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Item 8. Financial Statements and Supplementary Data

2023-03-13 compared with 2022-03-14 · 1287 added, 1021 removed, 180 unchanged (93% of the section changed)

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

PHARMACEUTICALS HOLDING CORP.

Report of Independent Registered Public Accounting Firm

ITEM 8 – FINANCIAL STATEMENTS AND

SUPPLEMENTARY DATA

TONIX PHARMACEUTICALS HOLDING CORP.

Report of Independent Registered Public Accounting

Consolidated balance sheets as of December 31, 2022 and

Consolidated statements of operations for the years ended December 31, 2021 and 2020

Consolidated statements of comprehensive loss for the years ended December 31, 2021 and 2020

Consolidated statements of stockholders’ equity for the years ended December 31, 2021 and 2020

Consolidated statements of cash flows for the years ended December 31, 2021 and 2020

Consolidated statements of operations

for the years ended December 31, 2022 and 2021

Consolidated statements of comprehensive

loss for the years ended December 31, 2022 and 2021

Consolidated statements of stockholders’

equity for the years ended December 31, 2022 and 2021

Consolidated statements of cash

flows for the years ended December 31, 2022 and 2021

Notes to consolidated financial statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders of

Pharmaceuticals Holding Corp.

on the Financial Statements

have audited the accompanying consolidated balance sheets of Tonix Pharmaceuticals Holding Corp and Subsidiaries (the “Company”)

as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive loss, stockholders’

equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial

position of the Company as of December 31, 2021 and 2020, and the consolidated results of their operations and their cash flows

for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

in Note 1 to the financial statements, the Company has continuing losses and negative cash flows from operating activities that

raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters

are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not

for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Tonix Pharmaceuticals Holding Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance

sheets of Tonix Pharmaceuticals Holding Corp and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related

consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years then ended,

and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements

present fairly, in all material respects, the consolidated financial position of the Company as of the Company as of December 31, 2022

and 2021, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with

accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared

assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has continuing

losses and negative cash flows from operating activities that raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal

control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements

that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that

are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication

of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole,

and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters

or on the accounts or disclosures to which it relates.

for clinical trial expenses

described in Note 2 to the consolidated financial statements, at each balance sheet date the Company estimates its expenses resulting

from its obligations under contracts with vendors, clinical research organizations and under clinical site agreements in connection

with conducting clinical trials.

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

The Company’s accrual for clinical trial expenses of approximately $2.8 million is included in accrued expenses and other

current liabilities in the December 31, 2021 consolidated balance sheet.

The Company also recorded prepaid clinical trial expenses

of approximately $7.7 million within prepaid expenses and other in the December 31, 2021 consolidated balance sheet.

recorded for clinical trial expenses represent the Company’s estimates of the unpaid and prepaid clinical trial expenses

based on facts and circumstances known to the Company at that time, and are dependent upon the timely and accurate reporting of

contract research organizations and other third-party vendors.

The estimation of clinical trial expenses was also identified as

a critical accounting estimate by management.

identified the accrual for clinical trial expenses as a critical audit matter due to the significant judgment and estimation required

by management in determining progress or state of completion of clinical trials or services completed.

This in turn led to a high

degree of auditor subjectivity, and significant audit effort was required in performing our procedures and evaluating audit evidence

relating to estimates made by management.

the matter involved performing procedures and evaluating audit evidence, in connection with forming our overall opinion on the

consolidated financial statements.

We obtained an understanding of Management’s process and evaluated the design of controls

over developing its estimate of accrued and prepaid clinical trial expenses, including the process of estimating the expenses

incurred to date based on the status of the clinical trials.

Our procedures also included, among others, reading agreements and

contract amendments with vendors, consultants and clinical research organizations and clinical site agreements in connection with

conducting clinical trials, and evaluating the significant assumptions described above and the methods used in developing the

clinical trial estimates and re-calculating the amounts that were unpaid and prepaid at the balance sheet date.

We confirmed contractual

commitments and amounts completed, paid and unpaid directly with the third parties involved in performing the clinical trial services

on behalf of the Company.

We also made direct inquiries of financial and clinical Company personnel regarding the contract amount

including change orders, status and progress to completion of clinical trials, amounts paid to date under each contract, and description

of future commitments.

We also assessed the historical accuracy of management’s estimates, and compared the current estimate

of expenses incurred to estimates previously made by management.

The critical audit matter communicated below is a

matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit

committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially

challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on

the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion

on the critical audit matter or on the accounts or disclosures to which it relates.

Accrual and prepaid balance for clinical trial expenses

As described in Note 2 to the consolidated financial

statements, at each balance sheet date the Company estimates its expenses resulting from its obligations under contracts with vendors,

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

The Company accounts

for trial expenses according to the timing of various aspects of the trial.

The Company’s accrual for clinical trial expenses of

approximately $3.3 million is included in accrued expenses and other current liabilities in the December 31, 2022 consolidated balance

The Company also recorded prepaid clinical trial expenses of approximately $8.0 million within prepaid expenses and other in the

December 31, 2022 consolidated balance sheet.

The amounts recorded for clinical trial expenses represent the Company’s estimates

of the unpaid and prepaid clinical trial expenses based on facts and circumstances known to the Company at that time, and are dependent

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

The estimation of clinical trial

expenses was also identified as a critical accounting estimate by management.

We identified the accrual for clinical trial expenses

as a critical audit matter due to the significant judgment and estimation required by management in determining progress or state of completion

of clinical trials or services completed.

This in turn led to a high degree of auditor subjectivity, and significant audit effort was

required in performing our procedures and evaluating audit evidence relating to estimates made by management.

Addressing the matter involved performing procedures

and evaluating audit evidence, in connection with forming our overall opinion on the consolidated financial statements.

We obtained an

understanding of Management’s process and evaluated the design of controls over developing its estimate of accrued and prepaid clinical

trial expenses, including the process of estimating the expenses incurred to date based on the status of the clinical trials.

Our procedures

also included, among others, reading agreements and contract amendments with vendors, consultants and clinical research organizations

and clinical site agreements in connection with conducting clinical trials, and evaluating the significant assumptions described above

and the methods used in developing the clinical trial estimates and re-calculating the amounts that were unpaid and prepaid at the balance

We confirmed contractual commitments and amounts completed, paid and unpaid directly with the third parties involved in performing

the clinical trial services on behalf of the Company.

We also made direct inquiries of financial and clinical Company personnel regarding

the contract amount including change orders, status and progress to completion of clinical trials, amounts paid to date under each contract,

and description of future commitments.

We also assessed the historical accuracy of management’s estimates by comparing current expenses

to prior-period expenses to identify unusual fluctuations, if any.

We have served as the Company’s auditor since

EISNERAMPER LLP

have served as the Company’s auditor since 2010.

PHARMACEUTICALS HOLDING CORP.

BALANCE SHEETS

31, 2021 AND 2020

Thousands, Except Par Value and Share Amounts)

Iselin, New Jersey

March 13, 2023

TONIX PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED BALANCE

DECEMBER 31, 2022 AND 2021

(In Thousands, Except Par Value and Share Amounts)

Current assets:

4 unchanged sentences

Operating lease right-to-use assets

Security deposit

Restricted cash

Intangible asset

Other non-current assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

8 unchanged sentences

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

Preferred stock, $ 0.001

shares authorized

Series B Convertible Preferred stock, 5,313 shares designated as of both December 31, 2021 and 2020;

Series B Convertible Preferred stock, 0

shares designated as of both December 31, 2022 and 2021;

issued and outstanding - None

Series A Convertible Preferred stock, 0 shares designated as of both December 31, 2021 and 2020;

Series A Convertible Preferred stock, 0

shares designated as of both December 31, 2022 and 2021;

issued and outstanding - None

Common stock, $ 0.001 par value;

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

496,245,564 and 206,008,683 shares issued and outstanding as of December 31, 2021 and 2020, respectively and 129,041 and 54,447 shares to be issued as of December 31, 2021 and December 31, 2020, respectively

Common stock, $ 0.001

1,000,000,000

and 25,000,000 shares

authorized as of December 31, 2022 and 2021, respectively;

and 15,638,274

shares issued and outstanding as of December 31, 2022 and 2021, respectively and 93,741

shares to be issued as of December 31, 2022 and December 31, 2021, respectively

Additional paid in capital

2 unchanged sentences

Total stockholders’ equity

Total liabilities and stockholders’ equity

the accompanying notes to the consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

STATEMENTS OF OPERATIONS

Thousands, Except Share and Per Share Amounts)

Total liabilities and stockholders’

See the accompanying notes to the consolidated

financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED STATEMENTS

OF OPERATIONS

(In Thousands, Except Share and Per Share Amounts)

Year ended December 31,

3 unchanged sentences

Operating loss

Interest income, net

Warrant deemed dividend

Preferred stock deemed dividend

Interest income

Preferred stock

deemed dividend

Net loss available to common stockholders

Net loss per common share, basic and diluted

Weighted average common shares outstanding, basic and diluted

the accompanying notes to the consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

STATEMENTS OF COMPREHENSIVE LOSS

Net loss per common share, basic and

Weighted average common shares outstanding,

basic and diluted

See the accompanying notes to the consolidated

financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE LOSS

(In Thousands)

Year ended December 31,

2 unchanged sentences

Comprehensive loss

the accompanying notes to the consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

STATEMENTS OF STOCKHOLDERS’ EQUITY

Thousands, Except Share and Per Share Amounts)

B Convertible

See the accompanying notes to the consolidated

financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED STATEMENTS

OF STOCKHOLDERS’ EQUITY

(In Thousands, Except Share and Per Share Amounts)

Comprehensive

December 31, 2020

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

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

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

of common stock under At-the-market offering, net of transactional expenses of $ 2,332

of common stock under 2021 Purchase Agreement, net of transactional expenses of $ 75

of commitment shares under 2021 Purchase agreement

of common stock in the acquisition of the OyaGen license

of commitment shares under Lincoln park Purchase agreement

stock purchase plan

currency transaction loss

December 31, 2021

the accompanying notes to the consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

STATEMENT OF STOCKHOLDERS’ EQUITY

In Thousands Except Per Share Amounts)

B Convertible

Income (loss)

Balance, December 31, 2021

Issuance of common stock under At-the-market offering, net

of transactional expenses of $ 3,078

Issuance of common stock under 2022 Purchase Agreement

Issuance of common stock under 2021 Purchase Agreement

Issuance of commitment shares under 2022 Purchase agreement

Preferred stock deemed dividend

Employee stock purchase plan

Stock-based compensation

Foreign currency transaction loss

Balance, December 31, 2022

See the accompanying notes to the consolidated

financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(In Thousands, Except Share and Per Share Amounts)

Comprehensive

December 31, 2019

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

dividend in connection with repricing of November 2019 warrants

deemed dividend

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

expenses of $ 711 )

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

stock deemed dividend

of common stock and common stock warrants in February 2020 net of transactional expenses of $ 292

of common stock upon conversion of Series B Convertible preferred stock

of common stock in March 2020 net of transactional expenses of $ 1,221

of common stock in June 2020 under the equity line

of common stock under At-the-market offering, net of transaction expenses of $ 2,304

of common stock in the acquisition of Trigemina assets

of common stock in July 2020 net of transactional expenses of $ 829

of common stock in exchange for exercise of warrants in July and August 2020 (see note 13)

commitment under 2020 Purchase Agreement

of common stock under 2020 Purchase Agreement

stock purchase plan

currency transaction loss

December 31, 2020

the accompanying notes to the consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

STATEMENTS OF CASH FLOWS

Income (loss)

Balance, December 31, 2020

Issuance of common stock in January 2021 ($ 25.60

per share), net of transactional expenses of $ 3,096

Issuance of common stock in exchange for exercise of warrants

in March 2021 ($ 18.24

Issuance of common stock in February 2021 ($ 38.40

per share), net of transactional expenses of $ 5,002

Issuance of common stock under At-the-market offering, net

of transactional expenses of $ 2,332

Issuance of common stock under 2021 Purchase Agreement, net

of transactional expenses of $ 75

Issuance of commitment shares under 2021 Purchase agreement

Issuance of common stock in the acquisition of the OyaGen license

Issuance of commitment shares under Lincoln park Purchase agreement

Employee stock purchase plan

Stock-based compensation

Foreign currency transaction loss

Balance, December 31, 2021

See the accompanying notes to the consolidated

financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED STATEMENTS

OF CASH FLOWS

(In Thousands)

Year ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

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

Adjustments to reconcile net loss to net cash used in operating

Depreciation and amortization

13 unchanged sentences

Proceeds from ESPP

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

Proceeds, net of $ 10,505 and $ 4,646 expenses, from sale of common stock and warrants

Proceeds, net of $ 6,659

expenses, from sale of convertible redeemable preferred stock

Redemption of convertible redeemable preferred stock

Proceeds, net of $ 3,078

expenses, from sale of common stock and warrants

Net cash provided by financing activities

Effect of currency rate change on cash

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash beginning of the period

Cash, cash equivalents and restricted cash end of period

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

Cash, cash equivalents and restricted

cash beginning of the period

Cash, cash equivalents and restricted

cash end of period

Supplemental disclosures of cash flow information:

Purchases of property and equipment included in accounts payable and accrued liabilities

Warrants deemed dividend

Series A Convertible preferred stock and deemed dividend

the accompanying notes to consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

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 diagnostics

to treat and prevent human disease and alleviate suffering.

The therapeutics include small molecules and biologics and all drug

product and diagnostic candidates are still in development.

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

and its wholly owned subsidiaries,

Tonix Sub, Krele LLC, Tonix Pharmaceuticals (Canada), Inc., Tonix Medicines, Inc., Jenner LLC, Tonix 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 December 31, 2021,

the Company had working capital of approximately $ 167.3 million .

At December 31, 2021, the Company had an accumulated deficit

of approximately $ 359.8 million .

The Company held cash and cash equivalents of approximately $ 178.7 million as of December 31,

Company believes that its cash resources at December 31, 2021 and the proceeds that it raised from equity offerings in the first

quarter of 2022 (See Note 19), will meet its operating and capital expenditure requirements through the end of 2022, but not beyond.

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.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

Purchases of property and equipment

included in accounts payable and accrued liabilities

Preferred stock deemed dividend

See the accompanying notes to consolidated financial

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

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

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 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.

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 December 31, 2022, the Company had working capital of approximately

$ 112.6 million.

31, 2022, the Company had an accumulated deficit of approximately $ 470.0

The Company held cash and cash equivalents of approximately $ 120.2

million as of December 31, 2022.

The Company believes that

its cash resources at December 31, 2022 and the proceeds that it raised from equity offerings in the first quarter of 2023, net of amounts

paid to repurchase shares in the first quarter of 2023 (See Note 22), will meet its operating and capital expenditure requirements into

the fourth quarter of 2023, but not beyond.

These factors raise

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

The Company faces 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.

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.

2 – SIGNIFICANT ACCOUNTING POLICIES

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 consolidated financial statements, on a retroactive basis, to reflect

the reverse stock split for all periods presented.

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

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.

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.

The Company’s primary

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

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

to continue for the foreseeable future.

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

revenues, and there is no assurance that if 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.

The preparation of financial

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

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

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

Actual results could differ from those

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

and the percent of completion of research and development contracts.

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 December 31, 2021 and December 31, 2020, cash equivalents, which consisted of

money market funds, amounted to $ 120.4

million and $ 40.4

million , respectively.

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

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

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

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

The Company considers cash

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

or less when purchased.

At December 31, 2022 and December 31, 2021, cash equivalents, which consisted of money market funds, amounted

to $ 116.3 million

and $ 120.4 million, respectively.

cash, which is included in Other non-current assets on the consolidated balance sheet at December 31, 2022 and December 31, 2021 of approximately

$ 241,000 and $ 240,000 ,

respectively, collateralizes a letter of credit issued in connection with the lease of office space in Chatham, New Jersey and New York

City (see Note 19).

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

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

TONIX PHARMACEUTICALS

HOLDING CORP.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands)

2 unchanged sentences

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.

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

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 years ended December 31, 2022, and 2021 was $ 1,253,000 and

2 unchanged sentences

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 December 31, 2021, and 2020,

the Company believed that no impairment existed.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

Company determines if an arrangement is a lease at inception.

During the year ended December

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

Identifiable intangibles

with indefinite lives, which are included in Other non-current assets on the consolidated balance sheet, 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 December 31, 2022, and 2021, the Company believed that no impairment existed.

The Company determines if

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

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

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

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.

assets, lease liability, short term and lease liability, long term in the Company’s consolidated balance sheets.

ROU assets represent

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

payments arising from the lease.

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

value of lease payments over the lease term.

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

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

value of lease payments.

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

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.

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

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.

and Development Costs

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

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

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

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

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

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

The financial terms of these contracts

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

over which materials or services are provided under such contracts.

The Company accounts for trial expenses according to the timing

of various aspects of the 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.

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

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

at the current enacted tax rates.

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

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

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

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

The tax benefits recognized

in the 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 December 31, 2021, the Company has not recorded any unrecognized

tax benefits.

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

component of income tax expense.

March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law.

Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security

payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction

limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods

for qualified improvement property.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

compensation or other expense over the requisite service period.

The Company accounts for share-based awards in accordance with

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

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.

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

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

TONIX PHARMACEUTICALS

HOLDING CORP.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

All stock-based payments to

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

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

over the requisite service period.

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

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

Currency Translation

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

its functional currency.

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 consolidated balance sheets.

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 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 to owners.

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

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

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

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

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

stock during the period.

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.

Deferred income tax assets

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

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

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

income tax assets will be realized.

The Company recognizes a

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

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

The tax benefits recognized in the consolidated financial statements

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

As of December 31, 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.

The computation of basic and

diluted loss per share for the years ended December 31, 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 years

ended December 31, 2021 and 2020, as results of operations were a loss for the period.

dilutive securities (See Note 14 and Note 15) excluded from the computation of basic and diluted net loss per share, as of December

31, 2021 and 2020, are as follows:

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 for the years ended December 31, 2022 and 2021, as results of operations were a loss

for the period.

dilutive securities excluded from the computation of basic and diluted net loss per share, as of December 31, 2022 and 2021, are as follows:

Warrants to purchase common stock

Options to purchase common stock

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

Issued Accounting Pronouncements

In August 2020, the FASB issued

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts

in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ,

which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and

it also simplifies the diluted earnings per share calculation in certain areas.

The Company will adopt ASU 2020-06 on January 1, 2023,

under the modified retrospective method of transition.

The Company does not anticipate the adoption of ASU 2020-06 to impact the Company’s

financial position, results of operations or cash flows.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3 – PROPERTY AND EQUIPMENT, NET

2 unchanged sentences

Property and equipment, net:

Construction in progress

Land improvements

Office furniture and equipment

1 unchanged sentence

Leasehold improvements

Accumulated depreciation and amortization

October 1, 2021, the Company completed the acquisition of a research and development facility in Maryland totaling $ 17.5 million ,

to process development activities.

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, and approximately $ 1.5 million was allocated to Office furniture and equipment and Laboratory equipment.

Of the $ 1.5 million , $ 1 .0 million is included in Construction in progress as those assets were not ready for their intended use.

Additionally,

we have incurred approximately $ 1.1 million in work-in-process, which is included in construction in progress as of December 31,

As of December 31, 2021, the asset was operational, but the asset was not ready for its intended use.

September 28, 2020, the Company completed the purchase of its 40,000 square foot facility in Massachusetts for $ 4 .0 million,

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

Construction in progress

Accumulated depreciation and

On 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

million, to process development activities.

Of the total purchase price, $ 2.1

million was allocated to the value of land acquired, and $ 2.8 million was allocated to construction in progress, as the building

was not ready for its intended use.

Additionally, we have incurred approximately $ 22.8 million in work-in-process, which is included

in construction in progress as of December 31, 2021.

As of December 31, 2021, the asset the asset was not ready for its intended use.

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 December 31, 2021, the asset

the asset was not ready for its intended use.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

million was allocated to buildings, and approximately $ 1.5

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

During the year ended December 31, 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,

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

million was allocated to buildings.

Additionally, the Company incurred approximately $ 38.8

million of costs during the year ended December 31, 2022, bringing total costs incurred-to-date to $ 61.6

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

During the year ended December 31, 2022, the assets became

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 December 31, 2022, the

asset was not ready for its intended use.

4 – OTHER BALANCE SHEET INFORMATION

8 unchanged sentences

Professional fees and other

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

5 – 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:

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.

Fair value measurements affect

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

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

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

according to a hierarchy that includes:

Observable inputs, such as quoted prices in active markets.

Inputs, other than quoted prices in active markets, that are observable

either directly or indirectly.

Level 2 assets and liabilities include debt securities with quoted market prices that are traded less

frequently than exchange-traded instruments.

This category includes U.S.

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

Unobservable inputs

in which there is little or no market data.

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

of $ 120.4 million and $ 40.4 million , respectively.

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

both December 31, 2021 and 2020.

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

TONIX PHARMACEUTICALS

HOLDING CORP.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

As of December 31, 2022, and

December 31, 2021, the Company used Level 1 quoted prices in active markets to value cash equivalents of $ 116.3

million and $ 120.4

million, respectively.

The Company did not have any Level 2 or Level 3 assets or liabilities as of both December 31, 2022 and 2021.

6 – STOCKHOLDERS’ EQUITY

March 26, 2021, the Company filed an amendment to its articles of incorporation, as amended, to increase the number of shares

of common stock authorized from 400,000,000 to 800,000,000 .

September 3, 2021, 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 was initially provided with a 180 calendar day period, or until March 2, 2022, 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.

As the Company

did not regain compliance within this 180 -day period, the Company requested and received an additional compliance period of 180

calendar days to regain compliance with the Minimum Bid Price Requirement, and provided 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.

February 10, 2022, the Company filed an amendment to its articles of incorporation, as amended, to increase the number of shares

of common stock authorized from 800,000,000 to 1,600,000,000 .

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

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.

share amounts and number of shares in the consolidated financial statements and related notes have been retroactively restated to reflect

the reverse stock split.

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 .

On December 13, 2022, the

Company filed an amendment to its articles of incorporation, as amended, to increase the number of shares of common stock authorized from

150,000,000 to 1,000,000,000 .

7 – TEMPORARY EQUITY

On October 26, 2022, the Company

closed on an offering (“the October offering”) with certain institutional investors (the “Investors”), pursuant

to which the Company issued and sold, in a private placement, 1,400,000

shares of the Company’s Series A Convertible Redeemable Preferred Stock, par value $ 0.001

per share (the “Series A Preferred Stock”), and 100,000

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 $ 14.3

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

The shares of Preferred Stock

were convertible, at a conversion price of $ 1.00

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 December 13, 2022, an amendment

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

shares of common stock from 150,000,000

to 1,000,000,000 , was approved at

a special meeting of shareholders.

The Series A Preferred Stock had the right to vote on such December 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 December 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 December 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 December 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 December 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 $ 1.00

The holders of the Preferred Stock had the right to require the Company to redeem their shares of preferred stock for cash

of the stated value of such shares through January 23, 2023.

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 CONSOLIDATED

FINANCIAL STATEMENTS

million in gross proceeds of the October offering was held in an escrow account, along with an additional $ 1.5

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

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

Series A Preferred Stock and Series B Preferred Stock was recorded at redemption value of approximately $ 14.7

million and $ 1.1

million, respectively, as calculated in the following table (in thousands):

A Preferred Stock

B Preferred Stock

Gross Proceeds

Preferred stock issuance costs

Accretion of carrying value to redemption value

Preferred stock subject to possible redemption

During December 2022, the

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

The Preferred Stock was redeemed during December 2022

of the $ 10.00

stated value of the Preferred Stock, or $ 15.8

million in the aggregate.

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.

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 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

The holders of the Preferred Stock had the right to require the Company to redeem their shares of preferred stock for cash

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

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.

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

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 at redemption value of approximately $ 26.3

million and $ 5.2

million, respectively, as calculated in the following table (in thousands):

A Preferred Stock

B Preferred Stock

Gross Proceeds

Preferred stock issuance costs

Accretion of carrying value to redemption value

Preferred stock subject to possible redemption

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.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8 – 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 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

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

On December 22, 2020, the

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

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

(the “Katana Assets”).

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

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

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

Agreement”), dated December 22, 2020.

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

million to Katana.

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

of operations for the year ended December 31, 2020.

Because the Katana intellectual property was acquired prior to 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.

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 December 31, 2022, no milestone payments have been accrued or paid in relation

to this agreement.

9 – 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

2,000,000 shares of the Company’s common stock, valued at $ 0.68 per share, based on the closing stock price on June 11,

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

The common stock is unregistered

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

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

accordance with management’s recommendations.

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

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.

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

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

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

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 to Tonix an exclusive license, with the right to sublicense, certain patents

related to the Trigemina Assets.

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

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

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

The Trigemina License Agreement

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

fee payable to Stanford.

As of December 31, 2022, other than the annual maintenance fee, no milestone payments have been accrued or paid

in relation to this agreement.

10 – 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.

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

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

Royalties payable on net

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

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

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

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

reasons such as material breach and bankruptcy.

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

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

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

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 subsequently amended.

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 Our option,

a total of approximately $ 3.4

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

Pursuant to the terms of the

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

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

WSU has reserved for itself the right to practice the

Technology for academic research and educational purposes.

Tonix is obligated to use commercially reasonable efforts to obtain regulatory

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

throughout the term of the WSU License Agreement.

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

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

Tonix is obligated to substantially

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

TONIX PHARMACEUTICALS

HOLDING CORP.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

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.

Royalties on each

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

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

Royalties payable on net sales of WSU Products

may be reduced by 50 %

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

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

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

As of December 31, 2022, no milestone payments have been accrued or paid in relation to this agreement.

11 – LICENSE AGREEMENT WITH CURIA

On December 12, 2022,

the Company entered into an exclusive license agreement with Curia for the development of three humanized murine mAbs for the

treatment or prophylaxis of SARS-CoV-2 infection.

We believe that the licensing of these mAbs strengthens our pipeline of

next-generation therapeutics to treat COVID-19, which is caused by SARS-CoV-2.

As consideration for entering into the License

Agreement, we paid a license fee of approximately $ 0.4

million to Curia.

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

December 31, 2022, other than the upfront fee, no payments have been accrued or paid in relation to this agreement.

12 – LICENSE AGREEMENT WITH UNIVERSITY OF ALBERTA

On May 18, 2022, the

Company 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, Tonix 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 December 31, 2022, other than the upfront fee, no milestone payments have been

accrued or paid in relation to this agreement.

13 – LICENSE AGREEMENT WITH OYAGEN

April 14, 2021, the Company and OyaGen, Inc.

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

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

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

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

License Agreement.

consideration for entering into the License Agreement, Tonix paid a low-seven digit license fee to OyaGen, and issued to OyaGen

and an affiliated entity an aggregate of 2,752,294 shares of the Company’s common stock, which are unregistered and subject

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

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

shares were valued at $ 3 .0 million, which was recorded as research and development expense.

The OyaGen License also provides for

single-digit royalties and contingent milestone payments.

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

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

On April 14, 2021, the Company

and OyaGen, Inc.

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

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

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

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

As consideration for entering

into the License Agreement, Tonix paid a low-seven digit license fee to OyaGen, and issued to OyaGen and an affiliated entity an aggregate

shares of the Company’s common stock.

The shares were valued at $ 3 .0

million, which was recorded as research and development expense.

The OyaGen License also provided for single-digit royalties and contingent

milestone payments.

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.

14 – LICENSE AGREEMENT WITH INSERM

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

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

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

Centre Hospitalier Universitaire of Toulouse.

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

payments upon the occurrence of specified sales milestones totaling approximately $ 0.4 million , as well royalties on net sales

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

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

12 – LICENSE AGREEMENTS WITH COLUMBIA UNIVERSITY

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

the Trustees of Columbia University in the City of New York (“Columbia”) pursuant to which Columbia granted to Tonix

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

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

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

TFF2 Technology for academic research and educational purposes.

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

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

The Company is obligated to use Commercially

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

specified developmental milestones.

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

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

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

Royalties on each particular

TFF2 Product are payable on a country-by-country and Product-by-Product basis until the latest of (i) the date of expiration of

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

period of time after the first commercial sale of a TFF2 Product in the country in question.

Royalties on each particular Other

Product are payable on a country-by-country and product-by-product basis until a specified period of time after the first commercial

sale of such particular Other Product in such country.

Royalties payable on net sales of the TFF2 Product and Other Products may

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

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

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

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

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

In addition, the Company

shall pay Columbia 5 % of consideration, other than royalty payments and certain other categories of consideration, payable to

the Company by a sublicensee.

On February 11, 2021,

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

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

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

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

specified sales milestones totaling approximately $ 0.4

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

As of December 31, 2022, no milestone payments have been accrued or paid in relation to this agreement.

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

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

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

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

thereunder (each, a “Product”).

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

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

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

license fee, was paid during the second quarter of 2020.

Both installments of the license fee were previously recorded to research

and development expenses.

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

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

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

Royalties on each particular Product

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

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

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

a regulatory agency.

15 – LICENSE AGREEMENTS WITH COLUMBIA UNIVERSITY

On September 16, 2019, the

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

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

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

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

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

research and educational purposes.

The Company paid a five-digit

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

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

The Company is obligated to use Commercially Reasonable

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

TONIX PHARMACEUTICALS

HOLDING CORP.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

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

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

Royalties payable on net sales of the Product

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

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

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

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

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

In addition, the Company shall

pay Columbia 5 % of consideration, other than royalty payments and certain other categories of consideration, payable to the Company

by a sublicensee.

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

Royalties payable on

net sales of the TFF2 Product and Other Products may be reduced by 50 %

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

licensed to Tonix under the Columbia License Agreement, provided that the royalty payable on a Product or Other Product may not be reduced

by more than 50 %.

The Company is also

obligated to make contingent milestone payments to Columbia totaling $ 4.1

million on a Product-by-Product basis upon the achievement of certain development, approval and sales milestones related to a

TFF2 Product.

In addition, the Company shall pay Columbia 5 %

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

As of December 31, 2022, no milestone payments have been accrued or paid in relation to this agreement.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

On May 20, 2019, the Company

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

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

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

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

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

academic research and educational purposes.

The Company 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 agreed to pay

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

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

Products”) sold by the Company or a sublicensee.

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

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

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

of any market exclusivity period granted by a regulatory agency.

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

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

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

Royalties payable on net sales

of the Product and Other Products may be reduced by 50 %

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

rights licensed to the Company under the License Agreement, provided that the royalty payable on a Product or Other Product may not be

reduced by more than 50 %.

The Company is also

obligated to make contingent milestone payments to Columbia totaling $ 3 million

on a Product-by-Product basis upon the achievement of certain development, approval and sales milestones related to a Product.

addition, the Company shall pay Columbia 5 %

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

As of December 31, 2022, no milestone payments have been accrued or paid in relation to this agreement.

16 – SALE OF COMMON STOCK

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”).

Pursuant to 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.

During the year ended December

31, 2022, the Company sold 1 .0

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

Subsequent to December

31, 2022, the Company sold 0.6

million shares of common stock under the 2022 Purchase Agreement with Lincoln Park for net proceeds of approximately $ 0.4

PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Agreement with Lincoln Park

December 3, 2021, the Company entered into a purchase agreement (the “Purchase Agreement with Lincoln Park”) and a

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

On December 3, 2021, the Company

entered into a purchase agreement (the “Purchase Agreement with Lincoln Park”) and a registration rights agreement (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 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 Purchase Agreement with

Lincoln Park.

Pursuant to the terms of the Purchase Agreement with Lincoln Park, Lincoln Park has agreed to purchase

from the Company up to $ 80,000,000 of the Company’s common stock (subject to certain limitations) from time to time during

the term of the Purchase Agreement with Lincoln Park.

Pursuant to the terms of the Lincoln Park 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 Purchase Agreement with Lincoln Park.

to the terms of the Purchase Agreement with Lincoln Park, at the time the Company signed the Purchase Agreement with Lincoln Park and the

Lincoln Park Registration Rights Agreement, the Company issued 2,909,091 shares of

common stock to Lincoln Park as consideration for its commitment to purchase shares of our common stock under the

Purchase Agreement with Lincoln Park.

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 Purchase Agreement with Lincoln Park.

shares were sold during the year ended December 31, 2021, under the Purchase Agreement with Lincoln Park.

Subsequent to December 31,

2021, the Company has sold 22 .0 million shares of common stock under the Purchase Agreement with Lincoln Park, for net proceeds of

approximately $ 4.5 million .

Pursuant to the terms of the Lincoln Park 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 Purchase Agreement

with Lincoln Park.

Pursuant to the terms of the

Purchase Agreement with Lincoln Park, at the time the Company signed the Purchase Agreement with Lincoln Park and the Lincoln Park Registration

Rights Agreement, the Company issued 90,910

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

with Lincoln Park.

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 Purchase Agreement with Lincoln Park.

During the year ended December

31, 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

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

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

As the Company has issued approximately 2.9

million shares to Lincoln Park, by December 31, 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.

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.

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”).

Pursuant to the terms of the 2021 Purchase

Agreement, Lincoln Park has agreed to purchase from the Company up to $ 80,000,000 of the Company’s common stock (subject

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

Pursuant to the terms of the 2021 Registration

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

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

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

Rights Agreement, the Company issued 1,280,000 shares of common stock to Lincoln

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

The commitment

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

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

the year ended December 31, 2021, the Company sold an aggregate of approximately 64.5 million shares of common stock under the

2021 Purchase Agreement, for gross proceeds of approximately $ 41.3 million .

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 64.5 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 2021 Purchase Agreement equals or exceeds a threshold amount.

As the Company has issued approximately

64.5 million shares to Lincoln Park, during the year end December 31, 2021, 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.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 year ended December 31, 2021, the Company sold an aggregate of approximately 2 .0

million shares of common stock under the 2021 Purchase Agreement, for gross proceeds of approximately $ 41.3

During the year ended December 31, 2022, no shares of common stock were sold under the 2021 Purchase Agreement.

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.

2021 Financing

February 8, 2021, the Company entered into a securities purchase agreement with certain institutional investors relating to the

issuance and sale of 58,333,334 shares of its common stock, in a registered direct public offering (“the February 2021 Financing”),

with A.G.P/Alliance Global Partners (“AGP”), acting as placement agent.

The public offering price for each share of

common stock was $ 1.20 .

On February 8, 2021, the Company

entered into a securities purchase agreement with certain institutional investors relating to the issuance and sale of 1.8

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

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

The public offering price for each share of common stock was $ 38.40 .

The February 2021 Financing closed on February 9, 2021.

AGP received a cash fee of 7 % of the gross proceeds,

for an aggregate amount of $ 4.9 million .

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

The Company received

net proceeds of approximately $ 65 .0 million, after deducting the fees and other offering expenses.

AGP received a cash fee of 7 %

of the gross proceeds, for an aggregate amount of $ 4.9

The Company incurred other offering expenses of approximately $ 0.1

The Company received net proceeds of approximately $ 65 .0

million, after deducting the fees and other offering expenses.

2021 Financing

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

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

with AGP as placement agent.

On January 11, 2021, the Company

entered into a securities purchase agreement with certain institutional investors relating to the issuance and sale of 1.6

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

The public offering price for each share of common stock was $ 25.60 .

The January 2021 Financing closed

on January 13, 2021.

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

The Company incurred

other offering expenses of approximately $ 0.3 million .

The Company received net proceeds of approximately $ 36.9 million , after

deducting the fees and other offering expenses.

At-the-Market

April 8, 2020, the Company entered into a sales agreement (the “Sales Agreement”) with AGP pursuant to which the Company

may issue and sell, from time to time, shares of the Company’s common stock having an aggregate offering price of up to

The January 2021 Financing closed on January 13, 2021.

AGP received a cash fee of 7 %

of the gross proceeds, for an aggregate of $ 2.8

The Company incurred other offering expenses of approximately $ 0.3

The Company received net proceeds of approximately $ 36.9

million, after deducting the fees and other offering expenses.

TONIX PHARMACEUTICALS

HOLDING CORP.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

At-the-Market Offerings

On April 8, 2020, the

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

from time to time, shares of the Company’s common stock having an aggregate offering price of up to $ 320 .0

million in at-the-market offerings (“ATM”) sales.

AGP will act as sales agent and will be paid a 3 % commission on each

sale under the Sales Agreement.

The Company’s common stock will be sold at prevailing market prices at the time of the sale,

and, as a result, prices will vary.

During the year ended December 31, 2021, the Company

sold approximately 110.2 million shares of common stock under the Sales Agreement, for net proceeds of approximately $ 69.3 million .

Subsequent to December 31, 2021, the Company has sold 15.6 million shares of common stock under the Sales Agreement, for net proceeds

of approximately $ 4.3 million

Lincoln Park Transaction

September 3, 2020, the Company entered into a purchase agreement (the “2020 Purchase Agreement”) and a registration

rights agreement (the “2020 Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”).

Pursuant to the terms of the 2020 Purchase Agreement, Lincoln Park has agreed to purchase from the Company up to $ 30,000,000 of

the Company’s common stock (subject to certain limitations) from time to time during the term of the 2020 Purchase Agreement.

Pursuant to the terms of the 2020 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 2020 Purchase Agreement.

to the terms of the 2020 Purchase Agreement, at the time the Company signed the 2020 Purchase Agreement and the 2020 Registration

Rights Agreement, the Company issued 600,000 shares of common stock to Lincoln Park

as consideration for its commitment to purchase shares of our common stock under the 2020 Purchase Agreement.

The commitment shares

were valued at $ 498,000 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 2020 Purchase Agreement.

the year ended December 31, 2020, the Company sold an aggregate of approximately 25.4 million shares of common stock under the

2020 Purchase Agreement, for gross proceeds of approximately $ 14.6 million .

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

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 2020 Purchase Agreement (approximately 26 million shares) to Lincoln

Park under the 2020 Purchase Agreement without stockholder approval, unless the average price of all applicable sales of its common

stock to Lincoln Park under the 2020 Purchase Agreement equals or exceeds a threshold amount.

As the Company has issued approximately

26 million shares to Lincoln Park, during the year end December 31, 2020, under the 2020 Purchase Agreement at less than the threshold

amount, the Company will not sell any additional shares under the 2020 Purchase Agreement without shareholder approval.

2020 Financing

July 13, 2020, the Company entered into an underwriting agreement with AGP, relating to the issuance and sale of 20,940,000 shares

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

The public offering price for

each share of common stock was $ 0.50 .

The July 2020 Financing closed on July 15, 2020.

AGP purchased the shares at a seven percent

discount to the then current public price, for an aggregate discount of $ 0.7 million .

The Company incurred other offering expenses

of approximately $ 0.1 million .

The Company received net proceeds of approximately $ 9.6 million , after deducting the underwriting

discount and other offering expenses.

2020 Financing

February 28, 2020, the Company entered into an underwriting agreement with AGP, relating to the issuance and sale of 14,550,000

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

The public offering price

for each share of common stock was $ 1.10 .

The March 2020 Financing closed on March 3, 2020.

AGP purchased the shares at a seven

percent discount to the then current public price, for an aggregate discount of $ 1.1 million .

The Company incurred other offering

expenses of approximately $ 0.1 million .

The Company received net proceeds of approximately $ 14.8 million , after deducting the

underwriting discount and other offering expenses.

2020 Financing

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

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

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

with each unit consisting of one share of Series B Convertible Preferred Stock, with a conversion price of $ 0.57 per share, convertible

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

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

February 2020 Financing closed on February 11, 2020.

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

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

The Company incurred other offering expenses

of approximately $ 0.5 million .

The Company received net proceeds of approximately $ 6.5 million , after deducting the underwriting

discount and other offering expenses.

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

Series B Convertible Preferred Stock was determined to be less than the fair value of the underlying common stock at the date

of commitment, resulting in a beneficial conversion feature (“BCF”) at that date.

Since the Series B Preferred Stock

has no stated maturity or redemption date and is immediately convertible at the option of the holder, the discount created by

the BCF of $ 1.3 million , based on intrinsic value, was charged to additional paid in capital as a non-cash “deemed dividend”

and included in net loss to common stockholders.

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

February and March 2020, 10.8 million of the warrants issued in the February 2020 Financing, with an exercise price of $ 0.57 ,

were exercised for proceeds of approximately $ 6.2 million .

August 2020, 2.2 million of the warrants issued in the February 2020 Financing, with an exercise price of $ 0.57 , were exercised

for proceeds of approximately $ 1.3 million .

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

2019 Financing

November 14, 2019, the Company sold securities consisting of 547,420 Class A Units at a public offering price of $ 1.94 per unit,

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

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

at a public offering price of $ 1,000 per unit, with each unit consisting of one share of Series A Convertible Preferred Stock,

with a conversion price of $ 1.94 per share, convertible into 515.464 shares of common stock, primary warrants to purchase 515.464

shares of common stock, and common warrants to purchase 257.732 shares of common stock (the “November 2019 Financing”).

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

The common warrants had an exercise price of $ 1.94 and expired 12 months from the date of issuance.

The common warrants were exercisable

on a cashless basis at the option of the holder on the earlier of 30 days from issuance and the date by which an aggregate of

$ 9 .0 million of the Company’s securities were traded.

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

of the warrants issued in the November 2019 Financing was triggered.

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

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

The non-cash “deemed dividend”

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

During February and March 2020, 2.3 million

of the warrants issued in the November 2019 financing, with an exercise price of $ 0.57 , were exercised for proceeds of approximately

$ 1.3 million .

Lincoln Park Transaction

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

rights agreement (the “2019 Registration Rights Agreement”) with Lincoln Park.

Pursuant to the terms of the 2019 Purchase

Agreement, Lincoln Park has agreed to purchase from us up to $ 15,000,000 of the Company’s common stock (subject to certain

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

Pursuant to the terms of the 2019 Registration

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

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

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

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

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

The commitment shares

were valued at $ 200,000 and recorded as an addition to equity for the issuance of the common stock and treated as a reduction

to equity as a cost of capital to be raised under the 2019 Purchase Agreement.

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

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

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

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

the year ended December 31, 2020, the Company sold an aggregate of approximately 464,471 shares of common stock under the 2019

Purchase Agreement, for gross proceeds of approximately $ 0.3 million .

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

AGP will act as sales agent and will be paid a 3 %

commission on each sale under the Sales Agreement.

The Company’s common stock will be sold at prevailing market prices at the time

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

During the year ended December 31, 2022, the Company sold approximately 56.4

million shares of common stock under the Sales Agreement, for net proceeds of approximately $ 85.3

During the year ended December 31, 2021, the Company sold approximately 3.5

million shares of common stock under the Sales Agreement, for net proceeds of approximately $ 69.3

Subsequent to December 31, 2022, the Company has sold 2.1

million shares of common stock under the Sales Agreement, for net proceeds of approximately $ 1.4

17 – STOCK-BASED COMPENSATION

Incentive Plans

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

2019 Stock Incentive Plan (the

“2019 Plan”).

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

With the adoption of

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

On January 16, 2020, the Company’s

On May 3, 2019, the Company’s

stockholders approved the Tonix Pharmaceuticals Holding Corp.

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

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

With the adoption of the Amended and Restated 2020 Plan

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

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

Amended and Restated 2020 Stock

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

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

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

The Amended and Restated 2020 Plan initially provided for the issuance of up to 10,000,000 shares of common stock, which amount will

be increased to the extent that awards granted under the Plans are forfeited, expire or are settled for cash (except as otherwise

provided in the Amended and Restated 2020 Plan).

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

provision” providing for an annual increase in the number of shares of our common stock available for issuance under the

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

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

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

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

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

The Board of Directors determines the exercise

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

However, the exercise price of an

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

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

The fair value of the common stock is determined

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

Additionally,

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

The 2019 Plan provided

for the issuance of up to 4,375

shares of common stock.

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

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

2020 Stock Incentive Plan (the “2020

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, the Company’s

stockholders approved the Tonix Pharmaceuticals Holding Corp.

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

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

Under the terms of the Amended

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

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

The Amended and Restated 2020 Plan initially

provided for the issuance of up to 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 31 st 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

As of December 31, 2022, 627,744

16,085,796 shares were available for future grants under the Amended and Restated 2020 Plan.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

summary of the stock option activity and related information for the Plans for the years ended December 31, 2021, and 2020

is as follows:

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

summary of the stock option activity and related information for the Plans for the years ended December 31, 2022, and 2021 is as

Weighted- Average

1 unchanged sentence

Weighted-Average

Contractual Term

Remaining Contractual Term

Aggregate Intrinsic

Outstanding at December 31, 2020

4 unchanged sentences

Exercisable at December 31, 2022

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

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

weighted average grant date fair value of options granted during the years ended December 31, 2021 and 2020, was $ 1.06 and $ 0.66

The aggregate intrinsic value

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

closing stock price at the respective dates.

The weighted average grant

date fair value of options granted during the years ended December 31, 2022 and 2021, was $ 5.25

per share, respectively.

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

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

value of the award is measured on the grant date.

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

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

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

The Company also issues premium options to executive

officers which have an exercise price greater than the grant date fair value and has issued performance-based options which vest

when target parameters are met or probable of being met, subject in each case to a one year minimum service period prior to vesting.

Stock-based compensation expense related to awards is amortized over the applicable service period using the straight-line method.

TONIX PHARMACEUTICALS

HOLDING CORP.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

The Company measures the

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

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

The fair value of the

award is measured on the grant date.

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

month thereafter for 24 months and expire ten

years from the date of grant.

In addition, the Company issues options to directors which vest over a one-year period.

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

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

in each case to a one

year minimum service period prior to vesting.

Stock-based compensation expense related to awards is amortized over the

applicable service period using the straight-line method.

assumptions used in the valuation of stock options granted during the year ended December 31, 2022 and 2021 were as follows:

Risk-free interest rate

0.79 % to 1.63 %

0.36 % to 1.25 %

Expected term of option

5.5 to 6 years

Expected stock price volatility

Expected dividend yield

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

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

the options as of the grant date.

The expected term of options is determined using the simplified method, as provided in

an SEC Staff Accounting Bulletin, and the expected stock price volatility is based on the Company’ historical stock

price volatility.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENT

compensation expense relating to options granted of $ 7.9 million , of which $ 5.5 million and $ 2.4 million , related to General and

Administration and Research and Development, respectively was recognized for the year ended December 31, 2021.

compensation expense relating to options granted of $ 2.9 million , of which $ 2 .0 million and $ 0.9 million , related to General and

Administration and Research and Development, respectively was recognized for the year ended December 31, 2020.

of December 31, 2021, the Company had approximately $ 14.2 million of unrecognized compensation cost related to non-vested awards

granted under the Plans, which the Company expects to recognize over a weighted average period of 1.91 years.

The risk-free interest rate

is based on the yield of Daily U.S.

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

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

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

Stock-based compensation expense

relating to options granted of $ 10.9

million, of which $ 7.9

million and $ 3 .0

million, related to General and Administration and Research and Development, respectively was recognized for the year ended December 31,

Stock-based compensation expense relating to options granted of $ 7.9

million, of which $ 5.5

million and $ 2.4

million, related to General and Administration and Research and Development, respectively was recognized for the year ended December

As of December 31, 2022, the

Company had approximately $ 11.6

million of unrecognized compensation cost related to non-vested awards granted under the Plans, which the Company expects to recognize

over a weighted average period of 1.73

Stock Purchase Plans

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

2019 Employee Stock Purchase Plan

(the “2019 ESPP”).

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

may be made under the 2019 ESPP Plan.

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

On May 3, 2019, the Company’s

stockholders approved the Tonix Pharmaceuticals Holdings Corp.

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

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

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

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

at the end of the offering period.

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

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

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

2020 Employee Stock Purchase Plan (the “2020

No further grants may be made under the 2020 ESPP Plan.

On May 6, 2022, the Company’s stockholders approved the Tonix

Pharmaceuticals Holdings Corp.

2022 Employee Stock Purchase Plan (the “2022 ESPP”, and together with the 2019 ESPP and the

2020 ESPP, the “ESPP Plans”)).

The 2022 ESPP allows eligible

employees to purchase up to an aggregate of 93,750 shares

of the Company’s common stock.

Under the 2022 ESPP, on the first day of each offering period, each eligible employee for that offering

period has the option to enroll for that offering period, which allows the eligible employees to purchase shares of the Company’s

common stock at the end of the offering period.

Each offering period under the 2022 ESPP is for six months, which can be modified from

time-to-time.

Subject to limitations, each participant will be permitted to purchase a number of shares determined by dividing the employee’s

accumulated payroll deductions for the offering period by the applicable purchase price, which is equal to 85 percent of

the fair market value of our common stock at the beginning or end of each offering period, whichever is less.

A participant must

designate in his or her enrollment package the percentage (if any) of compensation to be deducted during that offering period

for the purchase of stock under the 2020 ESPP, subject to the statutory limit under the Code.

As of December 31, 2021, 7 shares

were available for future sales under the 2020 ESPP.

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

For the year ended December 31, 2021, and 2020, $ 89,000 and $ 23,000 , respectively, was expensed.

In January 2020, 1,578 shares

that were purchased as of December 31, 2019, under the 2019 ESPP, were issued.

Accordingly, during the first quarter of 2020,

approximately $ 2,000 of employee payroll deductions accumulated at December 31, 2019, related to acquiring such shares, was transferred

from accrued expenses to additional paid in capital.

The remaining $ 7,000 was returned to the employees.

accumulated payroll deductions for the offering period by the applicable purchase price, which is equal to 85

percent of the fair market value of our common stock at the beginning or end of each offering period, whichever is less.

A participant

must designate in his or her enrollment package the percentage (if any) of compensation to be deducted during that offering period for

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

As of December 31, 2022, 9

approximately $ 32,000 of employee payroll deductions have accumulated and have been recorded in accrued expenses.

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 year ended December

31, 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.

2021, 116,505 shares that were purchased as of June 30, 2021, under the 2020 ESPP, were issued.

Accordingly, during July 2021,

approximately $ 68,000 of employee payroll deductions accumulated at June 30, 2021, related to acquiring such shares, was transferred

from accrued expenses to additional paid in capital.

The remaining $ 7,000 was returned to the employees.

Accordingly, during the first quarter of 2021, approximately

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.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

Accordingly, during the first quarter of 2022, approximately

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 December 31, 2022, approximately $ 43,000

of employee payroll deductions have accumulated and have been recorded in accrued expenses.

In January 2023, 93,741

shares that were purchased as of December 31, 2022, under the 2022 ESPP, were issued.

Accordingly, during the first quarter of 2023, approximately

of employee payroll deductions accumulated at December 31, 2023, related to acquiring such shares, was transferred from accrued expenses

to additional paid in capital.

The remaining $ 14,000

was returned to the employees.

18 – WARRANTS TO PURCHASE COMMON STOCK

following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at December 31, 2022:

February 2025

December 2023

the year ended December 31, 2021, 3,400 warrants from the February 2020 Financing, with an exercise price of $ 0.57 , were exercised

for proceeds of approximately $ 2,000 .

the year ended December 31, 2021, 5,441 and 474 warrants with a per share exercise price of $ 630 and $ 687.50 , respectively, expired.

the year ended December 31, 2020, 2.3 million warrants from the November 2019 financing, with an exercise price of $ 0.57 , were

exercised for proceeds of approximately $ 1.3 million .

During the year ended December 31, 2020, 2.3 million warrants from the November

2019 financing, with an exercise price of $ 0.50 , were exercised for proceeds of approximately $ 1.2 million .

the year ended December 31, 2020, 13 .0 million warrants from the February 2020 financing, with an exercise price of $ 0.57 , were

exercised for proceeds of approximately $ 7.5 million .

the year ended December 31, 2020, 2,500 warrants with a per share exercise price of $ 0.50 expired.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

Company has various operating lease agreements, which are primarily for office space.

These agreements frequently include one

or more renewal options and require the Company to pay for utilities, taxes, insurance and maintenance expense.

No lease agreement

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

At December 31, 2021, the Company has right-of-use assets of $ 0.9 million and a total lease liability for operating leases of

$ 1.0 million of which $ 0.5 million is included in long-term lease liabilities and $ 0.5 million is included in current lease liabilities.

December 31, 2021, future minimum lease payments for operating leases with non-cancelable terms of more than one year were as

follows (in thousands):

TONIX PHARMACEUTICALS

HOLDING CORP.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

No warrants were exercised

during the year ended December 31, 2022.

During the year ended December

31, 2021, 107

warrants from the February 2020 Financing, with an exercise price of $ 18.24 ,

were exercised for proceeds of approximately $ 2,000 .

During the year ended December

31, 2021, 5,441

warrants with a per share exercise price of $ 630.00

and $ 687.50 ,

respectively, expired.

The Company has various operating

lease agreements, which are primarily for office space.

These agreements frequently include one or more renewal options and require the

Company to pay for utilities, taxes, insurance and maintenance expense.

No lease agreement imposes a restriction on the Company’s

ability to engage in financing transactions or enter into further lease agreements.

At December 31, 2022, the Company has right-of-use

assets of $ 0.7

million and a total lease liability for operating leases of $ 0.7

million of which $ 0.3

million is included in long-term lease liabilities and $ 0.4

million is included in current lease liabilities.

December 31, 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,

Included interest

the year ended December 31, 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.

The Company also recognized

corresponding ROU assets of approximately $ 467,000 .

the year ended December 31, 2020, the Company entered into new operating leases and lease amendments, resulting in the Company

recognizing an additional operating lease liability of approximately $ 1.4 million based on the present value of the minimum rental

The Company also recognized a corresponding increase to ROU assets of approximately $ 1.4 million .

lease expense was $ 0.6 and $ 0.5 million for the years ended December 31, 2021 and 2020, respectively.

During the year ended December

31, 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.

The Company also recognized a corresponding increase to ROU assets of approximately

which represents a non-cash investing and financing activity.

During the year ended December

31, 2021, the Company entered into lease amendments, resulting in the Company recognizing an operating lease liability of approximately

based on the present value of the future minimum rental payments.

The Company also recognized corresponding ROU assets of approximately

Operating lease expense was

million for both years ended December 31, 2022 and 2021.

information related to leases was as follows:

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

Cash paid for amounts included in the

measurement of lease liabilities:

December 31, 2022

December 31, 2021

Operating cash flow from operating leases (in thousands)

Operating cash flow from operating leases (in

Weighted Average Remaining Lease Term

2 unchanged sentences

Operating leases

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

20 – COMMITMENTS

Company has entered into contracts with various contract research organizations with outstanding commitments aggregating approximately

The Company has entered into

contracts with various contract research organizations with outstanding commitments aggregating approximately $ 58.6

million at December 31, 2022 for future work to be performed.

The Company entered

into a construction contract with outstanding commitments aggregating approximately $ 30.1 million at December 31, 2021 for future

work to be performed.

March 3, 2021, the Company entered into a $ 2.9 million contingent non-binding Purchase and Sales Agreement in connection with

a property in Massachusetts.

The property is intended for process development activities.

The purchase is expected

to close during the second quarter of 2022.

The Company entered into a

construction contract with outstanding commitments aggregating approximately $ 2 .0

million at December 31, 2022 for future work to be performed.

contribution plan

Company has a qualified defined contribution plan (the “401(k) Plan”) pursuant to Section 401(k) of the Code, whereby

all eligible employees may participate.

Participants may elect to defer a percentage of their annual pretax compensation

to the 401(k) Plan, subject to defined limitations.

The Company is required to make contributions to the 401(k) Plan equal to

100 percent of each participant’s pretax contributions of up to six percent of his or her eligible compensation, and the

Company is also required to make a contribution equal to three percent of each participant’s salary, on an annual basis,

subject to limitations under the Code.

The Company charged operations $ 0.4 million and $ 0.1 million for the year ended December

31, 2021, and 2020, respectively, for contributions under the 401(k) Plan.

The Company has a qualified

defined contribution plan (the “401(k) Plan”) pursuant to Section 401(k) of the Code, whereby all eligible employees may participate.

Participants may elect to defer a percentage of their annual pretax compensation to the 401(k) Plan, subject to defined limitations.

Company is required to make contributions to the 401(k) Plan equal to 100

percent of each participant’s pretax contributions of up to six

percent of his or her eligible compensation, and the Company is also required to make a contribution equal to three

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

The Company charged operations

million and $ 0.4

million for the year ended December 31, 2022, and 2021, respectively, for contributions under the 401(k) Plan.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21 – INCOME TAXES –

of the net loss consist of the following (in thousands):

ended December 31,

2021, the foreign losses are comprised of $ 71.9 million related to the Irish operations and $ 1.8 million related to the Bermudan

operations of Tonix International Holding.

In 2020, the foreign losses were primarily comprised of $ 40.4 million related to the

Bermudan operations of Tonix International Holding.

reconciliation of the effect of applying the federal statutory rate to the net loss and the effective income tax rate used to

calculate the Company’s income tax provision is as follows:

Year ended December 31,

In 2022, the foreign losses

are primarily comprised of $ 86.7

million related to the Irish operations and $ 1.5

million related to the Bermudan operations of Tonix International Holding.

In 2021, the foreign losses were primarily comprised

million related to the Bermudan operations of Tonix International Holding.

reconciliation of the effect of applying the federal statutory rate to the net loss and the effective income tax rate used to calculate

the Company’s income tax provision is as follows:

Year Ended December 31,

Statutory federal income tax

3 unchanged sentences

Income Tax Provision

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

tax assets (liabilities) and related valuation allowance as of December 31, 2022 and 2021 were as follows (in thousands):

5 unchanged sentences

Net deferred tax assets

Company has incurred research and development (“R&D”) expenses, a portion of which qualifies for tax credits.

The Company conducted an R&D credit study to quantify the amount of credits and has claimed an R&D credit on its 2014-2017

A portion of these R&D credit carryforwards are subject to annual limitations in their use in accordance with

Internal Revenue Service Code (“IRC”) section 383.

The R&D credit carryforwards at December 31, 2021 have been

reduced to $ 0 .0 million to reflect IRC section 383 ownership changes through December 31, 2021 and the resulting inability to

utilize a portion of the R&D credit prior to its expiration.

December 31, 2021, the Company has $ 66.4

million of Ireland NOL carryforwards that do not expire.

At December 31, 2021, the Company has NOL carryforwards of $ 21 .0

million, which do not expire, but their utilization is limited to 80 % of taxable income.

Additionally, a portion of the federal NOL

carryforward is subject to annual limitation in their use in accordance with IRC section 382.

As of December 31, 2021, the

Company’s Federal NOL carryforwards of $ 12.9

million have an annual limitation of $ 2.4 million , and $ 8.6 million are not subject to limitations.

31, 2021, the Company has New Jersey NOL carryforwards of $ 6.6

million , which expire

in 20 years , are subject to annual limitations in their use in accordance with IRC section 382.

The New Jersey NOL carryforwards at December 31, 2021 have been reduced to reflect IRC

section 382 ownership changes through December 31, 2021 and resultant inability due to annual limitations, to utilize a portion of the

NOL prior to its expiration.

assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use

the existing deferred tax assets.

A significant piece of objective negative evidence evaluated was the cumulative loss incurred

over the three-year period ended December 31, 2021.

Such objective evidence limits the ability to consider other subjective evidence

such as our projections for future growth.

As such, the Company has determined that it is not more likely than not that the deferred

tax assets will be realized and accordingly, has provided a full valuation allowance against its gross deferred tax assets.

increase in the valuation allowance for the years ended December 31, 2021 and 2020 were $ 15.3 million , and $ 2.2 million respectively.

Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense.

However, as of December

31, 2021 there are no unrecognized tax benefits recorded.

The Company is subject to taxation in the United States and various

states and foreign jurisdictions.

As of December 31, 2021, the Company’s tax returns remain open and subject to examination

by the tax authorities for the tax years 2018 and after.

PHARMACEUTICALS HOLDING CORP.

TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has incurred research

and development (“R&D”) expenses, a portion of which qualifies for tax credits.

The Company conducted an R&D credit

study to quantify the amount of credits and has claimed an R&D credit on its 2014-2017 tax returns.

A portion of these R&D credit

carryforwards are subject to annual limitations in their use in accordance with Internal Revenue Service Code (“IRC”) section

The R&D credit carryforwards at December 31, 2022 have been reduced to $ 0 .0

million to reflect IRC section 383 ownership changes through December 31, 2022 and the resulting inability to utilize a portion of the

R&D credit prior to its expiration.

At December 31, 2022, the

Company has $ 165.5

million of Ireland net operating loss (“NOL”) carryforwards that do not expire.

As of December 31, 2022, the Company's

Federal NOL carryforwards of $ 3.6

million, which do

not expire, but their utilization is limited to 80 % of taxable income.

Additionally, the Company has New Jersey NOL carryforwards

million and Massachusetts NOL carryforwards of $ 0.3

million, which both expire

in 20 years .

The NOL carryforwards at December 31, 2022 have been reduced to reflect IRC section 382 ownership changes through December

31, 2022 and the resultant inability due to annual limitations, to utilize a portion of the NOL prior to its expiration.

Management assesses the available

positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.

A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December

Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.

As such, the Company has determined that it is not more likely than not that the deferred tax assets will be realized and accordingly,

has provided a full valuation allowance against its gross deferred tax assets.

The increase in the valuation allowance for the years ended

December 31, 2022 and 2021 were $ 9.5

million, and $ 15.3

million respectively.

The Company recognizes interest

accrued related to unrecognized tax benefits and penalties as income tax expense.

However, as of December 31, 2022 there are no unrecognized

tax benefits recorded.

The Company is subject to taxation in the United States and various states and foreign jurisdictions.

As of December

31, 2022, the Company’s tax returns remain open and subject to examination by the tax authorities for the tax years 2019 and after.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22 – SUBSEQUENT EVENTS

February 15, 2022, the Company granted options to purchase an aggregate of 15,480,690 shares of the Company’s common stock

to employees with an exercise price of $ 0.21 , with a term of ten years , vesting 1/3 on the first anniversary and 1/36th each month

thereafter for 24 months.

Additionally, the Company granted options to purchase 24,750,000 shares of the Company’s common

stock to certain employees with 10 % of such options vesting on the first anniversary of issuance, 10 % on the second anniversary

of issuance, 40 % on the third anniversary of issuance, and 40 % on the fourth anniversary of issuance, and expiring 10 years from

the date of issuance.

One-third of the stock options granted have an exercise price per share of $ 0.414 ;

one-third of the stock options granted have an exercise

price per share of $ 0.621 ;

and one-third

of the stock options granted have an exercise price per share of $ 0.828 .

February 10, 2022, the Company filed an amendment to its articles of incorporation, as amended, to increase the number of shares

of common stock authorized from 800,000,000 to 1,600,000,000 .

to December 31, 2021, the Company sold 15.6 million shares of common stock under the Sales Agreement with AGP for net proceeds of

approximately $ 4.3 million .

to December 31, 2021, the Company sold 22 .0 million shares of common stock under the Purchase Agreement with

Lincoln Park for net proceeds of approximately $ 4.5 million .

9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

January 1, 2023, the Company has repurchased 15,700,269

of its shares of common stock outstanding under its $ 12.5 million

s hare repurchase program at prices ranging from $ 0.44 to

per share for a gross aggregate cost of approximately $ 12.5

January 2023, the Board of Directors approved a new share repurchase

program pursuant to which the Company may repurchase up to $ 12.5

million in value of its outstanding common stock from time to time on the open market and in privately negotiated transactions

subject to market conditions, share price and other factors.

Since January 1, 2023, the

Company has repurchased 1,000,000 of

its shares of common stock outstanding under the new share repurchase program at $ 1.14

per share for a gross aggregate cost of $ 1.1

timing and amount of any shares repurchased will be determined based on the Company’s

evaluation of market conditions and other factors and the New Share Repurchase Program may

be discontinued or suspended at any time.

Repurchases will be made in accordance

with the rules and regulations promulgated by the Securities and Exchange Commission and certain other legal requirements to which the

Company may be subject.

Repurchases may be made, in part, under a Rule 10b5-1 plan,

which allows stock repurchases when the Company might otherwise be precluded from

to December 31, 2022, the Company regained compliance with the minimum bid price requirement for

continued listing on The Nasdaq Capital Market because the Company’s shares had a closing bid price at or above $ 1.00

per share for a minimum of 10

consecutive business days, as set forth in Nasdaq Listing Rule 5550(a)(2).

February 2, 2023, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Healion

Bio Inc., pursuant to which the Company acquired all the pre-clinical infectious disease assets

of Healion, including its portfolio of next-generation antiviral technology assets.

Healion’s drug portfolio includes a class of

broad-spectrum small molecule oral antiviral drug candidates with a novel host-directed mechanism of action, including TNX-3900, formerly

known as HB-121.

As consideration for entering into the Asset Purchase Agreement, the Company paid $ 1.2

million to Healion.

Because the Healion intellectual property was acquired prior to FDA approval, the cash consideration totaling

million, is expected to be expensed as research and development costs since there is no alternative future use and the acquired

intellectual property does not constitute a business.

On February 13, 2023, the

Company announced that it exercised an option to obtain an exclusive license from Columbia for the development of a portfolio of both

fully human and murine mAbs for the treatment or prophylaxis of SARS-CoV-2 infection, including the Company’s TNX-3600 and TNX-4100

product candidates, respectively.

The licensed mAbs were developed as part of a research collaboration and option agreement between the

Company and Columbia.

On February 23, 2023, the

Company granted options to purchase an aggregate of 4,394,303

shares of the Company’s common stock to employees with an exercise price of $ 0.73 ,

with a term of ten

years , vesting 1/3

on the first anniversary and 1/36 th

each month thereafter for 24 months.

Additionally, the Company granted options to purchase 1,327,500

shares of the Company’s common stock to certain employees with an exercise price of $ 0.91 ,

with a term of ten

years , vesting 1/3

on the first anniversary and 1/36 th

each month thereafter for 24 months.

Subsequent to December 31,

2022, the Company sold 2.1

million shares of common stock under the Sales Agreement with AGP for net proceeds of approximately $ 1.4

Subsequent to December 31,

2022, the Company sold 0.6

million shares of common stock under the 2022 Purchase Agreement with Lincoln Park for net proceeds of approximately $ 0.4

ITEM 9 - CHANGES IN AND DISAGREEMENTS

WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

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-K

Item 8. Financial Statements and Supplementary Data