What changed in this filing

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Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 931 added, 798 removed, 101 unchanged (94% of the section changed)

FINANCIAL STATEMENTS

PHARMACEUTICALS HOLDING CORP.

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

2 unchanged sentences

Cash and cash equivalents

Prepaid expenses and

current assets

Property and equipment,

Right of use assets,

Prepaid expenses and other

Total current assets

Property and equipment, net

Right-of-use assets, net

Security deposit

1 unchanged sentence

Intangible asset

AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses and

other current liabilities

Accrued expenses and other current liabilities

Lease liability, current

current liabilities

Lease liability, net

Total current liabilities

Lease liability, net of current portion

Total liabilities

Commitments (See Note 16)

Stockholders’

stock, $0.001 par value;

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

5,000,000 shares authorized

B Convertible Preferred stock, $0.001 par value;

5,313 shares designated as of March 31,

2021 and December 31, 2020 issued and outstanding - None

A Convertible Preferred stock, $0.001 par value;

7,938 shares designated as of March 31,

2021 and December 31, 2020 issued and outstanding - None

stock, $0.001 par value;

800,000,000 and 400,000,000 shares authorized as of March 31, 2021 and December 31, 2020, respectively;

323,917,731 and 206,008,683 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively, and 54,447 shares

to be issued as of December 31, 2020

Series B Convertible Preferred stock, $ 0.001 par value;

5,313 shares designated as of June 30, 2021 and December 31, 2020, issued and outstanding - None

Series A Convertible

Preferred stock, $ 0.001 par value;

7,938 shares designated as of June 30, 2021 and December 31, 2020, issued and outstanding - None

Common stock, $ 0.001 par value;

800,000,000 and 400,000,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively;

346,358,451 and 206,008,683 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively, and 116,505 and 54,447 shares to be issued as of June 30, 2021 and December 31, 2020, respectively

Additional paid in capital

Accumulated deficit

Accumulated other comprehensive

stockholders’ equity

liabilities and stockholders’ equity

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

Accumulated other comprehensive loss

Total stockholders’ equity

Total liabilities and stockholders’ equity

See the accompanying notes to the condensed consolidated

financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Share and Per Share Amounts)

Months Ended March 31,

AND EXPENSES:

and development

and administrative

Three Months Ended June 30,

Six Months Ended June 30,

COSTS AND EXPENSES:

Research and development

General and administrative

Operating Loss

Interest and other income, net

Warrant deemed dividend

Preferred stock deemed

Net loss available to

common stockholders

Net loss per common

share, basic and diluted

Weighted average common

shares outstanding, basic and diluted

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Preferred stock deemed dividend

Net loss available to common stockholders

Net loss per common share, basic and diluted

Weighted average common shares outstanding, basic and diluted

See the accompanying notes to the condensed consolidated

financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

(In Thousands)

Months Ended March 31,

Other comprehensive

currency translation loss

Total other comprehensive

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive loss:

Foreign currency translation loss

Comprehensive loss

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

MONTHS ENDED MARCH 31, 2021 AND 2020

Thousands, Except Share and Per Share Amounts)

See the accompanying notes to the condensed consolidated

financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’

(In Thousands, Except Share and Per Share Amounts)

Series B Convertible

Preferred stock

Comprehensive

December 31, 2020

of common stock upon exercise of warrants in March 2021 ($0.57 per share)

of common stock in January 2021 ($0.80 per share), net of transactional expenses of $3,096

of common stock in February 2021 ($1.20 per share), net of transactional expenses of $5,002

of common stock under at-the-market offering, net of transactional expenses of $230

stock purchase plan

currency transaction gain

March 31, 2021

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Balance, December 31, 2020

Issuance of common stock in exchange for exercise of warrants in March 2021 ($ 0.57 per share)

Issuance of common stock in January 2021 ($ 0.80 per share), net of transactional expenses of $ 3,096

Issuance of common stock in February 2021 ($ 1.20 per share), net of transactional expenses of $ 5,002

Issuance of common stock in January 2021 under At-the-market offering, net of transactional expenses of $ 230

Employee stock purchase plan

Stock-based compensation

Foreign currency transaction gain

Balance, March 31, 2021

Issuance of common stock in April and June 2021 under At-the-market offering, net of transactional expenses of $ 612

Issuance of commitment shares under 2021 Purchase Agreement

Issuance of common stock under 2021 Purchase Agreement

Issuance of common stock in the acquisition of the OyaGen license

Stock-based compensation

Foreign currency transaction gain

Balance, June 30, 2021

See the accompanying notes

to the condensed consolidated financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’

(In Thousands, Except Share and Per Share Amounts)

Series B Convertible

Preferred stock

Comprehensive

December 31, 2019

of common stock in exchange for exercise of warrants in February and March 2020 ($0.57 per share)

dividend in connection with repricing of November 2019 warrants

deemed dividend

of Series B Convertible preferred stock and common stock warrants in February 2020 ($1,000.00 per share, net of transactional expenses

conversion feature in connection with issuance of Series B Convertible preferred stock

stock deemed dividend

of common stock and common stock warrants in February 2020 ($0.57 per share, net of transactional expenses of $292)

of common stock upon conversion of

Series B Convertible preferred stock

of common stock in March 2020 ($1.10 per share, net of transactional expenses of $1,221)

stock purchase plan

currency transaction gain

March 31, 2020

the accompanying notes to the condensed consolidated financial statements

Balance, December 31, 2019

Issuance of common stock in exchange for exercise of warrants in February and March 2020 ($ 0.57 per share)

Deemed dividend in connection with repricing of November 2019 warrants

Warrant deemed dividend

Issuance of Series B Convertible preferred stock and common stock warrants in February 2020 ($ 1,000.00 per share, net of transactional expenses of $ 711 )

Beneficial conversion feature in connection with issuance of Series B Convertible preferred stock

Preferred stock deemed dividend

Issuance of common stock and common stock warrants in February 2020 ($ 0.57 per share, net of transactional expenses of $ 292 )

Issuance of common stock upon conversion of Series B Convertible preferred stock

Issuance of common stock in March 2020 ($ 1.10 per share, net of transactional expenses of $ 1,221 )

Employee stock purchase plan

Stock-based compensation

Foreign currency transaction gain

Balance, March 31, 2020

Issuance of common stock under 2019 Purchase Agreement

Issuance of common stock in May and June 2020 under At-the-market offering, net of transaction expenses of $ 1,131

Issuance of common stock in the acquisition of Trigemina assets

Stock-based compensation

Foreign currency transaction gain

Balance, June 30, 2020

See the accompanying notes

to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP .

1 unchanged sentence

(In Thousands)

Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash used

in operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

Common stock issued to acquire in-process research and development

Stock-based compensation

3 unchanged sentences

Lease liabilities and ROU asset, net

Accrued expenses and other

current liabilities

cash used in operating activities

Accrued expenses and other current liabilities

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

property and equipment

cash used in investing activities

Purchase of property and equipment

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from the exercise of warrants

Proceeds from exercise of warrants

Proceeds from ESPP

Proceeds, net of expenses of $0 and $711, from the

sale of preferred stock

Proceeds, net of expenses

of $8,328 and $1,513, from sale of common stock and warrants

cash provided by financing activities

Effect of currency rate

change on cash

Net increase in cash, cash equivalents and restricted

Cash, cash equivalents

and restricted cash beginning of the period

Cash, cash equivalents

and restricted cash end of period

Proceeds, net of $ 0 and $ 711 expenses, from sale of preferred stock

Proceeds, net of $ 8,940 and $ 2,644 expenses, from sale of common stock and warrants

Net cash provided by financing activities

Effect of currency rate change on cash

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash beginning of the period

Cash, cash equivalents and restricted cash end of period

Supplemental disclosures of cash flow information:

Non-cash financing activities:

Series B Convertible preferred stock deemed dividend

Non-cash financing and investing activities:

Warrants deemed dividend

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

Pharmaceuticals Holding Corp., through its wholly owned subsidiary Tonix Pharmaceuticals, Inc.

(“Tonix Sub”), is a clinical-stage

biopharmaceutical company focused on discovering, licensing, acquiring and developing small molecules and biologics to treat and prevent

human disease and alleviate suffering.

Series B Convertible preferred stock deemed dividend

See the accompanying notes

to the condensed consolidated financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020 (UNAUDITED)

NOTE 1 – BUSINESS

Tonix Pharmaceuticals Holding

Corp., through its wholly owned subsidiary Tonix Pharmaceuticals, Inc.

(“Tonix Sub”), is a clinical-stage biopharmaceutical

company focused on discovering, licensing, acquiring and developing small molecules and biologics to treat and prevent human disease and

alleviate suffering.

All drug product candidates are still in development.

consolidated financial statements include the accounts of Tonix Pharmaceuticals Holding Corp.

and its wholly owned subsidiaries,

Tonix Sub, Krele LLC, Tonix Pharmaceuticals (Canada), Inc., Tonix Medicines, Inc., Jenner LLC, Tonix Pharma Holdings Limited and Tonix

Pharma Limited (collectively hereafter referred to as the “Company” or “Tonix”).

All intercompany balances and

transactions have been eliminated in consolidation.

The accompanying financial statements

have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of

assets and satisfaction of liabilities and commitments in the normal course of business.

The Company has suffered recurring losses from

operations and negative cash flows from operating activities.

At March 31, 2021, the Company had working capital of approximately $167.1

At March 31, 2021, the Company had an accumulated deficit of approximately $288.2 million.

The Company held unrestricted cash

and cash equivalents of approximately $164.2 million as of March 31, 2021.

The Company believes that its cash resources at March 31, 2021, and the

proceeds that it raised from equity offerings subsequent to the end of the first quarter of 2021 (See Note 11), will meet its operating

and capital expenditure requirements through March 31, 2022, but not beyond.

These factors raise substantial doubt about the Company’s ability

to continue as a going concern.

The Company continues to face significant challenges and uncertainties and, as a result, its available

capital resources may be consumed more rapidly than currently expected due to changes it may make in its research and development spending

The Company has the ability to obtain additional funding through public and private financing and collaborative arrangements with

strategic partners to increase the funds available to fund operations.

However, the Company may not be able to raise capital with terms

acceptable to the Company.

Without additional funds, it may be forced to delay, scale back or eliminate some of its research and development

activities, or other operations and potentially delay product development in an effort to provide sufficient funds to continue operations.

If any of these events occurs, our ability to achieve our development and commercialization goals would be adversely affected.

The financial

statements do not include any adjustments that might result from the outcome of this uncertainty.

2 – SIGNIFICANT ACCOUNTING POLICIES

financial statements

unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles

generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and

Article 8 of Regulation S-X.

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation

have been included.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

condensed consolidated balance sheet as of December 31, 2020 contained herein has been derived from audited financial statements.

results for the three months ended March 31, 2021 are not necessarily indicative of results that may be expected for the year ending

December 31, 2021.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial

statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, filed with

the Securities and Exchange Commission (“SEC”) on March 15, 2021.

and uncertainties

The Company’s primary efforts are devoted to conducting research

and development of innovative pharmaceutical and biological products to address public health challenges.

The Company has experienced

net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future.

Further, the Company does not have any commercial products available for sale and has not generated revenues, and there is no assurance

that if any of its product candidates are approved for sale, that the Company will be able to generate cash flow to fund operations.

addition, there can be no assurance that the Company’s research and development will be successfully completed or that any product

candidate will be approved or commercially viable.

Moreover, the extent to which COVID-19 impacts the Company’s operations will

depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time.

December 2019, a novel strain of Coronavirus (“COVID-19”) emerged that has caused significant disruptions to the U.S.

global economy.

The spread of COVID-19 has led to regional quarantines, business shutdowns, labor shortages, disruptions to supply chains,

and overall economic instability.

Any of these events may in the future have a material adverse effect on our business, operations and

financial condition.

The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain

and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity

of COVID-19 and the actions taken to contain COVID-19 or treat its impact, among other things.

preparation of financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”) requires management

to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and

liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period.

Actual results

could differ from those estimates.

Significant estimates include the assumptions used in the fair value of stock-based compensation and

other equity instruments, and the percent of completion of research and development contracts.

The consolidated financial

statements include the accounts of Tonix Pharmaceuticals Holding Corp.

and its wholly owned subsidiaries, Tonix Sub, Krele LLC, Tonix

Pharmaceuticals (Canada), Inc., Tonix Medicines, Inc., Jenner LLC, Tonix Pharma Holdings Limited and Tonix Pharma Limited (collectively

hereafter referred to as the “Company” or “Tonix”).

All intercompany balances and transactions have been eliminated

in consolidation.

Going Concern

The accompanying financial

statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization

of assets and satisfaction of liabilities and commitments in the normal course of business.

The Company has suffered recurring losses

from operations and negative cash flows from operating activities.

At June 30, 2021, the Company had working capital of approximately

$ 169.2 million .

At June 30, 2021, the Company had an accumulated deficit of approximately $ 311.7 million .

The Company held unrestricted

cash and cash equivalents of approximately $ 165.7 million as of June 30, 2021.

The Company believes

that its cash resources at June 30, 2021, and the gross proceeds of approximately $ 8.4

million , that it raised from equity offerings subsequent to the end of the second quarter of 2021 (See Note 12), will meet

its operating and capital expenditure requirements through June 30, 2022, but not beyond.

These factors raise

substantial doubt about the Company’s ability to continue as a going concern.

The Company continues to face significant challenges

and uncertainties and, as a result, its available capital resources may be consumed more rapidly than currently expected due to changes

it may make in its research and development spending plans.

The Company has the ability to obtain additional funding through public and

private financing and collaborative arrangements with strategic partners to increase the funds available to fund operations.

the Company may not be able to raise capital with terms acceptable to the Company.

Without additional funds, it may be forced to delay,

scale back or eliminate some of its research and development activities, or other operations and potentially delay product development

in an effort to provide sufficient funds to continue operations.

If any of these events occurs, our ability to achieve our development

and commercialization goals would be adversely affected.

The financial statements do not include any adjustments that might result from

the outcome of this uncertainty.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Interim financial statements

The unaudited condensed consolidated

interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United

States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X.

they do not include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management,

all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The condensed consolidated

balance sheet as of December 31, 2020 contained herein has been derived from audited financial statements.

Operating results for the

three and six months ended June 30, 2021 are not necessarily indicative of results that may be expected for the year ending December 31,

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements

and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, filed with the Securities

and Exchange Commission (“SEC”) on March 15, 2021.

Risks and uncertainties

The Company’s primary

efforts are devoted to conducting research and development of innovative pharmaceutical and biological products to address public health

The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions

to continue for the foreseeable future.

Further, the Company does not have any commercial products available for sale and has not generated

revenues, and there is no assurance that if any of its product candidates are approved for sale, that the Company will be able to generate

cash flow to fund operations.

In addition, there can be no assurance that the Company’s research and development will be successfully

completed or that any product candidate will be approved or commercially viable.

Moreover, the extent to which COVID-19 impacts the Company’s

operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020 (UNAUDITED)

In December 2019, a novel

strain of Coronavirus (“COVID-19”) emerged that has caused significant disruptions to the U.S.

and global economy.

of COVID-19 has led to regional quarantines, business shutdowns, labor shortages, disruptions to supply chains, and overall economic

Any of these events may in the future have a material adverse effect on our business, operations and financial condition.

The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted

with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of COVID-19 and the

actions taken to contain COVID-19 or treat its impact, among other things.

Use of estimates

The preparation of financial

statements in accordance with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the

date of the financial statements, and the reported amounts of expenses during the reporting period.

Actual results could differ from those

Significant estimates include the assumptions used in the fair value of stock-based compensation and other equity instruments,

and the percent of completion of research and development contracts.

Cash, Cash Equivalents and Restricted Cash

The Company considers cash equivalents to be those investments which are

highly liquid, readily convertible to cash and have an original maturity of three months or less when purchased.

At March 31, 2021 and

December 31, 2020, cash equivalents, which consisted of money market funds, amounted to $100.4 million and $40.4 million, respectively.

cash at both March 31, 2021 and December 31, 2020 of approximately $240,000 collateralizes a letter of credit issued in connection with

the lease of office space in Chatham, New Jersey and New York, New York (see Note 14).

following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance

sheets that sum to the total of the same amounts shown in the condensed consolidated statement of cash flows:

The Company considers cash

equivalents to be those investments which are highly liquid, readily convertible to cash and have an original maturity of three months

or less when purchased.

At June 30, 2021 and December 31, 2020, cash equivalents, which consisted of money market funds, amounted to $ 100.4

million and $ 40.4 million , respectively.

Restricted cash at both June 30, 2021 and December 31, 2020 of approximately $ 240,000 collateralizes

a letter of credit issued in connection with the lease of office space in Chatham, New Jersey and New York, New York (see Note 15).

The following table provides

a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the

total of the same amounts shown in the condensed consolidated statement of cash flows:

(in thousands)

1 unchanged sentence

Restricted cash

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

and equipment

and equipment are stated at cost, less accumulated depreciation.

Depreciation is calculated using the straight-line method over the asset’s

estimated useful life, which is 20 years for buildings, three years for computer assets, five years for furniture and all other equipment

and term of lease for leasehold improvements.

Depreciation and amortization expense for both quarters ended March 31, 2021 and 2020

All property and equipment is located in the United States and Ireland.

assets with indefinite lives

the year ended December 31, 2015, the Company purchased certain internet domain rights, which were determined to have an indefinite life.

Identifiable intangibles with indefinite lives are not amortized but are tested for impairment annually or whenever events or changes

in circumstances indicate that their carrying amount may be less than fair value.

As of March 31, 2021, the Company believed that no

impairment existed.

Company determines if an arrangement is, or contains, a lease at inception.

Operating leases are included in operating lease right-of-use

(“ROU”) assets, operating lease liabilities, current and operating lease liabilities, noncurrent in the Company’s consolidated

balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent

its obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement

date based on the present value of lease payments over the lease term.

As the Company’s leases do not provide an implicit rate,

the Company uses an incremental borrowing rate based on the information available at the transition date and subsequent lease commencement

dates in determining the present value of lease payments.

This is the rate the Company would have to pay if borrowing on a collateralized

basis over a similar term to each lease.

Property and equipment

Property and equipment are

stated at cost, less accumulated depreciation.

Depreciation is calculated using the straight-line method over the asset’s estimated

useful life, which is 20 years for buildings, three years for computer assets, five years for furniture and all other equipment and term

of lease for leasehold improvements.

Depreciation and amortization expense for the three and six months ended June 30, 2021, was $ 7,000 and

$ 13,000 , respectively, and $ 6,000 and $ 12,000 , respectively, for the three and six months ended June 30, 2020.

All property and equipment

are located in the United States and Ireland.

Intangible assets with indefinite lives

During the year ended December

31, 2015, the Company purchased certain internet domain rights, which were determined to have an indefinite life.

Identifiable intangibles

with indefinite lives are not amortized but are tested for impairment annually or whenever events or changes in circumstances indicate

that their carrying amount may be less than fair value.

As of June 30, 2021, the Company believed that no impairment existed.

The Company determines if

an arrangement is, or contains, a lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”)

assets, operating lease liabilities, current and operating lease liabilities, noncurrent in the Company’s consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation

to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date based on

the present value of lease payments over the lease term.

As the Company’s leases do not provide an implicit rate, the Company uses

an incremental borrowing rate based on the information available at the transition date and subsequent lease commencement dates in determining

the present value of lease payments.

This is the rate the Company would have to pay if borrowing on a collateralized basis over a similar

term to each lease.

The operating lease ROU asset excludes lease incentives.

The Company’s lease terms may

include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Lease expense

for lease payments made under operating leases is recognized on a straight-line basis over the lease term.

and Development Costs

Company outsources certain of its research and development efforts and expenses these costs as incurred, including the cost of manufacturing

products for testing, as well as licensing fees and costs associated with planning and conducting clinical trials.

The value ascribed

to patents and other intellectual property acquired has been expensed as research and development costs, as such property related to

particular research and development projects and had no alternative future uses.

Company estimates its expenses resulting from its obligations under contracts with vendors, clinical research organizations and consultants

and under clinical site agreements in connection with conducting clinical trials.

The financial terms of these contracts are subject

to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials

or services are provided under such contracts.

The Company accounts for trial expenses according to the timing of various aspects of

The Company determines accrual estimates taking into account discussion with applicable personnel and outside service providers

as to the progress or state of consummation of trials, or the services completed.

the course of a clinical trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates.

Company makes estimates of its accrued expenses as of each balance sheet date based on the facts and circumstances known to it at that

The Company’s clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations

and other third-party vendors.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

All stock-based payments to employees

and to nonemployees for their services, including grants of restricted stock units (“RSUs”), and stock options, are measured

at fair value on the grant date and recognized in the consolidated statements of operations as compensation or other expense over the

requisite service period.

The Company accounts for share-based awards in accordance with the provisions of the Accounting Standards Codification

(“ASC”) 718, Compensation –

Stock Compensation.

Currency Translation

of the Canadian subsidiary are conducted in local currency, which represents its functional currency.

dollar is the functional

currency of the other foreign subsidiaries.

Balance sheet accounts of the Canadian subsidiary were translated from foreign currency

dollars at the exchange rate in effect at the balance sheet date and income statement accounts were translated at the average

rate of exchange prevailing during the period.

Translation adjustments resulting from this process were included in accumulated

other comprehensive loss on the condensed consolidated balance sheets.

Comprehensive

Income (Loss)

Comprehensive

income (loss) is defined as the change in equity of a business during a period from transactions and other events and circumstances

from non-owners sources.

It includes all changes in equity during a period except those resulting from investments by owners and distributions

Other comprehensive income (loss) represents foreign currency translation adjustments.

income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards

and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at

the current enacted tax rates.

The Company records a valuation allowance on its deferred income tax assets if it is not more likely than

not that these deferred income tax assets will be realized.

Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained

on examination by taxing authorities, based on the technical merits of the position.

The tax benefits recognized in the condensed consolidated

financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized

upon ultimate settlement.

As of March 31, 2021, the Company has not recorded any unrecognized tax benefits.

The Company’s policy

is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

computation of basic and diluted loss per share for the quarters ended March 31, 2021 and 2020 excludes potentially dilutive securities

when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock

during the period.

All warrants issued participate on a one-for-one basis with common stock

in the distribution of dividends, if and when declared by the Board of Directors, on the Company’s common stock.

For purposes of

computing EPS, these warrants are considered to participate with common stock in earnings of the Company.

Therefore, the Company calculates

basic and diluted EPS using the two-class method.

Under the two-class method, net income for the period is allocated between common stockholders

and participating securities according to dividends declared and participation rights in undistributed earnings.

The Company’s lease terms may include options to extend

or terminate the lease when it is reasonably certain that the Company will exercise that option.

Lease expense for lease payments made

under operating leases is recognized on a straight-line basis over the lease term.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020 (UNAUDITED)

Research and Development Costs

The Company outsources certain

of its research and development efforts and expenses these costs as incurred, including the cost of manufacturing products for testing,

as well as licensing fees and costs associated with planning and conducting clinical trials.

The value ascribed to patents and other intellectual

property acquired has been expensed as research and development costs, as such property related to particular research and development

projects and had no alternative future uses.

The Company estimates its

expenses resulting from its obligations under contracts with vendors, clinical research organizations and consultants and under clinical

site agreements in connection with conducting clinical trials.

The financial terms of these contracts are subject to negotiations, which

vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided

under such contracts.

The Company accounts for trial expenses according to the timing of various aspects of the trial.

The Company determines

accrual estimates taking into account discussion with applicable personnel and outside service providers as to the progress or state of

consummation of trials, or the services completed.

During the course of a clinical

trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates.

The Company makes estimates of

its accrued expenses as of each balance sheet date based on the facts and circumstances known to it at that time.

The Company’s

clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party

Stock-based compensation

All stock-based payments to

employees and to nonemployees for their services, including grants of restricted stock units (“RSUs”), and stock options,

are measured at fair value on the grant date and recognized in the consolidated statements of operations as compensation or other expense

over the requisite service period.

The Company accounts for share-based awards in accordance with the provisions of the Accounting Standards

Codification (“ASC”) 718, Compensation – Stock Compensation.

Foreign Currency Translation

Operations of the

Company’s Canadian subsidiary, Tonix Pharmaceuticals (Canada), Inc., are conducted in local currency, which represents its

functional currency.

dollar is the functional currency of the other foreign subsidiaries.

Balance sheet accounts of

the Canadian subsidiary were translated from foreign currency into U.S.

dollars at the exchange rate in effect at the balance sheet

date and income statement accounts were translated at the average rate of exchange prevailing during the period.

adjustments resulting from this process were included in accumulated other comprehensive loss on the condensed consolidated balance

Comprehensive Income (Loss)

Comprehensive income (loss) is

defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources.

It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

comprehensive income (loss) represents foreign currency translation adjustments.

Deferred income tax assets

and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary

differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted

The Company records a valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred

income tax assets will be realized.

The Company recognizes a tax

benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing

authorities, based on the technical merits of the position.

The tax benefits recognized in the condensed consolidated financial statements

from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate

As of June 30, 2021, the Company has not recorded any unrecognized tax benefits.

The Company’s policy is to recognize

interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

Per Share Data

The computation of basic and

diluted loss per share for the quarters ended June 30, 2021 and 2020 excludes potentially dilutive securities when their inclusion would

be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

All warrants issued

participate on a one-for-one basis with common stock in the distribution of dividends, if and when declared by the Board of

Directors, on the Company’s common stock.

For purposes of computing earnings per share (“EPS”), these warrants are

considered to participate with common stock in earnings of the Company.

Therefore, the Company calculates basic and diluted EPS

using the two-class method.

Under the two-class method, net income for the period is allocated between common stockholders and

participating securities according to dividends declared and participation rights in undistributed earnings.

No income was allocated

to the warrants for the three months ended March 31, 2021 and March 31, 2020, as results of operations were a loss for the period.

dilutive securities (See Note 12 and Note 13) excluded from the computation of basic and diluted net loss per share, as of March 31,

2021 and 2020, are as follows:

to the warrants for the three and six months ended June 30, 2021, and 2020, as results of operations were a loss for the periods.

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share, as of June 30, 2021 and 2020, are as

Warrants to purchase common stock

Options to purchase common

Options to purchase common stock

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020 (UNAUDITED)

NOTE 3 – PROPERTY AND EQUIPMENT, NET

Property and equipment, net

and equipment, net consisted of the following (in thousands):

consisted of the following (in thousands):

(in thousands)

1 unchanged sentence

Office furniture and equipment

Leasehold improvements

Accumulated depreciation and amortization

September 28, 2020, the Company completed the purchase of its 40,000 square foot facility in Massachusetts for $4,000,000, to house its

new Advanced Development Center for accelerated development and manufacturing of vaccines.

Of the total purchase price, $1.2 million was

allocated to the value of land acquired, and $2.8 million was allocated to construction in progress, as the building was not ready for

its intended use.

As of March 31, 2021, the asset has not been placed in service.

December 23, 2020, the Company completed the purchase of its approximately 44-acre site in Hamilton, Montana for $4.4 million, for the

construction of a vaccine development and commercial scale manufacturing facility.

As of March 31, 2021, the asset has not been placed

4 – FAIR VALUE MEASUREMENTS

value measurements affect the Company’s accounting for certain of its financial assets.

Fair value is defined as the price that

would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement

date and is measured according to a hierarchy that includes:

inputs, such as quoted prices in active markets.

Inputs, other

than quoted prices in active markets, that are observable either directly or indirectly.

Level 2 assets and liabilities include

debt securities with quoted market prices that are traded less frequently than exchange-traded instruments.

This category includes

On September 28, 2020,

the Company completed the purchase of its 4 .0 million

square foot facility in Massachusetts for $ 4,000,000 ,

to house its new Advanced Development Center for the development and manufacturing of vaccines.

Of the total purchase price, $ 1.2

million was allocated to the value of land acquired, and $ 2.8

million was allocated to construction in progress, as the building was not ready for its intended use.

As of June 30, 2021,

the asset has not been placed in service.

On December 23, 2020,

the Company completed the purchase of its approximately 44 -acre

site in Hamilton, Montana for $ 4.4

million , for the construction of a vaccine development and commercial scale manufacturing facility.

As of June 30, 2021, the

asset has not been placed in service.

NOTE 4 – FAIR VALUE MEASUREMENTS

Fair value measurements affect

the Company’s accounting for certain of its financial assets.

Fair value is defined as the price that would be received to sell

an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured

according to a hierarchy that includes:

Observable inputs, such as quoted prices in active markets.

Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

Level 2 assets and liabilities include debt securities with quoted market prices that are traded less frequently than exchange-traded instruments.

This category includes U.S.

government agency-backed debt securities and corporate-debt securities.

inputs in which there is little or no market data.

of March 31, 2021, and December 31, 2020, the Company used Level 1 quoted prices in active markets to value cash equivalents of $100.4

million and $40.4 million, respectively.

The Company did not have any Level 2 or Level 3 assets or liabilities as of both March 31, 2021

and December 31, 2020.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

5 – STOCKHOLDERS’ EQUITY

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

As of June 30, 2021, and December

31, 2020, the Company used Level 1 quoted prices in active markets to value cash equivalents of $ 100.4 million and $ 40.4 million , respectively.

The Company did not have any Level 2 or Level 3 assets or liabilities as of both June 30, 2021 and December 31, 2020.

NOTE 5 – STOCKHOLDERS’ EQUITY

On March 26, 2021, the Company

1 unchanged sentence

to 800,000,000 .

On October 1, 2020, the Company

received a letter from the Listing Qualifications staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based

upon the closing bid price of the Company’s common stock for the last 30 consecutive business days, the Company no longer meets

the requirement to maintain a minimum bid price of $1.00 per share, as set forth in Nasdaq Listing Rule 5450(a)(1) (the “Minimum

Bid Price Requirement”).

On March 3, 2021, the Company received a letter from Nasdaq stating that Company had regained compliance

with the Minimum Bid Price Requirement because the Company’s shares had a closing bid price at or above $1.00 per share for a minimum

of 20 consecutive business days.

6 – ASSET PURCHASE AGREEMENT WITH KATANA

December 22, 2020, the Company entered into an asset purchase agreement (the “Katana Asset Purchase Agreement”) with Katana

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020 (UNAUDITED)

NOTE 6 – ASSET PURCHASE AGREEMENT WITH KATANA

On December 22, 2020,

the Company entered into an asset purchase agreement (the “Katana Asset Purchase Agreement”) with Katana

Pharmaceuticals, Inc.

(“Katana”) pursuant to which Tonix acquired Katana assets related to insulin resistance and related

syndromes, including obesity (the “Katana Assets”).

In connection with the acquisition of the Katana Assets, Tonix assumed

Katana’s rights and obligations under that certain Exclusive License Agreement by and between Katana and The University of Geneva

(“Geneva”) (the “Geneva License “Agreement”) pursuant to an Assignment and Assumption Agreement with Geneva

(“Geneva Assignment and Assumption Agreement”), dated December 22, 2020.

As consideration for entering into the Katana Asset

Purchase Agreement, Tonix paid $0.7 million to Katana.

The costs associated with the cash payments were recorded to research and development

expenses in the statement of operations for the year ended December 31, 2020.

Because the Katana intellectual property was acquired prior

to FDA approval, the cash consideration totaling $0.7 million, was expensed as research and development costs since there is no alternative

future use and the acquired intellectual property does not constitute a business.

to the terms of the Geneva Assignment and Assumption Agreement, Geneva has granted to Tonix an exclusive license, with the right to sublicense,

certain patents related to the Katana Assets.

Tonix is obligated to use commercially reasonable efforts to diligently develop, manufacture,

and sell products claimed or covered by the patent and will use commercially reasonable efforts to diligently develop markets for such

The Geneva License Agreement specifies developmental milestones and the period of time during which such milestones must be

completed and provides for an annual maintenance fee payable to Geneva.

of March 31, 2021, no milestone payments have been accrued or paid in relation to this agreement.

7 – ASSET PURCHASE AGREEMENT WITH TRIGEMINA

June 11, 2020, the Company entered into an asset purchase agreement (the “Trigemina Asset Purchase Agreement”) with Trigemina,

(“Katana”) pursuant to which Tonix acquired Katana assets related to insulin resistance and

related syndromes, including obesity (the “Katana Assets”).

In connection with the acquisition of the Katana Assets,

Tonix assumed Katana’s rights and obligations under that certain Exclusive License Agreement by and between Katana and The

University of Geneva (“Geneva”) (the “Geneva License “Agreement”) pursuant to an Assignment and

Assumption Agreement with Geneva (“Geneva Assignment and Assumption Agreement”), dated December 22, 2020.

consideration for entering into the Katana Asset Purchase Agreement, Tonix paid $ 0.7

million to Katana.

The costs associated with the cash payments were recorded to research and development expenses in the

statement of operations for the year ended December 31, 2020.

Because the Katana intellectual property was acquired prior to FDA

approval, the cash consideration totaling $ 0.7 million , was expensed as research and development costs since there is no alternative future use and the acquired intellectual

property does not constitute a business.

Pursuant to the terms of the

Geneva Assignment and Assumption Agreement, Geneva has granted to Tonix an exclusive license, with the right to sublicense, certain patents

related to the Katana Assets.

Tonix is obligated to use commercially reasonable efforts to diligently develop, manufacture, and sell products

claimed or covered by the patent and will use commercially reasonable efforts to diligently develop markets for such products.

License Agreement specifies developmental milestones and the period of time during which such milestones must be completed and provides

for an annual maintenance fee payable to Geneva.

As of June 30, 2021, no milestone

payments have been accrued or paid in relation to this agreement.

NOTE 7 – ASSET PURCHASE AGREEMENT WITH TRIGEMINA

On June 11, 2020, the

Company entered into an asset purchase agreement (the “Trigemina Asset Purchase Agreement”) with Trigemina, Inc.

(“Trigemina”) and certain shareholders named therein (the “Executive Shareholders”) pursuant to which Tonix

acquired Trigemina assets related to migraine and pain treatment technologies (the “Trigemina Assets”).

In connection with

the acquisition of the Trigemina Assets, Tonix assumed Trigemina’s rights and obligations under that certain Amended and Restated

Exclusive License Agreement, dated November 30, 2007, as amended, by and between Trigemina and The Board of Trustees of the Leland Stanford

Junior University (“Stanford”) (the “Stanford License “Agreement”) pursuant to an Assignment and Assumption

Agreement with Stanford (“Assignment and Assumption Agreement”), dated June 11, 2020.

As consideration for entering into

the Asset Purchase Agreement, Tonix paid $824,759 to Trigemina and issued to Trigemina 2,000,000 shares of the Company’s common

stock, valued at $0.68 per share, based on the closing stock price on June 11, 2020, and paid Stanford $250,241 pursuant to the terms

of the Assignment and Assumption Agreement.

The common stock is unregistered and subject to a 12-month lock-up and a Shareholder Voting

Agreement, dated June 11, 2020, pursuant to which Trigemina and the Executive Shareholders have agreed to vote the common stock on any

matter put to a vote of the shareholders of the Company in accordance with management’s recommendations.

Both the costs associated

with the cash payments and share issuance, totaling $2.4 million, were recorded to research and development expenses in the statement

of operations for the year ended December 31, 2020.

Because the Trigemina intellectual property was acquired prior to FDA approval, the

cash and stock consideration, was expensed as research and development costs since there is no alternative future use and the acquired

intellectual property does not constitute a business.

to the terms of the Assignment and Assumption Agreement, Stanford has granted to Tonix an exclusive license, with the right to sublicense,

certain patents related to the Trigemina Assets.

Stanford has reserved for itself the right to practice under the patents

for academic research and educational purposes.

Tonix is obligated to use commercially reasonable efforts to diligently develop, manufacture,

and sell products claimed or covered by the patent and will use commercially reasonable efforts to diligently develop markets for such

The Trigemina License Agreement specifies developmental milestones and the period of time during which such milestones must

be completed and provides for an annual maintenance fee payable to Stanford.

of March 31, 2021, no milestone payments have been accrued or paid in relation to this agreement.

8 – ASSET PURCHASE AGREEMENT WITH TRIMARAN

August 19, 2019, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with TRImaran Pharma,

In connection

with the acquisition of the Trigemina Assets, Tonix assumed Trigemina’s rights and obligations under that certain Amended and

Restated Exclusive License Agreement, dated November 30, 2007, as amended, by and between Trigemina and The Board of Trustees of the

Leland Stanford Junior University (“Stanford”) (the “Stanford License “Agreement”) pursuant to an

Assignment and Assumption Agreement with Stanford (“Assignment and Assumption Agreement”), dated June 11, 2020.

consideration for entering into the Asset Purchase Agreement, Tonix paid $ 824,759

to Trigemina and issued to Trigemina 2,000,000

shares of the Company’s common stock, valued at $ 0.68

per share, based on the closing stock price on June 11, 2020, and paid Stanford $ 250,241

pursuant to the terms of the Assignment and Assumption Agreement.

The common stock is unregistered and subject to a 12-month lock-up

and a Shareholder Voting Agreement, dated June 11, 2020, pursuant to which Trigemina and the Executive Shareholders have agreed to

vote the common stock on any matter put to a vote of the shareholders of the Company in accordance with management’s

recommendations.

Both the costs associated with the cash payments and share issuance, totaling $ 2.4 million , were recorded to research and development expenses in the statement of operations for the year ended December 31, 2020.

Because the Trigemina intellectual property was acquired prior to FDA approval, the cash and stock consideration, was expensed as

research and development costs since there is no alternative future use and the acquired intellectual property does not constitute a

Pursuant to the terms of the

Assignment and Assumption Agreement, Stanford has granted to Tonix an exclusive license, with the right to sublicense, certain patents

related to the Trigemina Assets.

Stanford has reserved for itself the right to practice under the patents for academic research and educational

Tonix is obligated to use commercially reasonable efforts to diligently develop, manufacture, and sell products claimed or covered

by the patent and will use commercially reasonable efforts to diligently develop markets for such products.

The Trigemina License Agreement

specifies developmental milestones and the period of time during which such milestones must be completed and provides for an annual maintenance

fee payable to Stanford.

As of June 30, 2021, no milestone

payments have been accrued or paid in relation to this agreement.

NOTE 8 – ASSET PURCHASE AGREEMENT WITH TRIMARAN

On August 19, 2019, the

Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with TRImaran Pharma, Inc.

(“TRImaran”) and the selling shareholders named therein (the “Selling Shareholders”) pursuant to which Tonix

acquired TRImaran’s assets related to certain pyran-based compounds (the “Assets”).

In connection with the acquisition

of the Assets, Tonix entered into a First Amended and Restated Exclusive License Agreement (the “WSU License Agreement”)

with Wayne State University (“WSU”) on August 19, 2019.

As consideration for entering into the Asset Purchase Agreement,

Tonix paid $100,000 to TRImaran and has assumed certain liabilities of TRImaran totaling $68,500.

Upon the achievement of specified development,

regulatory and sales milestones, Tonix also agreed to pay TRImaran and the Selling Shareholders, in restricted stock or cash, at Tonix’s

option, a total of approximately $3.4 million.

Pursuant to the terms of the Asset Purchase Agreement, TRImaran and the Selling Shareholders

are prohibited from disclosing confidential information related to the Assets and are restricted from engaging, for a period of three

years, in the development or commercialization of any therapeutic containing any pyran-based drug compound for the treatment of post-traumatic

stress disorder, attention deficit hyperactivity disorder or major depressive disorder.

Also for a period of three years, if TRImaran

or any Selling Shareholder engage in the research or development of any potential therapeutic compound for the treatment of any central

nervous system disorder, TRImaran or such Selling Shareholder is obliged to provide notice and opportunity to Tonix to make an offer

to acquire or license rights with respect to such product candidate.

to the terms of the WSU License Agreement, WSU has granted to Tonix an exclusive license, with the right to sublicense, certain patents,

technical information and material (collectively, the “Technology”) related to the Assets.

WSU has reserved for itself the

right to practice the Technology for academic research and educational purposes.

Tonix is obligated to use commercially reasonable efforts

to obtain regulatory approval for one or more products utilizing the Technology (“WSU Products”) and to use commercially

reasonable marketing efforts throughout the term of the WSU License Agreement.

The WSU License Agreement specifies developmental milestones

and the period of time during which such milestones must be completed and provides for an annual maintenance fee payable to WSU.

is obligated to substantially manufacture WSU Products in the United States if WSU Products will be sold in the United States.

to the WSU License Agreement, Tonix has agreed to pay $75,000 to WSU as reimbursement of certain patent expenses, and, upon the achievement

of specified development, regulatory and sales milestones, the Company also agreed to pay WSU, milestone payments totaling approximately

$3.4 million.

Tonix has also agreed to pay WSU single-digit royalties on net sales of WSU Products sold by Tonix or a sublicensee on

a tiered basis based on net sales, and additional sublicense fees on certain consideration received from sublicensees.

Royalties on each

particular WSU Product are payable on a country-by-country and Product-by-Product basis until the date of expiration of the last valid

claim in the last to expire of the issued patents covered by the WSU License Agreement.

Royalties payable on net sales of WSU Products

may be reduced by 50% of the royalties payable by Tonix to any third party for intellectual property rights which are necessary for the

practice of the rights licensed to Tonix under the WSU License Agreement, provided that the royalty payable on a WSU Product may not

be reduced by more than 50%.

Each party also has the right to terminate the agreement for customary reasons such as material breach and

The WSU License Agreement contains provisions relating to termination, indemnification, confidentiality and other customary

matters for an agreement of this kind.

of March 31, 2021, no milestone payments have been accrued or paid in relation to this agreement.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

9 – LICENSE AGREEMENT WITH INSERM

February 11, 2021, the Company entered into a license agreement (the “Inserm License Agreement”) pursuant to

which it licensed technology using oxytocin-based therapeutics for the treatment of Prader-Willi syndrome and non-organic

failure to thrive disease from Inserm (the French National Institute of Health and Medical Research), Aix-Marseille

Université

and Centre Hospitalier Universitaire of Toulouse.

The Inserm License Agreement provides for the payment of

annual fees and milestone payments upon the occurrence of specified sales milestones totaling approximately $0.4 million, as well

royalties on net sales of products based on the licensed technology, and assignment/transfer and sublicense

of March 31, 2021, no milestone payments have been accrued or paid in relation to this agreement.

10 – LICENSE AGREEMENTS WITH COLUMBIA UNIVERSITY

September 16, 2019, the Company entered into an exclusive License Agreement (the “Columbia License Agreement”) with the Trustees

of Columbia University in the City of New York (“Columbia”) pursuant to which Columbia granted to Tonix an exclusive license,

with the right to sublicense, certain patents and technical information (collectively, the “TFF2 Technology”) related to

a recombinant Trefoil Family Factor 2 (TFF2), and to develop and commercialize products thereunder (each, a “TFF2 Product”).

Pursuant to the terms of the Columbia License Agreement, Columbia reserved for itself the right to practice the TFF2 Technology for academic

research and educational purposes.

Company paid a five-digit license fee to Columbia as consideration for entering into the Columbia License Agreement, which was recorded

to research and development expenses in the statement of operations for the year ended December 31, 2019.

The Company is obligated to

use Commercially Reasonable Efforts, as defined in the Columbia License Agreement, to develop and commercialize the TFF2 Product, and

to achieve specified developmental milestones.

Company agreed to pay Columbia single-digit royalties on net sales of (i) TFF2 Products sold by Tonix or a sublicensee and (ii) any other

products that involve material or technical information related to the TFF2 Product and transferred to Tonix pursuant to the Columbia

License Agreement (“Other Products”) sold by Tonix or a sublicensee.

Royalties on each particular TFF2 Product are payable

on a country-by-country and Product-by-Product basis until the latest of (i) the date of expiration of the last valid claim in the last

to expire of the issued patents covered by the Columbia License Agreement, and (ii) a specified period of time after the first commercial

sale of a TFF2 Product in the country in question.

Royalties on each particular Other Product are payable on a country-by-country and

product-by-product basis until a specified period of time after the first commercial sale of such particular Other Product in such country.

Royalties payable on net sales of the TFF2 Product and Other Products may be reduced by 50% of the royalties payable by Tonix to any

third party for intellectual property rights which are necessary for the practice of the rights licensed to Tonix under the Columbia

License Agreement, provided that the royalty payable on a Product or Other Product may not be reduced by more than 50%.

Company is also obligated to make contingent milestone payments to Columbia totaling $4.1 million on a Product-by-Product basis upon

the achievement of certain development, approval and sales milestones related to a TFF2 Product.

In addition, the Company shall pay Columbia

5% of consideration, other than royalty payments and certain other categories of consideration, payable to the Company by a sublicensee.

As of March 31, 2021, no milestone payments have been accrued or paid in relation to this agreement.

May 20, 2019, the Company entered into an exclusive License Agreement (the “License Agreement”) with Columbia pursuant to

which Columbia, for itself and on behalf of the University of Kentucky and the University of Michigan (collectively, the “Institutions”)

granted to the Company an exclusive license, with the right to sublicense, certain patents, technical information and material (collectively,

the “Technology”) related to a double-mutant cocaine esterase, and to develop and commercialize products thereunder (each,

a “Product”).

Pursuant to the terms of the License Agreement, Columbia has reserved for itself and the Institutions the right

to practice the Technology for academic research and educational purposes.

Company agreed to pay a six-digit license fee to Columbia as consideration for entering into the License Agreement.

The Company is obligated

to use Commercially Reasonable Efforts, as defined in the License Agreement, to develop and commercialize the Product, and to achieve

specified developmental milestones.

The first 50% of the license fee was paid by June 30, 2019, while the remaining 50% license fee,

was paid during the second quarter of 2020.

Both installments of the license fee were recorded to research and development expenses in

the 2019 statement of operations.

Company agreed to pay Columbia single-digit royalties on net sales of (i) Products sold by the Company or a sublicensee and (ii) any

other products that involve material or technical information related to the Product and transferred to the Company pursuant to the License

Agreement (“Other Products”) sold by the Company or a sublicensee.

Royalties on each particular Product are payable on a

country-by-country and Product-by-Product basis until the latest of (i) the date of expiration of the last valid claim in the last to

expire of the issued patents covered by the License Agreement, (ii) a specified period of time after the first commercial sale of a Product

in the country in question, or (iii) expiration of any market exclusivity period granted by a regulatory agency.

Royalties on each particular

Other Product are payable on a country-by-country and product-by-product basis until the later of (i) a specified period of time after

the first commercial sale of such particular Other Product in such country or (ii) expiration of any market exclusivity period granted

by a regulatory agency.

Royalties payable on net sales of the Product and Other Products may be reduced by 50% of the royalties payable

by the Company to any third party for intellectual property rights which are necessary for the practice of the rights licensed to the

Company under the License Agreement, provided that the royalty payable on a Product or Other Product may not be reduced by more than

Company is also obligated to make contingent milestone payments to Columbia totaling $3 million on a Product-by-Product basis upon the

achievement of certain development, approval and sales milestones related to a Product.

In addition, the Company shall pay Columbia 5%

of consideration, other than royalty payments and certain other categories of consideration, payable to the Company by a sublicensee.

As of March 31, 2021, no milestone payments have been accrued or paid in relation to this agreement.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

In connection with the

acquisition of the Assets, Tonix entered into a First Amended and Restated Exclusive License Agreement (the “WSU License

Agreement”) with Wayne State University (“WSU”) on August 19, 2019.

As consideration for entering into the Asset

Purchase Agreement, Tonix paid $ 100,000

to TRImaran and has assumed certain liabilities of TRImaran totaling $ 68,500 .

Upon the achievement of specified development, regulatory and sales milestones, Tonix also agreed to pay TRImaran and the Selling

Shareholders, in restricted stock or cash, at Tonix’s option, a total of approximately $ 3.4 million .

Pursuant to the terms of the Asset Purchase Agreement, TRImaran and the Selling Shareholders are prohibited from disclosing

confidential information related to the Assets and are restricted from engaging, for a period of three years, in the development or

commercialization of any therapeutic containing any pyran-based drug compound for the treatment of post-traumatic stress disorder,

attention deficit hyperactivity disorder or major depressive disorder.

Also for a period of three years, if TRImaran or any Selling

Shareholder engage in the research or development of any potential therapeutic compound for the treatment of any central nervous

system disorder, TRImaran or such Selling Shareholder is obliged to provide notice and opportunity to Tonix to make an offer to

acquire or license rights with respect to such product candidate.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020 (UNAUDITED)

Pursuant to the terms of the

WSU License Agreement, WSU has granted to Tonix an exclusive license, with the right to sublicense, certain patents, technical information

and material (collectively, the “Technology”) related to the Assets.

WSU has reserved for itself the right to practice the

Technology for academic research and educational purposes.

Tonix is obligated to use commercially reasonable efforts to obtain regulatory

approval for one or more products utilizing the Technology (“WSU Products”) and to use commercially reasonable marketing efforts

throughout the term of the WSU License Agreement.

The WSU License Agreement specifies developmental milestones and the period of time

during which such milestones must be completed and provides for an annual maintenance fee payable to WSU.

Tonix is obligated to substantially

manufacture WSU Products in the United States if WSU Products will be sold in the United States.

Pursuant to the WSU

License Agreement, Tonix paid $ 75,000

to WSU as reimbursement of certain patent expenses, and, upon the achievement of specified development, regulatory and sales

milestones, the Company also agreed to pay WSU, milestone payments totaling approximately $ 3.4 million .

Tonix has also agreed to pay WSU single-digit royalties on net sales of WSU Products sold by Tonix or a sublicensee on a

tiered basis based on net sales, and additional sublicense fees on certain consideration received from sublicensees.

each particular WSU Product are payable on a country-by-country and Product-by-Product basis until the date of expiration of the

last valid claim in the last to expire of the issued patents covered by the WSU License Agreement.

Royalties payable on net sales of

WSU Products may be reduced by 50 %

of the royalties payable by Tonix to any third party for intellectual property rights which are necessary for the practice of the

rights licensed to Tonix under the WSU License Agreement, provided that the royalty payable on a WSU Product may not be reduced by

more than 50 %.

Each party also has the right to terminate the agreement for customary reasons such as material breach and bankruptcy.

License Agreement contains provisions relating to termination, indemnification, confidentiality and other customary matters for an

agreement of this kind.

As of June 30, 2021, no milestone

payments have been accrued or paid in relation to this agreement.

9 – LICENSE AGREEMENT WITH OYAGEN

On April 14, 2021, the Company

and OyaGen, Inc.

(“OyaGen”) entered into an exclusive License Agreement (the “OyaGen License Agreement”) pursuant

to which OyaGen granted to Tonix an exclusive license to certain patents and technical information related to an antiviral inhibitor of

SARS-CoV-2, sangivamycin, and to develop and commercialize products thereunder, and to acquire rights to any technology based thereon

for the prevention or treatment of Covid-19 developed by OyaGen during the term of the License Agreement.

As consideration for

entering into the License Agreement, Tonix agreed to pay a low-seven digit license fee to OyaGen, and agreed to issue to OyaGen and

an affiliated entity an aggregate of 2,752,294

shares of the Company’s common stock, which are unregistered and subject to a six-month lock-up and a voting agreement,

pursuant to which OyaGen and the affiliated entity have agreed to vote the common stock on any matter put to a vote of the

shareholders of the Company in accordance with management’s recommendations.

The shares were valued at $ 3 .0

million, which was recorded as research and development expense.

The OyaGen License also provides for single-digit royalties and

contingent milestone payments.

As of June 30, 2021, no milestone

payments have been accrued or paid in relation to this agreement

NOTE 10 – LICENSE AGREEMENT WITH INSERM

On February 11, 2021,

the Company entered into a license agreement (the “Inserm License Agreement”) pursuant to which it licensed technology

using oxytocin-based therapeutics for the treatment of Prader-Willi syndrome and non-organic failure to thrive disease from Inserm

(the French National Institute of Health and Medical Research), Aix-Marseille Université and Centre Hospitalier Universitaire

The Inserm License Agreement provides for the payment of annual fees and milestone payments upon the occurrence of

specified sales milestones totaling approximately $ 0.4 million , as well royalties on net sales of products based on the licensed technology, and assignment/transfer and sublicense

As of June 30, 2021, no milestone

payments have been accrued or paid in relation to this agreement

NOTE 11 – LICENSE AGREEMENTS WITH COLUMBIA UNIVERSITY

On September 16, 2019, the

Company entered into an exclusive License Agreement (the “Columbia License Agreement”) with the Trustees of Columbia University

in the City of New York (“Columbia”) pursuant to which Columbia granted to Tonix an exclusive license, with the right to sublicense,

certain patents and technical information (collectively, the “TFF2 Technology”) related to a recombinant Trefoil Family Factor

2 (TFF2), and to develop and commercialize products thereunder (each, a “TFF2 Product”).

Pursuant to the terms of the Columbia

License Agreement, Columbia reserved for itself the right to practice the TFF2 Technology for academic research and educational purposes.

The Company paid a five-digit

license fee to Columbia as consideration for entering into the Columbia License Agreement, which was recorded to research and development

expenses in the statement of operations for the year ended December 31, 2019.

The Company is obligated to use Commercially Reasonable

Efforts, as defined in the Columbia License Agreement, to develop and commercialize the TFF2 Product, and to achieve specified developmental

The Company agreed to pay

Columbia single-digit royalties on net sales of (i) TFF2 Products sold by Tonix or a sublicensee and (ii) any other products that involve

material or technical information related to the TFF2 Product and transferred to Tonix pursuant to the Columbia License Agreement (“Other

Products”) sold by Tonix or a sublicensee.

Royalties on each particular TFF2 Product are payable on a country-by-country and Product-by-Product

basis until the latest of (i) the date of expiration of the last valid claim in the last to expire of the issued patents covered by the

Columbia License Agreement, and (ii) a specified period of time after the first commercial sale of a TFF2 Product in the country in question.

Royalties on each particular Other Product are payable on a country-by-country and product-by-product basis until a specified period of

time after the first commercial sale of such particular Other Product in such country.

Royalties payable on net sales of the TFF2 Product

and Other Products may be reduced by 50 % of the royalties payable by Tonix to any third party for intellectual property rights which are

necessary for the practice of the rights licensed to Tonix under the Columbia License Agreement, provided that the royalty payable on

a Product or Other Product may not be reduced by more than 50 %.

The Company is also obligated

to make contingent milestone payments to Columbia totaling $ 4.1 million on a Product-by-Product basis upon the achievement of certain

development, approval and sales milestones related to a TFF2 Product.

In addition, the Company shall pay Columbia 5 % of consideration,

other than royalty payments and certain other categories of consideration, payable to the Company by a sublicensee.

As of June 30, 2021, no milestone

payments have been accrued or paid in relation to this agreement.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020 (UNAUDITED)

On May 20, 2019, the Company

entered into an exclusive License Agreement (the “License Agreement”) with Columbia pursuant to which Columbia, for itself

and on behalf of the University of Kentucky and the University of Michigan (collectively, the “Institutions”) granted to the

Company an exclusive license, with the right to sublicense, certain patents, technical information and material (collectively, the “Technology”)

related to a double-mutant cocaine esterase, and to develop and commercialize products thereunder (each, a “Product”).

to the terms of the License Agreement, Columbia has reserved for itself and the Institutions the right to practice the Technology for

academic research and educational purposes.

The Company agreed to pay

a six-digit license fee to Columbia as consideration for entering into the License Agreement.

The Company is obligated to use Commercially

Reasonable Efforts, as defined in the License Agreement, to develop and commercialize the Product, and to achieve specified developmental

The first 50 % of the license fee was paid by June 30, 2019, while the remaining 50 % license fee, was paid during the second

quarter of 2020.

Both installments of the license fee were recorded to research and development expenses in the 2019 statement of operations.

The Company agreed to pay

Columbia single-digit royalties on net sales of (i) Products sold by the Company or a sublicensee and (ii) any other products that involve

material or technical information related to the Product and transferred to the Company pursuant to the License Agreement (“Other

Products”) sold by the Company or a sublicensee.

Royalties on each particular Product are payable on a country-by-country and Product-by-Product

basis until the latest of (i) the date of expiration of the last valid claim in the last to expire of the issued patents covered by the

License Agreement, (ii) a specified period of time after the first commercial sale of a Product in the country in question, or (iii) expiration

of any market exclusivity period granted by a regulatory agency.

Royalties on each particular Other Product are payable on a country-by-country

and product-by-product basis until the later of (i) a specified period of time after the first commercial sale of such particular Other

Product in such country or (ii) expiration of any market exclusivity period granted by a regulatory agency.

Royalties payable on net sales

of the Product and Other Products may be reduced by 50 % of the royalties payable by the Company to any third party for intellectual property

rights which are necessary for the practice of the rights licensed to the Company under the License Agreement, provided that the royalty

payable on a Product or Other Product may not be reduced by more than 50 %.

The Company is also obligated

to make contingent milestone payments to Columbia totaling $ 3 million on a Product-by-Product basis upon the achievement of certain development,

approval and sales milestones related to a Product.

In addition, the Company shall pay Columbia 5 % of consideration, other than royalty

payments and certain other categories of consideration, payable to the Company by a sublicensee.

As of June 30, 2021, no milestone

payments have been accrued or paid in relation to this agreement.

12 – SALE OF COMMON STOCK

2021 Financing

On February 8, 2021, the Company entered into a securities purchase agreement

with certain institutional investors relating to the issuance and sale of 58,333,334 shares of its common stock , in a

registered direct public offering (“the February 2021 Financing”), with A.G.P/Alliance Global Partners (“AGP”),

acting as placement agent.

The public offering price for each share of common stock was $1.20.

The February 2021 Financing closed on February

AGP received a cash fee of 7% of the gross proceeds, for an aggregate of $4.9 million.

The Company incurred other offering expenses

of approximately $0.1 million.

The Company received net proceeds of approximately $65.0 million, after deducting the fees and other offering

2021 Financing

January 11, 2021, the Company entered into a securities purchase agreement with certain institutional investors relating to the issuance

and sale of 50,000,000 shares of its common stock in a registered direct public offering (“the January 2021 Financing”),

with AGP as placement agent.

2021 Lincoln Park Transaction

May 14, 2021, the Company entered into a purchase agreement (the “2021 Purchase Agreement”) and a registration rights agreement

(the “2021 Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”).

Pursuant to the

terms of the 2021 Purchase Agreement, Lincoln Park has agreed to purchase from the Company up to $ 80,000,000 of the Company’s common

stock (subject to certain limitations) from time to time during the term of the 2021 Purchase Agreement.

Pursuant to the terms of the

2021 Registration Rights Agreement, the Company filed with the SEC a registration statement to register for resale under the Securities

Act the shares that have been or may be issued to Lincoln Park under the 2021 Purchase Agreement.

to the terms of the 2021 Purchase Agreement, at the time the Company signed the 2021 Purchase Agreement and the 2021 Registration Rights

Agreement, the Company issued 1,280,000 shares of common stock to Lincoln Park as consideration

for its commitment to purchase shares of our common stock under the 2021 Purchase Agreement.

The commitment shares were valued at $ 1.6 million

and recorded as an addition to equity for the issuance of the common stock and treated as a reduction to equity as a cost of capital

to be raised under the 2021 Purchase Agreement.

the six months ended June 30, 2021, the Company sold an aggregate of approximately 2.8 million shares of common stock under the 2021 Purchase

Agreement, for gross proceeds of approximately $ 3.3 million .

February 2021 Financing

On February 8, 2021, the Company

entered into a securities purchase agreement with certain institutional investors relating to the issuance and sale of 58,333,334 shares

of its common stock, in a registered direct public offering (“the February 2021 Financing”), with A.G.P/Alliance

Global Partners (“AGP”), acting as placement agent.

The public offering price for each share of common stock was $ 1.20 .

The January 2021 Financing closed on

January 13, 2021.

February 2021 Financing closed on February 9, 2021.

AGP received a cash fee of 7 % of the gross proceeds, for an aggregate of $ 4.9 million .

The Company incurred other offering

expenses of approximately $0.3 million.

The Company received net proceeds of approximately $36.9 million, after deducting the fees and

other offering expenses.

The Company incurred other offering expenses of approximately $ 0.1 million .

The Company received net proceeds of approximately $ 65.0 million ,

after deducting the fees and other offering expenses.

January 2021 Financing

On January 11, 2021, the Company

entered into a securities purchase agreement with certain institutional investors relating to the issuance and sale of 50,000,000 shares

of its common stock in a registered direct public offering (“the January 2021 Financing”), with AGP as placement agent.

public offering price for each share of common stock was $ 0.80 .

The January 2021 Financing closed on January 13, 2021.

AGP received a

cash fee of 7 % of the gross proceeds, for an aggregate of $ 2.8 million .

The Company incurred other offering expenses of approximately

$ 0.3 million .

The Company received net proceeds of approximately $ 36.9 million , after deducting the fees and other offering expenses.

At-the-Market Offerings

On April 8, 2020, the Company

entered into a sales agreement (the “Sales Agreement”) with AGP pursuant to which the Company may issue and sell, from time

to time, shares of the Company’s common stock having an aggregate offering price of up to $50.0 million in at-the-market offerings

(“ATM”) sales.

entered into a sales agreement (the “Sales Agreement”) with AGP pursuant to which the Company may issue and sell, from time

to time, shares of the Company’s common stock having an aggregate offering price of up to $ 50.0 million in at-the-market offerings

(“ATM”) sales.

On the same day, the Company filed a prospectus supplement under a shelf registration relating to the Sales

AGP will act as sales agent and will be paid a 3 % commission on each sale under the Sales Agreement.

The Company’s common

stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices will vary.

On September 4, 2020, the

Company filed an amended prospectus supplement under a shelf registration relating to the Sales Agreement to increase the aggregate offering

Company filed an amended prospectus supplement under the shelf registration relating to the Sales Agreement to increase the aggregate offering

price to $ 100 .0 million in ATM sales under the Sales Agreement.

During the quarter ended March 31, 2021, the Company sold approximately

9.5 million shares of common stock under the Sales Agreement, for gross proceeds of approximately $7.0 million.

Subsequent to March 31,

2021, the Company has sold 2.6 million shares of common stock under the Sales Agreement, for gross proceeds of approximately $3.2 million.

On April 19, 2021, the Company filed an amended prospectus supplement under a shelf registration relating to the Sales Agreement to increase

the aggregate offering price to $170.0 million in ATM sales under the Sales Agreement.

On April 19, 2021, the Company filed an amended prospectus supplement

under the shelf registration relating to the Sales Agreement to increase the aggregate offering price to $ 170.0 million in ATM sales under

the Sales Agreement.

During the six months ended June 30, 2021, the Company sold approximately 25.2 million shares of common stock under

the Sales Agreement, for gross proceeds of approximately $ 26.3 million .

Subsequent to June 30, 2021, the Company has sold 11.0 million

shares of common stock under the Sales Agreement, for gross proceeds of approximately $ 8.4 million .

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020 (UNAUDITED)

March 2020 Financing

On February 28, 2020,

the Company entered into an underwriting agreement with AGP, relating to the issuance and sale of 14,550,000

shares of common stock, in a registered direct public offering (“the March 2020 Financing”).

The public offering price

for each share of common stock was $ 1.10 .

The March 2020 Financing closed on March 3, 2020.

AGP purchased the shares at a seven percent discount to the then current public

price, for an aggregate discount of $ 1.1

The Company incurred other offering expenses of approximately $ 0.1

The Company received net proceeds of approximately $ 14.8 million , after deducting the underwriting discount and other offering expenses.

February 2020 Financing

On February 7, 2020, the Company

entered into an underwriting agreement with AGP, relating to the issuance and sale of 14,550,000 shares of common stock, in a registered

direct public offering (“the March 2020 Financing”).

The public offering price for each share of common stock was $1.10.

March 2020 Financing closed on March 3, 2020.

AGP purchased the shares at a seven percent discount to the then current public price, for

an aggregate discount of $1.1 million.

entered into an underwriting agreement with AGP pursuant to which the Company sold securities consisting of 3,837,000 Class A Units at

a public offering price of $ 0.57 per unit, with each unit consisting of one share of common stock and one warrant to purchase one share

of common stock, and 5,313 Class B Units at a public offering price of $ 1,000 per unit, with each unit consisting of one share of Series

B Convertible Preferred Stock, with a conversion price of $ 0.57 per share, convertible into 1,754.386 shares of common stock and warrants

to purchase 1,754.386 shares of common stock (“the February 2020 Financing”).

The warrants have an exercise price of $ 0.57 ,

are immediately exercisable and expire five years from the date of issuance.

The February 2020 Financing

closed on February 11, 2020.

AGP purchased the Class A and Class B Units at a seven -percent discount to the public offering price, for

an aggregate discount of approximately $ 0.5 million .

The Company incurred other offering expenses of approximately $ 0.5 million .

The Company received

net proceeds of approximately $14.8 million, after deducting the underwriting discount and other offering expenses.

2020 Financing

February 7, 2020, the Company entered into an underwriting agreement with AGP pursuant to which the Company sold securities consisting

of 3,837,000 Class A Units at a public offering price of $0.57 per unit, with each unit consisting of one share of common stock and one

warrant to purchase one share of common stock, and 5,313 Class B Units at a public offering price of $1,000 per unit, with each unit

consisting of one share of Series B Convertible Preferred Stock, with a conversion price of $0.57 per share, convertible into 1,754.386

shares of common stock and warrants to purchase 1,754.386 shares of common stock (“the February 2020 Financing”).

have an exercise price of $0.57, are immediately exercisable and expire five years from the date of issuance.

February 2020 Financing closed on February 11, 2020.

AGP purchased the Class A and Class B Units at a seven-percent discount to the public

offering price, for an aggregate discount of approximately $0.5 million.

The Company incurred other offering expenses of approximately

$0.5 million.

The Company received net proceeds of approximately $6.5 million, after deducting the underwriting discount and other offering

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

After allocating proceeds to the

warrants issued with the Series B Convertible Preferred Stock, the effective conversion price of the Series B Convertible Preferred Stock

was determined to be less than the fair value of the underlying common stock at the date of commitment, resulting in a beneficial conversion

feature (“BCF”) at that date.

Since the Series B Preferred Stock has no stated maturity or redemption date and is immediately

convertible at the option of the holder, the discount created by the BCF of $1.3 million, based on intrinsic value, was charged to additional

paid in capital as a non-cash “deemed dividend”

and included in net loss to common stockholders.

received net proceeds of approximately $ 6.5 million , after deducting the underwriting discount and other offering expenses.

After allocating proceeds

to the warrants issued with the Series B Convertible Preferred Stock, the effective conversion price of the Series B Convertible Preferred

Stock was determined to be less than the fair value of the underlying common stock at the date of commitment, resulting in a beneficial

conversion feature (“BCF”) at that date.

Since the Series B Preferred Stock has no stated maturity or redemption date and

is immediately convertible at the option of the holder, the discount created by the BCF of $ 1.3 million , based on intrinsic value, was

charged to additional paid in capital as a non-cash “deemed dividend” and included in net loss to common stockholders.

During the first quarter of

1 unchanged sentence

During February and March

10.8 million of the warrants issued in the February 2020 Financing, with an exercise price of $0.57, were exercised for proceeds of approximately

$6.2 million.

2019 Financing

November 14, 2019, the Company entered into an underwriting agreement with AGP pursuant to which the Company sold securities consisting

of 547,420 Class A Units at a public offering price of $1.94 per unit, with each unit consisting of one share of common stock, one warrant

to purchase one share of common stock (“primary warrant”) and one-half of one warrant to purchase one half of one share common

stock (“common warrant”), and 7,938 Class B Units at a public offering price of $1,000 per unit, with each unit consisting

of one share of Series A Convertible Preferred Stock, with a conversion price of $1.94 per share, convertible into 515.464 shares of

common stock, primary warrants to purchase 515.464 shares of common stock, and common warrants to purchase 257.732 shares of common stock

(the “November 2019 Financing”).

The primary warrants have an exercise price of $1.94, are immediately exercisable and expire

five years from the date of issuance.

The common warrants have an exercise price of $1.94, are exercisable and expire 12 months from

the date of issuance.

The common warrants are exercisable on a cashless basis at the option of the holder on the earlier of 30 days from

issuance and the date by which an aggregate of $9.0 million of our securities were traded.

November 2019 Financing closed on November 19, 2019.

AGP purchased the Class A and Class B Units at a seven-percent discount to the public

offering price, for an aggregate discount of approximately $0.6 million.

The Company incurred other offering expenses of approximately

$0.5 million.

The Company received net proceeds from the November 2019 Financing of approximately $7.9 million, after deducting the underwriting

discount and other offering expenses.

allocating proceeds to the warrants issued with the Series A Convertible Preferred Stock, the effective conversion price of the Series

A Convertible Preferred Stock was determined to be less than the fair value of the underlying common stock at the date of commitment,

resulting in a BCF at that date.

Since the Series A Preferred Stock has no stated maturity or redemption date and is immediately convertible

at the option of the holder, the discount created by the BCF of $2.5 million, based on the intrinsic value, was charged to additional

paid in capital as a non-cash “deemed dividend” and included in net loss to common stockholders.

of December 31, 2019, all 7,938 shares of Series A Convertible Preferred Stock were converted into common stock.

a result of the issuance of common stock in February 2020 for less than the November 2019 warrant exercise price, a repricing of the

warrants issued in the November 2019 Financing was triggered.

The Company recognized a one-time non-cash “deemed dividend”

of $0.5 million, representing the increase in the fair value of the warrants.

The non-cash “deemed dividend” was charged

to additional paid in capital and included in net loss to stockholders.

During February and March 2020, 2.3 million of the warrants issued

in the November 2019 financing, with an exercise price of $0.57, were exercised for proceeds of approximately $1.3 million.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

12 – STOCK-BASED COMPENSATION

Incentive Plans

May 3, 2019, the Company’s stockholders approved the Tonix Pharmaceuticals Holding Corp.

2019 Stock Incentive Plan (the “2019

The 2019 Plan provided for the issuance of up to 140,000 shares of common stock.

With the adoption of the 2020 Plan (as

defined below), no further grants may be made under the 2019 Plan.

On January 16, 2020, the Company’s stockholders approved the

2020, 10.8 million of the warrants issued in the February 2020 Financing, with an exercise price of $ 0.57 , were exercised for proceeds

of approximately $ 6.2 million .

November 2019 Financing

On November 14, 2019,

the Company sold securities consisting of 547,420

Class A Units at a public offering price of $ 1.94

per unit, with each unit consisting of one share of common stock, one warrant to purchase one share of common stock (“primary

warrant”) and one-half of one warrant to purchase one half of one share common stock (“common warrant”), and 7,938

Class B Units at a public offering price of $ 1,000

per unit, with each unit consisting of one share of Series A Convertible Preferred Stock, with a conversion price of $ 1.94

per share, convertible into 515.464

shares of common stock, primary warrants to purchase 515.464

shares of common stock, and common warrants to purchase 257.732

shares of common stock (the “November 2019 Financing”).

The primary warrants have an exercise price of $ 1.94 ,

are immediately exercisable and expire five

years from the date of issuance.

The common warrants had an exercise price of $ 1.94 and expired 12

months from the date of issuance.

The common warrants were exercisable on a cashless basis at the option

of the holder on the earlier of 30 days from issuance and the date by which an aggregate of $ 9 .0 million of the Company’s securities

As a result of the issuance

of common stock in February 2020 for less than the November 2019 warrant exercise price, a repricing of the warrants issued in the November

2019 Financing was triggered.

The Company recognized a one-time non-cash “deemed dividend” of $ 0.5 million , representing the

increase in the fair value of the warrants.

The non-cash “deemed dividend” was charged to additional paid in capital and included

in net loss to stockholders.

During February and March 2020, 2.3 million of the warrants issued in the November 2019 financing, with an

exercise price of $ 0.57 , were exercised for proceeds of approximately $ 1.3 million .

2019 Lincoln Park Transaction

August 20, 2019, the Company entered into a purchase agreement (the “2019 Purchase Agreement”) and a registration rights agreement

(the “2019 Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”).

Pursuant to the

terms of the 2019 Purchase Agreement, Lincoln Park has agreed to purchase from us up to $ 15,000,000 of the Company’s common stock

(subject to certain limitations) from time to time during the term of the 2019 Purchase Agreement.

Pursuant to the terms of the 2019 Registration

Rights Agreement, the Company filed with the SEC a registration statement to register for resale under the Securities Act the shares that

have been or may be issued to Lincoln Park under the 2019 Purchase Agreement.

to the terms of the 2019 Purchase Agreement, at the time the Company signed the 2019 Purchase Agreement and the 2019 Registration Rights

Agreement, the Company issued 35,529 shares of common stock to Lincoln Park as consideration

for its commitment to purchase shares of our common stock under the 2019 Purchase Agreement.

The commitment shares were valued at $ 200,000

and recorded as an addition to equity for the issuance of the common stock and treated as a reduction to equity as a cost of capital to

be raised under the 2019 Purchase Agreement.

a result of receiving stockholder approval on January 16, 2020, the Company may sell more than 19.9 % of it’s common stock outstanding

pursuant to the 2019 Purchase Agreement without violating Nasdaq Marketplace Rules, including Rule 5635(d), requiring shareholder

approval for the sale, issuance or potential issuance by an issuer of common stock (or securities convertible into or exercisable for

common stock) at a price less than the greater of book or market value.

the six months ended June 30, 2020, the Company sold an aggregate of approximately 464,471 shares of common stock under the 2019 Purchase

Agreement, for gross proceeds of approximately $ 0.3 million .

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020 (UNAUDITED)

NOTE 13 – STOCK-BASED COMPENSATION

Stock Incentive Plans

On May 3, 2019, the Company’s

stockholders approved the Tonix Pharmaceuticals Holding Corp.

2019 Stock Incentive Plan (the “2019 Plan”).

The 2020 Plan provided for the issuance

of up to 600,000 shares of common stock.

With the adoption of the Amended and Restated 2020 Plan (as defined below), no further grants

may be made under the 2020 Plan.

May 1, 2020, the Company’s stockholders approved the Tonix Pharmaceuticals Holding Corp.

Amended and Restated 2020 Stock Incentive

Plan (“Amended and Restated 2020 Plan”), and together with the 2020 Plan and the 2019 Plan, the “Plans”).

the terms of the Amended and Restated 2020 Plan, the Company may issue (1) stock options (incentive and nonstatutory), (2) restricted

stock, (3) SARs, (4) RSUs, (5) other stock-based awards, and (6) cash-based awards.

The Amended and Restated 2020 Plan initially provided

for the issuance of up to 10,000,000 shares of common stock, which amount will be increased to the extent that awards granted under

the Plans are forfeited, expire or are settled for cash (except as otherwise provided in the Amended and Restated 2020 Plan).

the Amended and Restated 2020 Plan contains an “evergreen provision” providing for an annual increase in the number of shares

of our common stock available for issuance under the Amended and Restated 2020 Plan on January 1 of each year for a period of ten years,

commencing on January 1, 2021 and ending on (and including) January 1, 2030, in an amount equal to the difference between (x) twenty

percent (20%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, and (y) the

total number of shares of common stock reserved under the Amended and Restated 2020 Plan on December 31st of such preceding calendar

year (including shares subject to outstanding awards, issued pursuant to awards or available for future awards).

The Board of Directors

determines the exercise price, vesting and expiration period of the grants under the Amended and Restated 2020 Plan.

However, the exercise

price of an incentive stock option may not be less than 110% of fair value of the common stock at the date of the grant for a 10% or

more shareholder and 100% of fair value for a grantee who is not a 10% shareholder.

The fair value of the common stock is determined

based on quoted market price or in absence of such quoted market price, by the Board of Directors in good faith.

Additionally, the expiration

period of grants under the Amended and Restated 2020 Plan may not be more than ten years.

As of March 31, 2021, 18,883,676 shares were

available for future grants under the Amended and Restated 2020 Plan.

summary of the stock option activity and related information for the Plans for the three months ended March 31, 2021 is as follows:

The 2019 Plan provided

for the issuance of up to 140,000 shares of common stock.

With the adoption of the 2020 Plan (as defined below), no further grants may

be made under the 2019 Plan.

On January 16, 2020, the Company’s stockholders approved the Tonix Pharmaceuticals Holding Corp.

Stock Incentive Plan (the “2020 Plan”).

The 2020 Plan provided for the issuance of up to 600,000 shares of common stock.

the adoption of the Amended and Restated 2020 Plan (as defined below), no further grants may be made under the 2020 Plan.

On May 1, 2020, the Company’s

stockholders approved the Tonix Pharmaceuticals Holding Corp.

Amended and Restated 2020 Stock Incentive Plan (“Amended and Restated

2020 Plan”), and together with the 2020 Plan and the 2019 Plan, the “Plans”).

Under the terms of the Amended

and Restated 2020 Plan, the Company may issue (1) stock options (incentive and nonstatutory), (2) restricted stock, (3) stock appreciation rights (“SARs”), (4) RSUs,

(5) other stock-based awards, and (6) cash-based awards.

The Amended and Restated 2020 Plan initially provided for the issuance of up

to 10,000,000 shares of common stock, which amount will be increased to the extent that awards granted under the Plans are forfeited,

expire or are settled for cash (except as otherwise provided in the Amended and Restated 2020 Plan).

In addition, the Amended and Restated

2020 Plan contains an “evergreen provision” providing for an annual increase in the number of shares of our common stock available

for issuance under the Amended and Restated 2020 Plan on January 1 of each year for a period of ten years, commencing on January 1, 2021

and ending on (and including) January 1, 2030, in an amount equal to the difference between (x) twenty percent ( 20 %) of the total number

of shares of common stock outstanding on December 31st of the preceding calendar year, and (y) the total number of shares of common stock

reserved under the Amended and Restated 2020 Plan on December 31st of such preceding calendar year (including shares subject to outstanding

awards, issued pursuant to awards or available for future awards).

The Board of Directors determines the exercise price, vesting and expiration

period of the grants under the Amended and Restated 2020 Plan.

However, the exercise price of an incentive stock option may not be less

than 110 % of fair value of the common stock at the date of the grant for a 10% or more shareholder and 100 % of fair value for a grantee

who is not a 10% shareholder.

The fair value of the common stock is determined based on quoted market price or in absence of such quoted

market price, by the Board of Directors in good faith.

Additionally, the expiration period of grants under the Amended and Restated 2020

Plan may not be more than ten years .

As of June 30, 2021, 16,894,483 shares were available for future grants under the Amended and Restated

A summary of the stock option activity and related

information for the Plans for the six months ended June 30, 2021 is as follows:

Weighted-Average

2 unchanged sentences

Contractual Term

at December 31, 2020

Outstanding at December 31, 2020

Forfeitures or expirations

Outstanding at March

Exercisable at March

aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on options with an exercise price

less than the Company’s closing stock price at the respective dates.

weighted average fair value of options granted for the three-month periods ended March 31, 2021 and 2020 was $1.10 and $0.35 per share,

respectively.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

Company measures the fair value of stock options on the date of grant, based on the Black Scholes option pricing model using certain

assumptions discussed below, and the closing market price of the Company’s common stock on the date of the grant.

The fair value

of the award is measured on the grant date.

One-third of most stock options granted pursuant to the Plans vest 12 months from the date

of grant and 1/36th each month thereafter for 24 months and expire ten years from the date of grant.

In addition, the Company issues

options to directors which vest over a one-year period.

The Company also issues premium options to executive officers which have an exercise

price greater than the grant date fair value and has issued performance-based options which vest when target parameters are met or probable

of being met, subject in each case to a one year minimum service period prior to vesting.

Stock-based compensation expense related to

awards is amortized over the applicable service period using the straight-line method.

assumptions used in the valuation of stock options granted during the three months ended March 31, 2021 and 2020 were as follows:

March 31, 2021

March 31, 2020

interest rate

Outstanding at June 30, 2021

Exercisable at June 30, 2021

The aggregate intrinsic value

in the preceding table represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s

closing stock price at the respective dates.

The weighted average fair

value of options granted during the three and six months ended June 2021 was $ 0.96 per share and $ 1.08 per share, respectively.

average fair value of options granted during the three and six months ended June 2020 was $ 0.68 per share and $ 0.66 per share, respectively.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020 (UNAUDITED)

The Company measures the fair

value of stock options on the date of grant, based on the Black Scholes option pricing model using certain assumptions discussed below,

and the closing market price of the Company’s common stock on the date of the grant.

The fair value of the award is measured on

the grant date.

One-third of most stock options granted pursuant to the Plans vest 12 months from the date of grant and 1/36th each month

thereafter for 24 months and expire ten years from the date of grant.

In addition, the Company issues options to directors which vest

over a one-year period.

The Company also issues premium options to executive officers which have an exercise price greater than the grant

date fair value and has issued performance-based options which vest when target parameters are met or probable of being met, subject in

each case to a one year minimum service period prior to vesting.

Stock-based compensation expense related to awards is amortized over

the applicable service period using the straight-line method.

The assumptions used in the

valuation of stock options granted during the six months ended June 30, 2021 and 2020 were as follows:

Six Months Ended

June 30, 2021

Six Months Ended

June 30, 2020

Risk-free interest rate

0.80 % to 1.63

0.36 % to 1.25

Expected term of option

5.5 to 10 years

Expected stock price

5.5 to 6 years

Expected stock price volatility

124.40 % - 137.74

124.11 % - 130.00

Expected dividend yield

risk-free interest rate is based on the yield of Daily U.S.

Treasury Yield Curve Rates with terms equal to the expected term of the options

as of the grant date.

The expected term of options is determined using the simplified method, as provided in an SEC Staff Accounting

Bulletin, and the expected stock price volatility is based on the Company’ historical stock price volatility.

compensation expense relating to options granted of $1.2 million, of which $0.8 million and $0.4 million, related to General and Administration

and Research and Development, respectively was recognized for the quarter ended March 31, 2021.

compensation expense relating to options granted of $0.4 million, of which $0.3 million and $0.1 million, related to General and Administration

and Research and Development, respectively was recognized for the quarter ended March 31, 2020.

of March 31, 2021, the Company had approximately $18.4 million of total unrecognized compensation cost related to non-vested awards granted

under the Plans, which the Company expects to recognize over a weighted average period of 2.67 years.

Stock Purchase Plans

May 3, 2019, the Company’s stockholders approved the Tonix Pharmaceuticals Holdings Corp.

The risk-free interest rate

is based on the yield of Daily U.S.

Treasury Yield Curve Rates with terms equal to the expected term of the options as of the grant date.

The expected term of options is determined using the simplified method, as provided in an SEC Staff Accounting Bulletin, and the expected

stock price volatility is based on the Company’ historical stock price volatility.

Stock-based compensation expense

relating to options granted of $ 2.1 million , of which $ 1.5 million and $ 0.6 million , related to General and Administration and Research

and Development, respectively was recognized for the quarter ended June 30, 2021.

Stock-based compensation expense relating to options

granted of $ 0.7 million , of which $ 0.5 million and $ 0.2 million , related to General and Administration and Research and Development, respectively

was recognized for the quarter ended June 30, 2020.

Stock-based compensation expense

relating to options granted of $ 3.3 million , of which $ 2.3 million and $ 1 .0 million, related to General and Administration and Research

and Development, respectively was recognized for the six-month period ended June 30, 2021.

Stock-based compensation expense relating to

options granted of $ 1.1 million , of which $ 0.8 million and $ 0.3 million , related to General and Administration and Research and Development,

respectively was recognized for the six-month period ended June 30, 2020.

As of June 30, 2021, the Company

had approximately $ 18.2 million of total unrecognized compensation cost related to non-vested awards granted under the Plans, which the

Company expects to recognize over a weighted average period of 2.33 years.

Employee Stock Purchase Plans

On May 3, 2019, the Company’s

stockholders approved the Tonix Pharmaceuticals Holdings Corp.

2019 Employee Stock Purchase Plan (the “2019 ESPP”).

of adoption of the 2020 ESPP, as defined below, by the stockholders, no further grants may be made under the 2019 ESPP Plan.

2020, the Company’s stockholders approved the Tonix Pharmaceuticals Holdings Corp.

2020 Employee Stock Purchase Plan (the “2020

“2019 ESPP”).

As a result of adoption of the 2020 ESPP, as defined below, by the stockholders, no further grants may be made

under the 2019 ESPP Plan.

On May 1, 2020, the Company’s stockholders approved the Tonix Pharmaceuticals Holdings Corp.

2020 Employee

Stock Purchase Plan (the “2020 ESPP”).

2020 ESPP allows eligible employees to purchase up to an aggregate of 300,000 shares of the Company’s common stock.

the 2020 ESPP, on the first day of each offering period, each eligible employee for that offering period has the option to enroll for

that offering period, which allows the eligible employees to purchase shares of the Company’s common stock at the end of the offering

Each offering period under the 2020 ESPP is for six months, which can be modified from time-to-time.

Subject to limitations,

each participant will be permitted to purchase a number of shares determined by dividing the employee’s accumulated payroll deductions

for the offering period by the applicable purchase price, which is equal to 85 percent of the fair market value of our common

stock at the beginning or end of each offering period, whichever is less.

A participant must designate in his or her enrollment package

the percentage (if any) of compensation to be deducted during that offering period for the purchase of stock under the 2020 ESPP, subject

to the statutory limit under the Code.

As of March 31, 2021, 245,553 shares were available for future sales under the 2020 ESPP.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

2020 and 2019 ESPP are considered compensatory plans with the related compensation cost expensed over the six-month offering period.

For the quarters ended March 31, 2021 and 2020, $47,000 and $0, respectively were expensed.

In January 2020, 1,578 shares that were purchased as of December 31, 2019, under the 2019 ESPP, were issued.

during the first quarter of 2020, approximately $2,000 of employee payroll deductions accumulated at December 31, 2019, related to acquiring

such shares, was transferred from accrued expenses to additional paid in capital.

The 2020 ESPP allows eligible

employees to purchase up to an aggregate of 300,000 shares of the Company’s common stock.

Under the 2020 ESPP, on the

first day of each offering period, each eligible employee for that offering period has the option to enroll for that offering period,

which allows the eligible employees to purchase shares of the Company’s common stock at the end of the offering period.

Each offering

period under the 2020 ESPP is for six months, which can be modified from time-to-time.

Subject to limitations, each participant will be

permitted to purchase a number of shares determined by dividing the employee’s accumulated payroll deductions for the offering period

by the applicable purchase price, which is equal to 85 percent of the fair market value of our common stock at the beginning

or end of each offering period, whichever is less.

A participant must designate in his or her enrollment package the percentage (if any)

of compensation to be deducted during that offering period for the purchase of stock under the 2020 ESPP, subject to the statutory limit

under the Code.

As of June 30, 2021, 129,048 shares were available for future sales under the 2020 ESPP.

The 2020 and 2019 ESPP

are considered compensatory plans with the related compensation cost expensed over the six-month offering period.

For the six months ended

June 30, 2021 and 2020, $ 47,000 and $ 0 , respectively were expensed.

In January 2020, 1,578 shares that were purchased as of December 31,

2019, under the 2019 ESPP, were issued.

Accordingly, during the first quarter of 2020, approximately $ 2,000 of employee payroll deductions

accumulated at December 31, 2019, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital.

The remaining $ 7,000 was returned to the employees.

As of December 31, 2020, approximately $32,000 of employee payroll deductions have accumulated and have been recorded in accrued expenses.

In January 2021, 54,447 shares that were purchased as of December 31, 2020, under the 2020 ESPP, were issued.

Accordingly, during the

first quarter of 2021, approximately $28,000 of employee payroll deductions accumulated at December 31, 2020, related to acquiring such

shares, was transferred from accrued expenses to additional paid in capital.

As of December 31, 2020, approximately $ 32,000 of employee payroll deductions have

accumulated and have been recorded in accrued expenses.

In January 2021, 54,447 shares that were purchased as of December 31, 2020, under

the 2020 ESPP, were issued.

Accordingly, during the first quarter of 2021, approximately $ 28,000 of employee payroll deductions accumulated

at December 31, 2020, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital.

The remaining

$ 4,000 was returned to the employees.

As of June 30, 2021, approximately $ 75,000 of employee payroll deductions have accumulated and have

been recorded in accrued expenses.

In July 2021, 116,505 shares that were purchased as of June 30, 2021, under the 2020 ESPP, were issued.

Accordingly, during July 2021, approximately $ 68,000 of employee payroll deductions accumulated at June 30, 2021, related to acquiring

such shares, was transferred from accrued expenses to additional paid in capital.

The remaining $ 7,000 was returned to the employees.

13 – WARRANTS TO PURCHASE COMMON STOCK

following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at March 31, 2021:

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020 (UNAUDITED)

NOTE 14 – STOCK WARRANTS

The following table summarizes

information with respect to outstanding warrants to purchase common stock of the Company at June 30, 2021:

November 2024

1 unchanged sentence

December 2023

During the quarter ended

March 31, 2021, 3,400 warrants from the February 2020 Financing, with an exercise price of $0.57, were exercised for proceeds of approximately

During the quarter ended

March 31, 2020, 2.3 million warrants from the November 2019 Financing, with an exercise price of $0.57, were exercised for proceeds of

approximately $1.3 million.

During the quarter ended

March 31, 2020, 10.8 million warrants from the February 2020 Financing, with an exercise price of $0.57, were exercised for proceeds of

During the six months June

30, 2021, 3,400 warrants from the February 2020 Financing, with an exercise price of $ 0.57 , were exercised for proceeds of approximately

During the six months ended

June 30, 2020, 2.3 million warrants from the November 2019 financing, with an exercise price of $ 0.57 , were exercised for proceeds of

approximately $ 1.3 million .

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

Company has various operating lease agreements, which are primarily for office space.

These agreements frequently include one or more

renewal options and require the Company to pay for utilities, taxes, insurance and maintenance expense.

No lease agreement imposes a

restriction on the Company’s ability to engage in financing transactions or enter into further lease agreements.

At March 31, 2021,

the Company has right-of-use assets of $0.9 million and a total lease liability for operating leases of $1.0 million of which $0.6 million

is included in long-term lease liabilities and $0.4 million is included in current lease liabilities.

March 31, 2021, future minimum lease payments for operating leases with non-cancelable terms of more than one year were as follows (in

During the six months ended

June 30, 2020, 10.8 million warrants from the February 7 th financing, with an exercise price of $ 0.57 , were exercised for proceeds

of approximately $ 6.2 million .

NOTE 15 – LEASES

The Company has various operating

lease agreements, which are primarily for office space.

These agreements frequently include one or more renewal options and require the

Company to pay for utilities, taxes, insurance and maintenance expense.

No lease agreement imposes a restriction on the Company’s

ability to engage in financing transactions or enter into further lease agreements.

At June 30, 2021, the Company has right-of-use assets

of $ 1.0 million and a total lease liability for operating leases of $ 1.1 million of which $ 0.6 million is included in long-term lease

liabilities and $ 0.5 million is included in current lease liabilities.

At June 30, 2021, future minimum

lease payments for operating leases with non-cancelable terms of more than one year were as follows (in thousands):

Year Ending December 31,

1 unchanged sentence

Included interest

the quarter ended March 31, 2020, the Company entered into a lease amendment, resulting in the Company recognizing

an operating lease liability of approximately $35,000 based on the present value of the future minimum rental payments.

The Company also

recognized corresponding ROU assets of approximately $35,000.

No new and amendments to operating leases were entered into by the Company

during the quarter ended March 31, 2021.

lease expense was $0.2 and $0.1 million for the quarters ended March 31, 2021 and 2020, respectively.

information related to leases is as follows:

Cash paid for amounts included

in the measurement of lease liabilities:

March 31, 2021

March 31, 2020

cash flow from operating leases (in thousands)

During the six months ended

June 30, 2021, the Company entered into lease amendments, resulting in the Company recognizing an operating lease liability of approximately

$ 249,000 based on the present value of the future minimum rental payments.

The Company also recognized corresponding ROU assets of approximately

During the six months

ended June 30, 2020, the Company entered into new operating leases and lease amendments, resulting in the Company recognizing an additional operating

lease liability of approximately $ 308,000

based on the present value of the minimum rental payments.

The Company also recognized a corresponding increase to ROU assets of

approximately $ 308,000 .

Operating lease expense was

$ 0.1 million for the three months ended June 30 for both reporting periods.

Operating lease expense

was $ 0.3 and $ 0.2 million

for the six-months ended June 30, 2021 and 2020, respectively.

Other information related to leases is as follows:

Cash paid for amounts included in the measurement of lease liabilities:

Six Months Ended

June 30, 2021

Six Months Ended

June 30, 2020

Operating cash flow from operating leases (in thousands)

Weighted Average Remaining Lease Term

Operating leases

Weighted Average Discount Rate

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 AND 2020 (UNAUDITED)

15 – COMMITMENTS

Operating leases

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020 (UNAUDITED)

NOTE 16 – COMMITMENTS

Contractual agreements

Company has entered into contracts with various contract research organizations with outstanding commitments aggregating approximately

$30.0 million at March 31, 2021 for future work to be performed.

On March 3, 2021, the Company entered into a $2.9 million contingent non-binding Purchase and Sales Agreement in connection with a property

in Massachusetts.

The property is intended for process development activities.

contribution plan

Company established a qualified defined contribution plan (the “401(k) Plan”) pursuant to Section 401(k) of the Code, whereby

all eligible employees may participate.

Participants may elect to defer a percentage of their annual pretax compensation to the 401(k)

Plan, subject to defined limitations.

The Company is required to make contributions to the 401(k) Plan equal to 100 percent of each participant’s

pretax contributions of up to six percent of his or her eligible compensation, and the Company is also required to make a contribution

equal to three percent of each participant’s salary, on an annual basis, subject to limitations under the Code.

For the three months

ended March 31, 2021 and 2020, the Company charged operations $70,000 and $50,000, respectively, for contributions under the 401(k) Plan.

16 – SUBSEQUENT EVENTS

On April 14, 2021, the Company

and OyaGen, Inc.

(“OyaGen”) entered into an exclusive License Agreement (the “OyaGen License Agreement”) pursuant

to which OyaGen granted to Tonix an exclusive license to certain patents and technical information related to an antiviral inhibitor of

SARS-CoV-2, sangivamycin, and to develop and commercialize products thereunder, and to acquire rights to any technology based on the thereon

for the prevention or treatment of Covid-19 developed by OyaGen during the term of the License Agreement.

As consideration for entering

into the License Agreement, Tonix agreed to pay a low-seven digit license fee to OyaGen, and agreed to issue to OyaGen and an affiliated

entity an aggregate of 2,752,294 shares of the Company’s common stock, which is unregistered and subject to a six-month lock-up

and a voting agreement, pursuant to which OyaGen and the affiliated entity have agreed to vote the common stock on any matter put to a

vote of the shareholders of the Company in accordance with management’s recommendations.

The OyaGen License also provides for single-digit

royalties and contingent milestone payments.

Subsequent to March 31, 2021, the Company has sold 2.6 million shares of common stock under the ATM Sales Agreement, for gross proceeds

of approximately $3.2 million.

On April 19, 2021,

the Company filed an amended prospectus supplement under a shelf registration relating to the ATM Sales Agreement to increase

the aggregate offering price to $170.0 million in ATM sales under the ATM Sales Agreement.

The Company has entered into

contracts with various contract research organizations with outstanding commitments aggregating approximately $ 39.1 million at June 30,

2021 for future work to be performed.

On July 26, 2021, the

Company entered into a $ 17.5

million contingent non-binding Purchase and Sales Agreement in connection with a property in Maryland.

The property is

intended for process development activities.

The purchase and sale is expected to close during the fourth quarter of

On March 3, 2021, the Company

entered into a $ 2.9 million contingent non-binding Purchase and Sales Agreement in connection with a property in Massachusetts.

is intended for process development activities.

The purchase and sale is expected to close during the third quarter of

Defined contribution plan

The Company has a qualified

defined contribution plan (the “401(k) Plan”) pursuant to Section 401(k) of the Code, whereby all eligible employees may participate.

Participants may elect to defer a percentage of their annual pretax compensation to the 401(k) Plan, subject to defined limitations.

Company is required to make contributions to the 401(k) Plan equal to 100 percent of each participant’s pretax contributions of

up to six percent of his or her eligible compensation, and the Company is also required to make a contribution equal to three percent

of each participant’s salary, on an annual basis, subject to limitations under the Code.

The Company charged operations $ 41,000

and $ 111,000 for the three and six months ended June 30, 2021, respectively, and $ 29,000 and $ 79,000 for the three and six months ended

June 30, 2020, respectively, for contributions under the 401(k) Plan.

NOTE 17 – SUBSEQUENT EVENTS

On July 26, 2021, the Company entered into a $ 17.5 million contingent non-binding Purchase and Sales Agreement in connection with a property in Maryland.

(See Note 16).

Subsequent to June 30, 2021,

the Company has sold 11.0 million shares of common stock under the ATM Sales Agreement, for gross proceeds of approximately $ 8.4 million .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements