What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-09 compared with 2021-05-10 · 776 added, 624 removed, 80 unchanged (95% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements

that reflect Management’s current views with respect to future events and financial performance.

You can identify these statements

by forward-looking words such as “may” “will,” “expect,” “anticipate,” “believe,”

“estimate” and “continue,” or similar words.

Those statements include statements regarding the intent, belief

or current expectations of us and members of its management team as well as the assumptions on which such statements are based.

investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties,

and that actual results may differ materially from those contemplated by such forward-looking statements.

are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the

Securities and Exchange Commission.

Important factors known to us could cause actual results to differ materially from

those in forward-looking statements.

We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions,

the occurrence of unanticipated events or changes in the future operating results over time.

We believe that its assumptions are based

upon reasonable data derived from and known about our business and operations.

No assurances are made that actual results of operations

or the results of our future activities will not differ materially from its assumptions.

Factors that could cause differences include,

but are not limited to:

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s

Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect

Management’s current views with respect to future events and financial performance.

You can identify these statements by forward-looking

words such as “may” “will,” “expect,” “anticipate,” “believe,” “estimate”

and “continue,” or similar words.

Those statements include statements regarding the intent, belief or current expectations

of us and members of its management team as well as the assumptions on which such statements are based.

Prospective investors are cautioned

that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual

results may differ materially from those contemplated by such forward-looking statements.

Readers are urged to carefully

review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange

Important factors known to us could cause actual results to differ materially from those in forward-looking

We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of

unanticipated events or changes in the future operating results over time.

We believe that its assumptions are based upon reasonable data

derived from and known about our business and operations.

No assurances are made that actual results of operations or the results of our

future activities will not differ materially from its assumptions.

Factors that could cause differences include, but are not limited to:

the COVID-19 pandemic, including its impact on the Company, substantial competition;

our possible need for additional

uncertainties of patent protection and litigation;

our possible need for additional financing;

uncertainties

of patent protection and litigation;

uncertainties of government or third party payor reimbursement;

research and development efforts and dependence upon third parties;

and risks related to failure to obtain clearances or approvals from

the United States Food and Drug Administration, or FDA, and noncompliance with FDA regulations.

are 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.

Tonix’s portfolio is primarily composed of central nervous system,

or CNS, and immunology product candidates.

The CNS portfolio includes both small molecules and biologics to treat pain, neurologic, psychiatric

and addiction conditions.

The immunology portfolio includes vaccines to prevent infectious diseases and biologics to address organ rejection,

cancer, and autoimmune diseases.

Our lead programs are TNX-102 SL*, a sublingual tablet for the management of fibromyalgia, or FM, and

TNX-1800**, a live replicating virus vaccine to protect against COVID-19.

limited research and development

efforts and dependence upon third parties;

and risks related to failure to obtain clearances or approvals from the United States Food

and Drug Administration, or FDA, and noncompliance with FDA regulations.

Business Overview

We are a clinical-stage biopharmaceutical

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

alleviate suffering.

Tonix’s portfolio is primarily composed of central nervous system, or CNS, and immunology product candidates.

The CNS portfolio includes both small molecules and biologics to treat pain, neurologic, psychiatric and addiction conditions.

The immunology

portfolio includes vaccines to prevent infectious diseases and biologics to address organ rejection, cancer, and autoimmune diseases.

Our lead programs are TNX-102 SL*, a sublingual tablet for the management of fibromyalgia, or FM, and TNX-1800**, a live virus vaccine

to protect against COVID-19.

Our most advanced CNS product candidate is TNX-102 SL*, a proprietary sublingual

1 unchanged sentence

TNX-102 SL has active investigational new drug applications,

or IND’s, for FM, posttraumatic stress disorder, or PTSD, agitation in Alzheimer’s disease, or AAD, and alcohol use disorder,

TNX-102 SL is in mid-Phase 3 development for the management of FM which is a pain disorder characterized by chronic widespread

pain, non-restorative sleep, fatigue and impaired cognition.

We reported positive results from its Phase 3 RELIEF study in December

2020 and expect interim analysis data from a second Phase 3 study, RALLY, in the third quarter of 2021 1 , followed by topline

data in the first quarter of 2022.

We completed enrollment of 50% of participants in the RALLY study in March 2021.

For TNX-102 SL in

PTSD, we completed the Phase 3 RECOVERY trial and reported topline results in the fourth quarter of 2020 in which TNX-102 SL did not meet

the primary efficacy endpoint.

In December 2020, we reported positive results from the Phase 3 RELIEF study

of TNX-102 SL 5.6 mg for the management of fibromyalgia.

In July 2021, we reported pre-planned interim analysis results from a second

Phase 3 study, RALLY.

Based on the recommendations from the independent data monitoring committee that the RALLY trial was unlikely to

demonstrate a statistically significant improvement in the primary endpoint, we stopped enrollment of new participants but are allowing

currently enrolled participants to complete the study.

We expect to report topline data from the full study in the fourth quarter of 2021.

For TNX-102 SL in PTSD, we completed the Phase 3 RECOVERY trial and reported topline results in the fourth quarter of 2020 in which TNX-102

SL did not meet the primary efficacy endpoint.

As a next step, we intend to meet with the U.S.

Food and Drug Administration, or FDA, to discuss potential

new endpoints for the indication of treatment of PTSD.

We expect to begin enrolling a Phase 3 study of TNX-102 SL in police in Kenya in

the third quarter of 2021.

PTSD is a serious psychiatric condition that develops in response to experiencing a traumatic event.

program is Phase 2 ready with an active IND and FDA Fast Track designation.

AAD, which includes emotional lability, restlessness, irritability,

and aggression, is one of the most distressing and debilitating of the behavioral complications of Alzheimer’s disease.

program is also Phase 2 ready with an active IND.

AUD is a chronic relapsing brain disease characterized by compulsive alcohol use, loss

of control over alcohol intake, and a negative emotional state when not using alcohol.

CNS candidates in development include TNX-1900* (intranasal potentiated oxytocin), which is in development as a candidate for prophylaxis

of chronic migraine and for the treatment of craniofacial pain, insulin resistance and related conditions.

TNX-1900 was acquired from

Trigemina, Inc.

Food and Drug Administration, or FDA, to

discuss potential new endpoints for the indication of treatment of PTSD.

We also expect to begin enrolling a Phase 3 study of TNX-102

SL in police in Kenya in the fourth quarter of 2021.

PTSD is a serious psychiatric condition that develops in response to experiencing

a traumatic event.

The AAD program is Phase 2 ready with an active IND and FDA Fast Track designation.

AAD, which includes emotional lability,

restlessness, irritability, and aggression, is one of the most distressing and debilitating of the behavioral complications of Alzheimer’s

The AUD program is also Phase 2 ready with an active IND.

AUD is a chronic relapsing brain disease characterized by compulsive

alcohol use, loss of control over alcohol intake, and a negative emotional state when not using alcohol.

We also plan to develop TNX-102

SL as a potential treatment for Long COVID Syndrome (Long COVID) which is known officially as Post-Acute Sequelae of COVID-19 (PASC).

We met with the FDA in the third quarter of 2021 to seek agreement on the design of a potential Phase 2 pivotal study and the overall

clinical development plan to qualify TNX-102 SL as an indicated treatment for Long COVID.

We expect to receive the official minutes from

this meeting in the third quarter of 2021.

Other CNS candidates in development include TNX-1900* (intranasal potentiated

oxytocin), which is in development as a candidate for prophylaxis of chronic migraine and for the treatment of craniofacial pain, insulin

resistance and related conditions.

TNX-1900 was acquired from Trigemina, Inc.

in 2020 and licensed from Stanford University in 2020.

We intend to submit an IND to the FDA in the third quarter of

2021 and initiate a Phase 2 study in migraine in the third quarter of 2021.

Tonix also licensed technology to use TNX-1900 for the treatment

of insulin resistance from the University of Geneva.

TNX-2900* is another intranasal oxytocin-based therapeutic in development for the

treatment of Prader-Willi syndrome, or PWS.

The technology for TNX-2900 was licensed from the French National Institute of Health and

Medical Research.

PWS, an orphan condition, is a rare genetic disorder of failure to thrive in infancy, associated with uncontrolled

appetite later in life.

CR* (tianeptine oxalate and naloxone controlled-release tablets) is another CNS product candidate in development as a treatment

for major depressive disorder, or depression, as well as for PTSD and neurocognitive dysfunction associated with corticosteroid use.

We completed a Phase 1 trial for formulation development outside of the U.S.

Based on official minutes from a pre-IND meeting with the

FDA, we expect to be in a position to initiate a Phase 2 study for the treatment of depression in the fourth quarter of 2021, pending

results of toxicology studies.

(double-mutant cocaine esterase) is also in Tonix’s CNS portfolio and is in Phase 2 development for the treatment of life-threatening

cocaine intoxication.

intend to submit an IND to the FDA in the third quarter of 2021 and initiate a Phase 2 study in migraine in the fourth quarter of 2021.

Tonix also licensed technology to use TNX-1900 for the treatment of insulin resistance from the University of Geneva.

TNX-2900* is another

intranasal oxytocin-based therapeutic in development for the treatment of Prader-Willi syndrome, or PWS.

The technology for TNX-2900 was

licensed from the French National Institute of Health and Medical Research.

PWS, an orphan condition, is a rare genetic disorder of failure

to thrive in infancy, associated with uncontrolled appetite later in life.

TNX-601 CR* (tianeptine oxalate

and naloxone controlled-release tablets) is another CNS product candidate in development as a treatment for major depressive disorder,

or depression, as well as for PTSD and neurocognitive dysfunction associated with corticosteroid use.

We completed a Phase 1 trial for

formulation development outside of the U.S.

Based on official minutes from a pre-IND meeting with the FDA, we expect to initiate a Phase

2 study for the treatment of depression in the first half of 2022, pending results of toxicology studies and IND clearance.

TNX-1300** (double-mutant

cocaine esterase) is also in Tonix’s CNS portfolio and is in Phase 2 development for the treatment of life-threatening cocaine intoxication.

TNX-1300 has been granted Breakthrough Therapy designation, or BTD by the FDA.

TNX-1300 was licensed from Columbia

University in 2019 after a Phase 2 study showed that it rapidly and efficiently disintegrates cocaine in the blood of volunteers who

had received intravenous, or i.v ., cocaine.

We expect to initiate a Phase 2 open-label safety study of TNX-1300 in an emergency

room setting in the third quarter of 2021.

immunology portfolio includes vaccines to prevent infectious diseases and biologics to address organ rejection, cancer, and autoimmune

Our lead vaccine candidate, TNX-1800**, is a live replicating vaccine based on the horsepox viral vector platform to protect

against COVID-19, primarily by eliciting a T cell immune response.

We reported positive immune response data in non-human primates in

the fourth quarter of 2020 and reported positive efficacy data from animal challenge studies using live SARS-CoV-2 in the first quarter

TNX-801**, a live horsepox virus vaccine for percutaneous administration, is in the pre-IND stages of development to protect

against smallpox and monkeypox.

Both TNX-1800 and TNX-801 are based on the proprietary horsepox viral vector platform.

We expect to initiate

a Phase 1 safety study of TNX-1800 for COVID-19 in the first half of 2022.

is a skin test we are developing to measure SARS-CoV-2 exposure and T cell immunity.

It is an intradermal test to measure

delayed-type hypersensitivity (DTH) response to SARS-CoV-2.

We have manufactured GMP peptides designed to stimulate SARS-CoV-2

specific T cells and expect to submit an IND to the FDA in the third quarter of 2021 and initiate a first-in-human clinical study in

the fourth quarter of 2021.

(sangivamycin) is an antiviral inhibitor of SARS-CoV-2.

It has demonstrated broad-spectrum activity in laboratory-based assays against

the coronaviruses SARS-CoV-2 and MERS-CoV.

TNX-1300 was licensed from Columbia University in 2019

after a Phase 2 study showed that it rapidly and efficiently disintegrates cocaine in the blood of volunteers who had received intravenous,

or i.v ., cocaine.

We expect to initiate a Phase 2 open-label safety study of TNX-1300 in an emergency room setting in the third

quarter of 2021.

Our immunology portfolio includes

vaccines to prevent infectious diseases and biologics to address organ rejection, cancer, and autoimmune diseases.

Our lead vaccine candidate,

TNX-1800**, is a live replicating vaccine based on the horsepox viral vector platform to protect against COVID-19, primarily by eliciting

a T cell immune response.

We reported positive immune response data in non-human primates in the fourth quarter of 2020 and reported positive

efficacy data from animal challenge studies using live SARS-CoV-2 in the first quarter of 2021.

TNX-801**, a live horsepox virus vaccine

for percutaneous administration, is in the pre-IND stages of development to protect against smallpox and monkeypox.

Both TNX-1800 and

TNX-801 are based on the proprietary horsepox viral vector platform.

We expect to initiate a Phase 1 safety study of TNX-1800 for COVID-19

in the first half of 2022.

TNX-2100** is a skin test we are

developing to measure SARS-CoV-2 exposure and T cell immunity.

It is an intradermal test to measure delayed-type hypersensitivity (DTH)

response to SARS-CoV-2.

We have manufactured GMP peptides designed to stimulate SARS-CoV-2 specific T cells and expect to submit an IND

to the FDA in the third quarter of 2021 and initiate a first-in-human clinical study in the fourth quarter of 2021.

TNX-3500* (sangivamycin) is an

antiviral inhibitor of SARS-CoV-2.

It has demonstrated broad-spectrum activity in laboratory-based assays against the coronaviruses SARS-CoV-2

and MERS-CoV.

Tonix licensed this compound from OyaGen, Inc.

and intends to develop it as a treatment for

COVID-19 and potentially other viral disorders.

The active ingredient of TNX-3500 has been studied for safety in humans in prior studies

on cancer patients at the U.S.

and intends to develop it as a treatment for COVID-19 and potentially other

viral disorders.

The active ingredient of TNX-3500 has been studied for safety in humans in prior studies on cancer patients at the U.S.

National Cancer Institute but has not been approved for marketing in any jurisdiction.

Tonix intends to

conduct further animal studies and submit an IND in the first half of 2022.

TNX-1500** is a humanized monoclonal antibody, or mAb, directed against

CD40-ligand, or CD40L, engineered to modulate binding to Fc receptors, that is being developed to prevent and treat organ transplant rejection

as well as to treat autoimmune conditions.

We expect to have GMP TNX-1500 product ready in the third quarter of 2021.

In experiments at

the Massachusetts General Hospital, a teaching hospital of Harvard Medical School, TNX-1500 product candidate is being studied as monotherapy

or in combination with mycophenolate mofetil in heart and kidney organ transplants in non-human primates.

Preliminary results from an

ongoing experiment in heart transplants indicated that TNX-1500 appeared to have comparable efficacy to historical experiments using the

chimeric mouse-human anti-CD40L monoclonal antibody (mAb) hu5c8 and no evidence of thrombosis has been observed.

our preclinical pipeline includes TNX-1600*, TNX-1700**, TNX-701* and TNX-2300**.

TNX-1600 is an inhibitor of the reuptake of neurotransmitters

serotonin, norepinephrine and dopamine (a triple reuptake inhibitor).

TNX-1600 was licensed from Wayne State University in 2019 and is

being developed as a treatment for PTSD, depression and attention-deficit/hyperactivity disorder, or ADHD.

TNX-1700 is a recombinant

modified form of Trefoil Family Factor 2, or rTFF2, that was licensed from Columbia University in 2019, and is a biologic being developed

to treat gastric and pancreatic cancers.

Tonix intends to conduct further animal studies.

TNX-1500** is a humanized monoclonal

antibody, or mAb, directed against CD40-ligand, or CD40L, engineered to modulate binding to Fc receptors, that is being developed to prevent

and treat organ transplant rejection as well as to treat autoimmune conditions.

In experiments at the Massachusetts General Hospital,

a teaching hospital of Harvard Medical School, TNX-1500 product candidate is being studied as monotherapy or in combination with mycophenolate

mofetil in heart and kidney organ transplants in non-human primates.

Preliminary results from an ongoing experiment in heart transplants

indicated that TNX-1500 appeared to have comparable efficacy to historical experiments using the chimeric mouse-human anti-CD40L monoclonal

antibody (mAb) hu5c8 and with TNX-1500 no evidence of thrombosis has been observed.

We expect to start a Phase 1 study of TNX-1500 in

the second half of 2022.

Finally, our preclinical pipeline

includes TNX-1600*, TNX-1700**, TNX-701* and TNX-2300**.

TNX-1600 is an inhibitor of the reuptake of neurotransmitters serotonin, norepinephrine

and dopamine (a triple reuptake inhibitor).

TNX-1600 was licensed from Wayne State University in 2019 and is being developed as a treatment

for PTSD, depression and attention-deficit/hyperactivity disorder, or ADHD.

TNX-1700 is a recombinant modified form of Trefoil Family

Factor 2, or rTFF2, that was licensed from Columbia University in 2019, and is a biologic being developed to treat gastric and pancreatic

cancers by an immune-oncology mechanism.

TNX-701 is an undisclosed small molecule, which is being developed to prevent deleterious effects

of radiation exposure which has the potential to be used as a medical countermeasure to improve biodefense.

Tonix is also developing

TNX-2300** as a second COVID-19 vaccine under an option agreement with Kansas State university.

TNX-2300 is a live replicating viral

vector based on the bovine parainfluenza virus.

agreement from FDA on statistical analysis plan.

SL, TNX-601 CR, TNX-1600, TNX-1900, TNX-2900, TNX-3500 and TNX-701 are investigational new drugs and have not been approved for any indication.

TNX-801, TNX-2300, TNX-2100, TNX-1300, TNX-1500 and TNX-1700 are investigational new biologics and have not been approved for any indication.

of Operations

anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, such as the progress of our

research and development efforts and the timing and outcome of regulatory submissions.

Due to these uncertainties, accurate predictions

of future operations are difficult or impossible to make.

Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

and Development Expenses .

Research and development expenses for the three months ended March 31, 2021 were $15.3 million,

an increase of $10.6 million, or 226%, from $4.7 million for the three months ended March 31, 2020.

This increase is predominately due

to timing of milestones related to the Phase 3 RELIEF study and the initiation of a second phase 3 study of TNX-102 SL for FM, RALLY,

in the third quarter of 2020, as well as activities to prepare for initiation of Phase 2 clinical studies of TNX-1300, TNX-1900 and TNX-601

by the end of 2021.

New activities related to the development of TNX-1800 as a potential COVID-19 vaccine, and increased spending related

to our development pipeline also contributed to the increase.

Tonix is also developing TNX-2300

as a second COVID-19 vaccine under an option agreement with Kansas State university.

TNX-2300 is a live viral vaccine based on bovine

parainfluenza virus.

As it relates

to our COVID-19 and other infectious diseases platform, we are developing three facilities to enable internal research, development and

manufacturing capabilities.

Our first such facility in process is the Advanced Development Center (ADC) located in New Bedford, Massachusetts.

This facility is intended to accelerate development and clinical scale manufacturing of live-virus vaccines to support Phase 1 and Phase

2 clinical trials.

It is currently under construction and will be an approximately 45,000 square foot BSL-2 facility, once completed.

It is expected to be operational in the first half of 2022.

We also intend to build a facility in Hamilton, Montana where we purchased

approximately 44 acres of land.

This Commercial Manufacturing Center (CMC) will focus on developing and manufacturing commercial scale

live-virus vaccines and is also intended to be biosafety level 2 (BSL-2).

Construction is expected to be initiated for the CMC in 2022.

Finally, we recently entered into an agreement to acquire an infectious disease R&D facility (RDF) in Frederick, Maryland.

The approximately

48,000 square foot, BSL-2 facility is currently owned and operated by Southern Research.

We intend for the RDF to focus on development

of vaccines and antiviral drugs against COVID-19, its variants and other infectious diseases.

The acquisition is expected to close in

the fourth quarter of 2021.

*TNX-102 SL, TNX-601 CR, TNX-1600,

TNX-1900, TNX-2900, TNX-3500 and TNX-701 are investigational new drugs and have not been approved for any indication.

**TNX-1800, TNX-801, TNX-2300,

TNX-2100, TNX-1300, TNX-1500 and TNX-1700 are investigational new biologics and have not been approved for any indication.

Results of Operations

We anticipate that our results

of operations will fluctuate for the foreseeable future due to several factors, such as the progress of our research and development efforts

and the timing and outcome of regulatory submissions.

Due to these uncertainties, accurate predictions of future operations are difficult

or impossible to make.

Three Months Ended June 30, 2021 Compared

to Three Months Ended June 30, 2020

Research and Development

Research and development expenses for the three months ended June 30, 2021 were $18.1 million, an increase of $7.5 million, or 71%, from $10.6 million for the three months ended June 30, 2020.

This increase is predominately due to increased non-clinical expenses of $7.1 million, manufacturing expenses of $2.7 million, employee-related expenses of $1.2 million and regulatory/legal expenses of $0.4 million offset by a decrease in clinical expenses of $4.1 million.

We expect research and development expenses to increase during 2021 as we move our clinical development programs forward and continue to invest in our development pipeline.

and Administrative Expenses .

General and administrative expenses for the three months ended March 31, 2021 were $5.4

million, an increase of $2.8 million, or 108%, from $2.6 million incurred in the three months ended March 31, 2020.

The increase is primarily

due to an increase in compensation expense of $0.7 million driven by increased salaries and additional personnel hired during the second

half of 2020, an increase in legal fees of $0.6 million due to increased corporate legal fees and patent prosecution costs, increased

financial reporting expenses of $1.0 million due to shareholder meetings held during the year, an increase in investor relations/public

relations costs of $0.1 million, and an increase in insurance premiums of $0.1 million.

a result of the forgoing, the net loss for the three months ended March 31, 2021 was $20.7 million, compared to a net loss of $7.3 million

for the three months ended March 31, 2020, an increase of $13.4 million or 184%.

General and administrative expenses for the three months ended June 30,

2021 were $5.4 million, an increase of $1.8 million, or 50%, from $3.6 million incurred in the three months ended June 30, 2020.

in primarily due to an increase in employee-related expenses of $1.1 million, an increase in investor relations/public relations expenses

of $0.2 million, an increase in financial reporting expenses of $0.2 million and an increase in insurance premiums of $0.2 million.

a result of the forgoing, the net loss for the three months ended June 30, 2021 was $23.6 million, compared to a net loss of $14.2 million

for the three months ended June 30, 2020.

Six Months Ended June 30, 2021 Compared to Six

Months Ended June 30, 2020

Research and Development

Research and development expenses for the six months ended June 30, 2021 were $33.5 million, an increase of $18.2

million, or 119%, from $15.3 million for the six months ended June 30, 2020.

This increase is predominately due to the increased non-clinical

expenses of $10.0 million, manufacturing expenses of $7.0 million, employee-related expenses of $2.0 million and regulatory/legal expenses

of $0.7 million offset by a decrease in clinical expenses of $1.7 million.

We expect research and development expenses to increase during

2021 as we move our clinical development programs forward and continue to invest in our development pipeline.

General and Administrative

General and administrative expenses for the six months ended June 30, 2021 were $10.8 million, an increase of $4.6

million, or 74%, from $6.2 million incurred in the six months ended June 30, 2020.

The increase is primarily due to employee-related expenses

of $1.8 million, an increase in legal fees of $0.5 million due to increased patent prosecution costs, an increase in investor relations/public

relations expenses of $0.3 million, an increase in financial reporting expenses of $1.2 million and an increase in insurance premiums

of $0.2 million.

of the foregoing, the net loss for the six months ended June 30, 2021 was $44.2 million, compared to a net loss of $21.5 million for the

six months ended June 30, 2020.

License Agreements

On April 14, 2021, we and

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

to which OyaGen granted us 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

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, we 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 our 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.

On February 11,

2021, we entered into a license agreement (the “Inserm License Agreement”) pursuant to which we 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 royalties.

As of March 31, 2021, no milestone payments have been accrued or

paid in relation to this agreement.

On September 16, 2019, we 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 us 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 has reserved for itself the right to practice the TFF2 Technology for academic research and educational purposes.

We 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

As consideration for

entering into the License Agreement, we 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 our common stock, valued at $3.0 million, 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.

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.

On February 11, 2021, we entered

into a license agreement (the “Inserm License Agreement”) pursuant to which we 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 royalties.

As of June 30, 2021, no milestone payments have been accrued or paid in relation to this agreement.

On September 16, 2019, we

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 us 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 has reserved for itself the right to practice the TFF2 Technology for academic research and educational purposes.

We 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.

3 unchanged sentences

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

or technical information related to the TFF2 Product and transferred to us pursuant to the License Agreement (“Other Products”)

sold by us or a sublicensee.

8 unchanged sentences

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

are 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, we shall pay Columbia 5% of consideration,

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

As of March 31, 2021, no milestone

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

May 20, 2019, we 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 us 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.

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

We are 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.

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

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

Products”) sold by us 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.

payable on net sales of the Product and Other Products may be reduced by 50% of the royalties payable by us to any third party for intellectual

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

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

are 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, we shall pay Columbia 5% of consideration, other

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

As of March 31, 2021, no milestone

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

Purchase Agreements

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

(“Katana”) pursuant to which we acquired Katana assets related to insulin resistance and related syndromes, including

obesity (the “Katana Assets”).

In connection with the acquisition of the Assets, we 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 Asset Purchase Agreement, we paid $0.7 million to

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, 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 granted us an exclusive license, with the right to sublicense,

certain patents related to the Katana Assets.

We are 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.

June 11, 2020, we 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 we acquired

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

In connection with the acquisition

of the Trigemina Assets, we 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 Trigemina Asset

Purchase Agreement, we paid $824,759 to Trigemina and issued to Trigemina 2,000,000 shares of our common stock 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 our shareholders 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 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 us 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.

We are 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 Stanford 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.

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

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

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

In connection with the

acquisition of the TRImaran Assets, we 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 TRImaran

Asset Purchase Agreement, we paid $100,000 to TRImaran and have assumed certain liabilities of TRImaran totaling $68,500.

was recorded to research and development expenses in the statement of operations in 2019.

Upon the achievement of specified development,

regulatory and sales milestones, we also agreed to pay TRImaran and the Selling Shareholders, in restricted stock or cash, at our option,

a total of approximately $3.4 million.

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

are prohibited from disclosing confidential information related to the TRImaran 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.

As of December 31, 2020, no milestone payments have

been accrued or paid in relation to this agreement.

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

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

WSU has reserved for itself the

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

We are 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, we shall pay Columbia 5% of consideration, other than royalty payments

and certain other categories of consideration, payable to us by a sublicensee.

As of June 30, 2021, no milestone payments have been accrued

or paid in relation to this agreement.

On May 20, 2019, we 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 us 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.

We agreed to pay a six-digit

license fee to Columbia as consideration for entering into the License Agreement.

We are 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.

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, we paid $75,000 to WSU as reimbursement of certain patent expenses, and, upon the achievement of specified

development, regulatory and sales milestones, we also agreed to pay WSU, milestone payments totaling approximately $3.4 million.

agreed to pay WSU single-digit royalties on net sales of WSU Products sold by us 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 us to any third party for intellectual property rights which are necessary for the practice of the rights licensed to us 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.

The WSU License Agreement contains

provisions relating to termination, indemnification, confidentiality and other customary matters for an agreement of this kind.

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

and Capital Resources

of March 31, 2021, we had working capital of $167.1 million, comprised primarily of cash and cash equivalents of $164.2

million and prepaid expenses and other of $9.0 million, offset by $2.9 million of accounts payable, $2.8 million of accrued

expenses and current lease liabilities of $0.4 million.

A significant portion of the accounts payable and accrued expenses

are due to work performed in relation to our Phase 3 clinical trial in FM and our vaccine program.

For the three months ended

March 31, 2021 and 2020, we used approximately $21.1 million and $9.3 million of cash in operating activities, respectively,

which represents cash outlays for research and development and general and administrative expenses in such periods.

increase in cash outlays principally resulted from an increase in research and development and general and administrative

For the three months ended March 31, 2021 and 2020, net proceeds from financing activities were $108.7 million

and $28.8 million, respectively, predominately from the sale of our common stock and warrants.

Cash used by investing

activities for the three months ended March 31, 2021 and 2020, was $0.5 million and $0 respectively, related to the purchase

of property and equipment.

We believe that our cash resources at March 31, 2021, and the proceeds

that we raised from equity offerings subsequent to the end of the first quarter of 2021, will meet our operating and capital expenditure

requirements through March 31, 2022, but not beyond.

continue to face significant challenges and uncertainties and, as a result, our available capital resources may be consumed more rapidly

than currently expected due to changes we may make in our research and development spending plans.

These factors raise substantial doubt

about our ability to continue as a going concern for the one year period from the date of filing of this Form 10-K.

We have the ability

to obtain additional funding through public or private financing or collaborative arrangements with strategic partners to increase the

funds available to fund operations.

Without additional funds, we may be forced to delay, scale back or eliminate some of our research

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

continue our operations.

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

Liquidity Requirements

expect to incur losses from operations for the near future.

We expect to incur increasing research and development expenses, including

expenses related to additional clinical trials and the buildout of our research and development operations and manufacturing.

not have enough resources to meet our operating requirements for the one-year period from filing date of this report.

future capital requirements will depend on a number of factors, including the progress of our research and development of product candidates,

the timing and outcome of regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing

patent claims and other intellectual property rights, the status of competitive products, the availability of financing and our success

in developing markets for our product candidates.

will need to obtain additional capital in order to fund future research and development activities.

Future financing may include the

issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.

Even if we are able to raise the funds

required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience

unexpected cash requirements that would force us to seek alternative financing.

Furthermore, if we issue additional equity or debt securities,

shareholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those

of existing holders of our common stock.

additional financing is not available or is not available on acceptable terms, we may be required to delay, reduce the scope of or eliminate

our research and development programs, reduce our commercialization efforts or obtain funds through arrangements with collaborative partners

or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize

independently.

as defined in the License Agreement, to develop and commercialize the Product, and to achieve specified developmental milestones.

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.

We agreed to pay Columbia

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

information related to the Product and transferred to us pursuant to the License Agreement (“Other Products”) sold by us 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 us to any third party for intellectual property rights

which are necessary for the practice of the rights licensed to us under the License Agreement, provided that the royalty payable on a

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

We are 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, we shall pay Columbia 5% of consideration, other than royalty payments

and certain other categories of consideration, payable to us by a sublicensee.

As of June 30, 2021, no milestone payments have been accrued

or paid in relation to this agreement.

Asset Purchase Agreements

On December 22, 2020, we entered

into an asset purchase agreement (the “Asset Purchase Agreement”) with Katana Pharmaceuticals, Inc.

pursuant to which we acquired Katana assets related to insulin resistance and related syndromes, including obesity (the “Katana

In connection with the acquisition of the Assets, we 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

As consideration for entering into the Asset Purchase Agreement, we 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, 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 granted us an exclusive license, with the right to sublicense, certain patents

related to the Katana Assets.

We are 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.

On June 11, 2020, we 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 we acquired Trigemina assets related

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

In connection with the acquisition of the Trigemina

Assets, we 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 Trigemina Asset Purchase Agreement, we paid

$824,759 to Trigemina and issued to Trigemina 2,000,000 shares of our common stock 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 our shareholders 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 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

Pursuant to the terms of the

Assignment and Assumption Agreement, Stanford has granted us 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

We are 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 Stanford 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.

On August 19, 2019, we entered

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

and the selling shareholders named therein (the “Selling Shareholders”) pursuant to which we acquired TRImaran’s assets

related to certain pyran-based compounds (the “TRImaran Assets”).

In connection with the acquisition of the TRImaran Assets,

we 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 TRImaran Asset Purchase Agreement, we paid $100,000 to

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

The $168,500 was recorded to research and development expenses

in the statement of operations in 2019.

Upon the achievement of specified development, regulatory and sales milestones, we also agreed

to pay TRImaran and the Selling Shareholders, in restricted stock or cash, at our option, a total of approximately $3.4 million.

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

information related to the TRImaran 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

As of June 30, 2021, no milestone payments have been accrued or paid in relation to this agreement.

Pursuant to the terms of the

WSU License Agreement, WSU granted us an exclusive license, with the right to sublicense, certain patents, technical information and material

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

WSU has reserved for itself the right to practice the Technology

for academic research and educational purposes.

We are 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.

We are 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, we paid $75,000 to WSU as reimbursement of certain patent expenses, and, upon the achievement of specified development,

regulatory and sales milestones, we also agreed to pay WSU, milestone payments totaling approximately $3.4 million.

We have also agreed

to pay WSU single-digit royalties on net sales of WSU Products sold by us 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 us to any

third party for intellectual property rights which are necessary for the practice of the rights licensed to us 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.

The WSU 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.

Liquidity and Capital Resources

As of June 30, 2021, we had

working capital of $169.2 million, comprised primarily of cash and cash equivalents of $165.7 million and prepaid expenses and other of

$11.6 million, offset by $3.4 million of accounts payable, $4.2 million of accrued expenses and current lease liabilities of $0.5 million.

A significant portion of the accounts payable and accrued expenses are due to work performed in relation to our Phase 3 clinical trial

in FM and our vaccine program.

For the six months ended June, 2021 and 2020, we used approximately $40.2 million and $19.4 million of

cash in operating activities, respectively, which represents cash outlays for research and development and general and administrative

expenses in such periods.

The increase in cash outlays principally resulted from an increase in research and development activities.

the six months ended June 30, 2021 and 2020, net proceeds from financing activities were $130.8 million and $63.2 million, respectively,

predominately from the sale of our common stock and warrants.

Cash used in investing activities

for the six months ended June 30, 2021 and 2020, was $1.9 million and $14,000 respectively, related to the purchase of property and equipment.

We believe that our cash resources at June 30, 2021, and the proceeds that

we raised from equity offerings subsequent to the end of the second quarter of 2021 will meet our operating and capital expenditure requirements

through June 30, 2022, but not beyond.

We continue to face significant

challenges and uncertainties and, as a result, our available capital resources may be consumed more rapidly than currently expected due

to changes we may make in our research and development spending plans.

These factors raise substantial doubt about our ability to continue

as a going concern for the one year period from the date of filing of this Form 10-Q.

We have the ability to obtain additional funding

through public or private financing or collaborative arrangements with strategic partners to increase the funds available to fund operations.

Without additional funds, we may be forced to delay, scale back or eliminate some of our research and development activities, or other

operations and potentially delay product development in an effort to provide sufficient funds to continue our operations.

If any of these

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

Future Liquidity Requirements

We expect to incur losses from

operations for the near future.

We expect to incur increasing research and development expenses, including expenses related to clinical

trials and the build out of recently acquired research and development and manufacturing facilities.

We will not have enough resources

to meet our operating requirements for the one-year from filing date of this report.

Our future capital requirements

will depend on a number of factors, including the progress of our research and development of product candidates, the timing and outcome

of regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and

other intellectual property rights, the status of competitive products, the availability of financing and our success in developing markets

for our product candidates.

We will need to obtain capital

in order to fund future research and development activities and the build out of our recently acquired research and development and manufacturing

Future financing may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.

Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant

amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing.

Furthermore, if we issue

additional equity or debt securities, shareholders may experience additional dilution or the new equity securities may have rights, preferences

or privileges senior to those of existing holders of our common stock.

If additional financing is

not available or is not available on acceptable terms, we may be required to delay, reduce the scope of or eliminate our research and

development programs, reduce our commercialization efforts or obtain funds through arrangements with collaborative partners or others

that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize independently.

2021 Lincoln Park Transaction

May 14, 2021, we 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 us up to $80,000,000 of our 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,

we 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 we signed the 2021 Purchase Agreement and the 2021 Registration Rights Agreement,

we 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, we 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, we entered

into a securities agreement (“the February 2021 Financing”) with A.G.P/Alliance Global Partners (“AGP”), relating

to the issuance and sale of 58,333,334 shares of our common stock, in a registered direct public offering.

The public offering price

for each share of common stock was $1.20.

The public offering price for

each share of common stock was $1.20.

The February 2021 Financing closed on February 9, 2021.

AGP purchased the shares at a seven

percent discount to the then current public price, for an aggregate discount of $4.9 million.

We incurred other offering expenses of

approximately $0.1 million.

We received net proceeds of approximately $65.0 million, after deducting the underwriting discount and other

offering expenses.

AGP purchased the shares at a seven percent

discount to the then current public price, for an aggregate discount of $4.9 million.

We incurred other offering expenses of approximately

$0.1 million.

We received net proceeds of approximately $65.0 million, after deducting the underwriting discount and other offering expenses.

January 2021 Financing

On January 11, 2021, we

entered into a securities purchase agreement (“the January 2021 Financing”) with AGP, relating to the issuance and sale of

On January 11, 2021, we entered

into a securities purchase agreement (“the January 2021 Financing”) with AGP, relating to the issuance and sale of 50,000,000

shares of our common stock, in a registered direct public offering.

The public offering price for each share of common stock

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

The January 2021 Financing closed on January 13, 2021.

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

public price, for an aggregate discount of $2.8 million.

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

price, for an aggregate discount of $2.8 million.

We incurred other offering expenses of approximately $0.3 million.

net proceeds of approximately $36.9 million, after deducting the underwriting discount and other offering expenses.

At-the-Market Offering

April 8, 2020, we entered into a sales agreement (the “Sales Agreement”) with AGP pursuant to which we may issue and sell,

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

(“ATM”) sales.

On the same day, we filed a prospectus supplement under a shelf registration relating to the Sales Agreement.

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

Our common stock will be sold at

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

On September 4, we filed an amended prospectus

supplement under a 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, we 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, we sold 2.6 million shares of common

stock under the Sales Agreement, for gross proceeds of approximately $3.2 million.

On April 19, 2021, we 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.

We received net proceeds

of approximately $36.9 million, after deducting the underwriting discount and other offering expenses.

At-the-Market Offerings

On April 8, 2020, we entered into

a sales agreement (the “Sales Agreement”) with AGP pursuant to which we may issue and sell, from time to time, shares of our

common stock having an aggregate offering price of up to $50.0 million in at-the-market offerings (“ATM”) sales.

day, we filed a prospectus supplement under a shelf registration relating to the Sales Agreement.

AGP will act as sales agent and will

be paid a 3% commission on each sale under the Sales Agreement.

Our common stock will be sold at prevailing market prices at the time

of the sale, and, as a result, prices will vary.

On September 4, we 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.

April 19, 2021, we 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, we sold

approximately 25.2 million shares of common stock under the Sales Agreement, for gross proceeds of approximately $26.3 million.

to June 30, 2021, we have sold 11.0 million shares of common stock under the Sales Agreement, for gross proceeds of approximately $8.4

March 2020 Financing

On February 28, 2020, we entered into an underwriting agreement (“the

February 28th Financing”) with AGP, relating to the issuance and sale of 14,550,000 shares of our common stock, in a registered

direct public offering.

On February 28, 2020, we entered

into an underwriting agreement (“the February 28th Financing”) with AGP, relating to the issuance and sale of 14,550,000 shares

of our common stock, in a registered direct public offering.

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

The February 28th Financing closed on March

AGP purchased the shares at a seven percent discount to the then current public price, for an aggregate discount of $1.1 million.

28th 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.

We incurred other offering expenses of approximately $0.1 million.

We received net proceeds of approximately $14.8 million, after deducting

the underwriting discount and other offering expenses.

2020 Financing

On February 7,

2020, we entered into an underwriting agreement (“the February 20 Financing”) with AGP pursuant to which we 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 our

common stock.

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

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.

We incurred other offering expenses of

approximately $0.5 million.

We received net proceeds of approximately $6.5 million, after deducting the underwriting discount

and other offering expenses.

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 “deemed dividend” and included in net loss to common stockholders.

the first quarter of 2020, all 5,313 shares of Series B Convertible Preferred Stock were converted into common stock.

February and March 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.

2019 Financing

November 14, 2019, we entered into an underwriting agreement with AGP pursuant to which we 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 our common stock.

The primary warrants have an exercise price of $1.94, are immediately exercisable and expire five years from the date of issuance.

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.

We received net proceeds of approximately

$14.8 million, after deducting the underwriting discount and other offering expenses.

February 2020 Financing

On February 7, 2020, we entered

into an underwriting agreement (“the February 20 Financing”) with AGP pursuant to which we 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 our common stock.

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.

We incurred other offering expenses of approximately $0.5 million.

We 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 “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.

We 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 “deemed dividend” and included in net loss to common stockholders.

During the first quarter of

2020, all 5,313 shares of Series B Convertible Preferred Stock were converted into common stock.

During February and March

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, we

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 our common stock.

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 our securities were traded.

With the February 2020 Financing, warrants that were issued as part of

3 unchanged sentences

We recognized a one-time

non-cash “deemed dividend”

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

The “deemed

dividend”

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

non-cash “deemed dividend” of $0.5 million, representing the increase in the fair value of the warrants.

dividend” was charged to additional paid in capital and included in net loss to stockholders.

During February and March 2020, 2.3

1 unchanged sentence

$1.3 million.

Incentive Plans

Stock Incentive Plan

May 3, 2019, our stockholders approved the Tonix Pharmaceuticals Holding Corp.

2019 Lincoln Park Transaction

August 20, 2019, we 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 our 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,

we 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 we signed the 2019 Purchase Agreement and the 2019 Registration Rights Agreement,

we 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, we may sell more than 19.9% of its 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, we sold an aggregate of approximately 464,471 shares of common stock under the 2019 Purchase Agreement,

for gross proceeds of approximately $0.3 million.

Stock Compensation

On May 3, 2019, our stockholders

approved the Tonix Pharmaceuticals Holding Corp.

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

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, our stockholders approved the Tonix Pharmaceuticals Holding Corp.

2020 Stock Incentive Plan

(the “2020 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 2019 Plan.

On January 16, 2020, our stockholders approved the Tonix Pharmaceuticals

Holding Corp.

2020 Stock Incentive Plan (the “2020 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 Stock Incentive Plan, no further grants may be made under the 2020

May 1, 2020, our 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, we may issue (1) stock options (incentive and nonstatutory), (2) restricted stock, (3)

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

The Amended and Restated 2020 Plan provides 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 March 31, 2021, 18,883,676 shares were available for future

grants under the Amended and Restated 2020 Plan.

measure 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 our 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, we issue options to directors which vest over a one-year

We also issue premium options to executive officers which have an exercise price greater than the grant date fair value and have

issued performance-based options which vest when target parameters are 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 vesting period using the straight-line

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.

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, we 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 Plan

May 3, 2019, our stockholders approved the Tonix Pharmaceuticals Holdings Corp.

With 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, our 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, we may issue (1) stock options (incentive and nonstatutory), (2) restricted stock, (3) SARs, (4) RSUs, (5) other

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

The 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

We measure 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 our common stock on the date of the grant.

For employees and directors, the fair value of the award is

measured on the grant date.

Most stock options granted pursuant to the Plans typically vest 1/3rd 12 months from the date of grant and

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

In addition, we issue options to directors which

vest over a one-year period.

We also issue premium options to executive officers, which have an exercise price greater than the grant

date fair value, subject to a one year minimum service period prior to vesting.

Stock-based compensation expense related to awards is

amortized over the applicable vesting period using the straight-line method.

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.

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, our stockholders

approved the Tonix Pharmaceuticals Holdings Corp.

2019 Employee Stock Purchase Plan (the “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, our 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 our 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 our 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 March 31, 2021, 245,553 shares were available for future sales under the 2020 ESPP.

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

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

As a result of adoption

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

On May 1, 2020, our stockholders

approved the Tonix Pharmaceuticals Holdings Corp.

2020 Employee Stock Purchase Plan (the “2020 ESPP”).

The 2020 ESPP allows eligible

employees to purchase up to an aggregate of 300,000 shares of our 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 our 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

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,

11 unchanged sentences

$4,000 was returned to the employees.

and Development Contracts

have 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.

of March 31, 2021, future minimum lease payments are as follows (in thousands):

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.

Contractual agreements

We have 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.

is intended for process development activities.

The purchase and sale is expected to close during the fourth quarter of 2021.

On March 3, 2021, we 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.

The purchase and sale is expected to close during the third quarter of 2021.

Operating leases

As of June 30, 2021, future

minimum lease payments are as follows (in thousands):

Year Ending December 31,

Remainder of 2021

Included interest

Accounting Policies and Estimates

discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which

have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these financial

statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses.

our estimates and judgments on an ongoing basis.

We base our estimates on historical experience and on assumptions that we believe to

be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and

liabilities that are not readily apparent from other sources.

Critical Accounting Policies and Estimates

Our discussion and analysis

of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared

in accordance with accounting principles generally accepted in the United States.

The preparation of these financial statements requires

us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses.

We evaluate our estimates and

judgments on an ongoing basis.

We base our estimates on historical experience and on assumptions that we believe to be reasonable under

the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are

not readily apparent from other sources.

Actual results may differ from these estimates.

believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our

consolidated financial statements.

and Development .

We outsource our research and development efforts and expense the related costs as incurred, including the cost

of manufacturing product for testing, licensing fees and costs associated with planning and conducting clinical trials.

The value ascribed

to patents and other intellectual property acquired was expensed as research and development costs, as it related to particular research

and development projects and had no alternative future uses.

estimate our accrued expenses.

Our clinical trial accrual process is designed to account for expenses resulting from our obligations

under contracts with vendors, consultants and clinical research organizations and clinical site agreements in connection with conducting

clinical trials.

The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result

in payment flows that do not match the periods over which materials or services are provided to us under such contracts.

We account for

trial expenses according to the progress of the trial as measured by participant progression and the timing of various aspects of the

We determine accrual estimates that take into account discussions with applicable personnel and outside service providers as to

the progress or state of completion of trials, or the services completed.

During the course of a clinical trial, we adjust our clinical

expense recognition if actual results differ from our estimates.

We make estimates of our accrued expenses as of each balance sheet date

based on the facts and circumstances known to us at that time.

Our clinical trial accruals and prepaid assets are dependent upon the

timely and accurate reporting of contract research organizations and other third-party vendors.

Compensation .

All stock-based payments to employees and to nonemployee directors for their services as directors consisted of grants

of restricted stock and stock options, which are measured at fair value on the grant date and recognized in the condensed consolidated

statements of operations as compensation expense over the relevant vesting period.

In addition, for awards that vest immediately and

are nonforfeitable, the measurement date is the date the award is issued.

for sale of Class B Units in November 2019 and February 2020 including beneficial conversion feature.

In connection with the November

2019 and February 2020 underwritten offerings, we issued warrants to purchase our common stock and convertible preferred stock.

for the transaction, we calculated the relative fair value of each instrument issued in the financing.

We believe the following critical

accounting policies affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial

Research and Development .

We outsource our research and development efforts and expense the related costs as incurred, including the cost of manufacturing product

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

The value ascribed to patents and other

intellectual property acquired was expensed as research and development costs, as it related to particular research and development projects

and had no alternative future uses.

The table below summarizes our direct research and development expenses

for our product candidates and development platform for the six months ended June 30, 2021, and 2020.

Six months ended June 30,

(in thousands)

Research and development expenses:

Direct expenses – TNX - 102 SL

Direct expenses – TNX - 1800

Direct expenses – TNX - 1300

Direct expenses – TNX - 1500

Direct expenses – TNX - 1900

Direct expenses – TNX - 3500

Direct expenses – Other programs

Internal staffing, overhead and other

Total research & development

Our direct research and development expenses consist principally of external

costs for clinical, nonclinical and manufacturing, such as fees paid to contractors, consultants and CROs in connection with our development

Included in “Internal Staffing, Overhead and Other” is overhead, supplies, research and development employee costs (including

stock option expenses), travel, regulatory and legal.

We estimate our accrued expenses.

Our clinical trial accrual process is designed to account for expenses resulting from our obligations under contracts with vendors, consultants

and clinical research organizations and clinical site agreements in connection with conducting clinical trials.

The financial terms of

these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the

periods over which materials or services are provided to us under such contracts.

We account for trial expenses according to the progress

of the trial as measured by participant progression and the timing of various aspects of the trial.

We determine accrual estimates that

take into account discussions with applicable personnel and outside service providers as to the progress or state of completion of trials,

or the services completed.

During the course of a clinical trial, we adjust our clinical expense recognition if actual results differ

from our estimates.

We make estimates of our accrued expenses as of each balance sheet date based on the facts and circumstances known

to us at that time.

Our clinical trial accruals and prepaid assets are dependent upon the timely and accurate reporting of contract research

organizations and other third-party vendors.

Stock-Based Compensation .

All stock-based payments to employees and to nonemployee directors for their services as directors consisted of grants of restricted stock

and stock options, which are measured at fair value on the grant date and recognized in the condensed consolidated statements of operations

as compensation expense over the relevant vesting period.

In addition, for awards that vest immediately and are nonforfeitable, the measurement

date is the date the award is issued.

Accounting for sale of

Class B Units in November 2019 and February 2020 including beneficial conversion feature.

In connection with the November 2019 and

February 2020 underwritten offerings, we issued warrants to purchase our common stock and convertible preferred stock.

To account for

the transaction, we calculated the relative fair value of each instrument issued in the financing.

We also determined if a beneficial

2 unchanged sentences

the commitment date.

A conversion feature is in the money if its conversion price is less than the current fair

value of the share.

For purposes of measuring a beneficial conversion feature, the effective conversion price should be based on the

proceeds allocated to the convertible instrument.

determined the fair value of the warrants to purchase common stock, using a Monte Carlo simulation, for the November 2019 financing,

which is a statistical method used to generate a defined number of share price paths to develop a reasonable estimate of the range of

future expected share prices.

A conversion feature is in the money if its conversion price is less than the current fair value of the share.

purposes of measuring a beneficial conversion feature, the effective conversion price should be based on the proceeds allocated to the

convertible instrument.

We determined the fair

value of the warrants to purchase common stock issued in the November 2019 Financing using a Monte Carlo simulation, which is a

statistical method used to generate a defined number of share price paths to develop a reasonable estimate of the range of future

expected share prices.

We determined the fair value of the warrants, using the black-scholes method, for the February 2020 warrants.

Estimates and assumptions impacting the fair value measurement include the number of shares for which the warrants are exercisable, remaining contractual term of the warrants, risk-free interest rate, expected

dividend yield and expected volatility of the price of the underlying common shares.

We estimate expected share volatility based on our

historical volatility for a term equal to the contractual term of the warrants adjusted for a discount that a market participant would

have taken when pricing the instrument.

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve for time

periods approximately equal to the remaining contractual term of the warrants.

We estimated a 0% expected dividend yield based on the

fact that we have never paid or declared dividends and do not intend to do so in the foreseeable future.

In general, the assumptions

used in calculating the fair value of the warrant represent management’s best estimates, but the estimates involve inherent uncertainties

and the application of management judgment.

We determine the fair value of the convertible preferred stock utilizing the price of the

common stock on the commitment date.

Estimates and assumptions impacting the fair value measurement include the number of shares for which the warrants are exercisable,

remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of

the underlying common shares.

We estimate expected share volatility based on our historical volatility for a term equal to the

contractual term of the warrants adjusted for a discount that a market participant would have taken when pricing the instrument.

risk-free interest rate is determined by reference to the U.S.

Treasury yield curve for time periods approximately equal to the

remaining contractual term of the warrants.

We estimated a 0% expected dividend yield based on the fact that we have never paid or

declared dividends and do not intend to do so in the foreseeable future.

In general, the assumptions used in calculating the fair

value of the warrant represent management’s best estimates, but the estimates involve inherent uncertainties and the

application of management judgment.

We determine the fair value of the convertible preferred stock utilizing the price of the common

stock on the commitment date.

We then allocated the relative fair value between the preferred shares and the warrants.

effective conversion price of the Preferred Stock is less than the fair value of the underlying common stock at the date of commitment,

there is a beneficial conversion feature at the commitment date.

Since the Preferred Stock has no stated maturity or redemption date

and is immediately convertible at the option of the holder, the discount created by the beneficial conversion feature was charged to

additional paid in capital as a “deemed dividend” and impacted earnings per share, reflected as an increase to loss to common

stockholders.

Sheet Arrangements

than contractual obligations incurred in the normal course of business, we do not have any off-balance sheet financing arrangements or

liabilities, guarantee contracts, retain or contingent interests in transferred assets or any obligation arising out of a material variable

interest in an unconsolidated entity.

3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

required under Regulation S-K for “smaller reporting companies.”

effective conversion price of the Preferred Stock is less than the fair value of the underlying common stock at the date of

commitment, there is a beneficial conversion feature at the commitment date.

Since the Preferred Stock has no stated maturity or

redemption date and is immediately convertible at the option of the holder, the discount created by the beneficial conversion

feature was charged to additional paid in capital as a “deemed dividend” and impacted earnings per share, reflected as

an increase to loss to common stockholders.

Off-Balance Sheet Arrangements

Other than contractual obligations

incurred in the normal course of business, we do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts,

retain or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated

ITEM 3 – QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

Not required under Regulation

S-K for “smaller reporting companies.”

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 2. Management’s Discussion and Analysis