UNITED STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
DC 20549



FORM 10-Q



|(Mark
    One) |  |                                                                                            
|-------------- |  | -------------------------------------------------------------------------------------------
|               |  |                                                                                            
|þ              |  | QUARTERLY REPORT
    PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly
period ended June 30, 2015



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 0-9314



ABEONA
THERAPEUTICS INC.

(Exact name
of registrant as specified in its charter)



|Delaware                            |  | 83-0221517                    
|----------------------------------- |  | ------------------------------
|(State
    or other jurisdiction of |  | (I.R.S. Employer
    I.D. No.)
|incorporation
    or organization)  |  |                               



3333 Lee
Parkway, Suite 600, Dallas, TX 75219

(Address of
principal executive offices)



(214)
665-9495

(Registrant’s
telephone number, including area code)



PLASMATECH
BIOPHARMACEUTICALS, INC.

4848 Lemmon
Avenue, Suite 517, Dallas, TX 75219
(Former name, former address and former fiscal year, if changed since last report)



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.

YesþNo ̈



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).    YesþNo ̈



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. (Check one):



|Large
    accelerated filer ̈ |  | Accelerated
    filer ̈                            |  | Non-accelerated
    filer ̈ |  | Smaller
    reporting companyþ
|---------------------------- |  | ------------------------------------------------- |  | -------------------------- |  | ------------------------------
|                             |  | (Do
    not check if a smaller reporting company)



Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ̈Noþ



Indicate the
number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



The number
of shares outstanding of the registrant’s common stock as of August 14, 2015 was 32,690,606 shares.











ABEONA THERAPEUTICS
INC.



INDEX



|                                   |                                                                                                                                    | Page No.
|---------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------- | --------
|                                   |                                                                                                                                   
|PART
    I - FINANCIAL INFORMATION |                                                                                                                                   
|                                   |                                                                                                                                    |         
|Item 1.                            | Financial Statements:                                                                                                              | 3       
|                                   |                                                                                                                                    |         
|                                   | Condensed Consolidated
    Balance Sheets at June 30, 2015 (unaudited) and December 31, 2014                                       | 19      
|                                   |                                                                                                                                    |         
|                                   | Condensed Consolidated
    Statements of Operations (unaudited) for the three and six months ended June 30, 2015 and June 30, 2014 | 20      
|                                   |                                                                                                                                    |         
|                                   | Condensed Consolidated
    Statement of Stockholders’ Equity (unaudited) for the three and six months ended June 30, 2015          | 21      
|                                   |                                                                                                                                    |         
|                                   | Condensed Consolidated
    Statements of Cash Flows (unaudited) for the six months ended June 30, 2015 and June 30, 2014           | 22      
|                                   |                                                                                                                                    |         
|                                   | Notes to Unaudited
    Condensed Consolidated Financial Statements                                                                 | 23      
|                                   |                                                                                                                                    |         
|Item 2.                            | Management's
    Discussion and Analysis of Financial Condition and Results of Operations                                          | 3       
|                                   |                                                                                                                                    |         
|Item 3.                            | Quantitative
    and Qualitative Disclosures About Market Risk                                                                     | 13      
|                                   |                                                                                                                                    |         
|Item 4.                            | Controls and
    Procedures                                                                                                        | 13      
|                                   |                                                                                                                                    |         
|PART
    II - OTHER INFORMATION    |                                                                                                                                   
|                                   |                                                                                                                                    |         
|Item 1.                            | Legal Proceedings                                                                                                                  | 15      
|                                   |                                                                                                                                    |         
|Item 2.                            | Unregistered
    Sales of Equity Securities and Use of Proceeds                                                                    | 16      
|                                   |                                                                                                                                    |         
|Item 3.                            | Defaults Under
    Senior Securities                                                                                               | 16      
|                                   |                                                                                                                                    |         
|Item 6.                            | Exhibits                                                                                                                           | 16      
|                                   |                                                                                                                                    |         
|SIGNATURES                         |                                                                                                                                    | 18      



1







PART I –FINANCIAL
INFORMATION



This Quarterly
Report on Form 10-Q (including the information incorporated by reference) contains ‘‘forward-looking statements’’
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, and that involve risks and uncertainties. These statements and other risks described below as well as those
discussed elsewhere in this Quarterly Report Form 10-Q, documents incorporated by reference and other documents and reports that
we file periodically with the Securities and Exchange Commission (“SEC”) include, without limitation, statements relating
to uncertainties associated with research and development activities, clinical trials, our ability to raise capital, the timing
of and our ability to achieve regulatory approvals, dependence on others to market our licensed products, collaborations and our
ability to attract licensing partners, future cash flow, the timing and receipt of licensing and milestone revenues, the future
success of our marketed products and products in development, our belief that advances in biotechnology will provide significant
opportunities to develop new treatments for rare diseases, our sales projections, and the sales projections of our licensing partners,
our ability to achieve licensing milestones, the size of the prospective markets in which we may offer products, anticipated product
launches and our commercialization strategies, anticipated product approvals and timing thereof, product opportunities, clinical
trials and U.S. Food and Drug Administration (‘‘FDA’’) applications, as well as our drug development strategy,
our clinical development organization expectations regarding our rate of technological developments and competition, our plan
not to establish an internal marketing organization, our expectations regarding minimizing development risk and developing and
introducing technology, the terms of future licensing arrangements, our ability to secure additional financing for our operations,
our ability to establish new relationships and maintain current relationships, our ability to attract and retain key personnel,
our belief that we will not pay any cash dividends in the foreseeable future, our belief that a failure to obtain necessary additional
capital in the future will result in our operations being jeopardized, our expectation that we will continue to incur losses,
our belief that we will expend substantial funds to conduct research and development programs, preclinical studies and clinical
trials of potential products, our belief that we have a rich pipeline of products and product candidates, our belief that recently
licensed technology will enable us to provide new therapeutic applications and expand market opportunities while enhancing margins,
our belief that we will continue to evaluate the most cost-effective methods to advance our programs, our ability to achieve profitability
on a sustained basis or at all, and our expected cash burn rate. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,”
“should,” “expects,” “plans,” “could,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential” or “continue” or the negative of such terms
or other comparable terminology. We intend the forward-looking statements to be covered by the safe harbor for forward-looking
statements in these sections. The forward-looking information is based on various factors and was derived using numerous assumptions.



Forward-looking
statements necessarily involve risks and uncertainties, and our actual results could differ materially from those anticipated
in the forward-looking statements due to a number of factors. The forward-looking statements contained in this Quarterly Report
on Form 10-Q represent our judgment only as of the date of this report. We caution readers not to place undue reliance on such
statements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.



2







| | ITEM 1. | FINANCIAL STATEMENTS
| | ------- | --------------------



The response
to this Item is submitted as a separate section of this report. See page 18.



| | ITEM 2. | MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
| | ------- | -------------------------------------------------------------------------------------



OVERVIEW



Abeona Therapeutics
Inc. (“Abeona” or the “Company”) is focused on developing and delivering gene therapy and plasma-based
products for severe and life-threatening rare diseases. Abeona's lead programs are ABO-101 (AA9 NAGLU) and ABO-102 (scAAV9 SGHG),
adeno-associated virus (AAV)-based gene therapies for Sanfilippo syndrome (MPS IIIA and IIIB) in collaboration with patient advocate
groups, researchers and clinicians, anticipated to commence clinical trials in 2015. We are also developing ABO-201 (scAAV9 CLN3)
gene therapy for juvenile Batten disease (JBD); and ABO-301 (AAV LK19 FANCC) for Fanconi anemia (FA) disorder using a novel CRISPR/Cas9-based
gene editing approach to gene therapy program for rare blood diseases. In addition, we are also developing rare plasma protein
therapies including PTB-101 SDF AlphaTM (alpha-1 protease inhibitor) for inherited COPD using our proprietary SDFTM
(Salt Diafiltration) ethanol-free process. Our principal executive office is located at 3333 Lee Parkway, Suite 600, Dallas, Texas
75219. Our website address is www.abeonatherapeutics.com.



Recent Developments



On July 31,
2015 we closed an upsized $15.5 million direct placement of registered common stock with institutional investors, including Soros
Fund Management and Perceptive Life Science Fund, and two members of our Board of Directors. The financing was comprised of 2.83
million shares of our common stock at a price of $5.50 per share.



During the
second quarter we received additional financing of $4.6 million through warrant exercises of our $5.00 warrants.



On June 19,
2015 we announced we changed our name to Abeona Therapeutics Inc. from PlasmaTech Biopharmaceuticals, Inc.



On June 15,
2015 we licensed exclusive worldwide rights to an AAV gene therapy and intellectual property from the University of Minnesota
to treat patients with Fanconi anemia (FA) disorder and other rare blood diseases using the CRISPR/cas9 technology platform for
undisclosed terms.



On June 8,
2015 we licensed exclusive worldwide rights to an AAV gene therapy and intellectual property for the treatment of juvenile Batten
disease (JBD) from UNeMed Corporation, the technology transfer and commercialization office for the University of Nebraska Medical
Center in Omaha, Nebraska for undisclosed terms.



On May 11,
2015 we closed a $10 million private placement of common stock consisting of 1,250,000 shares of our common stock, at a price
of $8.00 per share, and warrants to purchase 625,000 shares of our common stock with an exercise price of $10 per share.



3







On May 15,
2015 the Company completed its acquisition of Abeona Therapeutics LLC, an Ohio limited liability company (“Abeona Ohio”)
pursuant to the terms of an Agreement and Plan of Merger dated May 5, 2015 (the “Merger”). In connection with the
Merger, the Company agreed to issue to Abeona Ohio members an aggregate of 3,979,761 of our common stock and, there may be up
to an additional $9 million in performance milestones, in common stock or cash, at the Company’s option payable to Abeona
Ohio members.





On April 23,
2015 we closed an upsized $7 million private placement of common stock consisting of 2,333,333 shares of our common stock, at
a price of $3.00 per share.



On April 7,
2015 we announced we had appointed Charlie Strange, M.D. to our Scientific Advisory Board (SAB). Dr. Strange is a key opinion
leader in the Alpha-1 community, and has extensive clinical experience in designing and managing Alpha-1 clinical studies. We
believe his advice and counsel will help accelerate development and approval of our proprietary SDF AlphaTM biologic drug.



Product
Development Strategy



Abeona is focused
on developing and delivering gene therapy and plasma-based products for severe and life-threatening rare diseases. A rare disease
is one that affects fewer than 200,000 people in the United States. There are nearly 7,000 rare diseases, which may involve chronic
illness, disability, and often, premature death. More than 25 million Americans and 30 million Europeans have one. While rare
diseases can affect any age group, about 50% of people affected are children (15 million); and rare diseases account for 35% of
deaths in the first year of life. These rare diseases are often poorly diagnosed, very complex, and have no treatment or not very
effective treatment—over 95% of rare diseases do not have a single FDA or EMA approved drug treatment. However, most rare
diseases are often caused by changes in genes—80% are genetic in origin and can present at any stage of life. We believe
emerging insights in genetics and advances in biotechnology, as well as new approaches and collaboration between researchers,
industry, regulators and patient groups, provide significant opportunities to develop breakthrough treatments for rare diseases.
Below is the status of our various products and product candidates.



4











Developing
Next Generation Gene Therapy



Gene therapy
is the use of DNA as a potential therapy to treat a disease. In many disorders, particularly genetic diseases caused by a single
genetic defect, gene therapy aims to treat a disease by delivering the correct copy of DNA into a patient's cells. The healthy,
functional copy of the therapeutic gene then helps the cell function correctly. In gene therapy, DNA that encodes a therapeutic
protein is packaged within a "vector", often a “naked” virus, which is used to transfer the DNA to the inside
of cells within the body. Gene therapy can be delivered by a direct injection, either intravenously (IV) or directly into a specific
tissue in the body, where it is taken up by individual cells. Once inside cells, the correct DNA becomes expressed by the cell
machinery, resulting in the production of therapeutic protein, which in turn treats the patient's disease and can provide long-term
benefit.



Abeona is developing
next generation adeno-associated virus (AAV) gene therapies. Viruses such as AAV are utilized because they have evolved a way
of encapsulating and delivering one or more genes of the size needed for clinical application, and can be purified in large quantities
at high concentration. Unlike AAV vectors found in nature, the AAV vectors used by Abeona have been genetically-modified such
that they do not replicate. Although the preclinical studies in animal models of disease demonstrate the promising impact of AAV-mediated
gene expression to affected tissues such as the heart, liver and muscle, our programs use a specific virus that is capable of
delivering therapeutic DNA across the blood brain barrier and into the central nervous system (CNS) and the somatic system (body),
making them attractive for addressing lysosomal storage diseases which have severe CNS manifestations of the disease.



5







Lysosomal storage
diseases (LSD) are a group of rare inborn errors of metabolism resulting from deficiency in normal lysosomal function. These diseases
are characterized by progressive accumulation of storage material within the lysosomes of affected cells, ultimately leading to
cellular dysfunction. Multiple tissues ranging from musculoskeletal and visceral to tissues of the central nervous system are
typically involved in disease pathology. Since the advent of enzyme replacement therapy (ERT) to manage some LSDs, general clinical
outcomes have significantly improved; however, treatment with infused protein is lifelong and continued disease progression is
still evident in patients. Thus, AAV-based gene therapy may provide a viable alternative or adjunctive therapy to current management
strategies for LSDs.



Our initial
programs are focused on LSDs such as Mucopolysaccharidosis (MPS) IIIA and IIIB. Also known as Sanfilippo syndromes type A and
type B, MPS III is a progressive neuromuscular disease with profound CNS involvement. Our lead product candidates, ABO-101 and
ABO-102, have been developed to replace the damaged, malfunctioning enzymes within target cells with the normal, functioning version.
Delivered via a single injection, the drug is only given once.



ABO-101
for MPS III B and ABO-102 for MPS III A (Sanfilippo syndrome)



Mucopolysaccharidosis
(MPS) type III (Sanfilippo syndrome) is a group of four inherited genetic diseases, described as type A, B, C or D, which cause
enzyme deficiencies that result in the abnormal accumulation of glycosaminoglycans (sugars) in body tissues. MPS III is a lysosomal
storage disease, a group of rare inborn errors of metabolism resulting from deficiency in normal lysosomal function. The incidence
of MPS III (all four types combined) is estimated to be 1 in 70,000 births.



Mucopolysaccharides
are long chains of sugar molecule used in the building of connective tissues in the body. There is a continuous process in the
body of replacing used materials and breaking them down for disposal. Children with MPS III are missing an enzyme which is essential
in breaking down the used mucopolysaccharides called heparan sulfate. The partially broken down mucopolysaccharides remain stored
in cells in the body causing progressive damage. Babies may show little sign of the disease, but as more and more cells become
damaged, symptoms start to appear.



In MPS III,
the predominant symptoms occur due to accumulation within the central nervous system (CNS), including the brain and spinal cord,
resulting in cognitive decline, motor dysfunction, and eventual death. To date, there is no cure for MPS III and treatments are
largely supportive.



Abeona is developing
next generation adeno-associated viral (AAV)-based gene therapies for MPS III (Sanfilippo syndrome), which involves a one-time
delivery of a normal copy of the defective gene to cells of the central nervous system with the aim of reversing the effects of
the genetic errors that cause the disease.



After a single
dose in Sanfilippo preclinical models, ABO-101 and ABO-102 induced cells in the CNS and peripheral organs to produce the missing
enzymes which helped repair the damage caused to the cells. Preclinical in vivo efficacy studies in Sanfilippo syndrome
have demonstrated functional benefits that remain for months after treatment. A single dose of ABO-101 or ABO-102 significantly
restored normal cell and organ function, corrected cognitive defects that remained months after drug administration, increased
neuromuscular control and increased the lifespan of animals with MPS III over 100% one year after treatment compared to untreated
control animals. These results are consistent with studies from several laboratories suggesting AAV treatment could potentially
benefit patients with Sanfilippo Syndrome Type A and B. In addition, safety studies conducted in animal models of Sanfilippo syndromes
have demonstrated that delivery of AB0-101 or AB0-102 are well tolerated with minimal side effects.



6







ABO-201
for Juvenile Batten Disease (JBD)



ABO-201 (scAAV9
CLN3) is an AAV-based gene therapy which has shown promising preclinical efficacy in delivery of a normal copy of the defective
CLN3 gene to cells of the central nervous system with the aim of reversing the effects of the genetic errors that cause juvenile
Batten disease. Juvenile Batten disease (JBD) is a rare, fatal, autosomal recessive (inherited) disorder of the nervous system
that typically begins in children between 4 and 8 years of age. Often the first noticeable sign of JBD is vision impairment, which
tends to progress rapidly and eventually result in blindness. As the disease progresses, children experience the loss of previously
acquired skills (developmental regression). This progression usually begins with the loss of the ability to speak in complete
sentences. Children then lose motor skills, such as the ability to walk or sit. They also develop movement abnormalities that
include rigidity or stiffness, slow or diminished movements (hypokinesia), and stooped posture. Beginning in mid- to late childhood,
affected children may have recurrent seizures (epilepsy), heart problems, behavioral problems, and difficulty sleeping. Life expectancy
is greatly reduced. Most people with juvenile Batten disease live into their twenties or thirties. As yet, no specific treatment
is known that can halt or reverse the symptoms of juvenile Batten disease.



Juvenile Batten
disease is the most common form of a group of disorders known as neuronal ceroid lipofuscinoses (NCLs). Collectively, all forms
of NCL affect an estimated 2 to 4 in 100,000 live births in the United States. NCLs are more common in Finland, where approximately
1 in 12,500 individuals are affected; as well as Sweden, other parts of northern Europe, and Newfoundland, Canada.



Most cases
of juvenile Batten disease are caused by mutations in the CLN3 gene, which is the focus of our AAV-based gene therapy approach.
These mutations disrupt the function of cellular structures called lysosomes. Lysosomes are compartments in the cell that normally
digest and recycle different types of molecules. Lysosome malfunction leads to a buildup of fatty substances called lipopigments
and proteins within these cell structures. These accumulations occur in cells throughout the body, but neurons in the brain seem
to be particularly vulnerable to damage. The progressive death of cells, especially in the brain, leads to vision loss, seizures,
and intellectual decline in children with juvenile Batten disease.



ABO-301
for Fanconi Anemia (FA)



ABO-301 (AAV
LK19 FANCC) is an AAV-based gene therapy which has shown promising preclinical efficacy in delivery of a normal copy of the defective
gene to cells of the hematopoietic or blood system with the aim of reversing the effects of the genetic errors that cause juvenile
Batten disease. Fanconi anemia (FA) is a rare (1 in 160,000) pediatric, autosomal recessive (inherited) disease characterized
by multiple physical abnormalities, organ defects, bone marrow failure, and a higher than normal risk of cancer. The average lifespan
for people with FA is 20 to 30 years.



7







The major function
of bone marrow is to produce new blood cells. In FA, a DNA mutation renders the FANCC gene nonfunctional. Loss of FANCC causes
patient skeletal abnormalities and leads to bone marrow failure. Fanconi Anemia patients also have much higher rates of hematological
diseases, such as acute myeloid leukemia (AML) or tumors of the head, neck, skin, gastrointestinal system, or genital tract. The
likelihood of developing one of these cancers in people with Fanconi anemia is between 10 and 30 percent. Aside from bone marrow
transplantation (BMT) there are no specific treatments known that can halt or reverse the symptoms of FA. Reparing fibroblast
cells in FA patients with a functional FANCC gene is the focus of our AAV-based gene therapy approach.



Using a novel
CRISPR (clustered, regularly interspaced short palindromic repeats)-Cas9 (CRISPR associated protein 9) system, researchers used
a protein-RNA complex composed of an enzyme known as Cas9 bound to a guide RNA molecule that has been designed to recognize a
particular DNA sequence. The RNA molecules guide the Cas9 complex to the location in the genome that requires repair. CRISPR-Cas9
uniquely enables surgically efficient knock-out, knock-down or selective editing of defective genes in the context of their natural
promoters, unlocking the potential to treat both recessive and dominant forms of genetic diseases. Most importantly, this approach
has the potential to allow more precise gene modification.



Plasma-based
Therapeutics using the SDFTM technology platform



Abeona’s
proprietary Salt Diafiltration ProcessTM (SDF) focuses on ethanol-free extraction of therapeutic biologics from human plasma.
Plasma biologics are biopharmaceutical proteins extracted, purified, and formulated from human blood plasma by the use of biotechnological
processing techniques including precipitation, diafiltration, affinity chromatography, and ion-exchange chromatography. These
products are rendered virus-safe by means of chemical treatment, nanofiltration, and pasteurization. Plasma biologics primarily
address indications arising from genetic deficiencies, which are increasingly being identified by means of newly available rapid
and low-cost diagnostic genetic tests. Examples of plasma biologics include Alpha-1 Antitrypsin (also known as alpha-1 proteinase
inhibitor, A1PI), Intravenous Immune Globulin (IVIG), Anti-Hemophilic Factor VIII (AHF) and Albumin.



Plasma biologics
are currently obtained from human plasma by a fractionation process known as the Cohn Cold Ethanol Fractionation Process (Cohn
Process), which was developed prior to World War II to provide a stable solution of human albumin for the rapid treatment of hemorrhagic
shock on the battlefield. This process employs various concentrations of ethanol combined with adjustments of pH, ionic strength,
and temperature to bring about the necessary separations by precipitation. Ethanol can inactivate many of the plasma proteins.



In contrast
to the highly denaturing Cohn Process, Abeona’s patented SDFTM method involves a short two-step, ethanol-free salt
precipitation process optimized to extract a wide range of therapeutically useful biologic proteins from human blood plasma. SDFTM
enables the production of higher yields of these proteins compared with the Cohn Process.



PTB-101
SDF AlphaTM (alpha-1 protease inhibitor) for emphysema or chronic obstructive pulmonary disease (COPD) due
to severe congenital deficiency of A1PI (alpha-1-antitrypsin deficiency)



Alpha-1 antitrypsin
deficiency is a rare (1 in 1,500 to 3,500) genetic (inherited) autosomal disorder that may cause lung disease from an inability
to neutralize the enzyme neutrophil elastase and liver disease from retained misfolded protein. Alpha-1 antitrypsin deficiency
occurs worldwide, but its prevalence varies by population. Alpha-1 antitrypsin is also known as alpha-1 proteinase inhibitor (A1PI).



8







About 10 percent
of infants with alpha-1 antitrypsin deficiency develop liver disease, which often causes yellowing of the skin and whites of the
eyes (jaundice). Approximately 15 percent of adults with alpha-1 antitrypsin deficiency develop liver damage (cirrhosis) due to
the formation of scar tissue in the liver. Signs of cirrhosis include a swollen abdomen, swollen feet or legs, and jaundice. Individuals
with alpha-1 antitrypsin deficiency are also at risk of developing a type of liver cancer called hepatocellular carcinoma.



Alpha-1 antitrypsin
deficiency is inherited with an autosomal codominant pattern, which means that two different versions of the gene may be active
(expressed), and both versions contribute to the genetic trait. The most common version (allele) of the SERPINA1 gene, called
M, produces normal levels of alpha-1 antitrypsin. Most people in the general population have two copies of the M allele (MM) in
each cell. Other versions of the SERPINA1 gene lead to reduced levels of alpha-1 antitrypsin. For example, the S allele produces
moderately low levels of this protein, and the Z allele produces very little alpha-1 antitrypsin. Individuals with two copies
of the Z allele (ZZ) in each cell are likely to have alpha-1 antitrypsin deficiency. Those with the SZ combination have an increased
risk of developing liver and lung diseases such as chronic obstructive pulmonary disease (COPD).



It is estimated
that about 200,000 individuals in the United States and Europe have severe alpha-1 antitrypsin deficiency. However, only about
5% of this number have been diagnosed as symptoms caused by this deficiency are very similar to asthma and chronic obstructive
pulmonary disease (COPD) from non-genetic causes. Only about 1–2% of COPD patients have severe alpha-1 antitrypsin deficiency.
The Global Initiative for Chronic Obstructive Lung Disease (GOLD) defines COPD as group of airflow-limited diseases including
emphysema and chronic bronchitis. While severe alpha-1 antitrypsin deficiency can lead to or exacerbate all forms of COPD, it
is considered to be the dominant cause of Panacinar Emphysema, a form of emphysema which causes gradual destruction of all lung
aveolii.



PTB-101
SDF AlphaTM (alpha1-proteinase inhibitor) for Alpha-1 Antitrypsin Deficiency (Alpha-1)



Abeona is developing
PTB-101 SDF AlphaTM (alpha-1-proteinase inhibitor) for chronic augmentation and maintenance therapy in adults with clinically
evident panacinar emphysema and other forms of COPD due to severe deficiency of alpha-1-proteinase inhibitor.



Polymer
Hydrogel Technology (PHTTM)



MuGard®(mucoadhesive oral wound rinse) approved for mucositis, stomatitis, aphthous ulcers, and traumatic ulcers



MuGard®is our marketed product for the management of oral mucositis, a frequent side-effect of cancer therapy for which there is
no other established treatment. MuGard, a proprietary nanopolymer formulation, has received marketing clearance from the FDA in
the US as well as Europe, China, Australia, New Zealand and Korea. We launched MuGard in the U.S. in 2010 and licensed MuGard
for commercialization in the U.S. to AMAG Pharmaceuticals, Inc. (‘AMAG”) in 2013. We licensed MuGard to RHEI Pharmaceuticals,
N.V. (“RHEI”) for China and other Southeast Asian countries in 2010; Hanmi Pharmaceutical Co. Ltd. (“Hanmi”)
for South Korea in 2014; and Norgine B.V. (“Norgine”) for the European Union, Switzerland, Norway, Iceland, Lichtenstein,
Australia and New Zealand in 2014.



9







ProctiGardTM
(mucoadhesive oral wound rinse) approved for rectal mucositis and radiation proctitis



ProctiGardTM
received 510(K) marketing clearance from the FDA on July 22, 2014 for the treatment of symptomatic management of rectal mucositis.
ProctiGard is our product for the treatment of radiation proctitis, a frequent side effect of radiation treatment to the pelvic
region. Radiation proctitis, or RP, is the inflammation and damage to the lower portion of the colon after exposure to x-rays
or ionizing radiation as part of radiation therapy. RP is most common after treatments for cancer, such as cervical, colon and
prostate cancer. RP can be acute, occurring within weeks of initiation of therapy, or can occur months or years after treatment.
We intend to commercialize ProctiGard in a manner similar to the commercialization of MuGard, which may include confirmatory clinical
trials, with the objective of commercialization in collaboration with marketing partners globally.



LIQUIDITY AND CAPITAL RESOURCES



We have historically
funded our operations primarily through public and private sales of common stock, preferred stock, convertible notes and through
licensing agreements. Our principal source of liquidity is cash and cash equivalents. Licensing payments and royalty revenues
provided limited funding for operations during the period ended June 30, 2015. As of June 30, 2015, our cash and cash equivalents
were $30,410,000.



As of June
30, 2015, our working capital was $29,042,000. Our working capital at June 30, 2015 represented an increase of $20,385,000 as
compared to our working capital as of December 31, 2014 of $8,657,000. The net increase in the working capital at June 30, 2015
reflects financings, warrant exercises and the acquisition of Abeona Ohio less six months of net operating costs and changes in
current assets and liabilities.



On July 31,
2015 we closed an upsized $15.5 million direct placement of registered common stock with institutional investors, including Soros
Fund Management and Perceptive Life Science Fund, and two members of our Board of Directors. The financing was comprised of 2.83
million shares of our common stock at a price of $5.50 per share.



If we raise
additional funds by selling equity securities, the relative equity ownership of our existing investors will be diluted and the
new investors could obtain terms more favorable than previous investors.



We have incurred
negative cash flows from operations since inception, and have expended, and expect to continue to expend in the future, substantial
funds to complete our planned product development efforts. Since inception, our expenses have significantly exceeded revenues,
resulting in an accumulated deficit as of June 30, 2015 of $302,187,000. We cannot provide assurance that we will ever be able
to generate sufficient product sales or royalty revenue to achieve profitability on a sustained basis, or at all.



Since our inception,
we have devoted our resources primarily to fund our research and development programs. We have been unprofitable since inception
and to date have received limited revenues from the sale of products. We expect to incur losses for the next several years as
we continue to invest in product research and development, preclinical studies, clinical trials and regulatory compliance.



10







SECOND QUARTER 2015 COMPARED
TO SECOND QUARTER 2014



Our licensing
revenue for the second quarter of 2015 and 2014 was $150,000 for each period. We recognize licensing revenue over the period of
the performance obligation under our licensing agreements.



We recorded
royalty revenue for MuGard of $132,000 for second quarter of 2015 and $97,000 for the same period of 2014, an increase of $35,000.
We licensed MuGard to AMAG on June 6, 2013 and currently receive quarterly royalties from AMAG under our agreement.



Total research
and development spending for the second quarter of 2015 was $610,000, as compared to $81,000 for the same period of 2014, an increase
of $529,000. The increase in expenses was primarily due to:



| | · | increased
                                         development work on our new product A1PI ($352,000);
| | - | -------------------------------------------------------------------------------------------------------

| | · | increased
                                         salary and related costs ($76,000) from the rehiring of scientific staff;
| | - | ----------------------------------------------------------------------------------------------------------------------------

| | · | increased
                                         stock based compensation expense ($56,000); and
| | - | --------------------------------------------------------------------------------------------------

| | · | other
                                         net decreases in research spending ($45,000).
| | - | --------------------------------------------------------------------------------------------



Total general
and administrative expenses were $3,667,000 for the second quarter of 2015, as compared to $868,000 for the same period of 2014,
an increase of $2,799,000. The increase in expenses was due primarily to the following:



| | · | increase
                                         stock based compensation expense for granted restricted stock ($1,038,000) and granted
                                         stock options ($534,000);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | increased
                                         salary and related costs ($296,000) from hiring additional general and administrative
                                         staff;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | increased
                                         legal fees ($447,000);
| | - | -------------------------------------------------------------------------

| | · | increased
                                         expense for new licenses ($152,000);
| | - | ---------------------------------------------------------------------------------------

| | · | increased
                                         investor relations expenses ($150,000); and
| | - | ----------------------------------------------------------------------------------------------

| | · | other
                                         net increases in general and administrative expenses ($182,000).
| | - | ---------------------------------------------------------------------------------------------------------------



Depreciation
and amortization was $132,000 for the second quarter of 2015 as compared to $1,000 for the same period in 2014, an increase of
$131,000. We are amortizing the license over the life of the patents.



Total operating
expenses for the second quarter of 2015 were $4,409,000 as compared to total operating expenses of $950,000 for the same period
of 2014, an increase of $3,459,000 for the reasons listed above.



Interest and
miscellaneous income was $16,000 for the second quarter of 2015 as compared to $26,000 for the same period of 2014, a decrease
of $10,000.



Interest and
other expense was $2,000 for the second quarter of 2015 as compared to $137,000 in the same period of 2014, a decrease of $135,000.
The interest in 2014 represents interest accrued on unpaid dividends. All dividends and interest on dividends due were paid in
December 2014. There are no more dividends accruing.



11







We recorded
a loss for the derivative liability related to preferred stock of $11,693,000 for the second quarter of 2014. The preferred stock
related to the dividends was converted into common stock in December 2014.



Preferred stock
dividends of $726,000 were accrued for the second quarter of 2014. The preferred stock related to the dividends was converted
into common stock in December 2014.



Net loss allocable
to common stockholders for the second quarter of 2015 was $4,113,000, or a $0.16 basic and diluted loss per common share as compared
to a net loss of $13,233,000, or a $25.26 basic and diluted loss per common share, for the same period in 2014, an decreased loss
of $9,120,000.



SIX MONTHS ENDED JUNE 30, 2015
COMPARED TO SIX MONTHS ENDED JUNE 30, 2014



Our licensing
revenue for the first six months of 2015 was $301,000 and $296,000 for the same period of 2014. We recognize licensing revenue
over the period of the performance obligation under our licensing agreements.



We recorded
royalty revenue for MuGard of $239,000 for first six months of 2015 as compared to $159,000 for the same period of 2014, an increase
of $80,000. We licensed MuGard to AMAG on June 6, 2013 and currently receive quarterly royalties from AMAG under our agreement.



Total research
and development spending for the first six months of 2015 was $1,063,000, as compared to $225,000 for the same period of 2014,
an increase of $838,000. The increase in research and development expenses was primarily due to:



| | · | increased
                                         development work on our new product A1PI ($620,000);
| | - | -------------------------------------------------------------------------------------------------------

| | · | increased
                                         salary and related costs ($175,000) from increased scientific staff; and
| | - | ---------------------------------------------------------------------------------------------------------------------------

| | · | increased
                                         scientific consulting expense ($43,000).
| | - | -------------------------------------------------------------------------------------------



Total general
and administrative expenses were $5,356,000 for the first six months of 2015, as compared to $2,260,000 for the same period of
2014, an increase of $3,096,000. The increase in expenses was due primarily to the following:



| | · | increase
                                         stock based compensation expense for granted restricted stock ($1,038,000);
| | - | -----------------------------------------------------------------------------------------------------------------------------

| | · | increased
                                         legal fees ($695,000);
| | - | -------------------------------------------------------------------------

| | · | increased
                                         salary and related costs ($640,000) from hiring additional general and administrative
                                         staff;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | increased
                                         investor relations expenses ($385,000);
| | - | ------------------------------------------------------------------------------------------

| | · | increased
                                         director fees ($190,000); and
| | - | --------------------------------------------------------------------------------

| | · | net
                                         increase other general and administrative expenses ($148,000).
| | - | -----------------------------------------------------------------------------------------------------------



Depreciation
and amortization was $250,000 for the first six months of 2015 as compared to $1,000 for the same period in 2014. We have acquired
new licenses and fixed assets in 2015.



12







Total operating
expenses for the first six months of 2015 were $6,669,000 as compared to total operating expenses of $2,486,000 for the same period
of 2014, an increase of $4,183,000 for the reasons listed above.



Interest and
miscellaneous income was $19,000 for the first six months of 2015 as compared to $34,000 for the same period of 2014, a decrease
of $15,000.



Interest and
other expense was $3,000 for the first six months of 2015 as compared to $259,000 in the same period of 2014, a decrease of $256,000.
The interest in 2014 represents interest accrued on unpaid dividends. All dividends and interest on dividends due were paid in
December 2014. There are no more dividends accruing.



We recorded
a loss for the derivative liability related to preferred stock of $11,110,000 for the first six months of 2014. The preferred
stock related to the dividends was converted into common stock in December 2014.



Preferred stock
dividends of $1,451,000 were accrued for the first six months of 2014. The preferred stock related to the dividends was converted
into common stock in December 2014.



Net loss allocable
to common stockholders for the first six months of 2015 was $6,113,000, or a $0.27 basic and diluted loss per common share as
compared to a net loss of $14,817,000, or a $28.46 basic and diluted loss per common share, for the same period in 2014, a decreased
loss of $8,704,000.



| | ITEM 3. | QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
| | ------- | ----------------------------------------------------------



Not applicable.



| | ITEM 4. | CONTROLS AND PROCEDURES
| | ------- | -----------------------



Under the supervision
and with the participation of our management and consultants, including the Executive Chairman (our principal executive officer)
and Vice President Finance (our principal accounting officer), we have evaluated the effectiveness of the design and operation
of our disclosure controls and procedures, as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as
of the end of the period covered by this report.



Our management
is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance
with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.



Our management,
including our principal executive officer and principal accounting officer, conducted an evaluation of the effectiveness of our
internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control—Integrated Framework.



13







Based on our
evaluation, our management concluded in our Annual Report on Form 10-K for the year ended December 31, 2014 that there is a material
weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies,
in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s
annual or interim financial statements will not be prevented or detected on a timely basis.



The material
weakness identified in our Annual Report on Form 10-K for the year ended December 31, 2014 relates to the monitoring and review
of work performed by our Chief Accounting Officer and our then accounting consultant in the preparation of audit and financial
statements, footnotes and financial data provided to the Company’s registered public accounting firm in connection with
the annual audit. All of our financial reporting is now carried out by our Chief Accounting Officer. This lack of accounting staff
results in a lack of segregation of duties.



As
of the date of this Quarterly Report on Form 10-Q, we have not remediated such material weakness and, as a result, our Executive
Chairman and Vice President Finance, have concluded that a material weakness continues to exist as of the end of the period covered
by this Quarterly Report on Form 10-Q and, as such, our disclosure controls and procedures were not effective based on the criteria
established in Internal Control—Integrated Framework
issued by COSO. The material weakness identified did not result in the restatement of any previously reported financial statements
or any related financial disclosure, nor does management believe that it had any effect on the accuracy of the Company’s
financial statements for the current reporting period.



In order to
mitigate this material weakness to the fullest extent possible, all financial reports are reviewed for reasonableness by the Executive
Chairman as well as the Chairman of the Audit Committee. All unexpected results are investigated. At any time, if it appears that
any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. As soon as our finances
allow, we will hire sufficient accounting staff and implement appropriate procedures for monitoring and review of work performed
by our Chief Accounting Officer.



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, 2015 that have materially
affected, or are reasonable likely to materially affect, our internal control over financial reporting.



14











PART II -- OTHER INFORMATION



ITEM 1.          LEGAL
PROCEEDINGS.



Alan Schmidt (“Schmidt”), a former
shareholder of Genaera Corporation (“Genaera”), and a former unitholder of the Genaera Liquidating Trust (the ‘‘Trust’’),
filed a purported class action in the United States District Court for the Eastern District of Pennsylvania in June 2012. The lawsuit
named thirty defendants, including Abeona, MacroChem Corporation, which was acquired by us in February 2009, Jeffrey Davis, the
then-CEO and currently a director of Abeona, and Steven H. Rouhandeh and Mark Alvino, both of whom are our directors (the ‘‘Abeona
Defendants’’). With respect to the Abeona Defendants, the complaint alleged direct and derivative claims asserting
that directors of Genaera and the Trustee of the Trust breached their fiduciary duties to Genaera, Genaera’s shareholders
and the Trust’s unitholders in connection with the licensing and disposition of certain assets, aided and abetted by numerous
defendants including the Abeona Defendants. Schmidt seeks monetary damages, disgorgement of any distributions received from the
Trust, rescission of sales made by the Trust, attorneys’ and expert fees, and costs. On December 19, 2012, Schmidt filed
an amended complaint (the “Amended Complaint”) which asserted substantially the same allegations with respect to the
Abeona Defendants. On February 4, 2013, the Abeona Defendants moved to dismiss all claims asserted against them. On August 12,
2013 the court granted the Abeona Defendants’ motions to dismiss and entered judgment in favor of the Abeona Defendants on
all claims. On August 26, 2013, Schmidt filed a motion for reconsideration. On September 10, 2013 Schmidt filed a Notice of Appeal
with the District Court. On September 17, 2013, Schmidt filed his appeal with the U.S. Third Circuit Court of Appeals (the “Third
Circuit”). On September 25, 2013, the District Court denied Schmidt’s motion for reconsideration. On October 17, 2013,
Schmidt amended his appeal to include the District Court’s denial of his motion for reconsideration. On March 20, 2014, Schmidt
filed his Brief and Joint Appendix. On May 22, 2014, the Abeona Defendants filed their Oppositions to Schmidt’s Brief. On
May 29, 2014, Schmidt was granted an extension of time until June 23, 2014 to file his Reply Brief and filed his Reply Brief on
that date. The Third Circuit held oral argument on September 12, 2014. On October 17, 2014, in a split decision, the Third Circuit
reversed the District Court’s decision holding, among other things, that the District Court’s determination that the
Amended Complaint was time-barred on statute of limitations grounds was premature. The Third Circuit did not rule upon any of the
other grounds for dismissal advanced in the District Court and on appeal. The Third Circuit remanded the case to the District Court
for further proceedings. On January 6, 2015, the District Court ordered the parties to file supplemental briefs on all remaining
arguments for dismissal, and further ordered that a hearing on the motions to dismiss would be held on February 3, 2015. On January
23, 2015, the Abeona Defendants filed their Supplemental Brief. At the February 3, 2015 hearing, Schmidt sought and was granted
leave to amend his complaint for a second time. Schmidt filed his Second Amended Complaint on February 3, 2015. The Second Amended
Complaint asserts substantially the same factual allegations with respect to the Abeona Defendants, but eliminates all causes of
action against the Abeona Defendants except for aiding and abetting the Genaera directors’ and officers’ purported
breaches of fiduciary duties, a claim for “punitive damages” and a claim for rescission of a settlement agreement between
the Trust and the Abeona Defendants. On March 20, 2015, the Abeona Defendants filed a motion to dismiss the Second Amended Complaint.
The Abeona Defendants’ motion to dismiss is fully briefed, and oral argument on the motion is scheduled for September 30,
2015. We intend to continue contesting the claims vigorously.



We are not currently subject to any other material
pending legal proceedings.



15







ITEM 2.          UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.



On April 23, 2015 we closed a $7 million private
placement of common stock consisting of 2,333,333 shares of common stock, at a price of $3.00 per share. The issuance of shares
of our common stock was made pursuant to Section 4(2) and Rule 506 of the Securities Act of 1933, as amended.



On May 11, 2015, we closed a $10 million private
placement of common stock consisting of 1,250,000 shares of common stock, at a price of $8.00 per share, and warrants to purchase
625,000 shares of common stock. The warrants have an exercise price of $10.00 per share and are exercisable for 30 months following
the closing date. In connection with the private placement, the placement agent received warrants to purchase 50,000 shares of
common stock at $11.00 per share and which are exercisable for five years from the closing date. The issuance of shares of our
common stock and warrants to purchase shares of our common stock was made pursuant to Section 4(2) and Rule 506 of the Securities
Act of 1933, as amended.



On May 15, 2015, we closed our acquisition
of Abeona Ohio. In connection with the closing, we issued a total of 3,979,761 shares of common stock to Abeona Ohio members.



ITEM 3.          DEFAULTS
UPON SENIOR SECURITIES.



None.



ITEM 6.          EXHIBITS.





|Exhibits: |  |                                                                                                                                                                                                                                  
|--------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1       |  | Certificate of Amendment of Certificate of Incorporation filed June 19, 2015 (Incorporated by Reference to Exhibit 3.1 to our Form 8-K filed June 22, 2015)                                                                      
|          |  |                                                                                                                                                                                                                                  
|4.1***    |  | 2015 Equity Incentive Plan (Incorporated by reference to Exhibit 4.1 to our Form S-8 filed May 11, 2015)                                                                                                                         
|          |  |                                                                                                                                                                                                                                  
|10.1      |  | Agreement and Plan of Merger, dated May 5, 2015, by and among the Company, Plasmatech Merger Sub Inc., Abeona Therapeutics LLC and Paul A. Hawkins, in his capacity as Member Representative                                     
|          |  |                                                                                                                                                                                                                                  
|10.2      |  | Letter Agreement, dated July 31, 2015, by and among the Company, Sabby Healthcare Master Fund Ltd. and Sabby Volatility Warrant Master Fund, Ltd. (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed July 31, 2015)
|          |  |                                                                                                                                                                                                                                  
|10.3      |  | Form of Purchase Agreement, dated July 27, 2015 (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed August 3, 2015)                                                                                                 
|          |  |                                                                                                                                                                                                                                  
|10.4      |  | Form of Common Stock Purchase Agreement, dated April 1, 2015.                                                                                                                                                                    



16







|10.5  |  | Form of Securities Purchase Agreement dated May 6, 2015.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|31.1  |  | Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|31.2  |  | Principal Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|32.1* |  | Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|32.2* |  | Principal Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|101** |  | The following materials formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets at June 30, 2015 and December 31, 2014, (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2015 and June 30, 2014, (iii) Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2015, (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and June 30, 2014, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.








* This exhibit shall not be deemed “filed”
for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor
shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities and Exchange Act
of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filing.



** This exhibit is deemed to be furnished
and not filed.



*** Management contract or compensatory
plan.



17







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.



|                        | ABEONA THERAPEUTICS INC.
|----------------------- | ------------------------
|                        |                         
|Date:   August 14, 2015 |                         
|                        |                         
|                        |                         
|                        |                         
|                        |                         
|Date:   August 14, 2015 |                         
|                        |                         
|                        |                         
|                        |                         



18







Abeona Therapeutics Inc. and Subsidiaries



Condensed Consolidated Balance Sheets



|                                                                                                                                      |  | June 30, 2015 |              |   | December 31, 2014 |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------------ | - | ----------------- | -
|                                                                                                                                      |  | (unaudited)   |              |   |                   |  
|ASSETS                                                                                                                                |  |               |              |   |                   |  
|Current assets                                                                                                                        |  |               |              |   |                   |  
|Cash and cash equivalents                                                                                                             |  | $             | 30,410,000   |   |                   | $
|Receivables                                                                                                                           |  |               | 330,000      |   |                   |  
|Prepaid expenses and other current assets                                                                                             |  |               | 222,000      |   |                   |  
|Total current assets                                                                                                                  |  |               | 30,962,000   |   |                   |  
|Property and equipment, net                                                                                                           |  |               | 66,000       |   |                   |  
|Licensed technology, net                                                                                                              |  |               | 6,900,000    |   |                   |  
|Goodwill                                                                                                                              |  |               | 38,955,000   |   |                   |  
|Other assets                                                                                                                          |  |               | 42,000       |   |                   |  
|Total assets                                                                                                                          |  | $             | 76,925,000   |   |                   | $
|                                                                                                                                      |  |               |              |   |                   |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                  |  |               |              |   |                   |  
|Current liabilities                                                                                                                   |  |               |              |   |                   |  
|Accounts payable                                                                                                                      |  | $             | 1,318,000    |   |                   | $
|Short-term notes payable                                                                                                              |  |               | -            |   |                   |  
|Current portion of deferred revenue                                                                                                   |  |               | 602,000      |   |                   |  
|Total current liabilities                                                                                                             |  |               | 1,920,000    |   |                   |  
|Contingent consideration liability                                                                                                    |  |               | 6,489,000    |   |                   |  
|Payable due Licensor                                                                                                                  |  |               | 4,000,000    |   |                   |  
|Long-term deferred revenue                                                                                                            |  |               | 4,567,000    |   |                   |  
|Total liabilities                                                                                                                     |  |               | 16,976,000   |   |                   |  
|Commitments and contingencies                                                                                                         |  |               |              |   |                   |  
|Stockholders' equity                                                                                                                  |  |               |              |   |                   |  
|Common stock - $.01 par value; authorized 200,000,000 shares; issued, 29,861,515 at June 30, 2015 and 19,960,801 at December 31, 2014 |  |               | 299,000      |   |                   |  
|Additional paid-in capital                                                                                                            |  |               | 361,837,000  |   |                   |  
|Accumulated deficit                                                                                                                   |  |               | (302,187,000 | ) |                   |  
|Total stockholders' equity                                                                                                            |  |               | 59,949,000   |   |                   |  
|Total liabilities and stockholders' equity                                                                                            |  | $             | 76,925,000   |   |                   | $



The accompanying notes are an integral
part of these condensed consolidated statements.



19







Abeona Therapeutics Inc. and Subsidiaries



Condensed Consolidated Statements
of Operations

(unaudited)



|                                                             |  | Three months ended |            |   | Six months ended |  
|------------------------------------------------------------ |  | ------------------ | ---------- | - | ---------------- | -
|                                                             |  | June 30,           |            |   | June 30,         |  
|                                                             |  | 2015               |            |   | 2014             |  
|Revenues                                                     |  |                    |            |   |                  |  
|License revenues                                             |  | $                  | 150,000    |   |                  | $
|Royalties                                                    |  |                    | 132,000    |   |                  |  
|Total revenues                                               |  |                    | 282,000    |   |                  |  
|                                                             |  |                    |            |   |                  |  
|Expenses                                                     |  |                    |            |   |                  |  
|Research and development                                     |  |                    | 610,000    |   |                  |  
|General and administrative                                   |  |                    | 3,667,000  |   |                  |  
|Depreciation and amortization                                |  |                    | 132,000    |   |                  |  
|Total expenses                                               |  |                    | 4,409,000  |   |                  |  
|                                                             |  |                    |            |   |                  |  
|Loss from operations                                         |  |                    | (4,127,000 | ) |                  |  
|                                                             |  |                    |            |   |                  |  
|Interest and miscellaneous income                            |  |                    | 16,000     |   |                  |  
|Interest and other expense                                   |  |                    | (2,000     | ) |                  |  
|Loss on change in fair value of derivative - preferred stock |  |                    | -          |   |                  |  
|                                                             |  |                    | 14,000     |   |                  |  
|Net loss                                                     |  |                    | (4,113,000 | ) |                  |  
|                                                             |  |                    |            |   |                  |  
|Less preferred stock dividends                               |  |                    | -          |   |                  |  
|Net loss allocable to common stockholders                    |  | $                  | (4,113,000 | ) |                  | $
|                                                             |  |                    |            |   |                  |  
|Basic and diluted loss per common share                      |  | $                  | (0.16      | ) |                  | $
|                                                             |  |                    |            |   |                  |  
|Weighted average number of common shares outstanding         |  |                    | 25,695,973 |   |                  |  



The accompanying notes are an integral
part of these condensed consolidated statements.



20







Abeona Therapeutics Inc. and Subsidiaries



Condensed Consolidated Statements of Stockholders'
Equity

(unaudited)



|                                                 |  | Common Stock |            |  |        |   |         |                            |  |   |                     | 
|------------------------------------------------ |  | ------------ | ---------- |  | ------ | - | ------- | -------------------------- |  | - | ------------------- | 
|                                                 |  | Shares       |            |  | Amount |   |         | Additional paid-in capital |  |   | Accumulated deficit | 
|Balance December 31, 2014                        |  |              | 19,960,801 |  |        | $ | 200,000 |                            |  | $ | 300,690,000         | 
|                                                 |  |              |            |  |        |   |         |                            |  |   |                     | 
|Common stock issued to employees                 |  |              | 10,000     |  |        |   | -       |                            |  |   | 32,000              | 
|Common stock issued for services                 |  |              | 28,000     |  |        |   | -       |                            |  |   | 87,000              | 
|Stock option compensation expense                |  |              | -          |  |        |   | -       |                            |  |   | 224,000             | 
|Net loss                                         |  |              | -          |  |        |   | -       |                            |  |   | -                   | 
|Balance March 31, 2015                           |  |              | 19,998,801 |  |        | $ | 200,000 |                            |  | $ | 301,033,000         | 
|                                                 |  |              |            |  |        |   |         |                            |  |   |                     | 
|Restricted common stock issued to employees      |  |              | 1,350,000  |  |        |   | 13,000  |                            |  |   | 1,023,000           | 
|Common stock issued for services                 |  |              | 22,500     |  |        |   | -       |                            |  |   | 75,000              | 
|Exercise of $5.00 warrants                       |  |              | 927,119    |  |        |   | 9,000   |                            |  |   | 4,626,000           | 
|Common stock issued for $5.00 share net of costs |  |              | 2,333,334  |  |        |   | 24,000  |                            |  |   | 6,977,000           | 
|Common stock issued for $8.00 share net of costs |  |              | 1,250,000  |  |        |   | 13,000  |                            |  |   | 8,992,000           | 
|Common stock issued to Abeona Ohio holders       |  |              | 3,979,761  |  |        |   | 40,000  |                            |  |   | 38,207,000          | 
|Stock option compensation expense                |  |              | -          |  |        |   | -       |                            |  |   | 904,000             | 
|Net loss                                         |  |              | -          |  |        |   | -       |                            |  |   | -                   | 
|Balance June 30, 2015                            |  |              | 29,861,515 |  |        | $ | 299,000 |                            |  | $ | 361,837,000         | 



The accompanying notes are an integral part
of these condensed consolidated statements.



21







Abeona Therapeutics Inc. and Subsidiaries



Condensed Consolidated Statements of Cash Flows

(unaudited)



|                                                                        |  | Six Months ended June 30, |           
|----------------------------------------------------------------------- |  | ------------------------- | ----------
|                                                                        |  | 2015                      |           
|Cash flows from operating activities:                                   |  |                           |           
|Net loss                                                                |  | $                         | (6,113,000
|Adjustments to reconcile net loss to cash used in operating activities: |  |                           |           
|Loss on change in fair value of derivative – preferred stock            |  |                           | -         
|Depreciation and amortization                                           |  |                           | 250,000   
|Stock option compensation expense                                       |  |                           | 1,128,000 
|Stock issued to directors, employees and consultants                    |  |                           | 1,068,000 
|Stock issued for services                                               |  |                           | 162,000   
|Change in operating assets and liabilities:                             |  |                           |           
|Receivables                                                             |  |                           | (294,000  
|Prepaid expenses and other current assets                               |  |                           | (194,000  
|Other assets                                                            |  |                           | (9,000    
|Accounts payable and accrued expenses                                   |  |                           | (731,000  
|Interest payable on dividends                                           |  |                           | -         
|Deferred revenue                                                        |  |                           | (301,000  
|Net cash used in operating activities                                   |  |                           | (5,034,000
|                                                                        |  |                           |           
|Cash flows from financing activities:                                   |  |                           |           
|Capital expenditures                                                    |  |                           | (14,000   
|Net cash used in investing activities                                   |  |                           | (14,000   
|                                                                        |  |                           |           
|Cash flows from financing activities:                                   |  |                           |           
|Proceeds from $3.00 common stock issuances net of costs                 |  |                           | 7,001,000 
|Proceeds from $8.00 common stock issuances net of costs                 |  |                           | 9,005,000 
|Proceeds from exercise of $5.00 warrants                                |  |                           | 4,635,000 
|Cash from Abeona Ohio                                                   |  |                           | 3,697,000 
|Payment of short-term debt                                              |  |                           | (400,000  
|Net cash provided by financing activities                               |  |                           | 23,938,000
|                                                                        |  |                           |           
|                                                                        |  |                           |           
|Net increase (decrease)  in cash and cash equivalents                   |  |                           | 18,890,000
|Cash and cash equivalents at beginning of period                        |  |                           | 11,520,000
|Cash and cash equivalents at end of period                              |  | $                         | 30,410,000
|                                                                        |  |                           |           
|Supplemental cash flow information:                                     |  |                           |           
|Cash paid for interest                                                  |  | $                         | -         
|                                                                        |  |                           |           
|Supplemental disclosure of noncash transactions:                        |  |                           |           
|Shares issued to holders of Abeona Ohio for acquisition                 |  | $                         | 31,758,000
|Contingent milestones to Abeona Ohio members                            |  |                           | 6,489,000 
|Licensed technology from Abeona Ohio                                    |  |                           | 2,156,000 
|Preferred stock dividends in dividends payable                          |  |                           | -         



The accompanying notes are an integral part
of these condensed consolidated statements.



22







Abeona Therapeutics Inc. and Subsidiaries



Notes to Condensed Consolidated Financial Statements

Three and Six Months Ended June 30, 2015 and
2014

(unaudited)



Abeona Therapeutics
Inc. (together with our subsidiaries, “we”, “our”, “Abeona” or the “Company”) is
a Delaware corporation. We are an emerging biopharmaceutical company focused on developing and delivering gene therapy and plasma-based
products for severe and life-threatening rare diseases. Abeona's lead programs are ABO-101 (AA9 NAGLU) and ABO-102 (scAAV9 SGHG),
adeno-associated virus (AAV)-based gene therapies for Sanfilippo syndrome (MPS IIIA and IIIB) in collaboration with patient advocate
groups, researchers and clinicians, anticipated to commence clinical trials in 2015. We are also developing ABO-201 (scAAV9 CLN3)
gene therapy for juvenile Batten disease (JBD); and ABO-301 (AAV LK19 FANCC) for Fanconi anemia (FA) disorder using a novel CRISPR/Cas9-based
gene editing approach to gene therapy program for rare blood diseases. In addition, we are also developing rare plasma protein
therapies including PTB-101 SDF AlphaTM (alpha-1 protease inhibitor) for inherited COPD using our proprietary SDFTM (Salt
Diafiltration) ethanol-free process. Our efforts have been principally devoted to research and development, resulting in significant
losses.



| | (1) | Interim Financial Statements
| | --- | ----------------------------



The condensed consolidated balance sheet
as of June 30, 2015, the condensed consolidated statements of operations for the three and six months ended June 30, 2015 and 2014,
the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2015, and the condensed
consolidated statements of cash flows for the six months ended June 30, 2015 and 2014, were prepared by management without audit.
In the opinion of management, all adjustments, consisting only of normal recurring adjustments, except as otherwise disclosed,
necessary for the fair presentation of the financial position, results of operations, and changes in financial position for such
periods, have been made.



Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted. It is suggested that these interim financial statements be read in conjunction with
the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December
31, 2014. The results of operations for the period ended June 30, 2015 are not necessarily indicative of the operating results
which may be expected for a full year. The condensed consolidated balance sheet as of December 31, 2014 contains financial information
taken from the audited Abeona financial statements as of that date.



Certain reclassifications to the consolidated
financial statements for all periods presented have been made to conform to the June 30, 2015 presentation.



On June 19, 2015 we changed our name from PlasmaTech Biopharmaceuticals,
Inc. to Abeona Therapeutics Inc.



23







(2)         Intangible
Assets



Intangible assets consist of the following
(in thousands):



|                              |  | June 30, 2015        |       |  | December 31, 2014        |  
|----------------------------- |  | -------------------- | ----- |  | ------------------------ | -
|                              |  | Gross carrying value |       |  | Accumulated amortization |  
|Amortizable intangible assets |  |                      |       |  |                          |  
|                              |  |                      |       |  |                          |  
|Licensed technology           |  | $                    | 7,156 |  |                          | $



Amortization expense related to intangible
assets totaled $116,000 and $232,000 for the three and six months ended June 30, 2015, respectively, and totaled $0 for the three
and six months ended June 30, 2014. The aggregate estimated amortization expense for intangible assets remaining as of June 30,
2015 is as follows (in thousands):



|2015         |  | $ | 291   | 
|------------ |  | - | ----- | 
|2016         |  |   | 582   | 
|2017         |  |   | 582   | 
|2018         |  |   | 582   | 
|2019         |  |   | 582   | 
|over 5 years |  |   | 4,281 | 
|             |  |   |       | 
|Total        |  | $ | 6,900 | 



(3)         Stock
Based Compensation



For the three and six months ended June 30,
2015, we recognized stock-based compensation expense of $904,000 and $1,128,000, respectively. For the three and six months ended
March 31, 2014 we recognized stock-based compensation expense of $192,000 and $987,000, respectively.



The following table summarizes stock-based
compensation for the three and six months ended June 30, 2015 and 2014:



|                                                               |  | Three
                                         months ended June
                                         30, |         |  | Six
                                         months ended June
                                         30, |  
|-------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------- | ------- |  | ----------------------------------------------------------------------------------------------------------- | -
|                                                               |  | 2015                                                                                                          |         |  | 2014                                                                                                        |  
|Research and development                                       |  | $                                                                                                             | 86,000  |  |                                                                                                             | $
|Selling, general and administrative                            |  |                                                                                                               | 818,000 |  |                                                                                                             |  
|Stock-based compensation expense included in operating expense |  | $                                                                                                             | 904,000 |  |                                                                                                             | $



For the three and six months ended June 30,
2015 we granted 1,695,000 and 1,815,000 stock options, respectively, and for the three and six months ended June 30, 2014 we granted
no stock options.



For the three and six months ended June 30,
2015 we granted 1,350,000 and 1,360,000 shares of our common stock to directors and employees. For the three and six months ended
June 30, 2014 we granted no shares of our common stock to directors and employees.



24







| | (4) | Litigation
| | --- | ----------



Alan Schmidt (“Schmidt”), a former
shareholder of Genaera Corporation (“Genaera”), and a former unitholder of the Genaera Liquidating Trust (the ‘‘Trust’’),
filed a purported class action in the United States District Court for the Eastern District of Pennsylvania in June 2012. The lawsuit
named thirty defendants, including Abeona, MacroChem Corporation, which was acquired by us in February 2009, Jeffrey Davis, the
then-CEO and currently a director of Abeona, and Steven H. Rouhandeh and Mark Alvino, both of whom are our directors (the ‘‘Abeona
Defendants’’). With respect to the Abeona Defendants, the complaint alleged direct and derivative claims asserting
that directors of Genaera and the Trustee of the Trust breached their fiduciary duties to Genaera, Genaera’s shareholders
and the Trust’s unitholders in connection with the licensing and disposition of certain assets, aided and abetted by numerous
defendants including the Abeona Defendants. Schmidt seeks monetary damages, disgorgement of any distributions received from the
Trust, rescission of sales made by the Trust, attorneys’ and expert fees, and costs. On December 19, 2012, Schmidt filed
an amended complaint (the “Amended Complaint”) which asserted substantially the same allegations with respect to the
Abeona Defendants. On February 4, 2013, the Abeona Defendants moved to dismiss all claims asserted against them. On August 12,
2013 the court granted the Abeona Defendants’ motions to dismiss and entered judgment in favor of the Abeona Defendants on
all claims. On August 26, 2013, Schmidt filed a motion for reconsideration. On September 10, 2013 Schmidt filed a Notice of Appeal
with the District Court. On September 17, 2013, Schmidt filed his appeal with the U.S. Third Circuit Court of Appeals (the “Third
Circuit”). On September 25, 2013, the District Court denied Schmidt’s motion for reconsideration. On October 17, 2013,
Schmidt amended his appeal to include the District Court’s denial of his motion for reconsideration. On March 20, 2014, Schmidt
filed his Brief and Joint Appendix. On May 22, 2014, the Abeona Defendants filed their Oppositions to Schmidt’s Brief. On
May 29, 2014, Schmidt was granted an extension of time until June 23, 2014 to file his Reply Brief and filed his Reply Brief on
that date. The Third Circuit held oral argument on September 12, 2014. On October 17, 2014, in a split decision, the Third Circuit
reversed the District Court’s decision holding, among other things, that the District Court’s determination that the
Amended Complaint was time-barred on statute of limitations grounds was premature. The Third Circuit did not rule upon any of the
other grounds for dismissal advanced in the District Court and on appeal. The Third Circuit remanded the case to the District Court
for further proceedings. On January 6, 2015, the District Court ordered the parties to file supplemental briefs on all remaining
arguments for dismissal, and further ordered that a hearing on the motions to dismiss would be held on February 3, 2015. On January
23, 2015, the Abeona Defendants filed their Supplemental Brief. At the February 3, 2015 hearing, Schmidt sought and was granted
leave to amend his complaint for a second time. Schmidt filed his Second Amended Complaint on February 3, 2015. The Second Amended
Complaint asserts substantially the same factual allegations with respect to the Abeona Defendants, but eliminates all causes of
action against the Abeona Defendants except for aiding and abetting the Genaera directors’ and officers’ purported
breaches of fiduciary duties, a claim for “punitive damages” and a claim for rescission of a settlement agreement between
the Trust and the Abeona Defendants. On March 20, 2015, the Abeona Defendants filed a motion to dismiss the Second Amended Complaint.
The Abeona Defendants’ motion to dismiss is fully briefed, and oral argument on the motion is scheduled for September 30,
2015. We intend to continue contesting the claims vigorously.



25







We are not currently subject to any other material
pending legal proceedings.



| | (5) | Abeona Therapeutics LLC Acquisition
| | --- | -----------------------------------



On May 15, 2015, we agreed to issue
an aggregate of 3,979,761 unregistered shares of our common stock to the members of Abeona Therapeutics LLC (Abeona Ohio). Abeona
Ohio’s principal activities were focused on developing and delivering gene therapy products for severe and life-threatening
rare diseases. Abeona Ohio's lead program is ABO-101 (AA9 NAGLU) and ABO-102 (scAAV9 SGHG), adeno-associated virus (AAV)-based
gene therapies for Sanfilippo syndrome (MPS IIIA and IIIB) in collaboration with patient advocate groups, researchers and clinicians,
anticipated to commence clinical trials in 2015.



The initial consideration of $31,758,000
was calculated using the Company’s stock price on date of the closing, May 15, 2015 of $7.98 times the number of the Company
shares (3,979,761) issued to Abeona Ohio members.



There is a contingent valuation on
three milestones. Per the merger agreement with Abeona Ohio each milestone would consist of either cash, our stock or a combination
of both, at the Company’s election, equivalent to a stated dollar amount. The fair value of the probability of achieving
all three milestones is estimated at $6,489,000.



The following preliminary purchase
price allocation is based on information we have to date and is unaudited.



|Total purchase price               |  |   |            |  
|---------------------------------- |  | - | ---------- | -
|Initial consideration              |  | $ | 31,758,000 |  
|Contingent consideration           |  |   | 6,489,000  |  
|Total purchase price               |  | $ | 38,247,000 |  
|                                   |  |   |            |  
|Allocation of the purchase price   |  |   |            |  
|Cash                               |  | $ | 3,697,000  |  
|Accounts receivable                |  |   | 1,000      |  
|Prepaid expenses                   |  |   | 28,000     |  
|Property and equipment             |  |   | 51,000     |  
|Other assets                       |  |   | 1,000      |  
|Accounts payable                   |  |   | (153,000   | )
|Total tangible assets              |  |   | 3,625,000  |  
|                                   |  |   |            |  
|Licensing agreement                |  |   | 2,156,000  |  
|Goodwill                           |  |   | 38,955,000 |  
|Contingent consideration liability |  |   | (6,489,000 | )
|                                   |  |   |            |  
|Total net asset value              |  | $ | 38,247,000 |  



26







In connection with the acquisition
$375,000 in merger costs were expensed.



| | (6) | Subsequent Events
| | --- | -----------------



On July 31, 2015 we closed an upsized $15.5
million direct placement of registered common stock with institutional investors, including Soros Fund Management and Perceptive
Life Science Fund, and two members of the Board of Directors. The financing is comprised of 2.83 million shares of common stock
at a price of $5.50 per share.



27