Tonix Pharmaceuticals Holding Corp

Previous wording

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: the COVID-19 pandemic, including its impact on the Company, 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.

Current wording

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.

Previous wording

Tonix is a fully-integrated biopharmaceutical company focused on developing, licensing and commercializing therapeutics to treat and prevent human disease and alleviate suffering. Tonix’s development portfolio is focused on central nervous system (CNS) disorders. Tonix’s priority is to submit a New Drug Application (NDA) to the FDA in the second half of 2024 for TNX-102 SL, a product candidate for which two statistically significant Phase 3 studies have been completed for the management of fibromyalgia. TNX-102 SL for fibromyalgia was granted Fast Track designation by the FDA. Tonix expects a decision on marketing approval from the FDA in 2025. TNX-102 SL is also expected to be tested by the University of North Carolina under a physician IND for Acute Stress Reaction in a trial funded by the U.S. Department of Defense (DoD), Congressionally Directed Medical Research Program, or CDMRP for approximately $3 million. Tonix’s CNS portfolio includes TNX-1300 (cocaine esterase), a biologic designed to treat cocaine intoxication that has FDA Breakthrough Therapy designation. Tonix’s immunology development portfolio consists of biologics to address organ transplant rejection, autoimmunity and cancer, including TNX-1500, which is a humanized monoclonal antibody targeting CD40-ligand (CD40L or CD154) being developed for the prevention of allograft rejection and for the treatment of autoimmune diseases. Tonix also has product candidates in development in the areas of rare disease and infectious disease. Tonix’s infectious disease portfolio includes TNX-4200, an oral CD45 antagonist in development as a broad-spectrum antiviral. The program was awarded a contract for up to $34 million of funding by the U.S. Department of Defense (DoD), Defense Threat Reduction Agency (DTRA), to establish physicochemical properties, pharmacokinetics, and safety attributes to support an Investigational New Drug (IND) submission and to fund a first-in-human Phase 1 clinical study. Tonix is developing TNX-801 (recombinant horsepox virus), for preventing mpox (formerly known as monkeypox). On August 14, 2024, the World Health Organization determined that the upsurge of mpox in a growing number of countries in Africa constitutes a public health emergency of international concern. Tonix owns and operates a state-of-the art infectious disease research facility in Frederick, MD. Tonix Medicines, our commercial subsidiary, markets Zembrace® SymTouch® (sumatriptan injection) 3 mg and Tosymra® (sumatriptan nasal spray) 10 mg for the treatment of acute migraine with or without aura in adults.

Current wording

We are a fully integrated biopharmaceutical company focused on transforming therapies for pain management and vaccines for public health challenges. Our priority is to advance our TNX-102 SL product candidate for the management of fibromyalgia, for which a New Drug Application (“NDA”) was submitted to the U.S. Food and Drug Administration (“FDA”) in October 2024, based on two statistically significant Phase 3 studies. The FDA granted Fast Track designation to TNX-102 SL for the management of fibromyalgia in the third quarter. We expect an FDA decision on the acceptance of the NDA for review and PDUFA date in December and if accepted, a decision on NDA approval in 2025. Fibromyalgia is a common chronic pain condition that affects mostly women. Fibromyalgia is now recognized as the prototypic nociplastic pain syndrome. TNX-102 SL is a non-opioid, centrally acting analgesic developed for long-term use in fibromyalgia. If approved, TNX-102 SL would be the first new drug therapy for fibromyalgia in more than 15 years. TNX-102 SL is also being developed to treat acute stress reaction and acute stress disorder under a Physician-Initiated Investigational New Drug application (“IND”) at the University of North Carolina in the OASIS study funded by the U.S. Department of Defense (DoD). We expect to initiate enrollment in the OASIS study in the fourth quarter. Tonix’s CNS portfolio includes TNX-1300 (cocaine esterase), a biologic drug candidate in Phase 2 development designed to treat cocaine intoxication that has FDA Breakthrough Therapy designation, and its development is supported by a grant from the U.S. National Institute of Drug Abuse. Our immunology development portfolio includes TNX-1500, which is an Fc-modified humanized monoclonal antibody targeting CD40-ligand (CD40L or CD154) in Phase 1 development for the prevention of allograft rejection and for the treatment of autoimmune diseases. TNX-1700 is a fusion protein of TFF2 and albumin and is in the pre-IND stage of development to treat gastric and pancreatic cancer. We also have pre-clinical product candidates in development in the areas of rare disease, including TNX-2900 for Prader-Willi syndrome, and infectious disease, including TNX-801 a potential vaccine to prevent mpox and smallpox. We recently announced a contract with the U.S. DoD’s Defense Threat Reduction Agency (“DTRA”) for up to $34 million over five years to develop TNX-4200, small molecule broad-spectrum antiviral agents targeting CD45 for the prevention or treatment of infections to improve the medical readiness of military personnel in biological threat environments. We own and operate a state-of-the art infectious disease research facility in Frederick, MD. Tonix Medicines, our commercial subsidiary, markets Zembrace® SymTouch® (sumatriptan injection) 3 mg and Tosymra® (sumatriptan nasal spray) 10 mg for the treatment of acute migraine with or without aura in adults.

Previous wording

Tonix’s product development candidates are investigational new drugs or biologics and have not been approved for any indication.

Current wording

Our product development candidates are investigational new drugs or biologics and have not been approved for any indication.

Previous wording

Revenues. We recognized revenue beginning in July 2023, as a result of the acquisition of two marketed products. Revenue recognized for the quarter ended June 30, 2024, was $2.2 million.

Current wording

Revenues. We recognized revenue beginning in July 2023, as a result of the acquisition of two marketed products. Revenue recognized for the quarter ended September 30, 2024 and 2023, was $2.8 million and $4.0 million, respectively.

Previous wording

Cost of Sales*.* We recognized cost of sales beginning in July 2023 as a result of the acquisition of Zembrace and Tosymra from Upsher Smith. Cost of sales recognized for the quarter ended June 30, 2024, was $3.4 million, including write-downs related to Tosymra and Zembrace finished goods inventory of approximately $1.7 million based on an assessment of inventory on hand and projected sales prior to the respective expiration dates.

Current wording

Cost of Sales. We recognized cost of sales beginning in July 2023 as a result of the acquisition of Zembrace and Tosymra from Upsher Smith. Cost of sales recognized for the quarter ended September 30, 2024, was $1.6 million, including write-downs related to Tosymra finished goods inventory of approximately $0.3 million based on an assessment of inventory on hand and projected sales prior to the respective expiration dates. Cost of sales recognized for the quarter ended September 30, 2023, was $2.4 million.

Previous wording

Research and Development Expenses. Research and development expenses for the three months ended June 30, 2024 were $9.7 million, a decrease of $12.3 million, or 56%, from $22.0 million for the three months ended June 30, 2023. This decrease is predominately due to decreased clinical expenses of $3.8 million, non-clinal expenses of $3.9 million, manufacturing expenses of $1.5 million as a result of fewer trials in the clinic and pipeline prioritization period over period, employee-related expenses of $1.6 and lab supplies of $1.4 million due to a reduction in expenditures.

Current wording

Research and Development Expenses. Research and development expenses for the three months ended September 30, 2024 were $9.1 million, a decrease of $11.9 million, or 57%, from $21.0 million for the three months ended September 30, 2023. This decrease is predominately due to decreased clinical expenses of $5.3 million, non-clinal expenses of $2.8 million, manufacturing expenses of $0.5 million as a result of fewer trials in the clinic and pipeline prioritization period over period, employee-related expenses of $2.0 and lab supplies of $0.7 million due to a reduction in expenditures.

Previous wording

General and Administrative Expenses. General and administrative expenses for the three months ended June 30, 2024 were $7.5 million, an increase of $0.5 million, or 7%, from $7.0 million incurred in the three months ended June 30, 2023. The increase in primarily an increase in financial reporting expenses of $0.4 million, related to the shareholder meetings, an increase in sales and marketing of $0.5 million, offset by a decrease in employee-related expenses of $0.5 million.

Current wording

Selling, general and Administrative Expenses. General and administrative expenses for the three months ended September 30, 2024, were $7.7 million, a decrease of $1.0 million, or 11%, from $8.7 million incurred in the three months ended September 30, 2023. The decrease is primarily due to a decrease in employee-related expenses of $0.3 million, a decrease in the transactional services provided by Upsher Smith of $0.7 million and a decrease in sales and marketing of $0.4 million, offset by an increase in professional fees of $0.4 million.

Previous wording

Net Loss*.* As a result of the foregoing, the net loss for the three months ended June 30, 2024 was $78.8 million, an increase of $50.4 million, or 177%, compared to a net loss of $28.4 million for the three months ended June 30, 2023.

Current wording

Net Loss. As a result of the foregoing, the net loss for the three months ended September 30, 2024 was $14.2 million, a decrease of $13.8 million, or 49%, compared to a net loss of $28.0 million for the three months ended September 30, 2023.

Previous wording

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Current wording

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Previous wording

The following table sets forth our operating expenses for the six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table sets forth our operating expenses for the nine months ended September 30, 2024 and 2023 (in thousands):

Previous wording

Revenues. We recognized revenue beginning in July 2023, as a result of the acquisition of two marketed products. Revenue recognized for the six months ended June 30, 2024, was $4.7 million.

Current wording

Revenues. We recognized revenue beginning in July 2023, as a result of the acquisition of two marketed products. Revenue recognized for the nine months ended September 30, 2024 and 2023, was $7.5 million and $4.0 million, respectively.

Previous wording

Cost of Sales*.* We recognized cost of sales beginning in July 2023 as a result of the acquisition of Zembrace and Tosymra from Upsher Smith. Cost of sales recognized for the six months ended June 30, 2024, was $5.0 million, including write-downs related to Tosymra and Zembrace finished goods inventory of approximately $1.7 million based on an assessment of inventory on hand and projected sales prior to the respective expiration dates.

Current wording

Cost of Sales. We recognized cost of sales beginning in July 2023 as a result of the acquisition of Zembrace and Tosymra from Upsher Smith. Cost of sales recognized for the nine months ended September 30, 2024, was $6.6 million, including write-downs related to Tosymra and Zembrace finished goods inventory of approximately $2.0 million based on an assessment of inventory on hand and projected sales prior to the respective expiration dates. Cost of sales recognized for the nine months ended September 30, 2023, was $2.4 million

Previous wording

Research and Development Expenses. Research and development expenses for the six months ended June 30, 2024 were $22.6 million, a decrease of $25.9 million, or 53%, from $48.5 million for the six months ended June 30, 2023. This decrease is predominately due to decreased clinical expenses of $8.8 million, non-clinal expenses of $8.1 million, manufacturing expenses of $2.4 million as a result of fewer trials in the clinic and pipeline prioritization period over period, employee-related expenses of $2.4 and lab supplies of $3.2 million due to a reduction in expenditures.

Current wording

Research and Development Expenses. Research and development expenses for the nine months ended September 30, 2024 were $31.7 million, a decrease of $37.8 million, or 54%, from $69.5 million for the nine months ended September 30, 2023. This decrease is predominately due to decreased clinical expenses of $14.1 million, non-clinal expenses of $10.9 million, manufacturing expenses of $2.9 million as a result of fewer trials in the clinic and pipeline prioritization period over period, employee-related expenses of $4.4 and lab supplies of $3.8 million due to a reduction in expenditures.

Previous wording

The table below summarizes our direct research and development expenses for our product candidates and development platform for the six months ended June 30, 2024, and 2023.

Current wording

The table below summarizes our direct research and development expenses for our product candidates and development platform for the nine months ended September 30, 2024, and 2023.

Previous wording

General and Administrative Expenses. General and administrative expenses for the six months ended June 30, 2024 were $16.8 million, an increase of $2.4 million, or 17%, from $14.4 million incurred in the six months ended June 30, 2023. The increase is primarily due to an increase in financial reporting expenses of $1.0 million, related to the special shareholder meetings in 2024, an increase in sales and marketing of $0.8 million, and transition services agreement fees payable to Upsher Smith of $0.7 million.

Current wording

General and Administrative Expenses. General and administrative expenses for the nine months ended September 30, 2024 were $24.5 million, an increase of $1.4 million, or 6%, from $23.1 million incurred in the nine months ended September 30, 2023. The increase is primarily due to an increase in financial reporting expenses of $1.1 million, related to the special shareholder meetings in 2024, an increase in sales and marketing of $0.5 million, an increase in depreciation of property and equipment of $0.3 million and an increase in fees and permits of $0.4 million, related to licenses obtained to sell the migraine products, offset by a decrease in employee-related costs of $1.0 million, due to less employees.

Previous wording

Asset impairment charges*.* We recognized a non-cash impairment charge of $48.8 million related to property and equipment, a non-cash impairment of $1.0 million related to goodwill, and a non-cash impairment charge of $9.2 million related to intangible assets, which is reflected in asset impairment charges in the consolidated statements of operations for the three months ended June 30, 2024.

Current wording

Asset impairment charges. We recognized a non-cash impairment charge of $48.8 million related to property and equipment, a non-cash impairment of $1.0 million related to goodwill, and a non-cash impairment charge of $9.2 million related to intangible assets, which is reflected in asset impairment charges in the consolidated statements of operations for the nine months ended September 30, 2024.

Previous wording

Net Loss. As a result of the foregoing, the net loss for the six months ended June 30, 2024 was $93.7 million, an increase of $32.3 million, or 53%, compared to a net loss of $61.4 million for the six months ended June 30, 2023.

Current wording

Net Loss. As a result of the foregoing, the net loss for the nine months ended September 30, 2024 was $107.9 million, an increase of $18.6 million, or 21%, compared to a net loss of $89.3 million for the nine months ended September 30, 2023.

Previous wording

As of June 30, 2024, we had working capital of $3.2 million, comprised primarily of cash and cash equivalents of $4.2 million, Accounts receivable, net of $3.3 million, Inventory of $9.4 million and prepaid expenses and other of $8.3 million, offset by $10.4 million of accounts payable, $8.5 million of accrued expenses, short-term loan payable of $2.8 million, and current lease liabilities of $0.3 million. A significant portion of the accounts payable and accrued expenses are due to work performed in relation to our clinical programs, and the operations related to Zembrace and Tosymra. During the fourth quarter of 2023, we engaged CBRE, an international real estate brokerage firm, to potentially find a strategic partner for, or buyer of, our Advanced Development Center in North Dartmouth, Massachusetts (“ADC”), to align with our current business objectives and priorities. Currently, we do not have a commitment in place to sell the ADC.

Current wording

As of September 30, 2024, we had working capital of $35.4 million, comprised primarily of cash and cash equivalents of $28.2 million, Accounts receivable, net of $4.0 million, Inventory of $7.9 million and prepaid expenses and other of $10.4 million, offset by $3.9 million of accounts payable, $8.1 million of accrued expenses, short-term loan payable of $2.8 million, and current lease liabilities of $0.3 million. A significant portion of the accounts payable and accrued expenses are due to work performed in relation to our clinical programs, and the operations related to Zembrace and Tosymra. During the fourth quarter of 2023, we engaged CBRE, an international real estate brokerage firm, to potentially find a strategic partner for, or buyer of, our Advanced Development Center in North Dartmouth, Massachusetts (“ADC”), to align with our current business objectives and priorities. Currently, we do not have a commitment in place to sell the ADC.

Previous wording

The following table provides a summary of operating, investing and financing cash flows for the six months ended June 30, 2024, and 2023, respectively (in thousands):

Current wording

The following table provides a summary of operating, investing and financing cash flows for the nine months ended September 30, 2024, and 2023, respectively (in thousands):

Previous wording

For the six months ended June, 2024 and 2023, we used approximately $27.5 million and $56.3 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 decrease in research and development activities. For the six months ended June 30, 2024, net cash provided from financing activities was $6.8 million predominately from the issuance of common stock offset by the deferred payment to USL. For the six months ended June 30, 2023, net cash used from financing activities was $10.5 million, predominately from the repurchase of our common stock. Cash used in investing activities for the six months ended June 30, 2024 was $0.1 million related to the purchase of property and equipment, and $27.8 million for the six months ended June 30, 2023 related to the purchase of the USL assets and property and equipment.

Current wording

For the nine months ended September 30, 2024 and 2023, we used approximately $46.3 million and $79.7 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 decrease in research and development activities. For the nine months ended September 30, 2024, net cash provided by financing activities was $49.7 million predominately from the issuance of common stock offset by the deferred payment to USL. For the nine months ended September 30, 2023, net cash used in financing activities was $4.2 million, predominately from the repurchase of our common stock. Cash used in investing activities for the nine months ended September 30, 2024 was $0.1 million related to the purchase of property and equipment, and $28.6 million for the nine months ended September 30, 2023 related to the purchase of the USL assets and property and equipment.

Previous wording

We believe that our cash resources at June 30, 2024, and the proceeds that we raised from equity offerings subsequent to the end of the second quarter of 2024 will meet our operating and capital expenditure requirements into the third quarter of 2024, but not beyond.

Current wording

We believe that our cash resources at September 30, 2024, and the proceeds that we raised from equity offerings subsequent to the end of the third quarter of 2024 will meet our operating and capital expenditure requirements into the first quarter of 2025, but not beyond.

Previous wording

On July 30, 2024, we entered into a Sales Agreement with AGP pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $50.0 million in the ATM. AGP will act as sales agent and will be paid a 3% commission on each sale under the Sales Agreement. Our common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices will vary. Subsequent to June 30, 2024, the Company has sold 0.8 million shares of common stock under the Sales Agreement, for net proceeds of approximately $0.4 million.

Current wording

On July 30, 2024, we entered into a Sales Agreement with AGP pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $150.0 million in the ATM. AGP will act as sales agent and will be paid a 3% commission on each sale under the Sales Agreement. Our common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices will vary. During the three months ended September 30, 2024, we sold approximately 134.5 million shares of common stock under the Sales Agreement, for net proceeds of approximately $41.8 million. Subsequent to September 30, 2024, we sold 31.3 million shares of common stock under the Sales Agreement, for net proceeds of approximately $5.1 million.

Previous wording

During the three and six months ended June 30, 2023, we sold 0 and 3,000 shares, respectively, of common stock under the 2022 Purchase Agreement, for net proceeds of approximately $0 and $0.4 million, respectively. No shares were sold during 2024 under the 2022 Purchase Agreement.

Current wording

During the three and nine months ended September 30, 2023, we sold 0 and 3,000 shares, respectively, of common stock under the 2022 Purchase Agreement, for net proceeds of approximately $0 and $0.4 million, respectively. No shares were sold during 2024 under the 2022 Purchase Agreement.

Previous wording

On April 8, 2020, we entered into a sales agreement (the “Sales Agreement”) with AGP pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $320.0 million in at-the-market offerings (“ATM”) sales. AGP will act as sales agent and will be paid a 3% commission on each sale under the Sales Agreement. Our common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices will vary. There were no sales under the Sales Agreement during the three and six months ended June 30, 2024. During the three and six months ended June 30, 2023, we sold approximately 13,766 and 29,855 shares, respectively, of common stock under the Sales Agreement, for net proceeds of approximately $1.0 million and $3.0 million, respectively. There will be no more sales under the 2020 ATM.

Current wording

On April 8, 2020, we entered into a sales agreement (the “Sales Agreement”) with AGP pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $320.0 million in at-the-market offerings (“ATM”) sales. AGP will act as sales agent and will be paid a 3% commission on each sale under the Sales Agreement. Our common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices will vary. There were no sales under the Sales Agreement during the three and nine months ended September 30, 2024. During the three and nine months ended September 30, 2023, we sold approximately 0 shares and 29,855 shares, respectively, of common stock under the Sales Agreement, for net proceeds of approximately $0 million and $3.0 million, respectively. There will be no more sales under the 2020 ATM.

Previous wording

Under the terms of the Amended and Restated 2020 Plan, we 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 Amended and Restated 2020 Plan initially provided for the issuance of up to 1,563 shares of common stock, which amount will be increased to the extent that awards granted under the Plans are forfeited, expire or are settled for cash (except as otherwise provided in the Amended and Restated 2020 Plan). In addition, the Amended and Restated 2020 Plan contains an “evergreen provision” providing for an annual increase in the number of shares of our common stock available for issuance under the Amended and Restated 2020 Plan on January 1 of each year for a period of ten years, commencing on January 1, 2021 and ending on (and including) January 1, 2030, in an amount equal to the difference between (x) twenty percent (20%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, and (y) the total number of shares of common stock reserved under the Amended and Restated 2020 Plan on December 31 st of such preceding calendar year (including shares subject to outstanding awards, issued pursuant to awards or available for future awards). The Board of Directors determines the exercise price, vesting and expiration period of the grants under the Amended and Restated 2020 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 expiration period of grants under the Amended and Restated 2020 Plan may not be more than ten years. As of June 30, 2024, 55,544 options were available for future grants under the Amended and Restated 2020 Plan.

Current wording

Under the terms of the Amended and Restated 2020 Plan, we 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 Amended and Restated 2020 Plan initially provided for the issuance of up to 1,563 shares of common stock, which amount will be increased to the extent that awards granted under the Plans are forfeited, expire or are settled for cash (except as otherwise provided in the Amended and Restated 2020 Plan). In addition, the Amended and Restated 2020 Plan contains an “evergreen provision” providing for an annual increase in the number of shares of our common stock available for issuance under the Amended and Restated 2020 Plan on January 1 of each year for a period of ten years, commencing on January 1, 2021 and ending on (and including) January 1, 2030, in an amount equal to the difference between (x) twenty percent (20%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, and (y) the total number of shares of common stock reserved under the Amended and Restated 2020 Plan on December 31 st of such preceding calendar year (including shares subject to outstanding awards, issued pursuant to awards or available for future awards). The Board of Directors determines the exercise price, vesting and expiration period of the grants under the Amended and Restated 2020 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 expiration period of grants under the Amended and Restated 2020 Plan may not be more than ten years. As of September 30, 2024, 10,168 options were available for future grants under the Amended and Restated 2020 Plan.

Previous wording

The weighted average fair value of options granted during the three and six months ended June 2024 was $5.06 per share and $10.16 per share, respectively. The weighted average fair value of options granted during the three and six months ended June 2023 was $87.36 per share and $128.32 per share, respectively.

Current wording

The weighted average fair value of options granted during the three and nine months ended September 2024 was $0.15 per share and $8.68 per share, respectively. The weighted average fair value of options granted during the three and nine months ended September 2023 was $26.88 per share and $127.68 per share, respectively.

Previous wording

Stock-based compensation expense relating to options granted of $1.1 million, of which $0.8 million and $0.3 million, related to General and Administration and Research and Development, respectively was recognized for the quarter ended June 30, 2024. Stock-based compensation expense relating to options granted of $2.4 million, of which $1.6 million and $0.8 million, related to General and Administration and Research and Development, respectively was recognized for the quarter ended June 30, 2023.

Current wording

Stock-based compensation expense relating to options granted of $1.0 million, of which $0.7 million and $0.3 million, related to General and Administration and Research and Development, respectively, was recognized for the quarter ended September 30, 2024. Stock-based compensation expense relating to options granted of $2.1 million, of which $1.4 million and $0.7 million, related to General and Administration and Research and Development, respectively, was recognized for the quarter ended September 30, 2023.

Previous wording

Stock-based compensation expense relating to options granted of $2.8 million, of which $2.0 million and $0.8 million, related to General and Administration and Research and Development, respectively was recognized for the six-month period ended June 30, 2024. Stock-based compensation expense relating to options granted of $5.2 million, of which $3.6 million and $1.6 million, related to General and Administration and Research and Development, respectively was recognized for the six-month period ended June 30, 2023.

Current wording

Stock-based compensation expense relating to options granted of $3.9 million, of which $2.8 million and $1.1 million, related to General and Administration and Research and Development, respectively was recognized for the nine-month period ended September 30, 2024. Stock-based compensation expense relating to options granted of $7.2 million, of which $5.0 million and $2.2 million, related to General and Administration and Research and Development, respectively was recognized for the nine-month period ended September 30, 2023.

Previous wording

As of June 30, 2024, we had approximately $5.5 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 1.87 years.

Current wording

As of September 30, 2024, we had approximately $4.3 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 1.73 years.

Previous wording

The ESPP Plans are considered compensatory plans with the related compensation cost expensed over the six-month offering period. For the six months ended June 30, 2024 and 2023, $27,000 and $0, respectively, was expensed. In January 2023, 469 shares that were purchased as of December 31, 2022, under the 2022 ESPP, were issued. Accordingly, during the first quarter of 2023, approximately $29,000 of employee payroll deductions accumulated at December 31, 2022, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital. The remaining $14,000 was returned to the employees. As of December 31, 2023, approximately $44,000 of employee payroll deductions had accumulated and had been recorded in accrued expenses. In January 2024, 2,074 shares that were purchased as of December 31, 2023, under the 2022 ESPP, were issued. Accordingly, during the first quarter of 2024, approximately $24,000 of employee payroll deductions accumulated at December 31, 2023, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital. The remaining $20,000 was returned to the employees. As of June 30, 2024, approximately $33,000 of employee payroll deductions had accumulated and had been recorded in accrued expenses. In July 2024, 6,927 shares that were purchased as of June 30, 2024, under the 2022 ESPP, were issued. Accordingly, during the third quarter of 2024, approximately $5,000 of employee payroll deductions accumulated at June 30, 2024, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital. The remaining $28,000 was returned to the employees.

Current wording

The ESPP Plans are considered compensatory plans with the related compensation cost expensed over the six-month offering period. For the nine months ended September 30, 2024 and 2023, $27,000 and $34,000, respectively, was expensed. In January 2023, 469 shares that were purchased as of December 31, 2022, under the 2022 ESPP, were issued. Accordingly, during the first quarter of 2023, approximately $29,000 of employee payroll deductions accumulated at December 31, 2022, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital. The remaining $14,000 was returned to the employees. As of December 31, 2023, approximately $44,000 of employee payroll deductions had accumulated and had been recorded in accrued expenses. In January 2024, 2,074 shares that were purchased as of December 31, 2023, under the 2022 ESPP, were issued. Accordingly, during the first quarter of 2024, approximately $24,000 of employee payroll deductions accumulated at December 31, 2023, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital. The remaining $20,000 was returned to the employees. As of June 30, 2024, approximately $33,000 of employee payroll deductions had accumulated and had been recorded in accrued expenses. In July 2024, 6,927 shares that were purchased as of June 30, 2024, under the 2022 ESPP, were issued. Accordingly, during the third quarter of 2024, approximately $4,000 of employee payroll deductions accumulated at June 30, 2024, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital. The remaining $29,000 was returned to the employees.

Previous wording

We have entered into contracts with various contract research organizations with outstanding commitments aggregating approximately $16.9 million at June 30, 2024 for future work to be performed.

Current wording

We have entered into contracts with various contract research organizations with outstanding commitments aggregating approximately $15.1 million at September 30, 2024 for future work to be performed.

Previous wording

We completed the required annual impairment test for goodwill as of June 30, 2024, primarily using an income approach or discounted cash flow analysis. Additionally, due to a sustained decline in revenues and continued delays in building out the sales team for its commercialized products, we also tested the commercialized products asset group for recoverability as of June 30, 2024, and determined that the carrying value was not recoverable and therefore estimated the fair value of the asset group using a discounted cash flow analysis. The significant assumptions used in the discounted cash flow model included revenue growth, long-term growth rate, and discounts rate. The impairment assessments resulted in full non-cash impairment of $965,000 of goodwill and $9.2 million, consisting of $6.2 million and $3.0 million for the Zembrace and Tosymra developed technology, intangible assets, which are reflected in asset impairment charges in the consolidated statements of operations for the three and six months ended June 30, 2024.

Current wording

We completed the required annual impairment test for goodwill as of June 30, 2024, primarily using an income approach or discounted cash flow analysis. Additionally, due to a sustained decline in revenues and continued delays in building out the sales team for our commercialized products, we also tested the commercialized products asset group for recoverability as of June 30, 2024, and determined that the carrying value was not recoverable and therefore estimated the fair value of the asset group using a discounted cash flow analysis. The significant assumptions used in the discounted cash flow model included revenue growth, long-term growth rate, and discounts rate. The impairment assessments resulted in full non-cash impairment of $965,000 of goodwill and $9.2 million, consisting of $6.2 million and $3.0 million for the Zembrace and Tosymra developed technology, intangible assets, which are reflected in asset impairment charges in the consolidated statements of operations for the nine months ended September 30, 2024.

Previous wording

During the three months ended June 30, 2024, we identified certain triggering events related to the ADC and the decommissioning of the ADC. The Company determined that the carrying value of the ADC was not recoverable and that the carrying value exceeded its fair value. We engaged independent appraisers to value the building and land, using sales comparison and income capitalization approaches, and the related fixed assets using a indirect cost approach and market approach. The assessments resulted in a non-cash impairment charge of $48.8 million, which is reflected in asset impairment charges in the consolidated statements of operations for the three and six months ended June 30, 2024.

Current wording

During the second quarter of 2024, we identified certain triggering events related to the ADC and the decommissioning of the ADC. The Company determined that the carrying value of the ADC was not recoverable and that the carrying value exceeded its fair value. We engaged independent appraisers to value the building and land, using sales comparison and income capitalization approaches, and the related fixed assets using a indirect cost approach and market approach. The assessments resulted in a non-cash impairment charge of $48.8 million, which is reflected in asset impairment charges in the consolidated statements of operations for the nine months ended September 30, 2024.