
3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS

NOTE 8 – COMMITMENTS 

 

Research and development contracts

 

The Company has entered into contracts with various contract research organizations with outstanding commitments aggregating approximately $6.1 million at March 31, 2017 for future work to be performed.

 

Operating leases

 

As of March 31, 2017, future minimum lease payments under operating leases for office space were as follows (in thousands):

 

Year Ending December 31,      
2017   $ 387  
2018     459  
2019     181  
    $ 1,027  

 

Defined contribution plan

 

Approved by the Company’s Board of Directors on March 3, 2014, effective April 1, 2014, the Company established a qualified defined contribution plan (the “401(k) Plan”) pursuant to Section 401(k) of the Code, whereby all eligible employees may participate. Participants may elect to defer a percentage of their annual pretax compensation to the 401(k) Plan, subject to defined limitations. The Company is required to make contributions to the 401(k) Plan equal to 100 percent of each participant’s pretax contributions of up to three percent of his or her eligible compensation, and the Company is also required to make a contribution equal to three percent of each participant’s salary, on an annual basis, subject to limitations under the Code. For the three months ended March 31, 2017 and 2016, the Company charged operations $16,000 and $133,000, respectively, for contributions under the 401(k) Plan.

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SUBSEQUENT EVENT
3 Months Ended
Mar. 31, 2017
Subsequent Events [Abstract]  
SUBSEQUENT EVENT

NOTE 9 – SUBSEQUENT EVENTS

 

April 2017 financing

 

On March 30, 2017, the Company entered into an underwriting agreement with Aegis Capital Corp., as representative of the several underwriters (collectively, the “2017 Underwriters”), relating to the issuance and sale of 1,800,000 shares of the Company’s common stock, in an underwritten public offering (the “April 2017 Financing”). The public offering price for each share of common stock was $4.45. The Company granted the 2017 Underwriters an option to purchase up to an additional 270,000 shares of common stock to cover over-allotments, if any.

 

The April 2017 Financing closed on April 4, 2017. The 2017 Underwriters purchased the shares at a seven percent discount to the public offering price, for an aggregate discount of $0.6 million (or $0.31 per share). The Company also expects to incur offering expenses of approximately $0.2 million. The Company expects to receive net proceeds of approximately $7.2 million. On April 13, 2017, the 2017 Underwriters fully exercised the over-allotment option and purchased 270,000 shares of common stock for net proceeds of approximately $1.1 million, net of an aggregate discount of $0.1 million (or $0.31 per share).

 

At-the-market offering

 

In April 2017, the Company sold an aggregate of 1,251,928 shares of common stock using the ATM, resulting in net proceeds of $8.0 million, net of expenses, which included Cowen’s commission of approximately $0.2 million. With these sales, the Company has sold all $15 million of shares under the Sales Agreement, and the Sales Agreement has been terminated.

XML 29 R19.htm IDEA: XBRL DOCUMENT v3.7.0.1
SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Interim financial statements

Interim financial statements

 

The unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

 

The condensed consolidated balance sheet as of December 31, 2016 contained herein has been derived from audited financial statements.

 

Operating results for the three months ended March 31, 2017 are not necessarily indicative of results that may be expected for the year ending December 31, 2017. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on April 13, 2017.

Recent accounting pronouncements

Recent accounting pronouncements

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted.  Lessees (for capital and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. The Company is currently evaluating the impact of adopting this guidance.

Risks and uncertainties

Risks and uncertainties

 

The Company's primary efforts are devoted to conducting research and development of innovative pharmaceutical products to address public health challenges. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. Further, the Company does not have any commercial products available for sale and has not generated revenues and there is no assurance that if its products are approved for sale, that the Company will be able to generate cash flow to fund operations. In addition, there can be no assurance that the Company's research and development will be successfully completed or that any product will be approved or commercially viable.

 

At March 31, 2017, the Company had working capital of approximately $21.7 million, after raising approximately $1.1 million, net of expenses, through the at-the-market (“ATM”) offering during the quarter ended March 31, 2017.

 

At March 31, 2017, the Company had cash and marketable securities of approximately $22.4 million, which together with approximately $16.3 million of net proceeds from the sales of common stock subsequent to March 31, 2017 (see Note 9), constitutes sufficient funds for the Company to meet its research and development and other funding requirements for at least the next 12 months.

Use of estimates

Use of estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the useful life of fixed assets, assumptions used in the fair value of stock-based compensation and other equity instruments, and the percent of completion of research and development contracts.

Cash equivalents

Cash equivalents

 

The Company considers cash equivalents to be those investments which are highly liquid, readily convertible to cash and have an original maturity of three months or less when purchased. At March 31, 2017 and December 31, 2016, cash equivalents, which consisted of money market funds, amounted to $14.7 million and $10.0 million, respectively.

Marketable securities

Marketable securities 

 

Marketable securities consist primarily of certificates of deposit, U.S. agency, and U.S. treasury bonds with maturities greater than three months and up to two years at the time of purchase. These securities, which are classified as available for sale, are carried at fair value, with unrealized gains and losses, net of any tax effect, reported in stockholders’ equity as accumulated other comprehensive (loss) income. As investments are available for current operations, they are classified as current irrespective of their maturities. Amortization of premiums is included in interest income. For the quarters ended March 31, 2017 and 2016, the amortization of bond premiums totaled $6,000 and $24,000, respectively. As of March 31, 2017, amortized cost basis of the securities approximated their fair value. The values of these securities may fluctuate as a result of changes in market interest rates and credit risk. Marketable securities with a principal balance aggregating $4.7 million matured during the quarter ended March 31, 2017. 

 

The schedule of maturities at March 31, 2017 and December 31, 2016 is as follows (in thousands): 

 

    1 Year or Less  
    March 31, 2017     December 31, 2016  
U.S. treasury bonds   $ 1,500     $ 2,752  
U.S. agency bonds     -       1,254  
Certificates of deposit     980       3,174  
Total   $ 2,480     $ 7,180  

 

Property and equipment

Property and equipment

 

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset's estimated useful life, which is three years for computer assets, five years for furniture and all other equipment and term of lease for leasehold improvements. Expenditures for maintenance and repairs are expensed as incurred. Depreciation and amortization expense for the quarters ended March 31, 2017 and 2016 was $18,000 and $33,000, respectively. All property and equipment is located in the United States.

Intangible asset with indefinite lives

Intangible asset with indefinite lives

 

Prior to January 1, 2017, the Company purchased certain internet domain rights, which were determined to have an indefinite life. Identifiable intangibles with indefinite lives are not amortized but are reviewed for impairment annually or whenever events or changes in circumstances indicate that its carrying amount may be less than fair value. As of March 31, 2017, the Company believed that no impairment existed.

Research and development costs

Research and development costs

 

The Company outsources certain of its research and development efforts and expenses these costs as incurred, including the cost of manufacturing products for testing, as well as licensing fees and costs associated with planning and conducting clinical trials. The value ascribed to patents and other intellectual property acquired has been expensed as research and development costs, as such property related to particular research and development projects and had no alternative future uses.

 

The Company estimates its expenses resulting from its obligations under contracts with vendors, clinical research organizations and consultants and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. The Company accounts for trial expenses according to the timing of various aspects of the trial. The Company determines accrual estimates taking into account discussion with applicable personnel and outside service providers as to the progress or state of consummation of trials, or the services completed.

 

During the course of a clinical trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates. The Company makes estimates of its accrued expenses as of each balance sheet date based on the facts and circumstances known to it at that time. The Company’s clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors.

Stock-based compensation

Stock-based compensation

 

All stock-based payments to employees and to nonemployee directors for their services as directors, including grants of restricted stock units (“RSUs”), and stock options, are measured at fair value on the grant date and recognized in the condensed consolidated statements of operations as compensation or other expense over the relevant service period.

 

Stock-based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable, the measurement date is the date the award is issued.

Foreign currency translation

Foreign currency translation

 

Operations of the Canadian subsidiary are conducted in local currency which represents its functional currency. The U.S. dollar is the functional currency of the other foreign subsidiaries. Balance sheet accounts of the Canadian subsidiary were translated from foreign currency into U.S. dollars at the exchange rate in effect at the balance sheet date and income statement accounts were translated at the average rate of exchange prevailing during the period. Translation adjustments resulting from this process were included in accumulated other comprehensive income (loss) on the condensed consolidated balance sheets.

Comprehensive income (loss)

Comprehensive income (loss)

 

Comprehensive income (loss) is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Other comprehensive income (loss) represents foreign currency translation adjustments and unrealized gains or losses from available for sale securities.

 

The following table summarizes the changes in accumulated other comprehensive income by component:

 

    Foreign Currency Translation
Adjustment
    Unrealized Gains (Losses)
on available for sale
securities
    Total  
Balance at December 31, 2016     (7 )     -       (7 )
Other Comprehensive Loss     (1 )     -       (1 )
Balance at March 31, 2017     (8 )     -       (8 )
Income taxes

Income taxes

 

Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized.

 

The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of March 31, 2017, the Company has not recorded any unrecognized tax benefits.

Per share data

Per share data

 

Basic and diluted net loss per common share is calculated by dividing net loss, by the weighted average number of outstanding shares of common stock, adjusted to give effect to the 1-for-10 reverse stock split, which was effected on March 17, 2017 (see Note 4).

 

As of March 31, 2017 and 2016, there were outstanding warrants to purchase an aggregate of 733,444 and 172,922 shares, respectively, of the Company’s common stock. In addition, the Company has issued to employees, directors and consultants, options to acquire shares of the Company’s common stock, of which 307,426 and 223,996 were outstanding at March 31, 2017 and 2016, respectively, and restricted stock units issued to non-employee directors to acquire shares of the Company’s common stock of which 5,625 were outstanding at each of March 31, 2017 and 2016 (see Note 6). In computing diluted net loss per share for the three months ended March 31, 2017 and 2016, no effect has been given to such options, warrants and restricted stock units as their effect would be anti-dilutive.

XML 30 R20.htm IDEA: XBRL DOCUMENT v3.7.0.1
SIGNIFICANT ACCOUNTING POLICIES (Tables)
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Schedule of maturities for marketable securities

The schedule of maturities at March 31, 2017 and December 31, 2016 is as follows (in thousands): 

 

    1 Year or Less  
    March 31, 2017     December 31, 2016  
U.S. treasury bonds   $ 1,500     $ 2,752  
U.S. agency bonds     -       1,254  
Certificates of deposit     980       3,174  
Total   $ 2,480     $ 7,180  
Schedule of accumulated other comprehensive income

The following table summarizes the changes in accumulated other comprehensive income by component:

 

    Foreign Currency Translation
Adjustment
    Unrealized Gains (Losses)
on available for sale
securities
    Total  
Balance at December 31, 2016     (7 )     -       (7 )
Other Comprehensive Loss     (1 )     -       (1 )
Balance at March 31, 2017     (8 )     -       (8 )
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
FAIR VALUE MEASUREMENTS (Tables)
3 Months Ended
Mar. 31, 2017
Fair Value Disclosures [Abstract]  
Schedule of financial assets measured at fair value on a recurring basis

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016 (in thousands):

 

Description   March 31,
2017
    Quoted Prices in
Active Markets
(Level 1)
 
Assets:                
Cash equivalents   $ 14,749     $ 14,749  
Marketable securities – available for sale     2,480       2,480  
                 
Total assets   $ 17,229     $ 17,229  

 

Description   December 31,
2016
    Quoted Prices in
Active Markets
(Level 1)
    Significant Other
Observable Inputs
(Level 2)
 
Assets:                        
Cash equivalents   $ 10,006     $ 10,006     $  
Marketable securities – available for sale     7,180       5,926       1,254  
                         
Total assets   $ 17,186     $ 15,932     $ 1,254
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.7.0.1
STOCK BASED COMPENSATION (Tables)
3 Months Ended
Mar. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of stock option activity

The schedule of maturities at March 31, 2017 and December 31, 2016 is as follows (in thousands): 

 

    1 Year or Less  
    March 31,
2017
    December 31, 2016  
U.S. treasury bonds   $ 1,500     $ 2,752  
U.S. agency bonds     -       1,254  
Certificates of deposit     980       3,174  
Total   $ 2,480     $ 7,180  
Schedule of fair value assumptions of stock option

The assumptions used in the valuation of stock options granted during the three months ended March 31, 2017 and 2016 were as follows:

 

    Three Months Ended 
March 31, 2017
    Three Months Ended 
March 31, 2016
 
Risk-free interest rate     1.99% to 2.29 %
    0.85% to 1.86 %
Expected term of option     5.00 to 7.91 years       6.00 to 9.06 years  
Expected stock price volatility     76.61% to 76.77 %     76.41% to 81.59 %
Expected dividend yield   $ 0.0     $ 0.0
Schedule of restricted stock activity

The following table summarizes the restricted stock activity for the three months ended March 31, 2017:

 

Restricted stock units as of January 1, 2017     11,250  
Granted     -  
Forfeited     -  
Vested     (5,625 )
Unvested restricted stock units as of March 31, 2017     5,625
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.7.0.1
STOCK WARRANTS (Tables)
3 Months Ended
Mar. 31, 2017
Stock Warrants  
Schedule of warrants to purchase common stock

The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at March 31, 2017:

 

Exercise     Number     Expiration
Price     Outstanding     Date
$ 6.30       546,250     October 2021
$ 6.90       47,361     October 2021
$ 42.50       91,898     August 2018
$ 120.00       45,601     December 2017 to February 2018
$ 250.00       2,334     January 2019 to February 2019
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
COMMITMENTS (Tables)
3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Schedule of future minimum lease payments

As of March 31, 2017, future minimum lease payments under operating leases for office space were as follows (in thousands):

 

Year Ending December 31,      
2017   $ 387  
2018     459  
2019     181  
    $ 1,027
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.7.0.1
SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)
$ in Thousands
Mar. 31, 2017
Dec. 31, 2016
Schedule of Trading Securities and Other Trading Assets [Line Items]    
1 Year or Less $ 2,480 $ 7,180
U.S. Treasury Bonds [Member]    
Schedule of Trading Securities and Other Trading Assets [Line Items]    
1 Year or Less 1,500 2,752
U.S Agency Bonds [Member]    
Schedule of Trading Securities and Other Trading Assets [Line Items]    
1 Year or Less 1,254
Certificates Of Deposit [Member]    
Schedule of Trading Securities and Other Trading Assets [Line Items]    
1 Year or Less $ 980 $ 3,174
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.7.0.1
SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Increase (Decrease) in Stockholders' Equity [Roll Forward]    
Balance, at beginning $ (7)  
Other Comprehensive Loss (1) $ 43
Balance, at end (8)  
Foreign Currency Translation Adjustment [Member]    
Increase (Decrease) in Stockholders' Equity [Roll Forward]    
Balance, at beginning (7)  
Other Comprehensive Loss (1)  
Balance, at end (8)  
Unrealized Gains (Losses) On Available For Sale Securities [Member]    
Increase (Decrease) in Stockholders' Equity [Roll Forward]    
Balance, at beginning  
Other Comprehensive Loss  
Balance, at end  
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.7.0.1
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Apr. 28, 2016
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Working capital   $ 21,700    
Cash equivalents   14,700   $ 10,000
Cash and marketable securities   22,400    
Net proceeds from sales of common stock   16,300    
Amortization of bond premiums   6 $ 24  
Maturities of marketable securities   4,694 4,783  
Depreciation and amortization expense   $ 18,000 $ 33,000  
Reverse stock split  

1-for-10

   
Warrant [Member]        
Number of antidilutive securities excluded from computation of earnings per share   733,444 172,922  
Stock Option [Member] | Employees, Directors and Consultants [Member]        
Number of antidilutive securities excluded from computation of earnings per share   307,426 223,996  
Restricted Stock [Member]        
Number of antidilutive securities excluded from computation of earnings per share   5,625 5,625  
Computer Assets [Member]        
Estimated useful life of property and equipment   3 years    
Furniture And All Other Equipment [Member]        
Estimated useful life of property and equipment   5 years    
Leasehold Improvements [Member]        
Estimated useful life of property and equipment   5 years    
Minimum [Member]        
Available-for-sale securities maturity period   3 months    
Maximum [Member]        
Available-for-sale securities maturity period   2 years    
Sales Agreement [Member] | Cowen and Company LLC [Member] | At-The-Market Offering [Member]        
Net proceeds from issuance of common stock $ 15,000 $ 1,100    
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.7.0.1
FAIR VALUE MEASUREMENTS (Details) - Fair Value, Measurements, Recurring [Member] - USD ($)
$ in Thousands
Mar. 31, 2017
Dec. 31, 2016
Assets:    
Cash equivalents $ 14,749 $ 10,006
Marketable securities - available for sale 2,480 7,180
Total assets 17,229 17,186
Quoted Prices In Active Markets (Level 1) [Member]    
Assets:    
Cash equivalents 14,749 10,006
Marketable securities - available for sale 2,480 5,926
Total assets $ 17,229 15,932
Significant Other Observable Inputs (Level 2) [Member]    
Assets:    
Cash equivalents  
Marketable securities - available for sale   1,254
Total assets   $ 1,254
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.7.0.1
STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares
3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Stockholders' equity:    
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Shares outstanding, before reverse stock split 41,010,720  
Subsequent changes to number of common shares 4,101,072  
Additional number of shares issued relating to reverse stock split 1,034  
Common stock, authorized 15,000,000 15,000,000
Common stock, previously authorized 150,000,000  
Reverse stock split effective date Mar. 17, 2017  
Reverse stock split

1-for-10

 
XML 40 R30.htm IDEA: XBRL DOCUMENT v3.7.0.1
SALE OF COMMON STOCK (Details Narrative) - Sales Agreement [Member] - Cowen and Company LLC [Member] - At-The-Market Offering [Member] - USD ($)
$ in Thousands
3 Months Ended
Apr. 28, 2016
Mar. 31, 2017
Number of shares issued   234,546
Net proceeds from issuance of common stock $ 15,000 $ 1,100
Percentage of selling commission 3.00%  
Net of expenses   $ 34,000
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.7.0.1
STOCK-BASED COMPENSATION (Details)
3 Months Ended
Mar. 31, 2017
$ / shares
shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]  
Outstanding at begining 217,426
Grants 90,000
Exercised
Forfeitures or expirations
Outstanding at end 307,426
Vested and expected to vest at end 307,426
Exercisable at end 150,506
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]  
Outstanding at begining | $ / shares $ 91.33
Grants | $ / shares 5.50
Forfeitures or expirations | $ / shares
Outstanding at end | $ / shares 66.21
Vested and expected to vest at end | $ / shares 66.21
Exercisable at end | $ / shares $ 108.95
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term [Roll Forward]  
Outstanding at end 8 years 3 months 4 days
Vested and expected to vest at end 8 years 3 months 4 days
Exercisable at end 7 years 1 month 10 days
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.7.0.1
STOCK-BASED COMPENSATION (Details 1)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Expected dividend yield 0.00% 0.00%
Minimum [Member]    
Risk-free interest rate 1.99% 0.85%
Expected term of option 5 years 6 years
Expected stock price volatility 76.61% 76.41%
Maximum [Member]    
Risk-free interest rate 2.29% 1.86%
Expected term of option 7 years 10 months 28 days 9 years 21 days
Expected stock price volatility 76.77% 81.59%
XML 43 R33.htm IDEA: XBRL DOCUMENT v3.7.0.1
STOCK-BASED COMPENSATION (Details 2)
3 Months Ended
Mar. 31, 2017
shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]  
Granted 5,625
Restricted Stock Units [Member]  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]  
Restricted stock units at begining 11,250
Granted
Forfeited
Vested (5,625)
Unvested restricted stock units at end 5,625
XML 44 R34.htm IDEA: XBRL DOCUMENT v3.7.0.1
STOCK-BASED COMPENSATION (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended
Dec. 31, 2017
Mar. 01, 2017
May 11, 2016
Feb. 09, 2016
Jun. 09, 2014
Feb. 28, 2017
Jan. 31, 2017
Apr. 30, 2012
Mar. 31, 2017
Mar. 31, 2016
Number of shares granted other than option                 5,625  
Stock-based compensation expense                 $ 567 $ 896
Number of shares granted options to purchase                 90,000  
Exercise price (in dollars price per share)                 $ 5.50  
Exercisable, weighted average remaining contractual term                 7 years 1 month 10 days  
Stock Option [Member]                    
Stock-based compensation expense                 $ 500 $ 800
Unrecognized compensation cost                 $ 1,600  
Unrecognized weighted average period                 1 year 4 months 20 days  
Stock Option [Member] | Exercise Price @$98.70 [Member]                    
Options cancelled                   108,541
Exercise prices of forfeited shares (in dollars per share)                   $ 98.70
Stock Option [Member] | Exercise Price @$66.80 [Member]                    
Options cancelled                   108,541
Exercise prices of forfeited shares (in dollars per share)                   $ 66.80
Stock Option [Member] | Exercise Price @59.50 [Member]                    
Options cancelled                   1,320
Exercise prices of forfeited shares (in dollars per share)                   $ 59.50
Restricted Stock Units [Member]                    
Number of shares granted other than option                  
Stock-based compensation expense                 $ 50 $ 79
Unrecognized compensation cost                 $ 21,000  
Unrecognized weighted average period                 2 months  
Employee [Member]                    
Vesting period       1 year            
Weighted average grant date fair value other than option (in dollars per share)   $ 3.36   $ 24.91            
Description of award vesting rights  

Vesting 1/3 on the first anniversary and 1/36th each month thereafter for 24 months.

               
Number of shares granted options to purchase   61,750   40,300            
Exercise price (in dollars price per share)   $ 5.50   $ 50.30            
Exercisable, weighted average remaining contractual term   10 years   10 years            
Employee [Member] | Common Stock [Member]                    
Description of award vesting rights      

Vesting 1/3 each upon the Company’s common stock having an average closing sale price equal to or exceeding each of $60.00, $70.00 and $80.00 per share for 20 consecutive trading days, subject to a one year minimum service period prior to vesting.

           
Number of shares granted options to purchase       20,000            
Exercise price (in dollars price per share)       $ 50.30            
Exercisable, weighted average remaining contractual term       10 years            
Employee [Member] | Subsequent Event [Member]                    
Description of award vesting rights

Vesting 50% upon achieving enrollment of 250 participants in the ongoing HONOR study by December 31, 2017, and the remaining 50% vesting 1% for each participant that is enrolled in the HONOR study by December 31, 2017 in excess of 250, subject to a one year minimum service period prior to vesting.

                 
Number of shares granted options to purchase 28,250                  
Exercise price (in dollars price per share) $ 5.50                  
Exercisable, weighted average remaining contractual term 10 years                  
Employee [Member] | Subsequent Event [Member] | Minimum [Member]                    
Vesting period 1 year                  
2012 Incentive Stock Option Plan [Member]                    
Number of shares authorized               55,000    
Description of award vesting rights              

Stock options granted pursuant to the Plans typically vest 1/3rd 12 months from the date of grant and 1/36th each month thereafter for 24 months and expire ten years from the date of grant. In addition, the Company also issues performance-based options to executive officers, which options vest when the target parameters are met, subject to a one year minimum service period prior to vesting.

   
2014 Incentive Stock Option Plan [Member]                    
Number of shares authorized         180,000          
Description of award vesting rights        

Stock options granted pursuant to the Plans typically vest 1/3rd 12 months from the date of grant and 1/36th each month thereafter for 24 months and expire ten years from the date of grant. In addition, the Company also issues performance-based options to executive officers, which options vest when the target parameters are met, subject to a one year minimum service period prior to vesting.

         
2014 Incentive Stock Option Plan [Member] | Non-Employees Directors [Member] | Restricted Stock Units [Member]                    
Vesting period           1 year        
Number of shares granted other than option           5,625        
Weighted average grant date fair value other than option (in dollars per share)           $ 38.10        
2016 Incentive Stock Option Plan [Member]                    
Number of shares authorized     278,500              
Description of terms of exercise price    

The exercise price of an incentive stock option may not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more shareholder and 100% of fair value for a grantee who is not a 10% shareholder.

             
Vesting period     5 years              
Expiration period     10 years              
Number of shares reserved for future issuance     278,500           122,596  
Maximum number of shares issued pursuant to stock-settled awards     75,000              
Description of award under stock incentive plan    

(i) be granted options or SARs with respect to more than 75,000 shares of the Company’s common stock, (ii) earn more than 50,000 shares of the Company’s common stock under restricted stock awards, restricted stock unit awards, performance awards and/or other share-based awards, or (iii) earn more than $5,000,000 under an award; provided, however, that each of these limitations shall be multiplied by two

             
Description of stock-settled awards    

The calculation shall be based on one share for every one share that was subject to an option or SAR and 1.25 shares for every one share that was subject to an award other than an option or SAR.

             
Description of award vesting rights    

Stock options granted pursuant to the Plans typically vest 1/3rd 12 months from the date of grant and 1/36th each month thereafter for 24 months and expire ten years from the date of grant. In addition, the Company also issues performance-based options to executive officers, which options vest when the target parameters are met, subject to a one year minimum service period prior to vesting.

             
2014 Employee Stock Purchase Plan [Member]                    
Number of shares authorized         30,000          
Number of shares reserved for future issuance                 19,449  
Stock-based compensation expense                 $ 36 $ 59
Employee payroll deductions             $ 10,000   $ 42  
Number of shares issued under ESPP             2,496      
XML 45 R35.htm IDEA: XBRL DOCUMENT v3.7.0.1
STOCK WARRANTS (Details)
3 Months Ended
Mar. 31, 2017
$ / shares
shares
Class of Warrant or Right [Line Items]  
Number Outstanding 733,444
Warrant One [Member]  
Class of Warrant or Right [Line Items]  
Exercise Price (in dollars per share) | $ / shares $ 6.30
Number Outstanding 546,250
Expiration Date 2021-10
Warrant Two [Member]  
Class of Warrant or Right [Line Items]  
Exercise Price (in dollars per share) | $ / shares $ 6.90
Number Outstanding 47,361
Expiration Date 2021-10
Warrant Three [Member]  
Class of Warrant or Right [Line Items]  
Exercise Price (in dollars per share) | $ / shares $ 42.50
Number Outstanding 91,898
Expiration Date 2018-08
Warrant Four [Member]  
Class of Warrant or Right [Line Items]  
Exercise Price (in dollars per share) | $ / shares $ 120.00
Number Outstanding 45,601
Warrant Four [Member] | Minimum [Member]  
Class of Warrant or Right [Line Items]  
Expiration Date 2017-12
Warrant Four [Member] | Maximum [Member]  
Class of Warrant or Right [Line Items]  
Expiration Date 2018-02
Warrant Five [Member]  
Class of Warrant or Right [Line Items]  
Exercise Price (in dollars per share) | $ / shares $ 250.00
Number Outstanding 2,334
Warrant Five [Member] | Minimum [Member]  
Class of Warrant or Right [Line Items]  
Expiration Date 2019-01
Warrant Five [Member] | Maximum [Member]  
Class of Warrant or Right [Line Items]  
Expiration Date 2019-02
XML 46 R36.htm IDEA: XBRL DOCUMENT v3.7.0.1
STOCK WARRANTS (Details Narrative) - Warrant [Member]
Mar. 31, 2017
$ / shares
shares
Exercise Price (in dollars per share) | $ / shares $ 250.00
Number of warrants exercisable | shares 33,089
XML 47 R37.htm IDEA: XBRL DOCUMENT v3.7.0.1
COMMITMENTS (Details)
$ in Thousands
Mar. 31, 2017
USD ($)
Year Ending December 31,  
2017 $ 387
2018 459
2019 181
Total $ 1,027
XML 48 R38.htm IDEA: XBRL DOCUMENT v3.7.0.1
COMMITMENTS (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Defined Contribution Plan Disclosure [Line Items]    
Outstanding commitments $ 6,100  
Qualified Defined Contribution Plan [Member]    
Defined Contribution Plan Disclosure [Line Items]    
Employer matching contribution 100.00%  
Maximum annual contributions per employee 3.00%  
Maximum annual contributions per employer 3.00%  
Administrative expenses $ 16 $ 133
XML 49 R39.htm IDEA: XBRL DOCUMENT v3.7.0.1
SUBSEQUENT EVENT (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended
Apr. 13, 2017
Apr. 04, 2017
Mar. 30, 2017
Apr. 28, 2016
Apr. 30, 2017
Mar. 31, 2017
Mar. 31, 2016
Proceeds from issuance of shares           $ 1,102
Underwriting Agreement [Member] | Aegis Capital Corp. [Member] | Underwritten Public Offering [Member]              
Number of shares sold     1,800,000        
Sale of stock price per share     $ 4.45        
Underwriting Agreement [Member] | Aegis Capital Corp. [Member] | 45 Days Over-Allotment Option [Member]              
Number of shares sold     270,000        
Sales Agreement [Member] | Cowen and Company LLC [Member] | At-The-Market Offering [Member]              
Number of shares issued           234,546  
Net proceeds from issuance of common stock       $ 15,000   $ 1,100  
Subsequent Event [Member] | Underwriting Agreement [Member] | Underwritten Public Offering [Member]              
Proceeds from issuance of shares   $ 7,200          
Commission on issuance of shares   $ 600          
Sale of stock price per share   $ 0.31          
Discount on purchase of shares   7.00%          
Offering expenses   $ 200          
Subsequent Event [Member] | Underwriting Agreement [Member] | 45 Days Over-Allotment Option [Member]              
Number of shares sold 270,000            
Proceeds from issuance of shares $ 1,100            
Commission on issuance of shares $ 100            
Sale of stock price per share $ 0.31            
Subsequent Event [Member] | Sales Agreement [Member] | Cowen and Company LLC [Member] | At-The-Market Offering [Member]              
Number of shares sold         15,000    
Number of shares issued         1,251,928    
Net proceeds from issuance of common stock         $ 8,000    
Selling commission         $ 200    
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