Tonix Pharmaceuticals Holding Corp. - Quarter Report: 2013 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended June 30, 2013

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)

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.

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 August 14, 2013, there were 4,877,490 shares of registrant’s common stock outstanding.

TONIX PHARMACEUTICALS HOLDING CORP.

INDEX

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

See the accompanying notes to condensed consolidated financial statements

See the accompanying notes to the condensed consolidated financial statements

 See the accompanying notes to condensed consolidated financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013 AND 2012 (UNAUDITED)

NOTE 1 – BUSINESS AND RECAPITALIZATION

Tonix Pharmaceuticals Holding Corp., through its wholly owned subsidiary Tonix Pharmaceuticals, Inc., or Tonix Sub, is a specialty pharmaceutical company dedicated to the identification and development of novel pharmaceutical products for challenging disorders of the central nervous system (“CNS”), including fibromyalgia and post-traumatic stress disorder.

On August 16, 2010, Tonix Sub formed Krele LLC ("Krele") in the state of Delaware. Krele is a limited liability corporation whose sole member is Tonix Sub. Krele was established to commercialize products that are generic versions of predicate new drug application products or versions of drug efficacy study implementation products. The Company expects that its relationship to Krele will be similar to that of several other pharmaceutical companies and their subsidiaries that market generic versions of the parent's branded products at different periods in their product life-cycle.

On October 7, 2011, Tonix Sub (formerly Krele Pharmaceuticals, Inc. incorporated on June 7, 2007 in the State of Delaware) and a publicly traded non-operating shell company Tamandare Explorations Inc. (“Tamandare”), incorporated under the laws of the State of Nevada, along with certain other parties executed and consummated a share exchange agreement (the “Share Exchange”). Pursuant to the Share Exchange, each share of Tonix Sub’s common stock was exchanged for 0.045 shares of Tamandare’s common stock and each share of Tonix Sub’s Series A and B preferred stock was exchanged for 0.24 shares of Tamandare’s common stock. Upon completion of the Share Exchange, the Tonix Sub shareholders, including holders of restricted shares, which were subject to accelerated vesting, received in exchange for all of their shares, an aggregate of 1,133,334 shares of Tamandare’s common stock and Tamandare’s existing shareholders retained 200,000 shares of common stock. The 1,133,334 shares issued to the Tonix Sub shareholders constituted approximately 85% of Tamandare’s 1,333,334 issued and outstanding shares of common stock after the Share Exchange. Upon completion of the Share Exchange, Tonix Sub became Tamandare’s wholly-owned subsidiary and in October 2011 Tamandare was renamed Tonix Pharmaceuticals Holding Corp. As the owners and management of Tonix Sub obtained voting and operating control of Tamandare after the Share Exchange and Tamandare was non-operating, had no assets or liabilities and did not meet the definition of a business, the transaction has been accounted for as a recapitalization of Tonix Sub, accompanied by the issuance of its common stock for outstanding common stock of Tamandare, which was recorded at a nominal value. The accompanying financial statements and related notes give retroactive effect to the recapitalization as if it had occurred on June 7, 2007 (inception date) and accordingly all share and per share amounts have been adjusted.

On April 23, 2013, Tonix Sub formed a wholly owned subsidiary, Tonix Pharmaceuticals (Canada), Inc., in the province of New Brunswick, Canada for the purpose of obtaining research and development credits from the Canadian government for any research and development studies performed in Canada.

Tonix Pharmaceutical Holding Corp. and its subsidiaries are hereafter referred to as the “Company”.  

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 Rule 8-03 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, 2012 contained herein has been derived from audited financial statements.

TONIX PHARMACEUTICALS HOLDING CORP.

(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013 AND 2012 (UNAUDITED)

Operating results for the six months ended June 30, 2013 are not necessarily indicative of results that may be expected for the year ending December 31, 2013. 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, 2012 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 11, 2013.

Basis of presentation

The Company is devoting substantially all of its efforts to establishing a new business and while planned principal operations have commenced there has been no revenue generated from sales, license fees or royalties; accordingly the Company is considered a development stage enterprise. The Company’s consolidated financial statements are presented in accordance with authoritative accounting guidance related to a development stage enterprise and which provides that financial position, results of operations and cash flows of a development stage enterprise be presented in conformity with generally accepted accounting principles that apply to established operating enterprises.

As a development stage enterprise, the Company's primary efforts are devoted to conducting research and development for the treatment of CNS diseases. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. In addition, the Company has working capital and stockholders' deficiencies as of June 30, 2013. The Company requires additional financing to fund its working capital deficiency and future operations. Further, the Company does not have any commercial products available for sale and there is no assurance that if approval of its products is received 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.

On August 14, 2013, net cash proceeds of approximately $10,000,000 were received by the Company on the closing of an underwritten public offering for the sale of units (see Note 7). Management believes such net proceeds will be sufficient to meet its research and development and other funding requirements through at least June 30, 2014.

Costs incurred by the Company through June 30, 2013, in connection with the underwritten public offering of $109,916 have been recorded as deferred offering costs on the accompanying condensed consolidated balance sheet. Such costs together with additional offering costs incurred subsequent to June 30, 2013 will be charged to additional paid in capital as a reduction of proceeds received from the sale of units.

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, liabilities and expenses and disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Significant estimates include the useful life of fixed assets and assumptions used in the fair value of stock-based compensation.

Research and development costs

The Company outsources its research and development efforts and expenses these costs as incurred, including the cost of manufacturing products 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 in 2007 and 2010 as research and development costs, as it related to particular research and development projects and had no alternative future uses.

Income taxes

Income tax provisions or benefits for interim periods are computed based on the Company’s estimated annual effective tax rate. Based on the Company's historical losses and its expectation of continuation of losses for the foreseeable future, the Company has determined that it is more likely than not that deferred tax assets will not be realized and, accordingly, has provided a full valuation allowance. As the Company anticipates or anticipated that its net deferred tax assets at December 31, 2013 and 2012 would be fully offset by a valuation allowance, there is no federal or state income tax benefit for the periods ended June 30, 2013 and 2012 related to losses incurred during such periods.

TONIX PHARMACEUTICALS HOLDING CORP.

(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013 AND 2012 (UNAUDITED)

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 a 20-for-1 reverse stock split (see Note 3).

As of June 30, 2013, there were outstanding warrants to purchase an aggregate of 1,232,400 shares of the Company’s common stock (see Note 5). In addition, the Company has issued to employees, options to acquire shares of the Company’s common stock of which 376,500 were outstanding at June 30, 2013 (see Note 4). In computing diluted net loss per share for the three and six months ended June 30, 2013 and 2012, no effect has been given to such options and warrants as their effect would be anti-dilutive.

NOTE 3 – REVERSE STOCK SPLIT

On May 1, 2013, the Company filed an amendment to its Articles of Incorporation and effected a 20-for-1 reverse stock split of its issued and outstanding shares of common stock, $0.001 par value, whereby 43,182,599 outstanding shares of the Company’s common stock were exchanged for 2,159,156 shares of the Company's common stock. All per share amounts and number of shares in the consolidated financial statements and related notes have been retroactively restated to reflect the reverse stock split resulting in the transfer of $41,024 from common stock to additional paid in capital at June 30, 2013 and December 31, 2012.

NOTE 4 – STOCK OPTIONS

2012 Incentive Stock Option Plan

On February 12, 2012, the Company’s Board of Directors approved the 2012 Incentive Stock Option Plan (the “2012 Plan”). The 2012 Plan provides for the issuance of options to purchase up to 200,000 shares of the Company’s common stock to officers, directors, employees and consultants of the Company. Under the terms of the 2012 Plan, the Company may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of the Company and may also issue nonstatutory options to employees and others. The Board of Directors of the Company determines the exercise price, vesting and expiration period of the grants under the 2012 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 2012 Plan may not be more than five years and expiration period not more than ten years. The Company reserved 200,000 shares of its common stock for future issuance under the terms of the 2012 Plan. On May 9, 2012, 175,000 options had been granted under the 2012 Plan (of which 150,000 were outstanding at June 30, 2013) with an exercise price of $30.00, a 10 year life and fair value of $23.50. The options vest 1/3rd on May 9, 2013 and 1/36th on the 9th of each month thereafter for 24 months.

On February 12, 2013, the Company’s Board of Directors approved the Amended and Restated 2012 Incentive Stock Option Plan (the “Amended and Restated 2012 Plan”) to increase the number of shares reserved under the plan to 550,000. On February 12, 2013, 226,500 options were granted under the Amended and Restated 2012 Plan (all of which were outstanding at June 30, 2013) with an exercise price of $10.20, a 10 year life and fair value of $7.83. The options vest 1/3rd on February 12, 2014 and 1/36th on the 12th of each month thereafter for 24 months.

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 in the following paragraph, and the closing market price of the Company's common stock on the date of the grant. Stock options granted vest over a three year period and expire ten years from the date of grant. Share-based compensation expense related to awards is amortized over the applicable service period using the straight-line method.

TONIX PHARMACEUTICALS HOLDING CORP.

(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013 AND 2012 (UNAUDITED)

The assumptions used in the valuation of stock options granted during the six months ended June 30, 2013 were as follows:

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 and the expected stock price volatility is based on comparable companies’ historical stock price volatility since the Company does not have sufficient historical exercise data because its equity shares have been publicly traded for only a limited period of time.  

Share-based compensation expense of $441,572 and $833,895 was recognized for the three and six month periods ended June 30, 2013, respectively; and $228,532 for the three and six month periods ended June 30, 2012.

As of June 30, 2013, the Company had approximately $3,681,423 of total unrecognized compensation cost related to non-vested awards granted under the Company’s option plan, which the Company expects to recognize over approximately a three-year period.  

NOTE 5 – STOCK WARRANTS

The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at June 30, 2013: 

On January 1, 2013, the Company issued warrants to non-employees to purchase 10,800 shares of the Company's common stock at an exercise price of $12.00 per share expiring five years from the date of issuance vesting ratably over twelve months beginning January 1, 2013 in connection with services.

On April 26, 2013, the Company issued an aggregate of 38,334 shares of its common stock exchange for warrants exercised at $8.00 per share.

The Company measures the fair value of the vested portion of the issued warrants based on a Binomial option pricing model using certain assumptions discussed in the following paragraph, and the closing market price of the Company's common stock on the date of the fair value determination.

TONIX PHARMACEUTICALS HOLDING CORP.

(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013 AND 2012 (UNAUDITED)

The assumptions used in the valuation of warrants, which vested during the three months ended June 30, 2013, were as follows:

The risk-free interest rate is based on the yield of Daily U.S. Treasury Yield Curve Rates with terms equal to the life of the warrants as of the grant date. The expected stock price volatility is based on comparable companies’ historical stock price volatility since the Company does not have sufficient historical exercise data because its equity shares have been publicly traded for only a limited period of time.  

Compensation of $13,638 and $24,073 related to vested warrants was recognized for the three and six month periods ended June 30, 2013, respectively.

As of June 30, 2013, unrecognized compensation related to unvested warrants based on the market price of the Company’s common stock on such date was $27,275.

NOTE 6 – RELATED PARTY TRANSACTIONS

The Company has entered into an agreement with Lederman & Co., LLC (“Lederman & Co”), a company under the control of Dr. Seth Lederman, the Company’s Chief Executive Officer and Chairman of the Board.  Effective February 1, 2012, Lederman & Co receives $250,000 per annum for its consulting services. The agreement renews automatically for subsequent terms of one year at $250,000 per annum. Total expenses paid under this agreement were $62,500 and $125,000 during the three and six month periods ended June 30, 2013, respectively; and $62,500 and $138,750 during the three and six month periods ended June 30, 2012, respectively.

NOTE 7 – SUBSEQUENT EVENTS

On July 31, 2013, the Company sold a promissory note in the principal face amount of $150,000 to Lederman & Co., LLC in exchange for $150,000. The note is payable on demand at any time after one year from issuance and bears no interest. Cash was received prior to June 30, 2013 and is included as advances, related party on the Company’s balance sheet.

On July 31, 2013, the Company sold a promissory note in the principal face amount of $50,000 to Eli Lederman in exchange for $50,000. The note is payable on demand at any time after one year from issuance and bears no interest. Cash was received prior to June 30, 2013 and is included as advances, related party on the Company’s balance sheet.

On August 1, 2013, the Company sold a promissory note in the principal face amount of $80,000 to Lederman & Co., LLC in exchange for $80,000. The note is payable on demand at any time after one year from issuance and bears no interest.

On August 9, 2013, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Roth Capital Partners, LLC, as representative of the underwriters named therein (the “Underwriters”), pursuant to which the Company agreed to offer to the public through the Underwriters an aggregate of 2,680,000 units (each a “Unit”, and collectively, the “Units”) at a public offering price of $4.25 per Unit in an underwritten public offering (the “Offering”). Each Unit consists of (i) one share of common stock, par value $0.001 per share, of the Company (the “Common Stock”) and (ii) one Series A Warrant (the “Warrants”) to purchase one share of Common Stock. Pursuant to the Underwriting Agreement, the Company also granted the Underwriters an option for a period of 45 days to purchase up to (i) 402,000 additional Units or (ii) 402,000 additional shares of Common Stock and/or additional Warrants to purchase up to 402,000 shares of common stock, on the same terms, to cover over-allotments, if any.

The Offering closed on August 14, 2013. The Underwriters purchased the Units at an eight-percent discount to the public offering price, for an aggregate discount of approximately $911,200 (or $0.34 per unit). The Underwriters also received warrants to purchase up to an aggregate of 107,200 shares of Common Stock, or four percent of the total number of shares included in the Units.

TONIX PHARMACEUTICALS HOLDING CORP.

(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013 AND 2012 (UNAUDITED)

The Company received net proceeds from the Offering of approximately $10 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company associated with the Offering.

The Warrants are exercisable at an initial exercise price of $4.25 per share and expire on the fifth anniversary of the date of issuance. The Warrants will be exercisable on a “cashless” basis in certain circumstances. The exercise price and number of shares of Common Stock issuable upon exercise of the Warrants will be subject to adjustment in the event of any stock split, reverse stock split, stock dividend, recapitalization, reorganization or similar transaction, as described in the Warrants.

On August 14, 2013, the underwriters exercised their over-allotment option to purchase for $0.01 a warrant additional Warrants to purchase 402,000 shares of common stock.

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 our 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 currently known to Management 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 our 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 our assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing for materials, and competition.

Business Overview

We are a specialty pharmaceutical company dedicated to the identification and development of novel pharmaceutical products for challenging disorders of the central nervous system, or CNS, including fibromyalgia, or FM, and post-traumatic stress disorder, or PTSD.

TNX-102 SL

We are currently devoting the majority of our efforts to the development of our lead product candidate, TNX-102 sublingual tablet, or TNX-102 SL. TNX-102 SL is a novel dose and formulation of cyclobenzaprine, or CBP, the active pharmaceutical ingredient of two widely prescribed muscle relaxant products, Flexeril® and Amrix®. TNX-102 SL is distinct from these products as it is being developed at a dose level significantly below the lowest marketed doses of Flexeril and Amrix. TNX-102 SL is also distinct from these products with regard to its route of administration, as it is designed to be placed under the tongue, to disintegrate, dissolve and provide sublingual absorption, whereas Flexeril and Amrix are designed to be swallowed and to provide absorption in the small intestine. TNX-102 SL is also intended for chronic use, whereas Flexeril and Amrix are marketed for two to three weeks of use. We are currently developing TNX-102 SL for the treatment of FM, under a U.S Investigational New Drug application, or IND, and under three Clinical Trial Applications filed in Canada. We are also developing TNX-102 SL for the treatment of PTSD, for which we held a pre-IND meeting with the U.S. Food and Drug Administration, or FDA, in October 2012. We expect that any applications we submit for FDA approval of TNX-102 SL will be submitted under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, which we believe will allow for a shorter timeline of clinical development as compared to that needed to fulfill the requirements of Section 505(b)(1), under which new chemical entities are generally reviewed.

TNX-102 SL is a small, rapidly disintegrating tablet containing CBP for sublingual administration at bedtime. We designed TNX-102 SL to enable the efficient delivery of CBP to the systemic circulation via sublingual transmucosal absorption and to avoid first-pass liver metabolism. We also designed TNX-102 SL to provide CBP at doses lower than those currently available. We have conducted several clinical and pre-clinical pharmacokinetic studies of TNX-102 SL which we believe support its development as a novel therapeutic product for FM and PTSD, and which demonstrate a number of potentially advantageous characteristics as compared to current CBP-containing products, none of which are approved for these indications. Based on our Phase 1 comparative study, we have observed that, as compared to oral CBP tablets, TNX-102 SL results in faster systemic absorption and significantly higher plasma levels of CBP in the first hour following administration. TNX-102 SL was generally well-tolerated, with no serious adverse events reported in this study. Some subjects experienced transient numbness on the tongue after TNX-102 SL administration, and other side-effects reported were similar to those associated with current CBP products.

As a result of these promising results, we are advancing TNX-102 SL for the management of FM. We held a Pre-Phase 3 meeting with the FDA in February 2013, at which we discussed the design of the clinical program, including the acceptability of the pivotal study design and the proposed registration plan, to support the approval of TNX-102 SL for the management of FM. We believe that positive results from two adequate, well-controlled safety and efficacy studies and the completion of long-term open-label safety exposure studies would support the approval of TNX-102 SL by the FDA for the management of FM. Under the IND, we plan to initiate a potential pivotal efficacy trial (Phase 2b) in FM in the third quarter of 2013.

We are also advancing TNX-102 SL for the management of PTSD. We held a pre-IND meeting with the FDA in October 2012, and we plan to file an IND for this indication in the third quarter of 2013. We then plan to conduct a clinical proof-of-concept trial of TNX-102 SL in PTSD in the fourth quarter of 2013.

Additional Product Candidates

We also have a pipeline of other product candidates, including TNX-201 and TNX-301. TNX-201 is based on isometheptene mucate and is under development as a treatment for certain types of headaches. TNX-201 is a purified isomer of isometheptene mucate, which has been marketed and approved only as a mixture of two isomers. TNX-301 is a fixed dose combination of two FDA-approved drugs, disulfiram and selegiline, and is under development as a treatment for alcohol abuse and dependence. For competitive reasons, we do not disclose the identities of the active ingredients or targeted indications in our pipeline until a U.S. patent has been allowed or issued. Consistent with our mission, these product candidates are or likely will be reformulations of active ingredients that have been used in humans in other products and that are designed for new CNS therapeutic indications.

In other cases, the products will be formulated to match predicate products closely enough to be considered generic copies or similarly enough to other marketed products to rely (in part) on their regulatory review and approval, as well as available published data. The predicate product may be approved by the FDA under a New Drug Application, or NDA, or may have been reviewed for safety and effectiveness by the National Academy of Sciences under the Drug Efficacy Study Implementation, or DESI, program, in which case they would be considered by FDA to be “unapproved products”. For DESI products, it is our intent to develop NDA versions to meet current Good Manufacturing Practice requirements, and International Conference on Harmonization requirements to seek approval under the 505(b)(2) regulatory pathway.

Because of our size and being in the development stage, we do not currently devote a significant amount of time or resources towards our other pipeline candidates. We anticipate that sometime in 2013 we will begin developing formulations for TNX-201 and possibly TNX-301, but do not expect to start clinical trials until 2014 at the earliest.

On October 7, 2011, we executed and consummated the Share Exchange Agreement with Tonix Sub. Pursuant to the Share Exchange, each share of Tonix Sub’s common stock was exchanged for 0.045 shares of our common stock, and each share of Tonix Sub’s Series A and B preferred stock was exchanged for 0.24 shares of our common stock. Upon completion of the Share Exchange, the Tonix Sub shareholders, including holders of 1,396,982 restricted shares, which were subject to accelerated vesting, received in exchange for all of their shares, an aggregate of 1,133,334 shares of our common stock and our existing shareholders retained 200,000 shares of common stock. The 1,133,334 shares issued to the Tonix Sub shareholders constituted approximately 85% of our 1,333,334 shares of common stock issued and outstanding after the Share Exchange. Upon completion of the Share Exchange, Tonix Sub became our wholly-owned subsidiary. For accounting purposes, the acquisition has been treated as a recapitalization of Tonix Sub, accompanied by the issuance of our common stock for the outstanding common stock of Toxic Sub, which was recorded at a nominal value. The historical financial statements are those of Tonix Sub. The accompanying financial statements give retroactive effect to the recapitalization as if it had occurred on June 7, 2007 (inception date). Also, professional services expenses were allocated to research and development and general and administrative expenses in the cumulative from inception through December 31, 2012 statement of operations to be consistent with the current period’s presentation.

Current Operating Trends

Our current research and development efforts are focused on developing our lead product, TNX-102 SL, but we also expend some effort on our earlier pipeline programs. Our research and development expenses consist of manufacturing work and the cost of drug ingredients used in such work, 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 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 plan to start the next phase of clinical development for TNX-102 SL over the next six months, subject to raising necessary funds. Clinical trials can be very expensive. If these and additional necessary clinical trials are successful, we plan to prepare and submit applications to the FDA for marketing approval for our drug candidates. This process entails significant costs. As a result of these and other factors, we expect our research and development expenses to increase significantly over the next 12 to 24 months.

We expect that a larger percentage of our research and development expenses in the 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. 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 patient recruitment, 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.

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 June 30, 2013 Compared to Three Months Ended June 30, 2012

Revenues and Cost of Goods Sold. We had no revenues or cost of goods sold during the three month periods ended June 30, 2013 and 2012.

Research and Development Expenses. Research and development expenses for the three months ended June 30, 2013 were $943,995, an increase of $116,207, or 14%, from $827,788 for the three months ended June 30, 2012. The increase in clinical and non-clinical cost and activities is primarily due to additional development work related to TNX-102 SL, including manufacturing and clinical development, offset by decreases in regulatory and market research expenses.

General and Administrative Expenses. General and administrative expenses for the three months ended June 30, 2013 were $1,141,694, an increase of $118,544, or 12%, from $1,023,150 incurred in the three months ended June 30, 2012. This increase is primarily due to increases in payroll-related expenses, legal professional fees, travel, meals and entertainment expense, offset by a decrease in market research, investor and public relations, and accounting expenses.

Payroll-related expenses increased to $616,859 in the current period from $431,742 for the three months ended June 30, 2012, an increase of $185,117, or 43%, primarily related to stock-based compensation, offset by a decrease in cash compensation due to reduced payroll in the three months ended June 30, 2013. Payroll-related expenses for the three months ended June 30, 2013 include non-cash compensation associated with options granted in 2012 and 2013 of $441,571, as compared to $228,532 for the same period last year.

Professional services for the three months ended June 30, 2013 totaled $240,037, a decrease of $109,712, or 31%, over the $349,749 incurred for the three month period ended June 30, 2012. Investor and public relations fees incurred in the three months ended June 30, 2013 was $101,318, a decrease of $29,306, or 22%, from $130,624 incurred in the three months ended June 30, 2012. Accounting and auditing fees incurred in the three months ended June 30, 2013 amounted to $25,380, a decrease of $36,952, or 59%, from $62,332 incurred in the three months ended June 30, 2012 primarily due to the timing of our audit fees incurred. Legal fees totaled $113,087 for the three months ended June 30, 2013, an increase of $52,535, or 87%, from $60,552 incurred for the three months ended June 30, 2012. The increase in legal fees is due to legal expenses related to our patent filings. Other professional fees totaled $252 for the three months ended June 30, 2013, a decrease of $95,989, or 100%, from $96,241 for the three months ended June 30, 2012. The decrease in other professional fees is primarily due to decreases in investment banking and scientific advisory fees.

Market research was $20,513 for the three months ended June 30, 2013 as compared to $74,682 for the same period last year, decrease of $54,169, or 73%. The decrease was primarily due to a decrease in market research activity related to TNX-102 SL.

Travel, meals and entertainment costs for three months ended June 30, 2013 were $78,569, an increase of $31,391, or 67%, from $47,178 incurred in the three months ended June 30, 2012. Travel, meals and entertainment costs primarily include travel to contractors and consultants engaged in research and development activities related to TNX-102 as well as travel related to investor relations activities.

Rent for three months ended June 30, 2013 totaled $30,361, unchanged from $30,361 incurred in the three months ended June 30, 2012. Depreciation expense in the three months ended June 30, 2013 totaled $3,942, an increase of $179, or 6%, over the expense of $3,763 incurred in the three months ended June 30, 2012.

Change in fair value of warrant liability. In connection with a financing conducted in the first quarter of 2012, we issued warrants that contained certain reset provisions. As such, we were required to record the fair value as a liability and mark to market each reporting period. In June 2012, upon the effectiveness of our registration statement, these reset provisions expired. Therefore we adjusted the fair value of the warrants from the quarter ended June 30, 2012, charged operations for the increase in fair value of $1,224,049 and reclassified the fair value of warrants to equity. There were no similar liabilities during the three months ended June 30, 2013.

Interest and Other Financing Costs. Interest income for the three months ended June 30, 2013 totaled $28, as compared to interest income of $1,297 during the three months ended June 30, 2012.

Net Loss. As a result of the foregoing, the net loss for the three months ended June 30, 2013 was $2,085,661, compared to a net loss of $3,073,690 for the three months ended June 30, 2012, a decrease of $988,029, or 32%.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Revenues and Cost of Goods Sold. We had no revenues or cost of goods sold during the six months ended June 30, 2013 and 2012.

Research and Development Expenses. Research and development expenses for the six months ended June 30, 2013 were $1,684,624, an increase of $459,208, or 37%, from $1,225,416 for the six months ended June 30, 2012. The increase in clinical and non-clinical cost and activities is primarily due to additional development work related to TNX-102 SL, including manufacturing, regulatory, and clinical development, offset by a decrease in market research expense.

General and Administrative Expenses. General and administrative expenses for the six months ended June 30, 2013 were $2,503,206, an increase of $717,319, or 40%, from $1,785,887 incurred in the six months ended June 30, 2012. This increase is primarily due to an increase in payroll-related expenses, along with increases in investor and public relations fees, legal professional fees, and travel, meals and entertainment expense, offset by a decrease in other professional fees, market research and accounting expenses.

Payroll-related expenses increased to $1,178,350 in the current period from $796,045 for the six months ended June 30, 2012, an increase of $382,305, or 48%, primarily related to stock-based compensation, offset by a decrease in cash compensation due to reduced payroll in the six months ended June 30, 2012. Payroll-related expenses for the six months ended June 30, 2013 include non-cash compensation associated with options granted in 2012 and 2013 of $833,895, as compared to $228,532 for the same period last year.

Professional services for the six months ended June 30, 2013 totaled $737,735, an increase of $129,880, or 21%, over the $607,855 incurred for the three month period ended June 30, 2012. Investor and public relations fees incurred in the six months ended June 30, 2013 were $364,296, an increase of $171,853, or 89%, from $192,443 incurred in the six months ended June 30, 2012. The increase in investor and public relations fees is primarily due to increases in investor relations activities, including roadshow events. Accounting and auditing fees incurred in the six months ended June 30, 2013 amounted to $93,149, a decrease of $40,732, or 30%, from $133,881 incurred in the six months ended June 30, 2012. Legal fees totaled $251,694 for the six months ended June 30, 2013, an increase of $73,899, or 42%, from $177,795 incurred in the six months ended June 30, 2012. The increase in legal fees is due to legal expenses related to our patent filings. Other professional fees totaled $28,596 for the six months ended June 30, 2013, a decrease of $75,140, or 72%, from $103,736 for the six months ended June 30, 2012. The decrease in other professional fees is primarily due to decreases in investment banking and scientific advisory fees.

Market research was $39,234 for the six months ended June 30, 2013, as compared to $74,682 for the same period last year, a decrease of $35,448, or 47%. The decrease was primarily due to a decrease in market research activity related to TNX-102 SL.

Travel, meals and entertainment costs for six months ended June 30, 2013 were $123,665, an increase of $60,933, or 97%, from $62,732 incurred in the six months ended June 30, 2012. Travel, meals and entertainment costs primarily include travel to contractors and consultants engaged in research and development activities related to TNX-102 as well as travel related to investor relations activities.

Rent for six months ended June 30, 2013 totaled $60,721, unchanged from $60,721 incurred in the six months ended June 30, 2012. Depreciation expense for the six months ended June 30, 2013 totaled $8,080, an increase of $1,963, or 32%, over the expense of $6,117 incurred in the six months ended June 30, 2012, as a result of the purchase of new office computers.

Change in fair value of warrant liability. In connection with a financing conducted in the first quarter of 2012, we issued warrants that contained certain reset provisions. As such, we were required to record the fair value as a liability and mark to market each reporting period. In June 2012, upon the effectiveness of our registration statement, these reset provisions expired. Therefore we adjusted the fair value of the warrants from the six months ended June 30, 2012, charged operations for the increase in fair value of $1,177,026 and reclassified the fair value of warrants to equity. There were no similar liabilities during the six months ended June 30, 2013.

Interest and Other Financing Costs. Interest income for the six months ended June 30, 2013 totaled $50, as compared to interest expense of $900,349 incurred during the six months ended June 30, 2012. In 2012, our interest costs were comprised primarily of amortization and write-off of deferred financing costs of $196,166 related to the issuance of our secured convertible debentures in October 2011, allocated offering costs of $270,743 charged to interest as part of our financing conducted in the six months ended June 30, 2012, and the fair value of $426,153 for common stock and warrants issued to convertible debentures holders in connection with their conversion as part of our financing conducted in the six months ended June 30, 2012, net with prior period accrual. In addition, we incurred interest expense related to our convertible debentures during the six months ended June 30, 2012.

Net Loss. As a result of the foregoing, the net loss for the six months ended June 30, 2013 was $4,086,864, compared to a net loss of $5,088,678 for the six months ended June 30, 2012, a decrease of $1,001,814, or 20%.

Liquidity and Capital Resources

As of June 30, 2013, we had a working capital deficit of $2,148,427, comprised primarily of cash of $68,037 and prepaid expenses of $46,362, which was offset by $1,461,238 of accounts payable, $601,588 of accrued expenses and $200,000 of related party advances. A significant portion of the accounts payable and accrued expenses are due to work performed in relation to our anticipated Phase 2b clinical trial of TNX-102 SL in FM, but we do not expect a number of these expenses to be due or payable for several months. For the six months ended June 30, 2013 and 2012, we used $2,223,974 and $2,907,427 of cash in operating activities, respectively, which represent cash outlays for research and development and general and administrative expenses in such periods. Increases in cash outlays principally resulted from manufacturing, pre-clinical and clinical cost and activities, regulatory cost, and payroll. For the six months ended June 30, 2013, proceeds from financing activities were from the exercise of warrants of $306,666 and related party advances of $200,000. In the comparable 2012 period, $4,387,894 was raised through the sale of shares of common stock and warrants, net with $150,000 repayment of convertible debentures. At June 30, 2013, we had cash of $68,037 compared to $1,785,390 at December 31, 2012. Our cash is held in bank deposit accounts.

Cash used in investing activities for the six months ended June 30, 2013 was $45 reflecting interest earned in restricted cash accounts as compared to cash used for the six months ended June 30, 2012 of $33,859 reflecting purchase of equipment of $33,814 and $45 interest earned in restricted cash accounts.

In their report dated March 8, 2013, our independent registered public accounting firm stated at December 31, 2012, there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is an issue raised due to our net losses and negative cash flows from operations since inception and our expectation that these conditions will continue for the foreseeable future. In addition, we do not have any commercial products available for sale and have not generated revenues and there is no assurance that if approval of our products is received that we will be able to generate cash flow to fund operations. Further, there can be no assurance that our research and development will be successfully completed or that any product will be approved or commercially viable.

On August 9, 2013, we entered into an underwriting agreement (the “Underwriting Agreement”) with Roth Capital Partners, LLC, as representative of the underwriters named therein (the “Underwriters”) (the “Underwriters”), pursuant to which we agreed to offer to the public through the Underwriters an aggregate of 2,680,000 units (each a “Unit”, and collectively, the “Units”) at a public offering price of $4.25 per Unit in an underwritten public offering (the “Offering”). Each Unit consists of (i) one share of our common stock, par value $0.001 per share (the “Common Stock”) and (ii) one Series A Warrant (the “Warrants”) to purchase one share of Common Stock. Pursuant to the Underwriting Agreement, we also granted the Underwriters an option for a period of 45 days to purchase up to (i) 402,000 additional Units or (ii) 402,000 additional shares of Common Stock and/or additional Warrants to purchase up to 402,000 shares of common stock, on the same terms, to cover any over-allotments, if any.

The Offering closed on August 14, 2013. The Underwriters purchased the Units at an eight-percent discount to the public offering price, for an aggregate discount of approximately $0.34. The Underwriters also received warrants to purchase up to an aggregate of 107,200 shares of Common Stock, or four percent of the total number of shares included in the Units.

We received net proceeds from the Offering of approximately $10 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us associated with the Offering.

The Warrants are exercisable at an initial exercise price of $4.25 per share and expire on the fifth anniversary of the date of issuance. The Warrants will be exercisable on a “cashless” basis in certain circumstances.

The exercise price and number of shares of Common Stock issuable upon exercise of the Warrants will be subject to adjustment in the event of any stock split, reverse stock split, stock dividend, recapitalization, reorganization or similar transaction, as described in the Warrants.

The net proceeds from the Offering will not be sufficient to complete clinical trials and other studies required for the approval of any product by the FDA, and we will need significant additional funds in the future. 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 increase in the future as we expand our business development, add infrastructure and incur additional costs related to being a public company, including incremental audit fees, investor relations programs and increased professional services.

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. We believe our existing cash is sufficient to fund our operating expenses and capital equipment requirements for at least the next 12 months.

We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our history and historical operating losses, our operations have not been a source of liquidity. 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.

Transactions with Related Parties

We have entered into an agreement with Lederman & Co., LLC (“Lederman & Co”), a company under the control of Dr. Seth Lederman, our Chief Executive Officer and Chairman of the Board. Effective February 1, 2012, Lederman & Co receives $250,000 per annum for its consulting services. The agreement renews automatically for subsequent terms of one year at $250,000 per annum.

On July 31 and August 1, 2013, we sold three promissory notes in the aggregate principal face amount of $280,000 to two related parties in exchange for $280,000. The notes are payable on demand at any time after one year from issuance and bear no interest.

Stock Compensation

In February 2012, we approved the 2012 Incentive Stock Options Plan, which was amended and restated in February 2013 (“2012 Plan”). The 2012 Plan provides for the issuance of options to purchase up to 550,000 shares of our common stock to officers, directors, employees and consultants. Under the terms of the 2012 Plan, we may issue Incentive Stock Options, as defined by the Internal Revenue Code, and nonstatutory options. The Board of Directors determines the exercise price, vesting and expiration period of the options granted under the 2012 Plan. However, the exercise price of an Incentive Stock Option must be at least 100% of fair value of the common stock at the date of the grant (or 110% for any shareholder that owns 10% or more of our common stock). The fair market value of the common stock determined based on quoted market price or in absence of such quoted market price, by the Board of Directors in a good faith. Additionally, the vesting period of the grants under the 2012 Plan should not be more than five years and expiration period not more than ten years. We reserved 550,000 shares of our common stock for future issuance under the terms of the 2012 Plan.

In May 2012, we issued options to purchase 175,000 shares of common stock pursuant to the 2012 Plan, of which 150,000 were outstanding at June 30, 2013, with such options vesting 1/3^rd on May 9, 2013 and 1/36^th on the 9^th of each month thereafter for 24 months, having an exercise price of $30.00 and expiring 10 years from date of issuance. In February 2013, we issued options to purchase 226,500 shares of common stock pursuant to the 2012 Plan, with such options vesting 1/3^rd on February 12, 2014 and 1/36^th on the 12^th of each month thereafter for 24 months, having an exercise price of $10.20 and expiring 10 years from date of issuance.

Lease Commitments

In September 2010, we entered into a five-year lease for office space in New York City, with monthly payments escalating from approximately $10,000 in the first year to approximately $11,000 in the fifth year. The Company received a rent credit of $9,420 in each of the months of November 2010, December 2010 and January 2011. We issued a letter of credit in the amount of approximately $60,000 for the benefit of the landlord, which is collateralized by a money market account. Our future minimum lease payments under the operating lease are as follows:

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 of America. 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. Tonix outsources its research and development efforts and expenses 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.

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 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. 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.

Recent Accounting Pronouncements

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4 - CONTROLS AND PROCEDURES

a) 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 June 30, 2013, 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.

(b) Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

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 

On April 26, 2013, we issued an aggregate of 38,334 shares of common stock in exchange for $306,666 upon exercise of warrants.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits.

The exhibits listed on the Exhibit Index are provided as part of this report.

INDEX TO EXHIBITS

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.