What changed in this filing

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Item 1. Financial Statements

2022-11-07 compared with 2022-08-08 · 721 added, 614 removed, 457 unchanged (74% of the section changed)

1 unchanged sentence

PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED BALANCE SHEETS

Thousands, Except Par Value and Share Amounts)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Par Value and Share Amounts)

September 30,

Current assets:

Cash and cash equivalents

Restricted cash

Prepaid expenses and other

1 unchanged sentence

Property and equipment, net

Right-of-use assets, net

Operating lease right-to-use assets

Other non-current assets

LIABILITIES, REDEEMBABLE CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

1 unchanged sentence

Accrued expenses and other current liabilities

Lease liability, current

Lease liability, short term

Total current liabilities

Lease liability, net of current portion

Lease liability, long term

Total liabilities

Commitments (See Note 18)

Redeemable Convertible Preferred stock, $ 0.001 par value;

5,000,000 shares authorized:

Series A Convertible Redeemable Preferred stock, $ 0.001

2,500,000 and 0 shares designated as of June 30, 2022 and December 31, 2021, respectively;

and 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Series B Convertible Redeemable Preferred stock, $ 0.001 par value;

500,000 and 0 shares designated as of June 30, 2022 and December 31, 2021, respectively;

500,000 and 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

5,000,000 shares authorized

0 shares designated as of September 30, 2022 and December 31, 2021, 0 issued and outstanding as of September 30, 2022 and December 31, 2021

Common stock, $ 0.001 par value;

50,000,000 and 25,000,000 shares authorized as of June 30, 2022 and December 31, 2021, respectively;

31,692,024 and 15,638,274 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

150,000,000 and 25,000,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively;

53,321,511 and 15,638,274 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid in capital

2 unchanged sentences

Total stockholders’ equity

Total liabilities, redeemable convertible preferred stock and stockholders’ equity

Total liabilities and stockholders’ equity

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

Thousands, Except Share and Per Share Amounts)

Three Months Ended June 30,

Six Months Ended June 30,

CONDENSED CONSOLIDATED STATEMENTS

OF OPERATIONS

(In Thousands, Except Share and Per Share Amounts)

Three Months Ended

September 30,

Nine Months Ended

September 30,

COSTS AND EXPENSES:

2 unchanged sentences

Operating loss

Interest and other income, net

Interest income, net

Preferred stock deemed dividend

4 unchanged sentences

PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended June 30,

Six Months Ended June 30,

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE LOSS

(In Thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Other comprehensive loss:

4 unchanged sentences

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

MONTHS ENDED SEPTEMBER 30, 2022

Thousands, Except Share and Per Share Amounts)

8 unchanged sentences

Balance, March 31, 2022

Issuance of common stock in April, May and June 2022 under At-the-market offering, net of transactional expenses of $ 1,426

Issuance of common stock in April, May and June 2022 under At-the-market offering, net of transaction expenses of $ 1,426

Issuance of common stock under 2021 Purchase agreement

Preferred stock deemed dividend

Preferred stock dividend

Stock-based compensation

1 unchanged sentence

Balance, June 30, 2022

Issuance of common stock in July, August and September 2022 under At-the-market offering, net of transactional expenses of $ 805

Issuance of common stock under the 2021 Purchase agreement

Issuance of commitment shares under 2022 Purchase Agreement

Stock-based compensation

Foreign currency transaction gain

Balance, September 30, 2022

$ ( 438,358 )

2 unchanged sentences

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

MONTHS ENDED SEPTEMBER 30, 2021

Thousands, Except Share and Per Share Amounts)

17 unchanged sentences

Balance, June 30, 2021

Issuance of common stock in July, August and September 2021 under At-the-market offering, net of transactional expenses of $ 389

Issuance of common stock under 2021 Purchase Agreement

Employee stock purchase plan

Stock-based compensation

Foreign currency transaction gain

Balance, September 30, 2021

$ ( 330,267 )

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

6 unchanged sentences

Accounts payable

Lease liabilities and ROU asset, net

Operating lease liabilities and ROU asset, net

Accrued expenses and other current liabilities

6 unchanged sentences

Proceeds from ESPP

Proceeds, net of $ 4,255 , from sale of convertible redeemable preferred stock

Proceeds, net of $ 1,933 and $ 8,940 expenses, from sale of common stock and warrants

Proceeds, net of $ 4,255 expenses ,

from sale of convertible redeemable preferred stock

Redemption of convertible redeemable preferred stock

Proceeds, net of $ 2,738 and $ 9,329 expenses, from sale of common stock

Net cash provided by financing activities

Effect of currency rate change on cash

Net increase in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash beginning of the period

5 unchanged sentences

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2022 AND 2021 (UNAUDITED)

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

(“Tonix Sub”), is a

clinical-stage biopharmaceutical company focused on discovering, licensing, acquiring and developing therapeutics to treat and

prevent human disease and alleviate suffering.

The therapeutics include small molecules and biologics and all drug product candidates

are still in development and none are approved or marketed.

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

and its wholly owned subsidiaries,

Tonix Sub, Krele LLC, Tonix Pharmaceuticals (Canada), Inc., Tonix Medicines, Inc., Jenner LLC, Tonix R&D Center LLC, Tonix

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

All intercompany balances and transactions have been eliminated in consolidation.

accompanying financial statements have been prepared on a basis which assumes that the Company will continue as a going concern

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

The Company has suffered recurring losses from operations and negative cash flows from operating activities.

At June 30, 2022,

the Company had working capital of approximately $ 144.3 million , which excludes restricted cash of $ 31.5 million .

At June 30, 2022, the Company had an accumulated deficit of approximately

$ 409.4 million .

The Company held cash and cash equivalents of approximately $ 145.5 million as of June 30, 2022.

Company believes that its cash resources at June 30, 2022, and the gross proceeds of approximately $ 18.9 million , that it raised from equity offerings subsequent to the end of the second quarter of 2022 (See Note 19), will meet its

operating and capital expenditure requirements into the second quarter of 2023, but not beyond.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

NOTE 1 – BUSINESS

Tonix Pharmaceuticals

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

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

company focused on discovering, licensing, acquiring and developing therapeutics and vaccines to treat and prevent human disease

and alleviate suffering.

The therapeutics include both small molecules and biologics.

All drug product and vaccine candidates are

still in development and none are approved or marketed.

The condensed consolidated

financial statements include the accounts of Tonix Pharmaceuticals Holding Corp.

and its wholly owned subsidiaries, Tonix Sub,

Krele LLC, Tonix Pharmaceuticals (Canada), Inc., Tonix Medicines, Inc., Jenner LLC, Tonix R&D Center LLC, Tonix Pharma Holdings

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

intercompany balances and transactions have been eliminated in consolidation.

Going Concern

The accompanying financial

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

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

The Company has suffered

recurring losses from operations and negative cash flows from operating activities.

At September 30, 2022, the Company had working

capital of approximately $ 137.8 million .

At September 30, 2022, the Company had an accumulated deficit of approximately $ 438.4 million .

The Company held cash and cash equivalents of approximately $ 140.0 million as of September 30, 2022.

believes that its cash resources at September 30, 2022, and the gross proceeds of approximately $ 2.1 million, that it raised from equity offerings subsequent to the end of the third quarter of 2022 (See Note 19), will

allow the Company to meet its operating and capital expenditure requirements into the third quarter of 2023, but not

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

The Company continues to face

significant challenges and uncertainties and, as a result, its available capital resources may be consumed more rapidly than currently

expected due to changes it may make in its research and development spending plans.

The Company has the ability to obtain additional

funding through public and private financing and collaborative arrangements with strategic partners to increase the funds available

to fund operations.

However, the Company may not be able to raise capital on terms acceptable to the Company.

Without additional

funds, it may be forced to delay, scale back or eliminate some of its research and development activities, or other operations

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

If any of these events

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

The financial statements

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

2 – SIGNIFICANT ACCOUNTING POLICIES

The Company continues to

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

than currently expected due to changes it may make in its research and development spending plans.

The Company believes that

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

strategic partners to increase the funds available to fund operations.

However, the Company may not be able to raise capital

on terms acceptable to the Company.

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

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

sufficient funds to continue operations.

If any of these events occurs, the Company’s ability to achieve its

development and commercialization goals would be adversely affected.

The financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

NOTE 2 – SIGNIFICANT ACCOUNTING

Reverse Stock Split

16, 2022, the Company filed a Certificate of Change with the Nevada Secretary of State, effective May 17, 2022.

Pursuant to the Certificate

of Change, the Company effected a 1-for-32 reverse stock split of its issued and outstanding shares of common stock.

On May 16, 2022, the

Company filed a Certificate of Change with the Nevada Secretary of State, effective May 17, 2022.

Pursuant to the Certificate of

Change, the Company effected a 1-for-32 reverse stock split of its issued and outstanding shares of common stock.

The Company accounted

for the reverse stock split on a retrospective basis pursuant to ASC 260, Earnings Per Share.

All authorized, issued and outstanding common

stock, common stock warrants, stock option awards, exercise prices and per share data have been adjusted in these condensed consolidated

financial statements, on a retrospective basis, to reflect the reverse stock split for all periods presented.

Authorized preferred stock

was not adjusted because of the reverse stock split.

financial statements

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

principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions

to Form 10-Q and Article 8 of Regulation S-X.

Accordingly, they do not include all of the information and footnotes required by

GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals)

considered necessary for a fair presentation have been included.

condensed consolidated balance sheet as of December 31, 2021 contained herein has been derived from audited financial statements.

results for the three and six months ended June 30, 2022 are not necessarily indicative of results that may be expected for the

year ending December 31, 2022.

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

consolidated financial statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual

Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 14, 2022.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2022 AND 2021 (UNAUDITED)

and uncertainties

Company’s primary efforts are devoted to conducting research and development of innovative pharmaceutical and biological

products to address public health challenges.

The Company has experienced net losses and negative cash flows from operations since

inception and expects these conditions to continue for the foreseeable future.

Further, the Company does not have any commercial

products available for sale and has not generated revenues, and there is no assurance that if its products are approved for sale,

that the Company will be able to generate cash flow to fund operations.

In addition, there can be no assurance that the Company’s

research and development will be successfully completed or that any product will be approved or commercially viable.

the extent to which COVID-19 impacts the Company’s operations will depend on future developments, which are highly uncertain

and cannot be predicted with confidence at this time.

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

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

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

Actual results could differ from those estimates.

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

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

Cash Equivalents and Restricted Cash

Company considers cash equivalents to be those investments which are highly liquid, readily convertible to cash and have an original

maturity of three months or less when purchased.

At June 30, 2022 and December 31, 2021, cash equivalents, which consisted of

money market funds, amounted to $ 120.6 million and $ 120.4 million , respectively.

Restricted cash – short term, at June 30,

2022, was $ 31.5 million, to fund a preferred stock redemption (see Note 6).

Restricted cash – long term, which is included in Other non-current assets on the condensed consolidated balance sheet,

at both June 30, 2022, and December 31, 2021 of approximately $ 240,000 collateralizes a letter of credit issued in connection

with the lease of office space in Chatham, New Jersey and New York, New York (see Note 17).

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

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

and cash equivalents

cash – short term

cash – long term

and equipment

and equipment are stated at cost, less accumulated depreciation.

Depreciation is calculated using the straight-line method over

the asset’s estimated useful life, which is 20 years for buildings and laboratory equipment, three years for computer assets,

five years for furniture and all other equipment and term of lease for leasehold improvements.

Depreciation on assets begin when

the asset is placed in service.

Depreciation and amortization expense for the three and six months ended June 30, 2022, was $ 102,000

and $ 165,000 , respectively, and $ 7,000 and $ 13,000 , respectively, for the three and six months ended June 30, 2021.

and equipment are located in the United States.

assets with indefinite lives

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

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

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

As of June 30, 2022, the Company

believed that no impairment existed.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2022 AND 2021 (UNAUDITED)

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

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

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

condensed consolidated balance sheets.

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

term and lease liabilities represent its obligation to make lease payments arising from the lease.

Operating lease ROU assets

and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As the Company’s

leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the

transition date and subsequent lease commencement dates in determining the present value of lease payments.

This is the rate the

Company would have to pay if borrowing on a collateralized basis over a similar term to each lease.

The operating lease ROU asset

excludes lease incentives.

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably

certain that the Company will exercise that option.

Lease expense for lease payments made under operating leases is recognized

on a straight-line basis over the lease term.

Preferred Stock

shares subject to mandatory redemption are classified as liability instruments and are measured at fair value.

The Company classifies

conditionally redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within

the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s

control, as temporary equity (“mezzanine”) until such time as the conditions are removed or lapse.

and Development Costs

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

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

The value ascribed to patents and other intellectual property acquired has been expensed as research and development costs, as

such property is related to particular research and development projects and had no alternative future uses.

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

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

The financial terms of these contracts

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

over which materials or services are provided under such contracts.

The Company accounts for trial expenses according to the timing

of various aspects of the trial.

The Company determines accrual estimates taking into account discussion with applicable personnel

and outside service providers as to the progress or state of consummation of trials, or the services completed.

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

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

it at that time.

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

research organizations and other third-party vendors.

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

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

as compensation or other expense over the requisite service period.

The Company accounts for share-based awards in accordance

with the provisions of the Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation.

Currency Translation

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

its functional currency.

All authorized, issued and outstanding

common stock, common stock warrants, stock option awards, exercise prices and per share data have been adjusted in these condensed

consolidated financial statements, on a retroactive basis, to reflect the reverse stock split for all periods presented.

preferred stock was not adjusted because of the reverse stock split.

Interim financial statements

The unaudited condensed

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

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

8 of Regulation S-X.

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

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

fair presentation have been included.

The condensed consolidated

balance sheet as of December 31, 2021 contained herein has been derived from audited financial statements.

Operating results for

the three and nine months ended September 30, 2022 are not necessarily indicative of results that may be expected for the year

ending December 31, 2022.

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

financial statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form

10-K, filed with the Securities and Exchange Commission (“SEC”) on March 14, 2022.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

Risks and uncertainties

The Company’s

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

public health challenges.

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

these conditions to continue for the foreseeable future.

Further, the Company does not have any commercial products available for

sale and has not generated revenues, and there is no assurance that if its products are approved for sale, that the Company will

be able to generate cash flow to fund operations.

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

development will be successfully completed or that any product will be approved or commercially viable.

Moreover, the extent to

which COVID-19 impacts the Company’s operations will depend on future developments, which are highly uncertain and cannot

be predicted with confidence at this time.

Use of estimates

The preparation of

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

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

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

Actual results could

differ from those estimates.

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

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

Cash, Cash Equivalents and Restricted Cash

The Company considers

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

three months or less when purchased.

At September 30, 2022 and December 31, 2021, cash equivalents, which consisted of money market

funds, amounted to $ 121.2 million and $ 120.4 million , respectively.

Restricted cash, which is included in Other non-current assets

on the condensed consolidated balance sheet, at both September 30, 2022, and December 31, 2021 of approximately $ 240,000 collateralizes

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

The following table

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

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

September 30,

(in thousands)

Cash and cash equivalents

Restricted cash

Property and equipment

are stated at cost, less accumulated depreciation.

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

estimated useful life, which ranges from 20 to 30 years for buildings, 15 years for land improvements, and laboratory equipment,

three years for computer assets, five years for furniture and all other equipment and term of lease for leasehold improvements.

Depreciation on assets begin when the asset is available for its intended use.

Depreciation and amortization expense for the three and nine

months ended September 30, 2022 was $ 252,000 and $ 417,000 , respectively, and $ 10,000 and $ 23,000 , respectively, for the

three and nine months ended September 30, 2021.

All property and equipment is located in the United States.

Intangible assets with indefinite lives

During the year ended

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

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

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

As of September 30, 2022, the Company believed that no impairment

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

The Company determines

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

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

assets, operating lease liabilities, current and operating lease liabilities, noncurrent in the Company’s condensed consolidated

balance sheets.

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

represent its obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized

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

As the Company’s leases do not provide

an implicit rate, the Company uses an incremental borrowing rate based on the information available at the transition date and

subsequent lease commencement dates in determining the present value of lease payments.

This is the rate the Company would have

to pay if borrowing on a collateralized basis over a similar term to each lease.

The operating lease ROU asset excludes lease incentives.

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company

will exercise that option.

Lease expense for lease payments made under operating leases is recognized on a straight-line basis

over the lease term.

Convertible Preferred Stock

Preferred shares subject

to mandatory redemption are classified as liability instruments and are measured at fair value.

The Company classifies conditionally

redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within the control

of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as

temporary equity (“mezzanine”) until such time as the conditions are removed or lapse.

Research and Development Costs

The Company outsources

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

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

The value ascribed to

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

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

The Company estimates

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

clinical site agreements in connection with conducting clinical trials.

The financial terms of these contracts are subject to negotiations,

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

are provided under such contracts.

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

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

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

During the course of

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

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

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

and other third-party vendors.

Government Grants

From time to time, the Company may enter into arrangements with governmental

entities for the purpose of obtaining funding for research and development activities.

The Company is reimbursed for costs incurred that

are associated with specified research and development activities included in the grant application approved by the government authority.

The Company classifies government grants received under these arrangements as a reduction to the related research and development

expense in the same period as the relevant expenses are incurred.

In August 2022, the Company announced that it received a Cooperative

Agreement grant from the National Institute on Drug Abuse (“NIDA”), part of the National Institutes of Health, to support

the development of its TNX-1300 product candidate for the treatment of cocaine intoxication.

No funding was received as of September 30,

Stock-based compensation

All stock-based payments

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

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

compensation or other expense over the requisite service period.

The Company accounts for share-based awards in accordance with

the provisions of the Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

Foreign Currency Translation

Operations of the Company’s

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

dollar is the functional currency of the other foreign subsidiaries.

Balance sheet accounts

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

dollars at the exchange rate in effect at the balance

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

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

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2022 AND 2021 (UNAUDITED)

Comprehensive

Income (Loss)

Comprehensive

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

from non-owners sources.

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

distributions to owners.

Balance sheet accounts of the Canadian subsidiary

were translated from foreign currency into U.S.

dollars at the exchange rate in effect at the balance sheet date and income statement

accounts were translated at the average rate of exchange prevailing during the period.

Translation adjustments resulting from this

process were included in accumulated other comprehensive loss on the condensed consolidated balance sheets.

Comprehensive Income (Loss)

Comprehensive income

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

non-owners sources.

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

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

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

Deferred income tax

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

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

2 unchanged sentences

likely than not that these deferred income tax assets will be realized.

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

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

The tax benefits recognized

in the condensed consolidated financial statements from such a position are measured based on the largest benefit that has a greater

than 50% likelihood of being realized upon ultimate settlement.

As of June 30, 2022, the Company has not recorded any unrecognized

tax benefits.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a

component of income tax expense.

computation of basic and diluted loss per share for the quarters ended June 30, 2022 and 2021 excludes potentially dilutive securities

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

stock during the period.

All warrants and preferred stock issued participate on a one-for-one basis

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

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

Therefore, the Company calculates basic and diluted EPS using the two-class method.

Under the two-class method, net income for the period

is allocated between common stockholders and participating securities according to dividends declared and participation rights in undistributed

No income was allocated to the warrants and preferred stock for the three and six months ended June 30, 2022, and 2021, as results

of operations were a loss for the periods.

dilutive securities excluded from the computation of basic and diluted net loss per share, as of June 30, 2022 and 2021, are as

The Company recognizes

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

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

The tax benefits recognized in the condensed consolidated

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

realized upon ultimate settlement.

As of September 30, 2022, the Company has not recorded any unrecognized tax benefits.

The Company’s

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

Per Share Data

The computation of

basic and diluted loss per share for the quarters ended September 30, 2022 and 2021 excludes potentially dilutive securities when

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

during the period.

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

Board of Directors, on the Company’s common stock.

For purposes of computing EPS, these warrants are

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

Therefore, the Company calculates basic and diluted EPS

using the two-class method.

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

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

No income was allocated

to the warrants for the three and nine months ended September 30, 2022, and 2021, as results of operations

were a loss for the periods.

Potentially dilutive

securities excluded from the computation of basic and diluted net loss per share, as of September 30, 2022 and 2021, are as follows:

Warrants to purchase common stock

Series A convertible redeemable preferred stock

Series B convertible redeemable preferred stock

Options to purchase common stock

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2022 AND 2021 (UNAUDITED)

3 – PROPERTY AND EQUIPMENT, NET

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

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

NOTE 3 – PROPERTY AND EQUIPMENT,

Property and equipment,

net consisted of the following (in thousands):

(in thousands)

Land improvements

Construction in progress

3 unchanged sentences

Accumulated depreciation and amortization

October 1, 2021, the Company completed the acquisition of its approximately 45,000

square foot research and development facility

in Frederick, Maryland totaling $ 17.5

1, 2021, the Company completed the acquisition of its approximately 45,000

square foot research and development facility in Frederick, Maryland totaling $ 17.5

million , to process development activities.

the total purchase price, $ 2.1

million was allocated to the value of land acquired,

million was allocated to Construction in progress,

as the building was not ready for its intended use, and approximately $ 1.5

million was allocated to Office furniture and

equipment and Laboratory equipment, of which $ 0.6

million , as of June 30, 2022, is included in Construction in progress as those assets were not ready for their intended use.

Additionally,

as of June 30, 2022, the Company has incurred approximately $ 0.6

million in work-in-process, which is included in construction in progress.

As of June 30, 2022, the asset was operational, but

the asset was not ready for its intended use.

The Company expects the asset to be ready for its intended use by the third quarter of 2022.

September 28, 2020, the Company completed the purchase of its approximately 45,000

square foot facility in Dartmouth, Massachusetts for $ 4 .0

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

Of the total purchase

Of the total purchase price, $ 2.1

million was allocated to the value of land acquired, and $ 13.9

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

Additionally, the

Company incurred approximately $ 27.4

million of costs during the six months ended June 30, 2022, bringing total costs incurred-to-date to $ 50.2

million , of which the majority relates to the build-out of the facility, which is included in construction in progress as of

June 30, 2022.

As of June 30, 2022, the asset was operational, but the asset was not ready for its intended use.

The Company expects the asset to be ready for its intended use by the third quarter of 2022.

December 23, 2020, the Company completed the purchase of its approximately 44 -acre site in Hamilton, Montana for $ 4.5 million ,

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

As of June 30, 2022, the asset was

not ready for its intended use.

million has been allocated to buildings, and approximately $ 1.5

million was allocated to Office furniture and equipment and Laboratory equipment.

During the quarter ended September 30, 2022, the assets became ready for the intended use and were placed in service.

On September 28, 2020,

the Company completed the purchase of its approximately 45,000 square foot facility in Dartmouth, Massachusetts for $ 4 .0 million,

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

Of the total purchase price, $ 1.2

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

Additionally, the Company incurred

approximately $ 32.6 million of costs during the nine months ended September 30, 2022, bringing total costs incurred-to-date to

$ 55.4 million , of which the majority relates to the build-out of the facility.

Subsequent to the quarter ended September 30, 2022, the

assets were ready for the intended use and were placed in service.

On December 23, 2020,

the Company completed the purchase of its approximately 44 -acre site in Hamilton, Montana for $ 4.5 million , for the construction

of a vaccine development and commercial scale manufacturing facility.

As of September 30, 2022, the asset was not ready for its

intended use.

NOTE 4 – FAIR VALUE MEASUREMENTS

Fair value measurements

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

Fair value is defined as the price

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

at the measurement date and is measured according to a hierarchy that includes:

inputs, such as quoted prices in active markets.

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

Level 2 assets and liabilities

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

This category

includes U.S.

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

Fair value is defined as the price that would be received

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

and is measured according to a hierarchy that includes:

Observable inputs, such as quoted prices in active markets.

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

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

This category includes U.S.

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

inputs in which there is little or no market data.

of June 30, 2022, and December 31, 2021, the Company used Level 1 quoted prices in active markets to value cash equivalents of

$ 120.6 million and $ 120.4 million , respectively.

The Company did not have any Level 2 or Level 3 assets or liabilities as of both

June 30, 2022 and December 31, 2021.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2022 AND 2021 (UNAUDITED)

5 – STOCKHOLDERS’ EQUITY

May 16, 2022, the Company filed a Certificate of Change with the Nevada Secretary of State, effective May 17, 2022.

Pursuant to the Certificate

of Change, the Company effected a 1-for-32 reverse stock split of its issued and outstanding

shares of common stock, whereby 599,679,596

outstanding shares of the Company’s common

stock were exchanged for 18,740,141

shares of the Company’s common stock.

connection with the reverse stock split, the Company issued an additional 130,462

shares of the Company’s common stock due

to fractional shares.

Furthermore, pursuant to the Certificate of Change, the number of authorized shares of common stock was reduced from 800 million to 50

All per share amounts and number of shares in the condensed consolidated financial statements and related notes have been

retroactively restated to reflect the reverse stock split.

As a result of the reverse-stock-split, on June 1, 2022, the Company’s

stock regained compliance with the minimum bid price requirement of $ 1.00 per share for continued listing on the NASDAQ Capital Market,

as set forth in NASDAQ Listing Rule 5550(a)(2).

On August 5, 2022, the Company filed an amendment to its articles of incorporation,

as amended, to increase the number of shares of common stock authorized from 50,000,000

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

As of September 30,

2022, and December 31, 2021, the Company used Level 1 quoted prices in active markets to value cash equivalents of $ 121.2 million

and $ 120.4 million , respectively.

The Company did not have any Level 2 or Level 3 assets or liabilities as of both September 30,

2022 and December 31, 2021.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

NOTE 5 – STOCKHOLDERS’ EQUITY

On May 16, 2022, the

Company filed a Certificate of Change with the Nevada Secretary of State, effective May 17, 2022.

Pursuant to the Certificate of

Change, the Company effected a 1-for-32 reverse stock split of its issued and outstanding shares of common stock, whereby 599,679,596

outstanding shares of the Company’s common stock were exchanged for 18,740,141 shares of the Company’s common stock.

In connection with the reverse stock split, the Company issued an additional 130,462 shares of the Company’s common stock

due to fractional shares.

Furthermore, pursuant to the Certificate of Change, the number of authorized shares of common stock was

reduced from 800 million to 50 million .

All per share amounts and number of shares in the condensed consolidated financial statements

and related notes have been retroactively restated to reflect the reverse stock split.

As a result of the reverse-stock-split, on June 1, 2022, the Company’s stock regained compliance

with the minimum bid price requirement of $ 1.00 per share for continued listing on the NASDAQ Capital Market, as set forth in NASDAQ

Listing Rule 5550(a)(2).

On August 5, 2022, the Company filed an

amendment to its articles of incorporation, as amended, to increase the number of shares of common stock authorized from 50,000,000

to 150,000,000 .

6 – TEMPORARY EQUITY

June 24, 2022, the Company closed on an offering (“the Offering”) with certain institutional investors (the “Investors”),

pursuant to which the Company issued and sold, in a private placement, 2,500,000

shares of the Company’s Series A Convertible

Redeemable Preferred Stock, par value $ 0.001

per share (the “Series A Preferred Stock”),

shares of the Company’s Series B Convertible

Redeemable Preferred Stock, par value $ 0.001

per share (the “Series B Preferred Stock,”

and together with the Series A Preferred Stock, the “Preferred Stock”), at an offering price of $ 9.50

per share, representing a 5 %

original issue discount (“OID) to the stated

value of $ 10.00

per share, for gross proceeds of $ 28.5

million in the aggregate for the Offering, before the deduction of fees and offering expenses.

The shares of Preferred Stock

are convertible, at a conversion price of $ 4.00

per share (subject in certain circumstances to

adjustments), into shares of the Company’s common stock, at the option of the holders and, in certain circumstances, by the Company.

On August 5, 2022, an amendment (the “Amendment”) to the

Company’s Articles of Incorporation, as amended, to increase the Company’s authorized shares of common stock from 50,000,000

to 150,000,000 , was approved at a special meeting of shareholders.

The Series A Preferred Stock had the right to vote on such Amendment on an as-converted to common stock basis.

The shares of the

Series B Preferred Stock were automatically voted in a manner that “mirrored” the proportions on which the shares of

Common Stock (excluding any shares of Common Stock that were not voted) and Series A Preferred Stock were voted to increase the

Authorized Shares.

The Amendment required the approval of the majority of the votes associated with the Company’s outstanding stock entitled to vote on the proposal.

Because the Series B Preferred Stock

were automatically and without further action of the purchaser voted in a manner that “mirrored” the proportions on

which the shares of Common Stock (excluding any shares of Common Stock that were not voted) and Series A Preferred

Stock were voted on the Amendment, abstentions by common stockholders did not have any effect on the votes cast

by the holders of the Series B Preferred Stock.

The Certificates of Designation for the Preferred Stock provides that the Preferred

Stock have no voting rights other than the right to vote on the Amendment and as a class on certain other specified matter s,

and, with respect to the Series B Certificate of Designation, the

right to cast 2,500 votes per share of Series B Preferred Stock on the Amendment .

holders of Preferred Stock are entitled to dividends, on an as-if converted basis, equal to dividends actually paid, if any, on

shares of Common Stock.

The Preferred Stock is convertible, at the option of the holders and, in certain circumstances, by the

Company, into shares of Common Stock at a conversion price of $ 4.00

The conversion price can be adjusted pursuant to the Certificates of Designation for stock dividends and stock splits,

subsequent rights offering, pro rata distributions of dividends or the occurrence of a fundamental transaction (as defined in the

applicable Certificate of Designation).

The holders of the Preferred Stock have the right to require the Company to redeem their

shares of preferred stock for cash at 105 %

of the stated value of such shares through September 22, 2022.

The Company has the option to redeem the

Preferred Stock for cash at 105 %

of the stated value, subject to the holders’ rights to convert the shares prior to such redemption.

million in gross proceeds of the Offering are held in an escrow account, along with an additional $ 3 .0

million deposited by the Company to cover the aggregate OID as well as the additional amount that would be necessary to fund the 105 %

redemption price until the expiration of the

redemption period for the Preferred Stock, as applicable, subject to the earlier payment to redeeming holders.

Upon expiration of the

redemption period, any proceeds remaining in the escrow account will be disbursed to the Company.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2022 AND 2021 (UNAUDITED)

connection with the Offering, the Company and the Investors entered into a Registration Rights Agreement (the “Registration

Rights Agreement”), pursuant to which the Company is required to file a registration statement with the Securities and

Exchange Commission to register for resale the shares that are issued upon the potential conversion of shares of Preferred Stock.

The registration statement will be filed with the Securities and Exchange Commission on or before the later of 10 calendar days

following the date of the shareholder meeting held on August 5, 2022, to seek approval of the Amendment and the 70 th calendar

day following the date of the Registration Rights Agreement.

the Preferred stock has a redemption feature at the option of the holder, it is classified as temporary equity.

As of June 30,

2022, the Series A Preferred stock and Series B Preferred Stock has been recorded on the balance sheet at redemption value of approximately $ 26.3

million and $ 5.2 million , respectively.

June 30, 2022, Series A and Series B preferred shares reflected on the balance sheet is reconciled on the following table (in thousands):

Series A Preferred Stock

Series B Preferred Stock

NOTE 6 – TEMPORARY EQUITY

On June 24, 2022, the

Company closed on an offering (“the Offering”) with certain institutional investors (the “Investors”),

pursuant to which the Company issued and sold, in a private placement, 2,500,000 shares of the Company’s Series A Convertible

Redeemable Preferred Stock, par value $ 0.001 per share (the “Series A Preferred Stock”), and 500,000 shares of the

Company’s Series B Convertible Redeemable Preferred Stock, par value $ 0.001 per share (the “Series B Preferred Stock,”

and together with the Series A Preferred Stock, the “Preferred Stock”), at an offering price of $ 9.50 per share, representing

a 5 % original issue discount (“OID) to the stated value of $ 10.00 per share, for gross proceeds of $ 28.5 million in the aggregate

for the Offering, before the deduction of fees and offering expenses.

The shares of Preferred Stock were convertible, at a conversion

price of $ 4.00 per share (subject in certain circumstances to adjustments), into shares of the Company’s common stock, at

the option of the holders and, in certain circumstances, by the Company.

On August 5, 2022,

an amendment (the “Amendment”) to the Company’s Articles of Incorporation, as amended, to increase the Company’s

authorized shares of common stock from 50,000,000 to 150,000,000 , was approved at a special meeting of shareholders.

A Preferred Stock had the right to vote on such Amendment on an as-converted to common stock basis.

The shares of the Series B

Preferred Stock were automatically voted in a manner that “mirrored” the proportions on which the shares of Common

Stock (excluding any shares of Common Stock that were not voted) and Series A Preferred Stock were voted to increase the Authorized

The Amendment required the approval of the majority of the votes associated with the Company’s outstanding stock

entitled to vote on the proposal.

Because the Series B Preferred Stock were automatically and without further action of the purchaser

voted in a manner that “mirrored” the proportions on which the shares of Common Stock (excluding any shares of Common

Stock that were not voted) and Series A Preferred Stock were voted on the Amendment, abstentions by common stockholders did not

have any effect on the votes cast by the holders of the Series B Preferred Stock.

The Certificates of Designation for the Preferred

Stock provides that the Preferred Stock have no voting rights other than the right to vote on the Amendment and as a class on certain

other specified matters , and, with respect to the Series B Certificate of Designation, the right to cast 2,500 votes per share

of Series B Preferred Stock on the Amendment .

The holders of Preferred

Stock were entitled to dividends, on an as-if converted basis, equal to dividends actually paid, if any, on shares of Common Stock.

The Preferred Stock was convertible, at the option of the holders and, in certain circumstances, by the Company, into shares of

Common Stock at a conversion price of $ 4.00 per share.

The holders of the Preferred Stock had the right to require

the Company to redeem their shares of preferred stock for cash at 105 % of the stated value of such shares through September 22,

The Company had the option to redeem the Preferred Stock for cash at 105 % of the stated value, subject to the holders’

rights to convert the shares prior to such redemption.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

The $ 28.5 million in

gross proceeds of the Offering was held in an escrow account, along with an additional $ 3 .0 million deposited by the Company to

cover the aggregate OID as well as the additional amount that would be necessary to fund the 105 % redemption price until the expiration

of the redemption period for the Preferred Stock, as applicable, subject to the earlier payment to redeeming holders.

Upon expiration

of the redemption period, any proceeds remaining in the escrow account would be disbursed to the Company.

the Preferred Stock had a redemption feature at the option of the holder, it was classified as temporary equity.

The Series A Preferred Stock and Series B Preferred Stock was recorded on the balance sheet at redemption value of approximately

$ 26.3 million and $ 5.2 million , respectively, as calculated in the following table (in thousands):

Preferred Stock

Gross Proceeds

2 unchanged sentences

Preferred stock subject to possible redemption

7 – ASSET PURCHASE AGREEMENT WITH KATANA

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

Katana Pharmaceuticals, Inc.

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

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

In connection with the acquisition of the Katana Assets,

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

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

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

As consideration

for entering into the Katana Asset Purchase Agreement, Tonix paid $ 0.7 million to Katana.

The costs associated with the cash payments

were recorded to research and development expenses in the statement of operations for the year ended December 31, 2020.

the Katana intellectual property was acquired prior to U.S.

Food and Drug Administration (FDA) approval, the cash consideration

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

intellectual property does not constitute a business.

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

to sublicense, certain patents related to the Katana Assets.

Tonix is obligated to use commercially reasonable efforts to diligently

develop, manufacture, and sell products claimed or covered by the patent and will use commercially reasonable efforts to diligently

develop markets for such products.

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 June 30, 2022, no milestone payments have been accrued or paid in relation to this agreement.

8 – ASSET PURCHASE AGREEMENT WITH TRIGEMINA

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

Trigemina, Inc.

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

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

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

certain Amended and Restated Exclusive License Agreement, dated November 30, 2007, as amended, by and between Trigemina and The

Board of Trustees of the Leland Stanford Junior University (“Stanford”) (the “Stanford License “Agreement”)

pursuant to an Assignment and Assumption Agreement with Stanford (“Assignment and Assumption Agreement”), dated June

As consideration for entering into the Asset Purchase Agreement, Tonix paid $ 824,759 to Trigemina and issued to Trigemina

62,500 shares of the Company’s common stock, valued at $ 21.76 per share, based on the closing stock price on June 11,

2020, and paid Stanford $ 250,241 pursuant to the terms of the Assignment and Assumption Agreement.

The common stock is unregistered

and subject to a 12-month lock-up and a Shareholder Voting Agreement, dated June 11, 2020, pursuant to which Trigemina and the

Executive Shareholders have agreed to vote the common stock on any matter put to a vote of the shareholders of the Company in

accordance with management’s recommendations.

Both the costs associated with the cash payments and share issuance, totaling

$ 2.4 million , were recorded to research and development expenses in the statement of operations for the year ended December 31,

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

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2022 AND 2021 (UNAUDITED)

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

sublicense, certain patents related to the Trigemina Assets.

Stanford has reserved for itself the right to practice under the

patents for academic research and educational purposes.

Tonix is obligated to use commercially reasonable efforts to diligently

develop, manufacture, and sell products claimed or covered by the patent and will use commercially reasonable efforts to diligently

develop markets for such products.

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

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

of June 30, 2022, other than the annual maintenance fee, no milestone payments have been accrued or paid in relation to this

9 – ASSET PURCHASE AGREEMENT WITH TRIMARAN

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

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

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

In connection

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

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

As consideration for entering into

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

The $ 168,500 was previously recorded to research and development expenses in the statement of operations.

Upon the achievement

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

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

Pursuant to the terms of the Asset Purchase

Agreement, TRImaran and the Selling Shareholders are prohibited from disclosing confidential information related to the Assets

and are restricted from engaging, for a period of three years, in the development or commercialization of any therapeutic containing

any pyran-based drug compound for the treatment of post-traumatic stress disorder, attention deficit hyperactivity disorder or

major depressive disorder.

Also for a period of three years, if TRImaran or any Selling Shareholder engage in the research or

development of any potential therapeutic compound for the treatment of any central nervous system disorder, TRImaran or such Selling

Shareholder is obliged to provide notice and opportunity to Tonix to make an offer to acquire or license rights with respect to

such product candidate.

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

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

WSU has reserved

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

Tonix is obligated to use commercially

reasonable efforts to obtain regulatory approval for one or more products utilizing the Technology (“WSU Products”)

and to use commercially reasonable marketing efforts throughout the term of the WSU License Agreement.

The WSU License Agreement

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

maintenance fee payable to WSU.

Tonix is obligated to substantially manufacture WSU Products in the United States if WSU Products

will be sold in the United States.

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

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

$ 3.4 million .

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

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

During August

2022, the Company received redemption notices for all outstanding shares of Preferred Stock.

The Preferred Stock was redeemed during August 2022 at 105 %

of the $ 10.00

stated value of the Preferred Stock, or $ 31.5

million in the aggregate.

NOTE 7 – ASSET PURCHASE AGREEMENT WITH KATANA

On December 22, 2020,

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

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

including obesity (the “Katana Assets”).

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

rights and obligations under that certain Exclusive License Agreement by and between Katana and The University of Geneva (“Geneva”)

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

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

As consideration for entering into the Katana Asset Purchase

Agreement, Tonix paid $ 0.7 million to Katana.

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

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

Because the Katana intellectual property was acquired

prior to U.S.

Food and Drug Administration (FDA) approval, the cash consideration totaling $ 0.7 million , was expensed as research

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

Pursuant to the terms

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

certain patents related to the Katana Assets.

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

manufacture, and sell products claimed or covered by the patent and will use commercially reasonable efforts to diligently develop

markets for such products.

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.

As of September 30,

2022, no milestone payments have been accrued or paid in relation to this agreement.

NOTE 8 – ASSET PURCHASE AGREEMENT WITH TRIGEMINA

On June 11, 2020, the

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

(“Trigemina”)

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

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

In connection with the acquisition of

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

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

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

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

As consideration for

entering into the Asset Purchase Agreement, Tonix paid $ 824,759 to Trigemina and issued to Trigemina 62,500 shares of the Company’s

common stock, valued at $ 21.76 per share, based on the closing stock price on June 11, 2020, and paid Stanford $ 250,241 pursuant

to the terms of the Assignment and Assumption Agreement.

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

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

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

Both the costs associated with the cash payments and share issuance, totaling $ 2.4 million , were recorded to research and development

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

Because the Trigemina intellectual property was acquired

prior to FDA approval, the cash and stock consideration, was expensed as research and development costs since there is no alternative

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

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

Pursuant to the terms

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

patents related to the Trigemina Assets.

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

research and educational purposes.

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

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

such products.

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

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

As of September 30,

2022, other than the annual maintenance fee, no milestone payments have been accrued or paid in relation to this agreement.

NOTE 9 – ASSET PURCHASE AGREEMENT WITH TRIMARAN

On August 19, 2019,

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

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

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

In connection with the acquisition of the Assets, Tonix

entered into a First Amended and Restated Exclusive License Agreement (the “WSU License Agreement”) with Wayne State

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

As consideration for entering into the Asset Purchase Agreement, Tonix paid

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

The $ 168,500 was previously recorded to

research and development expenses in the statement of operations.

Upon the achievement of specified development, regulatory and

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

option, a total of approximately $ 3.4 million .

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

Shareholders are prohibited from disclosing confidential information related to the Assets and are restricted from engaging, for

a period of three years, in the development or commercialization of any therapeutic containing any pyran-based drug compound for

the treatment of post-traumatic stress disorder, attention deficit hyperactivity disorder or major depressive disorder.

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.

Pursuant to the terms

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

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

WSU has reserved for itself the right

to practice the Technology for academic research and educational purposes.

Tonix is obligated to use commercially reasonable efforts

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

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

The WSU License Agreement specifies developmental

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

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

Pursuant to the WSU

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

development, regulatory and sales milestones, the Company also agreed to pay WSU, milestone payments totaling approximately $ 3.4

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

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

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

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confidentiality and other customary matters for an agreement of this kind.

As of June 30, 2022, no milestone payments have been

accrued or paid in relation to this agreement.

As of September 30, 2022, no milestone payments have

been accrued or paid in relation to this agreement.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2022 AND 2021 (UNAUDITED)

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

NOTE 10 – LICENSE AGREEMENT WITH UNIVERSITY OF ALBERTA

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royalties and contingent milestone payments.

As of June 30, 2022,

As of September 30,

2022, other than the upfront fee, no milestone payments have been accrued or paid in relation to this agreement.

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contingent milestone payments.

As of June 30, 2022,

As of September 30,

2022, no milestone payments have been accrued or paid in relation to this agreement.

In July 2022, the Company

notified OyaGen of its intent to terminate the License Agreement, with an effective date of September 20, 2022.

In July 2022, the

Company notified OyaGen of its intent to terminate the OyaGen License Agreement, and the agreement was terminated effective

September 20, 2022.

NOTE 12 – LICENSE AGREEMENT WITH INSERM

6 unchanged sentences

technology, and assignment/transfer and sublicense royalties.

As of June 30, 2022,

As of September 30,

2022, no milestone payments have been accrued or paid in relation to this agreement

13 unchanged sentences

specified developmental milestones.

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

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

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

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

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

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

country in question.

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

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

Royalties payable

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

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

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

The Company is obligated to pay Columbia

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

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

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

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

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

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

a TFF2 Product in the country in question.

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

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

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

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

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

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2022 AND 2021 (UNAUDITED)

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

The Company is also

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

As of June 30, 2022,

As of September 30,

2022, no milestone payments have been accrued or paid in relation to this agreement.

7 unchanged sentences

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

The Company paid a six-digit

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

The Company is obligated to use Commercially Reasonable

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

The Company paid a

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

The Company is obligated to use Commercially

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

The Company agreed

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

As of June 30, 2022,

As of September 30,

2022, no milestone payments have been accrued or paid in relation to this agreement.

NOTE 14 – SALE OF COMMON STOCK

2022 Lincoln Park Transaction

On August 16, 2022,

the Company entered into a purchase agreement (the “2022 Purchase Agreement”) and a registration rights agreement (the

“2022 Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”).

the terms of the 2022 Purchase Agreement, Lincoln Park has agreed to purchase from the Company up to $ 50,000,000 of the Company’s

common stock (subject to certain limitations) from time to time during the term of the 2022 Purchase Agreement.

Pursuant to the

terms of the 2022 Registration Rights Agreement, the Company filed with the SEC a registration statement to register for resale

under the Securities Act the shares that have been or may be issued to Lincoln Park under the 2022 Purchase Agreement.

Pursuant to the terms

of the 2022 Purchase Agreement, at the time the Company signed the 2022 Purchase Agreement and the 2022 Registration Rights Agreement,

the Company issued 625,000 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of the

Company’s common stock under the 2022 Purchase Agreement.

The commitment shares were valued at $ 1,000,000 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 2022 Purchase Agreement.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

During the nine months

ended September 30, 2022, no shares of common stock were sold under the 2022 Purchase Agreement.

Subsequent to September 30, 2022,

the Company sold 1 .0 million shares of common stock under the 2022 Purchase Agreement, for net proceeds of approximately $ 0.5 million .

Purchase Agreement with Lincoln Park

8 unchanged sentences

Purchase Agreement with Lincoln Park.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2022 AND 2021 (UNAUDITED)

Pursuant to the terms

5 unchanged sentences

of capital to be raised under the Purchase Agreement with Lincoln Park.

During the six months

ended June 30, 2022, the Company sold 1.1 million shares of common stock under the Purchase Agreement with Lincoln Park, for

During the nine months

ended September 30, 2022, the Company sold 2.9 million shares of common stock under the Purchase Agreement with Lincoln Park, for

net proceeds of approximately $ 8.7 million .

Subsequent to June 30, 2022, the Company sol d

1.8 million shares of common stock under the Purchase Agreement with Lincoln Park,

for net proceeds of approximately $ 2.2 million .

Under applicable rules

of the NASDAQ Global Market, the Company could not issue or sell more than 19.99 % of the shares of its common stock outstanding

immediately prior to the execution of the Purchase Agreement with Lincoln Park (approximately 2.9 million shares) to Lincoln Park

under the Purchase Agreement with Lincoln Park without stockholder approval, unless the average price of all applicable sales of

its common stock to Lincoln Park under the Purchase Agreement with Lincoln Park equals or exceeds a threshold amount.

As the Company

has issued approximately 2.9 million shares to Lincoln Park, by September 30, 2022, under the Purchase Agreement with Lincoln Park

at less than the threshold amount, the Company will not sell any additional shares under the Purchase Agreement with Lincoln Park

without shareholder approval.

2021 Lincoln Park Transaction

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

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

Pursuant to the terms of the 2021 Purchase Agreement, Lincoln Park agreed to purchase from the Company up to $ 80,000,000 of

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

Pursuant to the terms of the 2021 Registration Rights Agreement, the Company filed with the SEC a registration statement to register

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

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

Rights Agreement, the Company issued 40,000 shares of common stock to Lincoln Park

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

The commitment shares

were valued at $ 1.6 million and recorded as an addition to equity for the issuance of the common stock and treated as a reduction

to equity as a cost of capital to be raised under the 2021 Purchase Agreement.

the six months ended June 30, 2021, the Company sold an aggregate of approximately 86,000 shares of common stock under the 2021

Purchase Agreement, for gross proceeds of approximately $ 3.3 million .

On May 14, 2021, the

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

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

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

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

Pursuant to the

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

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

Pursuant to the terms

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

the Company issued 40,000 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.

During the nine months

ended September 30, 2021, the Company sold an aggregate of approximately 1.3 million shares of common stock under the 2021 Purchase

Agreement, for gross proceeds of approximately $ 29.5 million .

Under applicable rules

of the NASDAQ Global Market, the Company could not issue or sell more than 19.99 % of the shares of its common stock outstanding

immediately prior to the execution of the 2021 Purchase Agreement (approximately 2 .0 million shares) to Lincoln Park under the

2021 Purchase Agreement without stockholder approval, unless the average price of all applicable sales of its common stock to Lincoln

Park under the 20121 Purchase Agreement equals or exceeds a threshold amount.

As the Company has issued approximately 2 .0 million

shares to Lincoln Park under the 2021 Purchase Agreement, at less than the threshold amount, the Company will not sell any additional

shares under the 2021 Purchase Agreement without shareholder approval.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

February 2021 Financing

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deducting the fees and other offering expenses.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2022 AND 2021 (UNAUDITED)

At-the-Market Offerings

7 unchanged sentences

as a result, prices will vary.

During the six months ended June 30, 2022, the Company sold approximately 15 .0 million shares of

common stock under the Sales Agreement, for net proceeds of approximately $ 51.5 million .

During the six months ended June 30, 2021,

During the nine months ended September 30, 2022, the Company sold approximately 34.2 million shares

of common stock under the Sales Agreement, for net proceeds of approximately $ 76.2 million .

During the nine months ended September

30, 2021, the Company sold approximately 1.3 million shares of common stock under the Sales Agreement, for net proceeds of approximately

$ 37.2 million .

Subsequent to June 30, 2022, the Company has sold 9.6 million shares of common stock under the Sales Agreement,

Subsequent to September 30, 2022, the Company has sold 3.2 million shares of common stock under the Sales Agreement,

for net proceeds of approximately $ 1.6 million .

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

NOTE 15 – STOCK-BASED COMPENSATION

39 unchanged sentences

the Amended and Restated 2020 Plan may not be more than ten years .

As of June 30, 2022, 606,227 shares were available for future

grants under the Amended and Restated 2020 Plan.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2022 AND 2021 (UNAUDITED)

As of September 30, 2022, 625,496 shares were available for

future grants under the Amended and Restated 2020 Plan.

A summary of the stock option activity and

related information for the Plans for the six months ended June 30, 2022 is as follows:

related information for the Plans for the nine months ended September 30, 2022 is as follows:

Weighted-Average

4 unchanged sentences

Forfeitures or expirations

Outstanding at June 30, 2022

Exercisable at June 30, 2022

Outstanding at September 30, 2022

Exercisable at September 30, 2022

The aggregate intrinsic

1 unchanged sentence

Company’s closing stock price at the respective dates.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

The weighted average

fair value of options granted during the three and six months ended June 2022 was $ 3.78 per share and $ 5.25 per share, respectively.

The weighted average fair value of options granted during the three and six months ended June 2021 was $ 30.62 per share and $ 34.45

fair value of options granted during the three and nine months ended September 2022 was $ 0 per share and $ 5.25 per share, respectively.

The weighted average fair value of options granted during the three and nine months ended September 2021 was $ 21.46 per share and

$ 33.78 per share, respectively.

14 unchanged sentences

The assumptions used

in the valuation of stock options granted during the six months ended June 30, 2022 and 2021 were as follows:

Six Months Ended

June 30, 2022

Six Months Ended

June 30, 2021

in the valuation of stock options granted during the nine months ended September 30, 2022 and 2021 were as follows:

Nine Months Ended

September 30, 2022

Nine Months Ended

September 30, 2021

Risk-free interest rate

16 unchanged sentences

expense relating to options granted of $ 2.7 million , of which $ 2 .0 million and $ 0.7 million , related to General and Administration

and Research and Development, respectively was recognized for the quarter ended June 30, 2022.

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.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022 AND 2021 (UNAUDITED)

and Research and Development, respectively was recognized for the quarter ended September 30, 2022.

Stock-based compensation

expense relating to options granted of $ 2.3 million , of which $ 1.6 million and $ 0.7 million , related to General and Administration

and Research and Development, respectively was recognized for the six-month period ended June 30, 2022.

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

Stock-based compensation

expense relating to options granted of $ 8.1 million , of which $ 5.9 million and $ 2.2 million , related to General and Administration

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

As of June 30, 2022,

the Company had approximately $ 17.3 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 2.09 years.

and Research and Development, respectively was recognized for the nine-month period ended September 30, 2022.

Stock-based compensation

expense relating to options granted of $ 5.6 million , of which $ 3.9 million and $ 1.7 million , related to General and Administration

and Research and Development, respectively was recognized for the nine-month period ended September 30, 2021.

As of September 30,

2022, the Company had approximately $ 14.3 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 1.9 years.

Employee Stock Purchase Plans

26 unchanged sentences

stock under the 2022 ESPP, subject to the statutory limit under the Code.

As of June 30, 2022, 1 share was available for future

As of September 30, 2022, 1 share was available for future

sales under the 2020 ESPP and 93,750 shares were available for future sales under the 2022 ESPP.

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

the six months ended June 30, 2022 and 2021, $ 0 and $ 47,000 , respectively were expensed.

In January 2021, 1,703 shares that were

purchased as of December 31, 2020, under the 2020 ESPP, were issued.

the three months ended September 30, 2022 and 2021, $ 46,000 and $ 42,000 , respectively, was expensed.

For the nine months ended

September 30, 2022 and 2021, $ 46,000 and $ 89,000 , respectively were expensed.

In January 2021, 1,703 shares that were purchased

as of December 31, 2020, under the 2020 ESPP, were issued.

Accordingly, during the first quarter of 2021, approximately $ 28,000

$ 28,000 of employee payroll deductions accumulated at December 31, 2020, related to acquiring such shares, was transferred from

accrued expenses to additional paid in capital.

of employee payroll deductions accumulated at December 31, 2020, related to acquiring such shares, was transferred from accrued

expenses to additional paid in capital.

The remaining $ 4,000 was returned to the employees.

In January 2022, 4,033 shares

that were purchased as of December 31, 2021, under the 2020 ESPP, were issued.

In January 2022, 4,033 shares that

were purchased as of December 31, 2021, under the 2020 ESPP, were issued.

Accordingly, during the first quarter of 2022, approximately

2 unchanged sentences

The remaining $ 30,000 was returned to the employees.

As of September 30, 2022,

approximately $40,000 of employee payroll deductions have accumulated and have been recorded in accrued expenses.

TONIX PHARMACEUTICALS HOLDING

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

NOTE 16 – STOCK WARRANTS

The following table

summarizes information with respect to outstanding warrants to purchase common stock of the Company at June 30, 2022:

summarizes information with respect to outstanding warrants to purchase common stock of the Company at September 30, 2022:

November 2024

1 unchanged sentence

December 2023

No warrants were

exercised during the six months ended June 30, 2022.

During the six months

June 30, 2021, 107 warrants from the February 2020 Financing, with an exercise price of $ 18.24 , were exercised for proceeds of

approximately $ 2,000 .

TONIX PHARMACEUTICALS HOLDING

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022 AND 2021 (UNAUDITED)

No warrants were exercised

during the nine months ended September 30, 2022.

During the nine months

September 30, 2021, 107 warrants from the February 2020 Financing, with an exercise price of $ 18.24 , were exercised for proceeds

of approximately $ 2,000 .

NOTE 17 – LEASES

5 unchanged sentences

on the Company’s ability to engage in financing transactions or enter into further lease agreements.

At June 30, 2022, the

Company has right-of-use assets of $ 0.9 million and a total lease liability for operating leases of $ 1.0 million of which $ 0.5

At September 30, 2022,

the Company has right-of-use assets of $ 0.8 million and a total lease liability for operating leases of $ 0.9 million of which $ 0.4

million is included in long-term lease liabilities and $ 0.5 million is included in current lease liabilities.

At June 30, 2022, future

minimum lease payments for operating leases with non-cancelable terms of more than one year were as follows (in thousands):

At September 30, 2022,

future minimum lease payments for operating leases with non-cancelable terms of more than one year were as follows (in thousands):

Year Ending December 31,

1 unchanged sentence

Included interest

During the six months

ended June 30, 2022, the Company entered into new operating leases and lease amendments, resulting in the Company recognizing an

additional operating lease liability of approximately $ 334,000 based on the present value of the minimum rental payments.

also recognized a corresponding increase to ROU assets of approximately $ 334,000 , which represents a non-cash investing and financing activity.

During the six months

ended June 30, 2021, the Company entered into lease amendments, resulting in the Company recognizing an operating lease liability

During the nine months

ended September 30, 2022, the Company entered into new operating leases and lease amendments, resulting in the Company recognizing

an additional operating lease liability of approximately $ 386,000 based on the present value of the minimum rental payments.

Company also recognized a corresponding increase to ROU assets of approximately $ 386,000 , which represents a non-cash investing

and financing activity.

During the nine months

ended September 30, 2021, the Company entered into lease amendments, resulting in the Company recognizing an operating lease liability

of approximately $ 467,000 based on the present value of the future minimum rental payments.

1 unchanged sentence

ROU assets of approximately $ 467,000 , which represents a non-cash investing and financing activity.

Other information related to leases is as follows:

Operating lease expense

was $ 0.1 million for both quarters ended June 30, 2022, and 2021.

was $ 0.1 million and $ 0.2 million for the three months ended September 30, 2022 and 2021, respectively.

Operating lease expense

million for both six-months ended June 30, 2022, and 2021.

was $ 0.4 and $ 0.5 million for the nine-months ended September 30, 2022 and 2021, respectively.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)

Other information related to leases is as follows:

Cash paid for amounts included in the measurement of lease liabilities:

Six Months Ended

June 30, 2022

Six Months Ended

June 30, 2021

September 30, 2022

September 30, 2021

Operating cash flow from operating leases (in thousands)

7 unchanged sentences

into contracts with various contract research organizations with outstanding commitments aggregating approximately $ 61.4 million

at June 30, 2022 for future work to be performed.

at September 30, 2022 for future work to be performed.

The Company entered

into a construction contract with outstanding commitments aggregating approximately $ 8.4 million at June 30, 2022 for future work

to be performed.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022 AND 2021 (UNAUDITED)

into a construction contract with outstanding commitments aggregating approximately $ 3.3 million at September 30, 2022 for future

work to be performed.

Defined contribution plan

7 unchanged sentences

equal to three percent of each participant’s salary, on an annual basis, subject to limitations under the Code.

charged operations $ 115,000 and $ 306,000 for the three and six months ended June 30, 2022, respectively, and $ 41,000 and $ 111,000

for the three and six months ended June 30, 2021, respectively, for contributions under the 401(k) Plan.

charged operations $ 122,000 and $ 428,000 for the three and nine months ended September 30, 2022, respectively, and $ 38,000 and

$ 149,000 for the three and nine months ended September 30, 2021, respectively, for contributions under the 401(k) Plan.

NOTE 19 – SUBSEQUENT EVENTS

Subsequent to June

30, 2022, the Company has sold 9.6 million shares of common stock under the ATM Sales Agreement, for net proceeds of approximately

Subsequent to September

30, 2022, the Company sold 3.2 million shares of common stock under the ATM Sales Agreement, for net proceeds of approximately

$ 1.6 million .

Subsequent to June

30, 2022, the Company has sol d 1.8 million shares

of common stock under the Purchase Agreement with Lincoln Park, for net proceeds of approximately $ 2.2 million .

Subsequent to September

30, 2022, the Company sold 1 .0 million shares of common stock under the 2022 Purchase Agreement, for net proceeds of approximately

$ 0.5 million .

On October 25, 2022,

the Company entered into a Securities Purchase Agreement with certain institutional investors, pursuant to which the Company agreed

to issue and sell, in a private placement, 1,400,000 shares of the Company’s Series A Convertible Redeemable Preferred Stock,

par value $ 0.01 per share, and 100,000 shares of the Company’s Series B Convertible Redeemable Preferred Stock, par value

$ 0.001 per share, at an offering price of $ 9.50 per share, representing a 5 % original issue discount to the stated value of $ 10.00

per share, for gross proceeds of $ 14.3 million in the aggregate for the Offering, before the deduction of fees and offering

The shares of Preferred Stock will be convertible, at a conversion price of $ 1.00 per share, into shares of the Company’s

common stock, par value $ 0.001 per share (the “Common Stock”), at the option of the holders and, in certain circumstances,

by the Company.

The Offering closed on October 26, 2022.

The $ 14.3 million in gross proceeds from the sale of the Preferred Stock is being held in escrow and is

expected to be used to fund the redemption of the Preferred Stock, which is expected to occur in 2022.

On October 25, 2022,

the Company received a letter (the “Notice”) from the Listing Qualifications staff of The Nasdaq Stock Market LLC (“Nasdaq”)

indicating that, based upon the closing bid price of the Company’s common stock for the last 30 consecutive business days,

the Company no longer meets the requirement to maintain a minimum bid price of $ 1 per share, as set forth in Nasdaq Listing Rule

55450(a)(1) (the “Minimum Bid Price Requirement”).

In accordance with

Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided a period of 180 calendar days, or until April 24, 2023, in which

to regain compliance.

In order to regain compliance with the Minimum Bid Price Requirement, the closing bid price of the Company’s

common stock must be at least $ 1 per share for a minimum of ten consecutive business days during this 180 -day period.

that the Company does not regain compliance within this 180 -day period, the Company may be eligible to seek an additional compliance

period of 180 calendar days if it meets the continued listing requirement for market value of publicly held shares and all other

initial listing standards for the Nasdaq Global Market, with the exception of the Minimum Bid Price Requirement, and provides written

notice to Nasdaq of its intent to cure the deficiency during this second compliance period, by effecting a reverse stock split,

if necessary.

However, if it appears to the Nasdaq Staff that the Company will not be able to cure the deficiency, or if the Company

is otherwise not eligible, Nasdaq will provide notice to the Company that its common stock will be subject to delisting.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements