What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-07 compared with 2022-08-08 · 529 added, 481 removed, 238 unchanged (81% of the section changed)

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

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

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

You can identify

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

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

Those statements include statements

regarding the intent, belief or current expectations of us and members of its management team as well as the assumptions on which

such statements are based.

Prospective investors are cautioned that any such forward-looking statements are not guarantees of

future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by

such forward-looking statements.

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

the Securities and Exchange Commission.

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

from those in forward-looking statements.

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

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

We believe that

its assumptions are based upon reasonable data derived from and known about our business and operations.

No assurances are made

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

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

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

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s

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

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

You can identify these statements by

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

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

Those statements include statements regarding the intent,

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

Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and

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

Readers are urged to carefully review and consider the various disclosures

made by us in this report and in our other reports filed with the Securities and Exchange Commission.

Important factors known to us could

cause actual results to differ materially from those in forward-looking statements.

We undertake no obligation to update

or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating

results over time.

We believe that its assumptions are based upon reasonable data derived from and known about our business and operations.

No assurances are made that actual results of operations or the results of our future activities will not differ materially from its assumptions.

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

risks related to failure to obtain clearances or approvals from

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

our possible need for additional financing;

substantial competition;

uncertainties of patent protection and litigation;

uncertainties of government

or third party payor reimbursement;

uncertainties of government or third party payor reimbursement;

limited research and development efforts and dependence upon third parties;

and risks related

to failure to obtain clearances or approvals from the United States Food and Drug Administration, or FDA, and noncompliance with

FDA regulations.

We are a clinical-stage biopharmaceutical company focused on discovering,

licensing, acquiring and developing therapeutics to treat and prevent human disease and alleviate suffering.

Our portfolio is composed

of infectious disease, central nervous system (CNS), rare disease, and immunology product candidates.

Our infectious disease pipeline

consists of a vaccine in development to prevent smallpox and monkeypox, next-generation vaccines to prevent COVID-19, and a platform to

make fully human monoclonal antibodies to treat COVID-19.

TNX-801, Tonix’s vaccine in development to prevent smallpox and monkeypox,

is expected to enter a Phase 1 study in Kenya, in the first half of 2023.

TNX-801 also serves as the live virus vaccine platform or recombinant

pox vaccine (RPV) platform for other infectious diseases.

Our lead vaccine candidate for COVID-19 is TNX-1850, a live virus vaccine based

on Tonix’s RPV platform encoding the spike protein from SARS-CoV-2, BA.2 strain.

A Phase 1 study of the COVID-19 vaccine is expected

to be initiated in the second half of 2023.

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

and addiction conditions.

Our lead CNS candidate, TNX-102 SL (cyclobenzaprine HCl sublingual tablet), is in mid-Phase 3 development for

the management of fibromyalgia with a potentially confirmatory Phase 3 study launched in the second quarter of 2022 and interim data expected

in the first quarter of 2023.

TNX-102 SL is also being developed to treat Long COVID, a chronic post-acute COVID-19 condition.

to initiate a Phase 2 study in Long COVID in the third quarter of 2022.

TNX-102 SL is also being developed to treat posttraumatic stress

disorder, or PTSD.

We expect to begin enrolling a Phase 2 study in PTSD in police in Kenya in the third quarter of 2022.

TNX-1300 (cocaine

esterase) is a biologic designed to treat cocaine intoxication that is in mid-Phase 2 development with a new potentially pivotal Phase

2 study expected to be initiated in the fourth quarter of 2022.

This study will be partially funded by the National Institute of Drug

Abuse or NIDA.

TNX-1300 has been granted Breakthrough Therapy Designation by the FDA.

TNX-1900 (intranasal potentiated oxytocin), a small

molecule in development for chronic migraine, is expected to enter the clinic with a Phase 2 study in the first half of 2023.

TNX-601 ER (tianeptine hemioxalate and extended-release tablets) is in development for the treatment of major depressive disorder with

a Phase 2 study expected to be initiated in the first quarter of 2023.

Our rare disease portfolio includes TNX-2900 (intranasal potentiated

oxytocin) for the treatment of Prader-Willi syndrome.

and the COVID-19 pandemic, including its impact on the Company.

Business Overview

are a clinical-stage biopharmaceutical company focused on discovering, licensing, acquiring and developing therapeutics and vaccines

to treat and prevent human disease and alleviate suffering.

Our portfolio is composed of central nervous system (CNS), rare disease,

immunology and infectious disease product candidates.

Our CNS portfolio includes both small molecules and biologics to treat

pain, neurologic, psychiatric and addiction conditions.

Our lead CNS candidate, TNX-102 SL (cyclobenzaprine HCl sublingual tablet), is

in mid-Phase 3 development for the management of fibromyalgia, a chronic pain condition.

We are enrolling patients into a Phase 3 study

that was launched in the second quarter of 2022 and for which interim data are expected in the second quarter of 2023.

TNX-102 SL is also

being developed to treat Long COVID, a chronic post-acute COVID-19 condition.

We initiated a Phase 2 study in Long COVID in the third

quarter of 2022 and expect interim data in the second quarter of 2023.

Finally, TNX-102 SL is being developed to treat posttraumatic stress

disorder (PTSD), a serious psychiatric disorder.

We expect to begin enrolling a Phase 2 study in Kenya in the fourth quarter of 2022.

TNX-1300 (cocaine esterase) is a biologic designed to treat cocaine intoxication and has been granted Breakthrough Therapy designation

We have been awarded a grant from the National Institute of Drug Abuse to support clinical development of TNX-1300.

2 study of TNX-1300 is expected to be initiated in the first quarter of 2023.

TNX-1900 (intranasal potentiated oxytocin), a small molecule

in development for chronic migraine, is expected to enter the clinic with a Phase 2 study in the fourth quarter of 2022.

TNX-601 ER (tianeptine

hemioxalate extended-release tablets) is a once-daily formulation of tianeptine being developed as a potential treatment for major depressive

disorder (MDD) with a Phase 2 study expected to be initiated in the first quarter of 2023.

rare disease portfolio includes TNX-2900 (intranasal potentiated oxytocin) for the treatment of Prader-Willi syndrome, a rare

genetic disorder.

TNX-2900 has been granted Orphan Drug designation by the FDA.

Our immunology

portfolio includes biologics to address organ transplant rejection, autoimmunity and cancer, including TNX-1500 which is a humanized

monoclonal antibody targeting CD40-ligand being developed for the prevention of allograft and xenograft rejection and for the treatment

of autoimmune diseases.

immunology portfolio includes biologics to address organ transplant rejection, autoimmunity and cancer, including TNX-1500, which

is a humanized monoclonal antibody targeting CD40-ligand (CD40L or CD154) being developed for the prevention of allograft rejection

and for the treatment of autoimmune diseases.

A Phase 1 study of TNX-1500 is expected to be initiated in the first half of 2023.

In July 2022, Tonix announced

that it was terminating development of TNX-3500, an antiviral inhibitor of SARS-CoV-2, based on technology licensed from OyaGen, Inc.

The associated License Agreement with OyaGen, Inc.

is expected to be terminated, effective September 20, 2022.

We own and operate an infectious

disease research and development facility in Frederick, MD and a live virus vaccine process development and manufacturing facility in

the New Bedford Business Park in Dartmouth, MA.

Both facilities are expected to be fully functional during the third quarter of 2022.

All of our product candidates are investigational new drugs or biologics

and none has been approved for any indication.

of Operations

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

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

Due to these uncertainties, accurate

predictions of future operations are difficult or impossible to make.

Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

and Development Expenses .

Research and development expenses for the three months ended June 30, 2022 were $16.6 million,

a decrease of $1.5 million, or 9%, from $18.1 million for the three months ended June 30, 2021.

This decrease is predominately

due to decreased clinical expenses of $0.4 million, non-clinical expenses of $4.3 million, manufacturing expenses of $0.9 million,

offset by an increase in employee-related expenses of $2.2 million and increased lab supplies of $0.8 million.

We expect research

and development expenses to increase during 2022 as we move our clinical development programs forward and continue to invest in

our development pipeline.

table below summarizes our direct research and development expenses for our product candidates and development platform for the

three months ended June 30, 2022, and 2021.

Three months ended June 30,

We are also developing TNX-1700 which is a recombinant fusion protein including Trefoil Family Factor 2 (TFF2)-related peptides

as an immune-oncology treatment for certain cancers, particularly colorectal and gastric cancer.

infectious disease pipeline consists of a vaccine in development to prevent smallpox and monkeypox, next-generation vaccines to

prevent COVID-19, and a platform to make fully human monoclonal antibodies to treat COVID-19.

TNX-801, our vaccine in development

to prevent smallpox and monkeypox, also serves as the live virus vaccine platform or recombinant pox vaccine (RPV) platform for

other infectious diseases.

A Phase 1 study of TNX-801 is expected to be initiated in Kenya in the first half of 2023.

vaccine candidate for COVID-19 is TNX-1850, a live virus vaccines based on Tonix’s recombinant pox live virus vector vaccine

We have collaborated with scientists at Columbia University to make fully human monoclonal antibodies with the potential

to treat COVID-19.

We own and operate an infectious disease research and development facility in Frederick, MD and a live virus

vaccine process development and manufacturing facility in the New Bedford Business Park in Dartmouth, MA.

All of Tonix’s

product candidates are investigational new drugs or biologics and have not been approved for any indication.

Results of Operations

We anticipate that

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

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

Due to these uncertainties, accurate predictions

of future operations are difficult or impossible to make.

Three Months Ended September 30,

2022 Compared to Three Months Ended September 30, 2021

Development Expenses .

Research and development expenses for the three months ended September 30, 2022 were $22.2 million,

an increase of $9.1 million, or 69%, from $13.1 million for the three months ended September 30, 2021.

This increase is predominately

due to increased clinical expenses of $2.4 million, manufacturing expenses of $1.0 million, non-clinical expenses of $1.4 million,

employee-related expenses of $2.5 million and laboratory expenses of $0.9 million.

We expect research and development expenses

to increase during 2022 as we move our clinical development programs forward and continue to invest in our development pipeline.

The table below summarizes

our direct research and development expenses for our product candidates and development platform for the three months ended September

30, 2022, and 2021.

Three months ended September 30,

(in thousands)

8 unchanged sentences

Direct expenses – TNX - 2100

Direct expenses – TNX - 3500

Direct expenses – Other programs

1 unchanged sentence

Total research & development

direct research and development expenses consist principally of external costs for clinical, nonclinical and manufacturing, such

as fees paid to contractors, consultants and CROs in connection with our development work.

Included in “Internal Staffing,

Overhead and Other” is overhead, supplies, research and development employee costs (including stock option expenses), travel,

regulatory and legal.

Our direct research

and development expenses consist principally of external costs for clinical, nonclinical and manufacturing, such as fees paid to

contractors, consultants and CROs in connection with our development work.

Included in “Internal Staffing, Overhead and Other”

is overhead, supplies, research and development employee costs (including stock option expenses), travel, regulatory and legal.

and Administrative Expenses .

General and administrative expenses for the three months ended June 30, 2022 were $6.8

million, an increase of $1.4 million, or 26%, from $5.4 million incurred in the three months ended June 30, 2021.

in primarily due to an increase in employee-related expenses of $1.2 million, and an increase in travel-related expenses of $0.2

As a result of the forgoing, the net loss for the three months ended June 30, 2022 was $23.1 million, compared

to a net loss of $23.6 million for the three months ended June 30, 2021.

Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

and Development Expenses .

Research and development expenses for the six months ended June 30, 2022 were $35.0 million,

an increase of $1.5 million, or 5%, from $33.5 million for the six months ended June 30, 2021.

General and administrative expenses for the three months ended September 30, 2022 were

$7.4 million, an increase of $1.9 million, or 35%, from $5.5 million incurred in the three months ended September 30, 2021.

increase is primarily due to employee-related expenses of $0.9 million, an increase in legal fees of $0.3 million due to increased

patent prosecution costs, and an increase in financial reporting expenses of $0.7 million.

As a result of the foregoing, the net loss for the three months ended September 30, 2022 was $29.0 million, compared to a net loss

of $18.5 million for the three months ended September 30, 2021.

Nine Months Ended September 30, 2022

Compared to Nine Months Ended September 30, 2021

Development Expenses .

Research and development expenses for the nine months ended September 30, 2022 were $57.2 million,

an increase of $10.7 million, or 23%, from $46.5 million for the nine months ended September 30, 2021.

This increase is predominately

due to increased employee-related expenses of $4.1 million, regulatory/legal expenses of $0.3 million and lab supplies of $1.0

million offset by a decrease in non-clinical expenses of $3.3 million, clinical expenses of $1.4 million and manufacturing expenses

of $0.7 million.

We expect research and development expenses to increase during 2022 as we move our clinical development programs

forward and continue to invest in our development pipeline.

table below summarizes our direct research and development expenses for our product candidates and development platform for the

six months ended June 30, 2022, and 2021.

Six months ended June 30,

due to increased clinical expenses of $1.0 million, employee-related expenses of $6.7 million, rent and office expenses of $1.0

million and lab supplies of $1.9 million.

We expect research and development expenses to increase during 2022 as we move our clinical

development programs forward and continue to invest in our development pipeline.

The table below summarizes

our direct research and development expenses for our product candidates and development platform for the nine months ended September

30, 2022, and 2021.

Nine months ended September 30,

(in thousands)

8 unchanged sentences

Direct expenses – TNX - 2100

Direct expenses – TNX - 3500

Direct expenses – Other programs

1 unchanged sentence

Total research & development

direct research and development expenses consist principally of external costs for clinical, nonclinical and manufacturing, such

as fees paid to contractors, consultants and CROs in connection with our development work.

Included in “Internal Staffing,

Overhead and Other” is overhead, supplies, research and development employee costs (including stock option expenses), travel,

regulatory and legal.

Our direct research

and development expenses consist principally of external costs for clinical, nonclinical and manufacturing, such as fees paid to

contractors, consultants and CROs in connection with our development work.

Included in “Internal Staffing, Overhead and Other”

is overhead, supplies, research and development employee costs (including stock option expenses), travel, regulatory and legal.

and Administrative Expenses .

General and administrative expenses for the six months ended June 30, 2022 were $14.8

million, an increase of $4.0 million, or 37%, from $10.8 million incurred in the six months ended June 30, 2021.

is primarily due to employee-related expenses of $2.9 million, and an increase in travel related expenses of $0.3 million.

As a result of the foregoing, the net loss for the six months ended June 30, 2022 was $49.6 million, compared to

a net loss of $44.2 million for the six months ended June 30, 2021.

May 18, 2022, we entered into an exclusive License Agreement with the University of Alberta focused on identifying and testing

broad-spectrum antiviral drugs against future variants of SARS-CoV-2 and other emerging viruses.

As consideration for entering into

the License Agreement, we paid a low-five digit license fee to University of Alberta.

The License Agreement also provides for

single-digit royalties and contingent milestone payments.

As of June 30, 2022, other than the upfront fee, no payments have been accrued or paid in relation to

this agreement.

April 14, 2021, we and OyaGen, Inc.

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

Agreement”) pursuant to which OyaGen granted us an exclusive license to certain patents and technical information related

to an antiviral inhibitor of SARS-CoV-2, sangivamycin, and to develop and commercialize products thereunder, and to acquire rights

to any technology based thereon for the prevention or treatment of Covid-19 developed by OyaGen during the term of the License

consideration for entering into the License Agreement, we agreed to pay a low-seven digit license fee to OyaGen, and agreed to

issue to OyaGen and an affiliated entity an aggregate of 86,010 shares of our common stock, valued at $3.0 million, which are

unregistered and subject to a six-month lock-up and a voting agreement, pursuant to which OyaGen and the affiliated entity have

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

recommendations.

The OyaGen License also provides for single-digit royalties and contingent milestone payments.

As of June 30,

General and administrative expenses for the nine months ended September 30, 2022

were $22.2 million, an increase of $5.9 million, or 36%, from $16.3 million incurred in the nine months ended September 30,

The increase is primarily due to employee-related expenses of $3.8 million, an increase in technology and software

expenses of $0.5 million, an increase in travel and entertainment of $0.3 million and an increase in financial reporting

expenses of $0.6 million.

As a result of the foregoing, the net loss for the nine months ended September 30, 2022 was $78.5 million, compared to a net loss

of $62.7 million for the nine months ended September 30, 2021.

License Agreements

On May 18, 2022, we

entered into an exclusive License Agreement with the University of Alberta focused on identifying and testing broad-spectrum antiviral

drugs against future variants of SARS-CoV-2 and other emerging viruses.

As consideration for entering into the License Agreement,

we paid a low-five digit license fee to University of Alberta.

The License Agreement also provides for single-digit royalties and

contingent milestone payments.

As of September 30, 2022, other than the upfront fee, no payments have been accrued or paid in relation

to this agreement.

On April 14, 2021,

we and OyaGen, Inc.

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

pursuant to which OyaGen granted us an exclusive license to certain patents and technical information related to an antiviral inhibitor

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

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

As consideration for

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

an affiliated entity an aggregate of 86,010 shares of our common stock, valued at $3.0 million, which are unregistered and subject

to a six-month lock-up and a voting agreement, pursuant to which OyaGen and the affiliated entity have agreed to vote the common

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

OyaGen License also provides for single-digit royalties and contingent milestone payments.

As of September 30, 2022, no milestone

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

In July 2022, we notified OyaGen of our intent to terminate

the License Agreement, and the agreement was terminated effective September 20, 2022.

On February 11, 2021,

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

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

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

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

specified sales milestones, totaling approximately $0.4 million, as well royalties on net sales of products based on the licensed

technology, and assignment/transfer and sublicense royalties.

As of September 30, 2022, no milestone payments have been accrued

or paid in relation to this agreement.

On September 16, 2019,

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

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

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

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

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

academic research and educational purposes.

We paid a five-digit

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

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

We are obligated to use Commercially Reasonable Efforts,

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

We are obligated to pay Columbia single-digit

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

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

sold by us or a sublicensee.

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 us to any third party for

intellectual property rights which are necessary for the practice of the rights licensed to us under the Columbia License Agreement,

provided that the royalty payable on a TFF2 Product or Other Product may not be reduced by more than 50%.

We are also obligated

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

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

In addition, we shall pay Columbia 5% of consideration, other

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

As of September 30, 2022,

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

In July 2022, we notified OyaGen of

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

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

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

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

Universitaire of Toulouse.

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

occurrence of specified sales milestones, totaling approximately $0.4 million, as well royalties on net sales of products based

on the licensed technology, and assignment/transfer and sublicense royalties.

As of June 30, 2022, no milestone payments have

been accrued or paid in relation to this agreement.

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

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

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

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

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

the TFF2 Technology for academic research and educational purposes.

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

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

We are obligated to

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

and to achieve specified developmental milestones.

paid Columbia single-digit royalties on net sales of (i) TFF2 Products sold by us or a sublicensee and (ii) any

other products that involve material or technical information related to the TFF2 Product and transferred to us pursuant to the

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

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 us to any third party for intellectual property rights which are necessary for the practice

of the rights licensed to us under the Columbia License Agreement, provided that the royalty payable on a TFF2 Product or Other

Product may not be reduced by more than 50%.

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

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

In addition, we shall pay Columbia

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

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

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

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

On May 20, 2019, we

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

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

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

3 unchanged sentences

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

We paid a six-digit license fee

to Columbia as consideration for entering into the License Agreement.

We are obligated to use Commercially Reasonable Efforts, as defined

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

We paid Columbia single-digit

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

related to the Product and transferred to us pursuant to the License Agreement (“Other Products”) sold by us or a sublicensee.

Royalties on each particular Product are payable on a country-by-country and Product-by-Product basis until the latest of (i) the date

of expiration of the last valid claim in the last to expire of the issued patents covered by the License Agreement, (ii) a specified period

of time after the first commercial sale of a Product in the country in question, or (iii) expiration of any market exclusivity period

granted by a regulatory agency.

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

basis until the later of (i) a specified period of time after the first commercial sale of such particular Other Product in such country

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

Royalties payable on net sales of the Product and

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

for the practice of the rights licensed to us under the License Agreement, provided that the royalty payable on a Product or Other Product

may not be reduced by more than 50%.

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

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

In addition, we shall pay Columbia 5%

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

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

Purchase Agreements

On December 22, 2020, we entered into an asset purchase agreement (the

“Asset Purchase Agreement”) with Katana Pharmaceuticals, Inc.

(“Katana”) pursuant to which we acquired Katana

assets related to insulin resistance and related syndromes, including obesity (the “Katana Assets”).

In connection with the

acquisition of the Assets, we assumed Katana’s rights and obligations under that certain Exclusive License Agreement by and between

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

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

As consideration

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

Because the Katana intellectual property was acquired

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

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

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

certain patents related to the Katana Assets.

We paid a six-digit

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

We are obligated to use Commercially Reasonable

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

We are obligated to pay Columbia single-digit

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

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

by us or a sublicensee.

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

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

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

of any market exclusivity period granted by a regulatory agency.

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

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

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

Royalties payable

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

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

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

We are also obligated

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

development, approval and sales milestones related to a Product.

In addition, we shall pay Columbia 5% of consideration, other

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

As of September 30, 2022,

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

Asset Purchase Agreements

On December 22, 2020,

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

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

In connection with the acquisition of the Assets, we assumed Katana’s rights and obligations under that certain

Exclusive License Agreement by and between Katana and The University of Geneva (“Geneva”) (the “Geneva License

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

Agreement”), dated December 22, 2020.

As consideration for entering into the Asset Purchase Agreement, we paid $0.7 million

Because the Katana intellectual property was acquired prior to FDA approval, the cash consideration totaling $0.7 million,

was expensed as research and development costs since there is no alternative future use and the acquired intellectual property

does not constitute a business.

Pursuant to the terms

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

patents related to the Katana Assets.

We are obligated to use commercially reasonable efforts to diligently develop, manufacture,

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

for such products.

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 June 30, 2022, no milestone payments have

been accrued or paid in relation to this agreement.

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

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

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

In connection

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

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

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

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

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

62,500 shares of our common stock and paid Stanford $250,241 pursuant to the terms of the Assignment and Assumption Agreement.

The common stock is unregistered and subject to a 12 month lock-up and a Shareholder Voting Agreement, dated June 11, 2020, pursuant

to which Trigemina and the Executive Shareholders have agreed to vote the common stock on any matter put to a vote of our shareholders

in accordance with management’s recommendations.

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

$2.4 million, were recorded to research and development in the statement of operations for the year ended December 31, 2020.

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

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

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

sublicense, certain patents related to the Trigemina Assets.

Stanford has reserved for itself the right to practice under the

patents for academic research and educational purposes.

We are obligated to use commercially reasonable efforts to diligently

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

diligently develop markets for such products.

The Stanford License Agreement specifies developmental milestones and the

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

As of June 30, 2022, other than the annual maintenance fee, no milestone payments have been accrued or paid

in relation to this agreement.

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

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

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

connection with the acquisition of the TRImaran Assets, we entered into a First Amended and Restated Exclusive License Agreement

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

As consideration

for entering into the TRImaran Asset Purchase Agreement, we paid $100,000 to TRImaran and have assumed certain liabilities of

TRImaran totaling $68,500.

The $168,500 was recorded to research and development expenses in the statement of operations in 2019.

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

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

Pursuant to the terms of the

TRImaran Asset Purchase Agreement, TRImaran and the Selling Shareholders are prohibited from disclosing confidential information

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

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

hyperactivity disorder or major depressive disorder.

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

engage in the research or development of any potential therapeutic compound for the treatment of any central nervous system disorder,

TRImaran or such Selling Shareholder is obliged to provide notice and opportunity to Tonix to make an offer to acquire or license

rights with respect to such product candidate.

As of June 30, 2022, no milestone payments have been accrued or paid in relation

to this agreement.

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

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

WSU has reserved

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

We are obligated to use commercially

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

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

The WSU License Agreement

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

maintenance fee payable to WSU.

We are obligated to substantially manufacture WSU Products in the United States if WSU Products

will be sold in the United States.

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

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

We have also agreed to pay WSU single-digit royalties on net sales of WSU Products sold by us or a sublicensee on a tiered

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

Royalties on each

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

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

Royalties payable on net sales of

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

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

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

Each party also has the right to terminate the agreement for customary reasons

such as material breach and bankruptcy.

The WSU License Agreement contains provisions relating to termination, indemnification,

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

As of June 30, 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.

On June 11, 2020, we

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

(“Trigemina”)

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

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

In connection with the acquisition of

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

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

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

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

As consideration for

entering into the Trigemina Asset Purchase Agreement, we paid $824,759 to Trigemina and issued to Trigemina 62,500 shares of our

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

The common stock is unregistered

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

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

management’s recommendations.

Both the costs associated with the cash payments and share issuance, totaling $2.4 million,

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

Because the Trigemina

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

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

Pursuant to the terms

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

patents related to the Trigemina Assets.

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

research and educational purposes.

We are obligated to use commercially reasonable efforts to diligently develop, manufacture,

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

such products.

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

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

As of September 30, 2022, other than the annual

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

On August 19, 2019,

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

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

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

In connection with the acquisition of the

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

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

As consideration for entering into the TRImaran Asset Purchase

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

The $168,500 was recorded

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

Upon the achievement of specified development, regulatory

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

a total of approximately $3.4 million.

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

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

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

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

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

compound for the treatment of any central nervous system disorder, TRImaran or such Selling Shareholder is obliged to provide notice

and opportunity to Tonix to make an offer to acquire or license rights with respect to such product candidate.

As of September

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

Pursuant to the terms

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

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

WSU has reserved for itself the right

to practice the Technology for academic research and educational purposes.

We are obligated to use commercially reasonable efforts

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

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

The WSU License Agreement specifies developmental

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

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

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

agreed to pay WSU single-digit royalties on net sales of WSU Products sold by us or a sublicensee on a tiered basis based on net

sales, and additional sublicense fees on certain consideration received from sublicensees.

Royalties on each particular WSU Product

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

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

Royalties payable on net sales of WSU Products may be reduced

by 50% of the royalties payable by us to any third party for intellectual property rights which are necessary for the practice

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

by more than 50%.

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

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

for an agreement of this kind.

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

Liquidity and Capital Resources

As of June 30, 2022,

we had working capital of $144.3 million, which excludes restricted cash of $31.5 million, comprised primarily of cash and cash equivalents of $145.5 million and prepaid expenses

and other of $14.8 million, offset by $9.6 million of accounts payable, $5.8 million of accrued expenses and current lease liabilities

of $0.5 million.

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

Phase 3 clinical trial in FM, our vaccine program and the build-out of our facilities.

As of September

30, 2022, we had working capital of $137.8 million, comprised primarily of cash and cash equivalents of $140.0 million and prepaid

expenses and other of $11.2 million, offset by $4.6 million of accounts payable, $8.3 million of accrued expenses and current lease

liabilities of $0.5 million.

A significant portion of the accounts payable and accrued expenses are due to work performed in relation

to our Phase 3 clinical trial in FM, our vaccine program and the build-out of our facilities.

The following table

provides a summary of operating, investing and financing cash flows for the six months ended June 30, 2022, and 2021, respectively

provides a summary of operating, investing and financing cash flows for the nine months ended September 30, 2022, and 2021, respectively

(in thousands):

September 30,

Net cash used in operating activities

1 unchanged sentence

Net cash provided by financing activities

For the six months ended June, 2022 and 2021, we used approximately $52.2

million and $40.2 million of cash in operating activities, respectively, which represents cash outlays for research and development and

general and administrative expenses in such periods.

The increase in cash outlays principally resulted from an increase in both research

and development and general and administrative activities.

For the six months ended June 30, 2022 and 2021, net proceeds from financing

activities were $85.2 million and $130.8 million, respectively, predominately from the sale of our common and preferred stock, $31.5 million

of which is expected to fund the redemption of our outstanding redeemable preferred stock.

Cash used in investing activities for the six

months ended June 30, 2022 and 2021, was $34.7 million and $1.9 million respectively, related to the purchase of property and equipment.

We believe that our cash resources at June 30, 2022, and the proceeds that

we raised from equity offerings subsequent to the end of the second quarter of 2022 will meet our operating and capital expenditure requirements

into the second quarter of 2023, but not beyond.

We continue to face

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

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

These factors raise substantial doubt about

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

We have the ability

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

the funds available to fund operations.

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

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

funds to continue our operations.

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

would be adversely affected.

For the nine months

ended September, 2022 and 2021, we used approximately $75.8 million and $53.1 million of cash in operating activities, respectively,

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

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

For the nine months ended September

30, 2022 and 2021, net proceeds from financing activities were $80.6 million and $168.7 million, respectively, predominately from

the sale of our common stock and warrants.

Cash used in investing

activities for the nine months ended September 30, 2022 and 2021, was $43.5 million and $9.7 respectively, related to the purchase

of property and equipment.

We believe that

our cash resources at September 30, 2022, and the proceeds that we raised from equity offerings subsequent to the end of the

third quarter of 2022 will allow us to meet our operating and capital expenditure requirements into the third quarter of

2023, but not beyond.

We continue to

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

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

These factors raise

substantial doubt about our ability to continue as a going concern for the one year period from the date of filing of this

We believe we have the ability to obtain additional funding through public or private financing or collaborative

arrangements with strategic partners to increase the funds available to fund operations.

Without additional funds, we may be

forced to delay, scale back or eliminate some of our research and development activities, or other operations and potentially

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

If any of these events occurs,

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

Future Liquidity Requirements

25 unchanged sentences

Convertible Redeemable Preferred stock

June 24, 2022, we issued 2,500,000 shares of Series A Preferred Stock and 500,000 shares of Series B Preferred Stock to certain

institutional investors in a private placement.

24, 2022, we issued 2,500,000 shares of Series A Preferred Stock and 500,000 shares of Series B Preferred Stock to certain institutional

investors in a private placement.

The Preferred Stock has an aggregate stated value of $30,000,000.

Each share of

the Preferred Stock has a purchase price of $9.50, representing an OID of 5% of the stated value.

The shares of the Preferred

Stock are convertible into shares of our common stock, upon the occurrence of certain events, at a conversion price of $4.00 per

The Preferred Stock may convert at the option of the holder.

We may compel conversion of the Preferred Stock after the

fulfillment of certain conditions and subject to certain limitations.

The Company and the holders of the Preferred Stock also

entered into a registration rights agreement to register the resale of the shares of common stock issuable upon conversion of

the Preferred Stock.

The $28.5 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.

We expect redemption to occur in 2022.

The 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.

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 per share.

The conversion price will be adjusted for stock dividends and stock splits, subsequent

rights offering, pro rata distributions of dividends or the occurrence of a fundamental transaction.

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.

Each share of the Preferred Stock

had a purchase price of $9.50, representing an OID of 5% of the stated value.

The shares of the Preferred Stock were convertible into

shares of our common stock, upon the occurrence of certain events, at a conversion price of $4.00 per share, at the option of the holder,

and at our option upon the fulfillment of certain conditions and subject to certain limitations.

The Company and the holders of the Preferred

Stock also entered into a registration rights agreement to register the resale of the shares of common stock issuable in the event of

the conversion of the Preferred Stock.

The $28.5 million in gross proceeds of the Offering were 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 have been necessary

to fund the 105% redemption price until the expiration of the redemption period for the Preferred Stock.

All outstanding shares of its

Series A Convertible Redeemable Preferred Stock and Series B Convertible Redeemable Preferred Stock was redeemed in August 2022 at 105%

of the $10.00 stated value of the Preferred Stock, or $31.5 million in the aggregate.

2022 Lincoln Park Transaction

On August 16, 2022,

we 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”).

Pursuant to the terms of

the 2022 Purchase Agreement, Lincoln Park has agreed to purchase from us up to $50,000,000 of our 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, we filed with the SEC a registration statement to register for resale under the Securities Act the shares that have

been or may be issued to Lincoln Park under the 2022 Purchase Agreement.

Pursuant to the terms

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

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

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,

we 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

2 unchanged sentences

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

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

of our common stock (subject to certain limitations) from time to time during the term of the Purchase Agreement with Lincoln Park.

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

our common stock (subject to certain limitations) from time to time during the term of the Purchase Agreement with Lincoln Park.

Pursuant to the terms of the Lincoln Park Registration Rights Agreement, we filed with the SEC a registration statement to register

8 unchanged sentences

to be raised under the Purchase Agreement with Lincoln Park.

During the six months ended June 30, 2022, we sold 1.1 million shares of

common stock under the Purchase Agreement with Lincoln Park, for net proceeds of approximately $6.5 million.

Subsequent to June 30, 2022,

we 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 (approximately 3 million shares) with Lincoln Park under the Purchase Agreement without stockholder

approval, unless the average price of all applicable sales of its common stock to Lincoln Park under the Purchase Agreement equals or

exceeds a threshold amount.

As we have issued approximately 3,000,000 shares to Lincoln Park under the Purchase Agreement at less than

the threshold amount, we will not sell any additional shares under the Purchase Agreement without shareholder approval.

During the nine months

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

of approximately $8.7 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 (approximately 2.9 million shares) with Lincoln Park under the Purchase

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

the Purchase Agreement equals or exceeds a threshold amount.

As we have issued approximately 2.9 million shares to Lincoln Park

under the Purchase Agreement at less than the threshold amount, we will not sell any additional shares under the Purchase Agreement

without shareholder approval.

2021 Lincoln Park Transaction

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

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

to the terms of the 2021 Purchase Agreement, Lincoln Park agreed to purchase from us up to $80,000,000 of our common stock

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

Pursuant to the terms of the

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

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

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

Agreement, we issued 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, we 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, we

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

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

Pursuant to the terms of

the 2021 Purchase Agreement, Lincoln Park agreed to purchase from us up to $80,000,000 of our common stock (subject to certain

limitations) from time to time during the term of the 2021 Purchase Agreement.

Pursuant to the terms of the 2021 Registration Rights

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

been or may be issued to Lincoln Park under the 2021 Purchase Agreement.

Pursuant to the terms

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

issued 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

During the nine months

ended September 30, 2021, we 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, we could not issue or sell more than 19.99% of the shares of our 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 we have issued approximately 2.0 million shares to Lincoln

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

Purchase Agreement without shareholder approval.

February 2021 Financing

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prices will vary.

During the six months ended June 30, 2022, we 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, we sold approximately 0.8 million

shares of common stock under the Sales Agreement, for net proceeds of approximately $25.5 million.

Subsequent to June 30, 2022, we sold

During the nine months ended September 30, 2022, we 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, we sold approximately

1.3 million shares of common stock under the Sales Agreement, for net proceeds of approximately $37.2 million.

Subsequent to September

30, 2022, we sold 3.2 million shares of common stock under the Sales Agreement, for net proceeds of approximately $1.6 million.

Stock Compensation

On May 3, 2019, our stockholders approved the Tonix Pharmaceuticals Holding

On May 3, 2019, our

stockholders approved the Tonix Pharmaceuticals Holding Corp.

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

The 2019 Plan provided for the issuance of up to 4,375 shares of common

With the adoption of the 2020 Plan (as defined below), no further grants may be made under the 2019 Plan.

On January 16, 2020,

our stockholders approved the Tonix Pharmaceuticals Holding Corp.

Plan provided for the issuance of up to 4,375 shares of our common stock.

With the adoption of the 2020 Plan (as defined below),

no further grants may be made under the 2019 Plan.

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

2020 Stock Incentive Plan (the “2020 Plan”).

The 2020 Plan provided for the issuance of up to 18,750 shares of

our common stock.

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

the 2020 Plan.

provided for the issuance of up to 18,750 shares of common stock.

With the adoption of the Amended and Restated 2020 Plan (as defined

below), no further grants may be made under the 2020 Plan.

On May 1, 2020, our

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Under the terms of

the Amended and Restated 2020 Plan, we may issue (1) stock options (incentive and nonstatutory), (2) restricted stock, (3) SARs,

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

The Amended and Restated 2020 Plan initially provided for the

issuance of up to 312,500 shares of common stock, which amount will be increased to the extent that awards granted under the

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

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

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

of ten years, commencing on January 1, 2021 and ending on (and including) January 1, 2030, in an amount equal to the difference

between (x) twenty percent (20%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar

year, and (y) the total number of shares of common stock reserved under the Amended and Restated 2020 Plan on December 31st of

such preceding calendar year (including shares subject to outstanding awards, issued pursuant to awards or available for future

The Board of Directors determines the exercise price, vesting and expiration period of the grants under the Amended and

Restated 2020 Plan.

However, the exercise price of an incentive stock option may not be less than 110% of fair value of the common

stock at the date of the grant for a 10% or more shareholder and 100% of fair value for a grantee who is not a 10% shareholder.

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

Board of Directors in good faith.

Additionally, the expiration period of grants under the Amended and Restated 2020 Plan may not

be more than ten years.

As of June 30, 2022, 606,227 shares were available for future grants under the Amended and Restated 2020

the Amended and Restated 2020 Plan, we may issue (1) stock options (incentive and nonstatutory), (2) restricted stock, (3) stock

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

The Amended and Restated

2020 Plan initially provided for the issuance of up to 312,500 shares of common stock, which amount will be increased to the

extent that awards granted under the Plans are forfeited, expire or are settled for cash (except as otherwise provided in the Amended

and Restated 2020 Plan).

In addition, the Amended and Restated 2020 Plan contains an “evergreen provision” providing

for an annual increase in the number of shares of our common stock available for issuance under the Amended and Restated 2020 Plan

on January 1 of each year for a period of ten years, commencing on January 1, 2021 and ending on (and including) January 1, 2030,

in an amount equal to the difference between (x) twenty percent (20%) of the total number of shares of common stock outstanding

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

and Restated 2020 Plan on December 31st of such preceding calendar year (including shares subject to outstanding awards, issued

pursuant to awards or available for future awards).

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

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

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

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

for a grantee who is not a 10% shareholder.

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

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

Additionally, the expiration period of grants under

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

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

future grants under the Amended and Restated 2020 Plan.

We measure the

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expense related to awards is amortized over the applicable vesting period using the straight-line method.

The weighted average fair value of options granted during the three and

six months ended June 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 per share, respectively.

The weighted average

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.

The risk-free interest

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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.

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,

we have approximately $17.3 million of total unrecognized compensation cost related to non-vested awards granted under the Plans,

which we expect 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, we had approximately $14.3 million of total unrecognized compensation cost related to non-vested awards granted under the

Plans, which we expect to recognize over a weighted average period of 1.9 years.

Employee Stock Purchase Plans

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

As a result of adoption of the 2020 ESPP, as defined below, by our stockholders, no further grants may be made under the 2019 ESPP

As a result of adoption of the 2020 ESPP, as defined below, by the stockholders, no further grants may be made under the 2019 ESPP

On May 1, 2020, our stockholders approved the Tonix Pharmaceuticals Holdings Corp.

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“2020 ESPP”).

As a result of the adoption of the 2022 ESPP, as defined below, by our stockholders, no further grants

As a result of the adoption of the 2022 ESPP, as defined below, by the stockholders, no further grants

may be made under the 2020 ESPP Plan.

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subject to the statutory limit under the Code.

As of June 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.

The 2022 and 2020 ESPP are considered

compensatory plans with the related compensation cost expensed over the six-month offering period.

For 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.

Accordingly, during the first quarter of 2021, approximately $28,000 of employee payroll deductions accumulated

at December 31, 2020, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital.

The remaining

$4,000 was returned to the employees.

In January 2022, 4,033 shares that were purchased as of December 31, 2021, under the 2020 ESPP,

Accordingly, during the first quarter of 2022, approximately $40,000 of employee payroll deductions accumulated at December

31, 2021, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital.

The remaining $30,000

was returned to the employees.

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 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

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.

Accordingly, during the first quarter of 2022, approximately

$40,000 of employee payroll deductions accumulated at December 31, 2021, related to acquiring such shares, was transferred from

accrued expenses to additional paid in capital.

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.

Contractual agreements

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

June 30, 2022 for future work to be performed.

September 30, 2022 for future work to be performed.

We have entered into

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

be performed.

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

to be performed.

Operating leases

As of June 30, 2022,

As of September 30,

2022, future minimum lease payments are as follows (in thousands):

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the measurement date is the date the award is issued.

Redeemable 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

Redeemable Convertible

Preferred Stock.

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

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

Other than contractual

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interest in an unconsolidated entity.

Off-Balance Sheet Arrangements

Other than contractual

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

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

interest in an unconsolidated entity.

ITEM 3 – QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

Not applicable.

Not required under

Regulation S-K for “smaller reporting companies.”

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis