What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-10 · 818 added, 763 removed, 587 unchanged (73% of the section changed)

FINANCIAL STATEMENTS

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED

BALANCE SHEETS

(In Thousands, Except Par Value and Share

PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Par Value and Share Amounts)

September 30,

Current assets:

Cash and cash equivalents

Receivables, net

Prepaid expenses and other

2 unchanged sentences

Intangible assets, net

Right-of-use assets, net

Operating lease right-to-use assets

Other non-current assets

LIABILITIES, REDEEMBABLE CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

1 unchanged sentence

Accrued expenses and other current liabilities

Lease liability, current

Lease liability, short term

Total current liabilities

Lease liability, net of current portion

Lease liability, long term

Total liabilities

Commitments (See Note 19)

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

5,000,000 shares authorized

Series B Convertible Preferred stock, 0 shares

designated as of both June 30, 2023 and December 31, 2022;

Series B Convertible Preferred stock, 0 shares designated as of both September 30, 2023 and December 31, 2022;

issued and outstanding - none

Series A Convertible Preferred stock, 0 shares designated as of both June 30, 2023 and December 31, 2022;

Series A Convertible Preferred stock, 0 shares designated as of both September 30, 2023 and December 31, 2022;

issued and outstanding - none

Stockholders’ equity:

Common stock, $ 0.001 par value;

160,000,000 shares authorized;

10,762,341 and 12,368,620 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively and 14,999 shares to be issued as of December 31, 2022

17,762,341 and 12,368,620 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively and 14,999 shares to be issued as of December 31, 2022

Additional paid in capital

2 unchanged sentences

Total stockholders’ equity

Total liabilities, redeemable convertible preferred stock and stockholders’ equity

See the accompanying notes to the condensed

consolidated financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF

(In Thousands, Except Share and Per

Share Amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Total liabilities and stockholders’ equity

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

(In Thousands, Except Share and Per Share Amounts)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Product revenue, net

COSTS AND EXPENSES:

Cost of revenue

Research and development

General and administrative

Selling, general and administrative

Costs and Expenses

Operating loss

Interest and other income, net

Interest income, net

Preferred stock deemed dividend

2 unchanged sentences

Weighted average common shares outstanding, basic and diluted

See the accompanying notes to the condensed

consolidated financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE LOSS

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

(In Thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Other comprehensive loss:

1 unchanged sentence

Comprehensive loss

See the accompanying notes to the condensed

consolidated financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENT OF

STOCKHOLDERS’ EQUITY

(In Thousands, Except Share and Per

Share Amounts)

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

MONTHS ENDED SEPTEMBER 30, 2023

Thousands, Except Share and Per Share Amounts)

Comprehensive

Balance, December 31, 2022

Repurchase of common stock under share repurchase program, including transactional expenses of $ 334

$ ( 470,038 )

Issuance of common stock under 2022 Purchase agreement with Lincoln Park

Issuance of common stock net of transactional expenses of $ 101

Repurchase of common stock under Share Repurchase Program

( 2,672,044 )

Issuance of common stock under 2022 Purchase agreement

Issuance of common stock under At-the-market offering, net of transactional expenses of $ 101

Employee stock purchase plan

2 unchanged sentences

Balance, March 31, 2023

Issuance of common stock net of transactional expenses of $ 36

$ ( 517,005 )

Issuance of common stock under At-the-market offering, net of transactional expenses of $ 36

Stock-based compensation

1 unchanged sentence

Balance, June 30, 2023

See the accompanying

notes to the condensed consolidated financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENT OF

STOCKHOLDERS’ EQUITY

(In Thousands, Except Share and Per

Share Amounts)

$ ( 545,361 )

Issuance of common stock under AGP Financing, net of transactional expenses of $ 726

Issuance of common stock upon exercise of prefunded warrants under AGP Financing

Stock-based compensation

Foreign currency transaction gain

Balance, September 30, 2023

$ ( 573,336 )

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

MONTHS ENDED SEPTEMBER 30, 2022

Thousands, Except Share and Per Share Amounts)

Comprehensive

Balance, December 31, 2021

$ ( 359,820 )

Issuance of common stock in January and March 2022 under At-the-market offering, net of transactional expenses of $ 507

4 unchanged sentences

Balance, March 31, 2022

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

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

Issuance of common stock under 2021 Purchase agreement

Preferred stock deemed dividend

Preferred stock dividend

Stock-based compensation

1 unchanged sentence

Balance, June 30, 2022

See the accompanying

notes to the condensed consolidated financial statements

TONIX PHARMACEUTICALS

HOLDING CORP .

CONDENSED CONSOLIDATED STATEMENTS OF

(In Thousands)

Six Months Ended June 30,

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

Issuance of common stock under the 2021 Purchase agreement

Issuance of commitment shares under 2022 Purchase Agreement

Stock-based compensation

Foreign currency transaction gain

Balance, September 30, 2022

$ ( 438,358 )

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

Depreciation and amortization

Gain on disposal of property and equipment

Stock-based compensation

Changes in operating assets and liabilities:

Receivables, net

Prepaid expenses and other

Accounts payable

Lease liabilities and ROU asset, net

Operating lease liabilities and ROU asset, net

Accrued expenses and other current liabilities

2 unchanged sentences

Purchase of a business

Disposal of property and equipment

Purchase of property and equipment

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchase of common stock

Proceeds from ESPP

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

Proceeds, net of $ 137 and $ 1,933 expenses, from sale of common stock and warrants

Proceeds, net of $ 0 and $ 4,255 expenses, from sale of convertible redeemable preferred stock

Redemption of convertible redeemable preferred stock

Repurchase of common stock

Proceeds, net of $ 863 and $ 2,738 expenses, from sale of common stock

Net cash (used in) provided by financing activities

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Preferred stock deemed dividend

See the accompanying

notes to the condensed consolidated financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

the accompanying notes to the condensed consolidated financial statements

PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND 2022 (UNAUDITED)

Tonix Pharmaceuticals Holding

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

(“Tonix Sub”), is a biopharmaceutical company focused

on commercializing, developing, discovering and licensing therapeutics to treat and prevent human disease and alleviate suffering.

therapeutics under development include both small molecules and biologics.

Tonix, through its recent acquisition, markets Zembrace®

SymTouch® (sumatriptan injection) 3 mg and Tosymra® (sumatriptan nasal spray) 10 mg.

Zembrace® SymTouch® and Tosymra®,

which were acquired as of June 30, 2023 (See Note 8), are each indicated for the treatment of acute migraine with or without aura

All other drug product and vaccine candidates are still in development, and are not approved or marketed.

30, 2023 AND 2022 (UNAUDITED)

NOTE 1 – BUSINESS

Tonix Pharmaceuticals

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

(“Tonix Sub”), is a biopharmaceutical

company focused on commercializing, developing, discovering and licensing therapeutics to treat and prevent human disease and alleviate

The therapeutics under development include both small molecules and biologics.

Tonix, through its recent acquisition,

markets Zembrace® SymTouch® (sumatriptan injection) 3 mg and Tosymra® (sumatriptan nasal spray) 10 mg.

SymTouch® and Tosymra®, which were acquired as of June 30, 2023 (See Note 10), are each indicated for the treatment of

acute migraine with or without aura in adults.

All other drug product and vaccine candidates are still in development, and are

not approved or marketed.

The condensed consolidated

financial statements include the accounts of Tonix Pharmaceuticals Holding Corp.

and its wholly owned subsidiaries, Tonix

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

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

All intercompany balances and transactions have been eliminated in consolidation.

and its wholly owned subsidiaries, Tonix Sub,

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

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

intercompany balances and transactions have been eliminated in consolidation.

Going Concern

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

At June 30, 2023, the Company had working capital

of approximately $ 32.9 million.

At June 30, 2023, the Company had an accumulated deficit of approximately $ 545.4 million.

held cash and cash equivalents of approximately $ 25.6 million as of June 30, 2023.

The Company believes

that its cash resources at June 30, 2023 and the proceeds that it raised from equity offerings in the third 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 continues to face significant

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

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

The Company believes it has the ability to obtain

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

available to fund operations.

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

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.

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

At September 30, 2023, the Company had working

capital of approximately $ 13.6 million.

At September 30, 2023, the Company had an accumulated deficit of approximately $ 573.3 million.

The Company held cash and cash equivalents of approximately $ 6.9 million as of September 30, 2023.

Company believes that its cash resources at September 30, 2023 and the proceeds that it raised from equity offerings in the fourth

quarter of 2023 (See Note 20), will not meet its operating and capital expenditure requirements through the fourth quarter of 2023.

These factors raise substantial doubt about the Company’s ability

to continue as a going concern.

The Company continues to face significant challenges and uncertainties and must 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, or at all.

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, its ability to achieve

our development and commercialization goals would be adversely affected and the Company may be forced to cease operations.

The financial

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

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SIGNIFICANT ACCOUNTING

Interim financial statements

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Operating results for

the three and six months ended June 30, 2023 are not necessarily indicative of results that may be expected for the year ending

December 31, 2023.

the three and nine months ended September 30, 2023 are not necessarily indicative of results that may be expected for the year

ending December 31, 2023.

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

1 unchanged sentence

10-K, filed with the Securities and Exchange Commission (“SEC”) on March 13, 2023.

TONIX PHARMACEUTICALS HOLDING

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND 2022 (UNAUDITED)

Reverse Stock Split

9 unchanged sentences

Risks and uncertainties

The Company’s

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

public health challenges.

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

these conditions to continue for the foreseeable future.

Further, the Company has not previously had commercial products available

for sale, and has yet to generate revenues from a commercial product, and there is no assurance that the Company will be able

to generate cash flow to fund operations from any of its commercial products or products in development if and when approved.

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 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 now has commercial products available for sale, and generates revenue from the sale of its Zembrace® SymTouch®

and Tosymra® products, with no assurance that the Company will be able to generate sufficient cash flow to fund operations from its

commercial products or products in development if and when approved.

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.

TONIX PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022 (UNAUDITED)

Use of estimates

The preparation of

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

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

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

results could differ from those estimates.

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

compensation and other equity instruments, the percent of completion of research and development contracts, fair value estimates

for assets acquired in business combinations, and assessment of useful lives of acquired intangible assets.

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, but are not limited to, provisions for product returns, coupons, rebates,

chargebacks, discounts, allowances, inventory realization, the assumptions used in the fair value of stock-based compensation and

other equity instruments, the percent of completion of research and development contracts, fair value estimates for assets acquired

in business combinations, and assessment of useful lives of acquired intangible assets.

Business Combinations

9 unchanged sentences

part of the business acquisition transaction and are expensed as incurred.

Segment Information and Concentrations

Operating segments are

defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating

decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company views

its operations and manages its business in one segment.

The Company has two

products that each accounted for more than 10 % of total revenues during the three and nine months ended September 30, 2023.

products collectively accounted for 100 % of revenues during the three and nine months ended September 30, 2023.

of September 30, 2023, accounts receivable from four customers accounted for 25 % , 23 % , 19 %

of total accounts receivable.

For the three and nine months ended September 30, 2023, revenues from four customers accounted

for 25 % , 21 % , 18 %

of net product revenues, respectively.

As of September 30, 2022, and for the three and nine months ended September 30, 2022,

the Company had no commercialized products and therefore had no accounts receivables or revenues.

Cash, Cash Equivalents and Restricted Cash

2 unchanged sentences

three months or less when purchased.

At June 30, 2023 and December 31, 2022, cash equivalents, which consisted of money market

At September 30, 2023 and December 31, 2022, cash equivalents, which consisted of money market

funds, amounted to $ 3.7 million and $ 116.3 million, respectively.

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

on the condensed consolidated balance sheet, at both June 30, 2023, and December 31, 2022, of approximately $ 243,000 and $ 241,000 ,

on the condensed consolidated balance sheet, at both September 30, 2023, and December 31, 2022, of approximately $ 244,000 and $ 241,000 ,

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

New York, New York (see Note 18).

In addition, the Company has $ 758,000 of restricted cash held by vendors in escrow accounts for patient support services as of September 30, 2023.

The following table

1 unchanged sentence

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

September 30,

(in thousands)

Cash and cash equivalents

Restricted cash – short term

Restricted cash

Accounts Receivable, net

Accounts receivable consists of amounts due from our wholesale and other third-party distributors and pharmacies and have standard

payment terms that generally require payment within 30 to 90 days.

For certain customers, the accounts receivable for the customer

is net of prompt payment or specialty pharmacy discounts.

We do not adjust our receivables for the effects of a significant financing

component at contract inception if we expect to collect the receivables in one year or less from the time of sale.

We provide reserves

against accounts receivable for estimated losses that may result from a customer’s inability to pay.

Amounts determined to

be uncollectible are charged or written-off against the reserve.

However, during the period covered by the Transition Services

Agreement, the Seller has agreed to collect the accounts receivable on behalf of the Company and net settle within 45 days from

each month-end.

See note 10 for further details.

The Company had no accounts receivable as of any prior period presented other than as of September 30, 2023.

As of September

30, 2023 , the Company did not have an allowance for doubtful accounts.

An allowance for doubtful accounts is determined based on

the financial condition and creditworthiness of customers and the Company considers economic factors and events or trends expected to

affect future collections experience.

Any allowance would reduce the net receivables to the amount that is expected to be collected.

payment history of the Company’s customers will be considered in future assessments of collectability as these patterns are established

over a longer period .

Concentration of Credit Risk

Financial instruments

that potentially subject us to concentrations of credit risk include cash and cash equivalents, and accounts receivable.

to minimize the risks related to cash and cash equivalents by investing in a broad and diverse range of financial instruments,

and we have established guidelines related to credit ratings and maturities intended to safeguard principal balances and maintain

Concentrations of credit risk with respect to receivables, which are typically unsecured, are somewhat mitigated due

to the wide variety of customers using our products, as well as their dispersion across different geographic areas.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND 2022 (UNAUDITED)

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022 (UNAUDITED)

We monitor the financial

performance and creditworthiness of our customers so that we can properly assess and respond to changes in their credit profile.

We continue to monitor these conditions and assess their possible impact on our business.

Inventories are recorded

at the lower of cost or net realizable value, with cost determined by the weighted average cost method.

The Company periodically

reviews the composition of inventory in order to identify excess, obsolete, slow-moving or otherwise non-saleable items taking

into account anticipated future sales compared with quantities on hand, and the remaining shelf life of goods on hand.

If non-saleable

items are observed and there are no alternate uses for the inventory, the Company records a write-down to net realizable value

in the period that the decline in value is first recognized.

Although the Company makes every effort to ensure the accuracy of

forecasts of future product demand, any significant unanticipated decreases in demand could have a material impact on the carrying

value of inventories and reported operating results.

The Company’s reserves were approximately $ 21,000 as of September 30,

The Company did not have inventory on hand prior to the acquisition of Zembrace and Tosymra on June 30, 2023.

Property and equipment

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Depreciation and amortization

expense for the three and six months ended June 30, 2023, was $ 900,000 and $ 1.8 million, respectively, and $ 102,000 and $ 165,000 ,

respectively, for the three and six months ended June 30, 2022.

All property and equipment are located in the United States.

expense for the three and nine months ended September 30, 2023, was $ 978,000 and $ 2.8 million, respectively, and $ 252,000

and $ 417,000 , respectively, for the three and nine months ended September 30, 2022.

All property and equipment are located in the

United States.

Intangible assets, net

5 unchanged sentences

assets are amortized using the straight-line method over the estimated useful lives of the respective assets.

Amortization expense

for the three months ended September 30, 2023, was $ 238,000 .

The annual impairment assessment date will be June 30.

No triggering events were identified during the nine months ended September 30, 2023.

During the year ended

3 unchanged sentences

amount may be less than fair value.

As of June 30, 2023, the Company believed that no impairment existed.

As of September 30, 2023, the Company believed that no impairment existed.

Goodwill represents

the excess of the aggregate purchase price over the fair value of the net tangible and intangible assets acquired in a business

Goodwill is reviewed for impairment on an annual basis, or more frequently if events or changes in circumstances

indicate that the carrying amount of goodwill may be impaired.

As of June 30, 2023, the Company has recognized goodwill in connection

with the USL Acquisition consummated on June 30, 2023 (See Note 8).

Goodwill is reviewed for impairment on an annual basis, or more frequently if events or changes in circumstances indicate

that the carrying amount of goodwill may be impaired.

As of September 30, 2023, the Company has recognized goodwill in connection with

the USL Acquisition consummated on June 30, 2023 (See Note 8).

The Company determines

24 unchanged sentences

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

Revenue Recognition

Company records and recognizes revenue in a manner that depicts the transfer of promised goods or services to customers in an

amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

The Company’s revenues primarily result from contracts with customers, which are generally short-term and have a single

performance obligation - the delivery of product.

The Company’s performance obligation to deliver products is satisfied

at the point in time that the goods are received by the customer, which is when the customer obtains title to and has the

risks and rewards of ownership of the products, which is generally upon shipment or delivery to the customer as stipulated by

the terms of the sale agreements.

The transaction price is the amount of consideration to

which the Company expects to be entitled in exchange for transferring promised goods to a customer.

The consideration promised

in a contract with a customer may include fixed amounts, variable amounts, or both.

Our contractual payment terms are typically 30 to 90 days .

TONIX PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2023 AND 2022 (UNAUDITED)

Revenues from product

sales, net of gross-to-net deductions, are recorded only to the extent a significant reversal in the amount of cumulative revenue

recognized is not probable of occurring and when the uncertainty associated with gross-to-net deductions is subsequently resolved.

Taxes assessed by governmental authorities and collected from customers are excluded from product sales.

Shipping and handling

activities are considered to be fulfillment activities and not a separate performance obligation.

Many of the Company’s

products sold are subject to a variety of deductions.

Revenues are recognized net of estimated rebates and chargebacks, cash discounts,

distributor fees, sales return provisions and other related deductions.

Deductions to product sales are referred to as gross-to-net

deductions and are estimated and recorded in the period in which the related product sales occur.

Accruals for these provisions

are presented in the consolidated financial statements as reductions to gross sales in determining net sales, and as a contra asset

within accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash).

Amounts recorded for revenue

deductions can result from a complex series of judgements about future events and uncertainties and can rely heavily on estimates

and assumptions.

The following section briefly describes the nature of the Company’s provisions for variable consideration

and how such provisions are estimated:

Chargebacks -

The Company sells a portion of its products indirectly through wholesaler distributors, and enters into specific agreements with

these indirect customers to establish pricing for the Company’s products, and in-turn, the indirect customers and entities

independently purchase these products.

Because the price paid by the indirect customers and/or entities is lower than the price

paid by the wholesaler, the Company provides a credit, called a chargeback, to the wholesaler for the difference between the contractual

price with the indirect customers and the wholesale customer’s purchase price.

The Company’s provision for chargebacks

is based on expected sell-through levels by the Company’s wholesale customers to the indirect customers and estimated wholesaler

inventory levels as well as historical chargeback rates.

The Company continually monitors its reserve for chargebacks and adjusts

the reserve accordingly when expected chargebacks differ from actual experience.

Rebates - The

Company participates in certain government and specific sales rebate programs which provides discounted prescription drugs to qualified

recipients, and primarily relate to Medicaid and managed care rebates in the U.S., pharmacy rebates, Tri-Care rebates and discounts,

specialty pharmacy program fees and other governmental rebates or applicable allowances.

● Managed Care Rebates are processed in the quarter following the quarter in which they are earned.

The managed care reporting entity submits utilization data after the end of the quarter and the Company processes the payment in

accordance with contract terms.

All rebates earned but not paid are estimated by the Company according to historical payments trended

for market growth assumptions.

● Medicaid and State Agency rebates are based upon historical experience of claims submitted by various

The Company monitors Medicaid legislative changes to determine what impact such legislation may have on the provision for

Medicaid rebates.

The accrual of State Agency reserves is based on historical payment rates.

There is an approximate three-month

lag from the time of product sale until the rebate is paid.

● Tri-Care represents a regionally managed health care program for active duty and retired members,

dependents and survivors of the US military.

The Tri-Care program supplements health care resources of the US military with civilian

health care professionals for greater access and quality healthcare coverage.

Through the Tri-Care program, the Company provides

pharmaceuticals on a direct customer basis.

Prices of pharmaceuticals sold under the Tri-Care program are pre-negotiated and a

reserve amount is established to represent the proportionate rebate amount associated with product sales.

● Coverage Gap refers to the Medicare prescription drug program and represents specifically the period

between the initial Medicare Part D prescription drug program coverage limit and the catastrophic coverage threshold.

pharmaceutical products sold during this coverage gap timeframe are discounted by the Company.

Since the nature of the program

is that coverage limits are reset at the beginning of the calendar year;

the payments escalate each quarter as the participants

reach the coverage limit before reaching the catastrophic coverage threshold.

The Company has determined that the cost of this

reserve will be viewed as an annual cost.

Therefore, the accrual will be incurred evenly during the year with quarterly review

of the liability based on payment trends and any revision to the projected annual cost.

Prompt-Pay and other

Sales Discounts - The Company provides for prompt pay discounts, which early payments are recorded as a reduction of revenue

and as a reduction in the accounts receivable at the time of sale based on the customer’s contracted discount rate.

sales discounts represent programs the Company has in place to reduce costs to the patient.

This includes copay buy down and eVoucher

Product Returns

- Consistent with industry practice, the Company offers customers a right to return any unused product.

The customer’s right

of return commences typically six months prior to product expiration date and ends one year after product expiration date.

Products returned

for expiration are reimbursed at current wholesale acquisition cost or indirect contract price.

The Company estimates the amount

of its product sales that may be returned by the Company’s customers and accrues this estimate as a reduction of revenue

in the period the related product revenue is recognized.

The Company estimates products returns as a percentage of sales to its

The rate is estimated by using historical sales information, including its visibility and estimates into the inventory

remaining in the distribution channel.

Adjustments are made to the current provision for returns when data suggests product returns

may differ from original estimates.

Research and Development Costs

6 unchanged sentences

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

JUNE 30, 2023 AND 2022 (UNAUDITED)

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2023 AND 2022 (UNAUDITED)

The Company estimates

13 unchanged sentences

Government Grants

From time to time,

the Company may enter into arrangements with governmental entities for the purpose of obtaining funding for research and development

From time to time, the

Company may enter into arrangements with governmental entities for the purpose of obtaining funding for research and development

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.

During the three and six months ended June 30, 2023, we received $ 1.9 million

in funding as a reduction of related research and development expense.

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

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.

During the three and nine months ended September 30, 2023, we received $ 0.4 and $ 2.3

million, respectively, for the three and nine months ended September 30, 2023, in funding as a reduction of related research and

development expense.

Stock-based compensation

13 unchanged sentences

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 condensed balance sheets.

Translation adjustments resulting from this

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

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

6 unchanged sentences

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

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND 2022 (UNAUDITED)

The Company recognizes

4 unchanged sentences

realized upon ultimate settlement.

As of June 30, 2023, the Company has not recorded any unrecognized tax benefits.

As of September 30, 2023, the Company has not recorded any unrecognized tax benefits.

The Company’s

1 unchanged sentence

Per Share Data

The computation of

basic and diluted loss per share for the quarters ended June 30, 2023 and 2022 excludes potentially dilutive securities when their

The computation of basic

and diluted loss per share for the quarters ended September 30, 2023 and 2022 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

9 unchanged sentences

No income was allocated

to the warrants and preferred stock for the three and six months ended June 30, 2023, and 2022, as results of operations were a

loss for the periods.

to the warrants and preferred stock for the three and nine months ended September 30, 2023, and 2022, as results of operations

were a loss for the periods.

Potentially dilutive

securities excluded from the computation of basic and diluted net loss per share, as of June 30, 2023 and 2022, are as follows:

securities excluded from the computation of basic and diluted net loss per share, as of September 30, 2023 and 2022, are as follows:

Warrants to purchase common stock

Series A convertible redeemable preferred stock

Series B convertible redeemable preferred stock

Options to purchase common stock

TONIX PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2023 AND 2022 (UNAUDITED)

Recently Adopted Accounting Pronouncements

13 unchanged sentences

issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments.

The main objective of ASU 2016-13 is to provide

financial statement users with more decision-useful information about an entity's expected credit losses on financial instruments

and other commitments to extend credit at each reporting date.

To achieve this objective, the amendments in this update replace

the incurred loss impairment methodology currently used today with a methodology that reflects expected credit losses and requires

The main objective of ASU 2016-13 is to provide financial

statement users with more decision-useful information about an entity’s expected credit losses on financial instruments and

other commitments to extend credit at each reporting date.

To achieve this objective, the amendments in this update replace the

incurred loss impairment methodology currently used today with a methodology that reflects expected credit losses and requires

consideration of a broader range of reasonable and supportable information to develop credit loss estimates.

will be effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal

years, using a modified retrospective approach.

ASU 2016-13 will be

effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years,

using a modified retrospective approach.

Early adoption is permitted.

The Company adopted ASU 2016-13 and

related updates as of January 1, 2023.

The adoption of ASU 2016-13 did not impact the Company’s financial

position, results of operations or cash flows.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND 2022 (UNAUDITED)

The Company adopted ASU 2016-13 and related updates as of

January 1, 2023.

The adoption of ASU 2016-13 did not impact the Company’s financial position, results of operations or cash

NOTE 3 – INVENTORY

The components of inventory

consisted of the following as of September 30, 2023:

Raw Materials

Work-in-process

Finished Goods

Inventory reserves

Total Inventory

NOTE 4 – PROPERTY AND EQUIPMENT,

1 unchanged sentence

net consisted of the following (in thousands):

September 30,

(in thousands)

26 unchanged sentences

of a vaccine development and commercial scale manufacturing facility.

As of June 30, 2023, the asset was not ready for its intended

As of September 30, 2023, the asset was not ready for its

intended use.

During the quarter ended

September 30, 2023, property and equipment with a net book value of approximately $ 0.8 million were sold for net proceeds of approximately

$ 1 .0 million.

TONIX PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2023 AND 2022 (UNAUDITED)

NOTE 5 – GOODWILL AND INTANGIBLE ASSETS

4 unchanged sentences

Acquired during the period (see Note 8)

Balance at June 30, 2023

Balance at September 30, 2023

The following table

provides the gross carrying amount and accumulated amortization for each major class of intangible asset:

September 30,

(in thousands)

5 unchanged sentences

Total intangible assets, net

No amortization expense was recorded during

the six months ended June 30, 2023.

At June 30, 2023, the

related amortization for each of the next five years ended December 31 is as follows (in thousands):

During the three months ended September 30,

2023, the Company recorded amortization of $ 238,000 .

At September 30, 2023,

the related amortization for each of the next five years ended December 31 is as follows (in thousands):

Year Ending December 31,

2 unchanged sentences

NOTE 6 – FAIR VALUE MEASUREMENTS

Fair value measurements

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

Fair value is defined as the price that would be received

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

and is measured according to a hierarchy that includes:

Observable inputs, such as quoted prices in active markets.

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

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

This category includes U.S.

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

Fair value is defined as the price

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

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

inputs, such as quoted prices in active markets.

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

Level 2 assets and liabilities

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

This category

includes U.S.

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

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

As of June 30, 2023,

and December 31, 2022, the Company used Level 1 quoted prices in active markets to value cash equivalents of $ 19.2 million and

$ 116.3 million, respectively.

The Company did not have any Level 2 or Level 3 assets or liabilities as of both June 30, 2023 and

December 31, 2022.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND 2022 (UNAUDITED)

inputs in which there is little or no market data.

As of September 30,

2023, and December 31, 2022, the Company used Level 1 quoted prices in active markets to value cash equivalents of $ 3.7 million

and $ 116.3 million, respectively.

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

2023 and December 31, 2022.

NOTE 7 – STOCKHOLDERS’ EQUITY

On May 9, 2023,

the Company filed a Certificate of Change with the Nevada Secretary of State, effective May 10, 2023.

Pursuant to the

Certificate of Change, the Company effected a 1-for-6.25

reverse stock split of its issued and outstanding shares of common stock, whereby 64,627,246

outstanding shares of the Company’s common stock were exchanged for 10,340,506

shares of the Company’s common stock.

In connection with the reverse stock split, the Company issued an additional 131,902

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 1,000,000,000

to 160,000,000 .

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

restated to reflect the reverse stock split.

As a result of the reverse-stock-split, on May 24, 2023, the Company’s

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

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

On May 9, 2023, the

Company filed a Certificate of Change with the Nevada Secretary of State, effective May 10, 2023.

Pursuant to the Certificate of

Change, the Company effected a 1-for-6.25 reverse stock split of its issued and outstanding shares of common stock, whereby 64,627,246

outstanding shares of the Company’s common stock were exchanged for 10,340,506 shares of the Company’s common stock.

In connection with the reverse stock split, the Company issued an additional 131,902 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 1,000,000,000 to 160,000,000 .

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

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

On October 17, 2023,

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

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

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

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

TONIX PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022 (UNAUDITED)

Company was initially provided with a 180

calendar day period, or until April 15, 2024, in which to regain compliance.

In the event that the Company does not regain compliance

within this 180 -day

period, the Company may be eligible to seek an additional 180

day compliance period if it meets the continued listing requirement for market value of publicly held shares and all other initial listing

standards for the Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and provides written notice to Nasdaq

of its intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary.

NOTE 8 – TEMPORARY EQUITY

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 $ 6.25

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.

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 24,000,000

to 160,000,000 , as

adjusted for the reverse split, 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 .

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 $ 6.25

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.

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 $ 6.25 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 24,000,000 to 160,000,000 , as adjusted for the reverse split, 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

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 $ 6.25 per share.

The holders of the Preferred Stock had the right to require the Company

to redeem their shares of preferred stock for cash at 105 % of the stated value of such shares through January 23, 2023.

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.

The $ 14.3 million in

3 unchanged sentences

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

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND 2022 (UNAUDITED)

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 $ 14.7 million and $ 1.1 million, respectively,

as calculated in the following table (in thousands):

Since 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 $ 14.7 million and $1.1 million, respectively, as

calculated in the following table (in thousands):

Series A Preferred Stock

8 unchanged sentences

December 2022 at 105 % of the $ 10.00 stated value of the Preferred Stock, or $ 15.8 million in the aggregate.

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 %

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 $ 25.00

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.

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 8,000,000

to 24,000,000 ,

as adjusted for the reverse split, 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

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 % 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 $ 25.00 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 8,000,000 to 24,000,000 , as adjusted for the reverse split, 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 .

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 $ 25.00

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

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND

2022 (UNAUDITED)

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):

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 $ 25.00 per share.

The holders of the Preferred Stock had the right to require the Company

to redeem their shares of preferred stock for cash at 105 % of the stated value of such shares through September 22, 2022.

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.

The $ 28.5 million in

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

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

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

Upon expiration

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

Since 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):

Series A Preferred Stock

8 unchanged sentences

August 2022 at 105 % of the $ 10.00 stated value of the Preferred Stock, or $ 31.5 million in the aggregate.

NOTE 9 – REVENUES

Disaggregation of Net Revenues

The Company’s net product revenues

are summarized below:

Months Ended September 30,

Zembrace® Symtouch®

Total product revenues

Gross-to-Net Sales Accruals

We record gross-to-net

sales accruals for chargebacks, rebates, sales and other discounts, and product returns, which are all customary to the pharmaceutical

Our provision for gross-to-net allowances

was $ 2.5 million at September 30, 2023, $ 0.7 million of which was recorded as a reduction to accounts receivable and $ 1.8 million

recorded as a component of accrued expenses.

NOTE 10 – ASSET PURCHASE AGREEMENT WITH UPSHER-SMITH

On June 30, 2023 (the

“Closing”), pursuant to an Asset Purchase Agreement (the “Asset Purchase Agreement”) entered into on June

23, 2023 with USL, the Company completed the acquisition

of certain assets related to Zembrace® SymTouch® (sumatriptan injection) 3 mg (“Zembrace”) and Tosymra®

(sumatriptan nasal spray) 10 mg (“Tosymra”) products (such businesses collectively, the “Business”) and

certain inventory related to the Business for an aggregate purchase price of approximately $ 26.5 million, including certain deferred

payments and subject to customary adjustments (such transaction, the “USL Acquisition”).

On June 30, 2023, the Company completed the acquisition of certain assets from Upsher-Smith Laboratories LLC ("USL") related to Zembrace® SymTouch® (sumatriptan

injection) 3 mg (“Zembrace”) and Tosymra® (sumatriptan nasal spray) 10 mg (“Tosymra”) products (such

businesses collectively, the “Business”) and certain inventory related to the Business for an aggregate purchase price

of approximately $26.5 million, including certain deferred payments and subject to customary adjustments (such transaction, the

“USL Acquisition”).

On June 30, 2023, in

connection with the USL Acquisition, the Company and USL entered into a Transition Services Agreement (the “Transition

Services Agreement”), pursuant to which USL will provide certain transition services to the Company for base fees equal

to $ 100,000 per month for the first six months, and $ 150,000 per months for the seventh through ninth months, plus additional monthly

fees for each service category totaling up to $ 150,000 per month.

As consideration for

acquisition of the Business and certain product-related inventories, the Company paid an aggregate upfront purchase price

of approximately $ 22.2 million in cash.

The closing cash consideration was later adjusted upwards by approximately

$ 1.3 million upon the determination of the value of the acquired inventory on hand as of June 30, 2023.

The inventory adjustment

payment is expected to be settled in the third quarter of 2023.

On the earlier of March 2024 and the completion of the transition

services to be provided by USL, as described above, the Company agreed to pay an additional deferred payment of $ 3 .0 million in

connection with the USL Acquisition, the Company and USL entered into a Transition Services Agreement (the “Transition Services

Agreement”), pursuant to which USL will provide certain transition services to the Company for base fees equal to $ 100,000

per month for the first six months, and $ 150,000 per months for the seventh through ninth months, plus additional monthly fees

for each service category totaling up to $ 150,000 per month.

has assumed certain obligations of Seller, including the payment of quarterly earn-out payments on annual net sales from the Business

for Tosymra, 4 % for net sales of $ 0 to $ 30 million, 7 % of net sales of $ 30 to $ 75 million;

9 % for net sales of

$ 75 to $ 100 million;

12 % for net sales of $ 100 to $ 150 million;

and 15 % for net sales greater than $ 150 million.

Earn-out payments with

respect to Tosymra are payable until the expiration or termination of the product’s Orange Book listed patent(s) with respect to

the United States or, outside the United States, the expiration of the last valid claim covering the product in the relevant country of

the territory.

For Zembrace, earn-out payments on annual net sales in the U.S.

are 3 % for net sales of $ 0 to $ 30 million, 6 % of net sales

of $ 30 to $ 75 million;

12 % for net sales of $ 75 to $ 100 million;

16 % for net sales of greater than $ 100 million.

Such earn-out payments

are payable until July 19, 2025.

Upon the entry of a generic version of the relevant product, the applicable earn-out rates shall be reduced

by 90 % percent with respect to Zembrace, and by 66.7 % percent for Tosymra.

Prior to Purchaser or a licensee filing an application for

marketing authorization for either of the products in a permitted country outside the U.S., the parties will negotiate in good faith the

earn-out payment rates annual net sales tiers that will apply for such country, based on the market opportunity for the product in such

If the parties fail to agree, then the earn-out payment rates and annual net sales tiers described above will apply.

PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

30, 2023 AND 2022 (UNAUDITED)

the Company has assumed the obligation to pay an additional 3 % royalty on net sales of Tosymra, plus an additional 3 % if a patent containing

certain claims related to Tosymra issues in the U.S., for 15 years from the first commercial sale of Tosymra in the applicable country

or for as long as the manufacture, use or sale of Tosymra in such country is covered by a valid claim of a licensed patent, and up to

$ 15 million per Tosymra product on the achievement of sales milestones.

consideration for acquisition of the Business and certain product-related inventories, the Company paid approximately $23.5

million in cash upfront.

On the earlier of March

2024 and the completion of the transition services to be provided by USL, as described above, the Company agreed to pay an additional

deferred payment of $ 3 .0

million in cash, which is included in Accrued expenses and other current liabilities on

the accompanying balance sheet.

The following table summarizes the components of the purchase consideration (in thousands):

25 unchanged sentences

Fair value of assets acquired

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND

2022 (UNAUDITED)

The acquired inventory

4 unchanged sentences

The $ 1 .0 million of

goodwill arising from the USL Acquisition represents expected synergies from combining

operations, intangible assets that do not qualify for separate recognition, and other factors, of which all is expected to be deductible

for tax purposes, subject to any limitations.

goodwill arising from the USL Acquisition represents expected synergies from combining operations, intangible assets that do not

qualify for separate recognition, and other factors, of which all is expected to be deductible for tax purposes, subject to any

Intangible assets eligible

19 unchanged sentences

differ from these estimates and assumptions.

As the Closing occurred

on the last day of the second quarter of 2023, the operations of the Business had no impact on the Company’s operating results

for the three or six months ended June 30, 2023.

Supplemental Pro Forma Information

The following unaudited

pro forma consolidated financial information reflects the results of operations of the Company for the three and six months ended

June 30, 2023 and 2022 as if the USL Acquisition had occurred as of January 1, 2022 and gives effect to transactions that are directly

attributable to the acquisition.

These amounts are based on financial information of the acquired business and are not necessarily

indicative of what the Company’s operating results would have been had the acquisition taken place on the date presented,

nor is it indicative of the Company’s future operating results.

Three Months Ended June 30,

Six Months Ended June 30,

pro forma consolidated financial information reflects the results of operations of the Company for the three and nine months ended

September 30, 2023 and 2022 as if the USL Acquisition had occurred as of January 1, 2022 and gives effect to transactions that

are directly attributable to the acquisition.

These amounts are based on financial information of the acquired business and are

not necessarily indicative of what the Company’s operating results would have been had the acquisition taken place on the

date presented, nor is it indicative of the Company’s future operating results.

Three Months Ended September 30,

Nine Months Ended September 30,

Net Product Sales

The pro forma information for all periods presented include additional

amortization expense related to the fair value of the acquired intangible assets as if such assets were acquired on January 1, 2022.

pro forma financial information for the three and six months ended June 30, 2022 also reflects an increase in Cost of Sales related to

the preliminary acquisition-date fair value adjustment to inventory.

This adjustment is not reflected in the three or six months ended

June 30, 2023 as the acquired inventory is expected to be sold within one year from the acquisition date.

TONIX PHARMACEUTICALS HOLDING CORP.

PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND

2022 (UNAUDITED)

30, 2023 AND 2022 (UNAUDITED)

The pro forma information

for all periods presented include additional amortization expense related to the fair value of the acquired intangible assets as

if such assets were acquired on January 1, 2022.

The pro forma financial information for the three and nine months ended September

30, 2022 also reflects an increase in Cost of Sales related to the preliminary acquisition-date fair value adjustment to inventory.

This adjustment is not reflected in the three and nine months ended September 30, 2023 as the acquired inventory is expected to

be sold within one year from the acquisition date.

As described above,

in connection with the USL Acquisition, the Company and USL entered into a Transition Services Agreement with the Seller related

to providing ongoing services associated with the assets acquired, such as procuring and selling migraine therapy products, providing

accounting and billing services and collecting accounts receivable and paying trade payables.

The Seller collected and will continue

to collect cash on behalf of Tonix for revenue generated by sales of the assets acquired from June 30, 2023 through the transition

period and the Seller is obligated to transfer cash generated by such sales to the Buyer.

amount due to USL for reimbursement of services performed under the transition services agreement was $ 498,000

as of September 30, 2023.

The transition service fees were netted against the receivables collected of $ 4,784,000

and liabilities paid of $ 2,724,000

on behalf of the Company with the net amount due to the Company of $ 1,562,000

recorded within receivables, net on the condensed consolidated balance sheet as of September 30, 2023.

NOTE 11 – ASSET PURCHASE AGREEMENT

February 2, 2023, the Company entered into an asset purchase agreement (the “Healion Asset Purchase Agreement”)

with Healion Bio Inc., (“Healion”) 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 Healion Asset

Purchase Agreement, the Company paid $ 1.2 million to Healion.

February 2, 2023, the Company entered into an asset purchase agreement (the “Healion Asset Purchase Agreement”) with Healion

Bio Inc., (“Healion”) 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 Healion Asset Purchase Agreement, the Company paid $ 1.2

million to Healion.

Because the Healion intellectual property was acquired prior to U.S.

Food and Drug Administration (FDA) approval, the cash consideration totaling $ 1.2 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.

NOTE 10 – ASSET PURCHASE AGREEMENT

On December 22, 2020,

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

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

including obesity (the “Katana Assets”).

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

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

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

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

As consideration for entering into the Katana Asset Purchase

Agreement, Tonix paid $ 0.7 million to Katana.

The costs associated with the cash payments were previously recorded to research

and development expenses in the statement of operations.

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

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

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

Pursuant to the terms

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

certain patents related to the Katana Assets.

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

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

markets for such products.

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

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

As of June 30, 2023, no milestone

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

NOTE 11 – ASSET PURCHASE AGREEMENT

WITH TRIGEMINA

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

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

Trigemina Asset Purchase Agreement, Tonix paid $ 824,759

to Trigemina and issued to Trigemina 10,000

shares of the Company’s common stock, valued at $ 136.00

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

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 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.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND

2022 (UNAUDITED)

The Trigemina License

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

for an annual maintenance fee payable to Stanford.

As of June 30, 2023, other than the annual maintenance fee, no milestone payments

have been accrued or paid in relation to this agreement.

NOTE 12 – ASSET PURCHASE AGREEMENT

WITH TRIMARAN

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

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

which 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 TRImaran

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 TRImaran 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

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

Pursuant to the WSU

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

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

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

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

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

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.

As of June 30, 2023, no milestone payments have been

accrued or paid in relation to this agreement.

Food and Drug Administration (FDA) approval,

the cash consideration totaling $ 1.2

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.

NOTE 12 – LICENSE AGREEMENT WITH CURIA

8 unchanged sentences

milestone payments.

As of June 30, 2023, other than the upfront fee, no payments have been accrued or paid in relation to this

As of September 30, 2023, other than the upfront fee, no payments have been accrued or paid in relation to

this agreement.

NOTE 13 – 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 June 30, 2023, other than the upfront fee, no milestone payments have been accrued

or paid in relation to this agreement.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND

2022 (UNAUDITED)

NOTE 15 – LICENSE AGREEMENT WITH

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 royalties.

As of June 30, 2023, no milestone payments have been accrued or paid

in relation to this agreement.

NOTE 16 – 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

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 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

The Company is obligated

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

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

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

Royalties on each particular TFF2 Product are payable

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

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

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

Royalties on each particular Other Product are payable on a

country-by-country and product-by-product basis until a specified period of time after the first commercial sale of such particular

Other Product in such country.

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

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

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

be reduced by more than 50 %.

The Company is also

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

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

In addition, the Company shall pay Columbia 5 %

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

As of June 30, 2023, no milestone payments have been accrued or paid in relation to this agreement.

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”).

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.

The Company paid a

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

The Company is obligated to use Commercially

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

The Company agreed 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 %.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND

2022 (UNAUDITED)

The Company is also

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

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

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

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

30, 2023 no milestone payments have been accrued or paid in relation to this agreement.

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 September 30, 2023, other than the upfront fee, no milestone payments have been accrued or paid in relation to this agreement.

14 – LICENSE AGREEMENTS WITH COLUMBIA UNIVERSITY

On February 13, 2023,

2 unchanged sentences

The licensed mAbs were developed as part of a research collaboration and option agreement between Tonix and Columbia.

NOTE 17 – SALE AND PURCHASE OF COMMON STOCK

PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

30, 2023 AND 2022 (UNAUDITED)

NOTE 15 – SALE OF COMMON STOCK

July 2023 Financing

On July 27, 2023, the

Company sold 2,530,000 shares of common stock;

pre-funded warrants

to purchase up to 4,470,000 shares of common stock, and accompanying common warrants to purchase up to 7,000,000 shares of common

stock with an exercise price of $ 1.00 per share in a public offering that closed on August 1, 2023.

The offering price per share of common stock and accompanying common warrant was

$ 1.00 , and the offering price per share of pre-funded warrant and accompanying common warrant was $ 0.9999 .

The Company incurred offering expenses of approximately $ 0.7 million, including placement agent fees of approximately

$ 0.5 million.

The Company received net proceeds of approximately $ 6.3 million, after deducting the underwriting discount and other

offering expenses.

2022 Lincoln Park Transaction

On August 16, 2022,

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

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

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

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

Pursuant to the

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

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

Pursuant to the terms

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

the Company issued 100,000 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 three and

six months ended June 30, 2023, the Company sold 0 and 0.1 million shares, respectively, of common stock under the 2022 Purchase

Agreement, for net proceeds of approximately $ 0 and $ 0.4 million, respectively.

TONIX PHARMACEUTICALS HOLDING CORP.

On August 16, 2022, the Company

entered into an equity line of credit with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park

agreed to purchase up to $ 50,000,000 of the Company’s common stock (subject to certain limitations) from time to time.

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.

The Company issued 100,000 shares of common stock to Lincoln Park as consideration

for its commitment to purchase shares of the Company’s common stock.

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 equity line of credit.

During the three and nine

months ended September 30, 2023, the Company sold 0 and 0.1 million shares, respectively, of common stock under the equity line of credit

with Lincoln Park, for net proceeds of approximately $ 0 and $ 0.4 million, respectively.

During the nine months ended

September 30, 2022, no shares of common stock were sold under the equity line of credit.

PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND 2022 (UNAUDITED)

30, 2023 AND 2022 (UNAUDITED)

Purchase Agreement with Lincoln Park

15 unchanged sentences

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

During the three and

six months ended June 30, 2022, the Company sold 0.1 million and 0.2 million shares, respectively, of common stock under the

Purchase Agreement with Lincoln Park, for net proceeds of approximately $ 2 .0 million and $ 6.5 million, respectively.

No sales occurred

During the nine months

ended September 30, 2022, the Company sold 0.5 million shares of common stock under the Purchase Agreement with Lincoln Park, for

net proceeds of approximately $ 8.7 million.

No sales occurred in 2023.

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 0.5 million shares) to Lincoln Park

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

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

As the Company

has issued approximately 0.4 million shares to Lincoln Park, by September 30, 2022, under the Purchase Agreement with Lincoln Park

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

without shareholder approval.

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 three and six months ended June 30, 2023, the Company sold approximately 0.4 million

and 1.0 million shares, respectively, of common stock under the Sales Agreement, for net proceeds of approximately $ 1 .0 million

and $ 3 .0 million, respectively.

During the three and six months ended June 30, 2022, the Company sold approximately 2.2 million

and 2.4 million shares, respectively, of common stock under the Sales Agreement, for net proceeds of approximately $ 43 .0 million

and $ 51.5 million, respectively.

On April 8, 2020, the Company entered into a sales agreement

with AGP pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $ 320 .0

million in at-the-market offerings (“ATM”) sales at prevailing market prices at the time of the sale, and, as a result, prices

AGP receives a 3 % commission on each ATM sale under the Sales Agreement.

the three and nine months ended September 30, 2023, the Company sold approximately 0 and 1 .0 million shares, respectively, of

common stock under the Sales Agreement, for net proceeds of approximately $ 0 million and $ 3 .0 million, respectively.

nine months ended September 30, 2022, the Company sold approximately 5.5 million shares of common stock under the Sales Agreement,

for net proceeds of approximately $ 76.2 million.

Stock Repurchases

During the first quarter of 2023, the Company has repurchased 2,512,044 of its shares of common stock outstanding under the 2022 share repurchase

program for up to $ 12.5 million at prices ranging from $ 2.75 to $ 8.61 per share for a gross aggregate cost of approximately $ 12.5

During the first quarter

of 2023, the Company has repurchased 2,512,044 of its shares of common stock outstanding under the 2022 share repurchase program

for up to $ 12.5 million at prices ranging from $ 2.75 to $ 8.61 per share for a gross aggregate cost of approximately $ 12.5 million.

In addition, the Company incurred expenses of $ 0.3 million.

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

to which the Company may repurchase up to an additional $ 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.

During the first quarter of 2023, the Company has repurchased 160,000 of our shares of common stock

outstanding under the new 2023 share repurchase program at $ 7.12 per share for a gross aggregate cost of $ 1.1 million .

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 doing so.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND 2022 (UNAUDITED)

NOTE 18 – STOCK-BASED COMPENSATION

January 2023, the Board of Directors approved a new 2023 share repurchase program pursuant to which the Company

may repurchase up to an additional $ 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.

During the first quarter of 2023, the Company has repurchased 160,000

of our shares of common stock outstanding under the new 2023 share repurchase program at $ 7.12

per share for a gross aggregate cost of $ 1.1

No additional repurchases have occurred since the first quarter of 2023.

The 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 doing so.

16 – STOCK-BASED COMPENSATION

On May 1, 2020, 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 700 shares of common stock.

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

no further grants may be made under the 2019 Plan.

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

Holding Corp.

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

The 2020 Plan provided for the issuance of up to 3,000

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.

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,

Amended and Restated 2020 Stock Incentive Plan (“Amended

and Restated 2020 Plan”).

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.

18 unchanged sentences

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

As of June 30, 2023, 1,057,051 options were available for future

grants under the Amended and Restated 2020 Plan.

A summary of the stock option activity and

related information for the Plans for the three months ended June 30, 2023 is as follows:

Weighted-Average

As of September 30, 2023, 1,062,874 options were available for

future grants under the Amended and Restated 2020 Plan.

PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

30, 2023 AND 2022 (UNAUDITED)

A summary of the stock

option activity and related information for the Plans for the nine months ended September 30, 2023 is as follows:

Exercise Price

Weighted-Average

Contractual Term

Outstanding at December 31, 2022

Forfeitures or expirations

Outstanding at June 30, 2023

Exercisable at June 30, 2023

Outstanding at September 30, 2023

Exercisable at September 30, 2023

The weighted average

fair value of options granted during the three and six months ended June 2023 was $ 2.73 per share and $ 4.01 per share, respectively.

The weighted average fair value of options granted during the three and six months ended June 2022 was $ 23.63 per share and $ 32.81

fair value of options granted during the three and nine months ended September 2023 was $ 0.84 per share and $ 3.99 per share, respectively.

The weighted average fair value of options granted during the three and nine months ended September 2022 was $ 0 per share and $ 32.81

per share, respectively.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

JUNE 30, 2023 AND 2022 (UNAUDITED)

The Company measures

13 unchanged sentences

The assumptions used

in the valuation of stock options granted during the six months ended June 30, 2023 and 2022 were as follows:

Six Months Ended

June 30, 2023

Six Months Ended

June 30, 2022

in the valuation of stock options granted during the nine months ended September 30, 2023 and 2022 were as follows:

Nine Months Ended

September 30, 2023

Nine Months Ended

September 30, 2022

Risk-free interest rate

16 unchanged sentences

expense relating to options granted of $ 2.1 million, of which $ 1.4 million and $ 0.7 million, related to General and Administration

and Research and Development, respectively was recognized for the quarter ended June 30, 2023.

Stock-based compensation expense

relating to options granted of $ 2.8 million, of which $ 2.0 million and $ 0.8 million, related to General and Administration and

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

and Research and Development, respectively was recognized for the quarter ended September 30, 2023.

Stock-based compensation

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

and Research and Development, respectively was recognized for the six-month period ended June 30, 2023.

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

Stock-based compensation

expense relating to options granted of $ 7.2 million, of which $ 5 .0 million and $ 2.2 million, related to General and Administration

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

As of June 30, 2023,

and Research and Development, respectively was recognized for the nine-month period ended September 30, 2023.

Stock-based compensation

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

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

As of September 30,

2023, the Company had approximately $ 8.2 million of total unrecognized compensation cost related to non-vested awards granted under

3 unchanged sentences

Company’s stockholders approved the Tonix Pharmaceuticals Holdings Corp.

2019 Employee Stock Purchase Plan (the “2019

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

the 2019 ESPP Plan.

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

2020 Employee

Stock Purchase Plan (the “2020 ESPP”).

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”)).

2022 Employee Stock Purchase Plan.

(the "2022 ESPP"), which was replaced by the Tonix Pharmaceuticals Holdings Corp.

2023 Employee Stock Purchase

Plan (the “2023 ESPP”, and together with the 2022 ESPP, the “ESPP Plans”), which was approved by the Company's stockholders on May 5, 2023.

The 2023 ESPP allows

11 unchanged sentences

of stock under the 2023 ESPP, subject to the statutory limit under the Code.

As of June 30, 2023, 1 share were available for future

sales under the 2022 ESPP.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023 AND 2022 (UNAUDITED)

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

expenditure was recorded during either the six months ended June 30, 2023 and 2022.

In January 2022, 646 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

As of September 30, 2023, 800,000 shares were available

for future sales under the 2023 ESPP.

PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

30, 2023 AND 2022 (UNAUDITED)

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

three months ended September 30, 2023 and 2022, $ 34,000

and $ 46,000 ,

respectively, was expensed.

For the nine months ended September 30, 2023 and 2022, $ 34,000

and $ 46,000 ,

respectively were expensed.

In January 2022, 646

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.

In January 2023, 14,999 shares that

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

Accordingly, during the first quarter of 2023, approximately

$ 29,000 of employee payroll deductions accumulated at December 31, 2022, related to acquiring such shares, was transferred from

accrued expenses to additional paid in capital.

The remaining $ 14,000 was returned to the employees.

The remaining $ 30,000

was returned to the employees.

In January 2023, 14,999

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

Accordingly, during the first quarter of 2023,

approximately $ 29,000

of employee payroll deductions accumulated at December 31, 2022, related to acquiring such shares, was transferred from accrued

expenses to additional paid in capital.

The remaining $ 14,000

was returned to the employees.

As of September 30, 2023, approximately $ 32,000

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

NOTE 17 – STOCK WARRANTS

The following table

summarizes information with respect to outstanding warrants to purchase common stock of the Company at June 30, 2023:

summarizes information with respect to outstanding warrants to purchase common stock of the Company at September 30, 2023:

November 2024

1 unchanged sentence

December 2023

In connection with the

July 2023 Financing, the Company issued 4,470,000 prefunded warrants with an exercise price of $ 0.0001 .

All prefunded warrants were exercised during the quarter ended September 30, 2023.

Additionally, the Company issued warrants to purchase up to an aggregate of 7,000,000 shares of the Company's common

The warrants are exercisable at $ 1.00 per share, expire five years from the date of issuance.

No warrants were exercised

during either of the six months ended June 30, 2023, and 2022.

during either of the nine months ended September 30, 2023, and 2022.

NOTE 18 – LEASES

5 unchanged sentences

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

At June 30, 2023, the

Company has right-of-use assets of $ 1.2 million and a total lease liability for operating leases of $ 1.2 million of which $ 0.8

At September 30, 2023,

the Company has right-of-use assets of $ 1.1 million and a total lease liability for operating leases of $ 1.1 million of which $ 0.7

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

At June 30, 2023, future

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

At September 30, 2023,

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

Year Ending December 31,

1 unchanged sentence

Included interest

During the six months

ended June 30, 2023, the Company entered into new operating leases and lease amendments, resulting in the Company recognizing an

additional operating lease liability of approximately $ 898,000 based on the present value of the minimum rental payments.

also recognized a corresponding increase to ROU assets of approximately $ 898,000 , which represents a non-cash investing and financing

During the six months

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

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

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

During the nine months

ended September 30, 2023, the Company entered into new operating leases and lease amendments, resulting in the Company recognizing

an additional operating lease liability of approximately $ 898,000 based on the present value of the minimum rental payments.

Company also recognized a corresponding increase to ROU assets of approximately $ 898,000 , which represents a non-cash operating activity.

During the nine months

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

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

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

Other information related to leases is as follows:

Operating lease expense

was $ 0.2 and $ 0.1 million for the quarters ended June 30, 2023, and 2022, respectively.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023 AND 2022 (UNAUDITED)

was $ 0.1 million for both three months ended September 30, 2023 and 2022.

Operating lease expense

was $ 0.3 million for both six-months ended June 30, 2023, and 2022.

was $ 0.4 million for both the nine-months ended September 30, 2023 and 2022.

Other information related to leases is as follows:

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

Six Months Ended

June 30, 2023

Six Months Ended

June 30, 2022

September 30, 2023

September 30, 2022

Operating cash flow from operating leases (in thousands)

3 unchanged sentences

Operating leases

PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

30, 2023 AND 2022 (UNAUDITED)

NOTE 19 – COMMITMENTS

2 unchanged sentences

into contracts with various contract research organizations with outstanding commitments aggregating approximately $ 33.4 million

at June 30, 2023 for future work to be performed.

at September 30, 2023 for future work to be performed.

Defined contribution plan

7 unchanged sentences

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

charged operations $ 200,000 and $ 500,000 for the three and six months ended June 30, 2023, respectively, and $ 115,000 and $ 306,000

for the three and six months ended June 30, 2022, respectively, for contributions under the 401(k) Plan.

charged operations $ 200,000 and $ 700,000 for the three and nine months ended September 30, 2023, respectively, and $ 122,000 and

$ 428,000 for the three and nine months ended September 30, 2022, respectively, for contributions under the 401(k) Plan.

NOTE 20 – SUBSEQUENT EVENTS

On July 27, 2023,

the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional

investors (collectively, the “Purchasers”), pursuant to which the Company sold 2,530,000

September 28, 2023, the Company sold 4,050,000

shares of common stock;

pre-funded warrants to purchase up to 4,950,000

shares of common stock, and accompanying common warrants to purchase up to 7,000,000

shares of common stock with an exercise price of $ 1.00 per share.

The offering price per share of common stock and

accompanying common warrant was $ 1.00 ,

and the offering price per share of pre-funded warrant and accompanying common warrant was $ 0.9999 .

The offering closed

on August 1, 2023.

The Company incurred offering expenses of approximately $ 0.8 million, including placement agent fees of approximately $ 0.5 million.

The Company received net proceeds

of approximately $ 6.2 million, after deducting the underwriting discount and other offering expenses.

shares of common stock, and accompanying Series A warrants to purchase up to 9,000,000

shares of common stock with an exercise price of $ 0.50

per share and expiring five

years from date of issuance, and Series B warrants to purchase up to 9,000,000

shares of common stock with an exercise price of $ 0.50

per share and expiring one

year from date of issuance in a public offering, which closed on October 3, 2023.

The offering price per share of common

stock and accompanying warrants was $ 0.50 ,

and the offering price per share of pre-funded warrant and accompanying warrants was $ 0.4999 .

The Company incurred offering expenses of approximately $ 0.5 million, including placement agent fees of approximately

$ 0.3 million.

The Company received net proceeds of approximately $ 4.0 million, after deducting the underwriting discount and other

offering expenses.

October 17, 2023, the Company received a letter from the Listing Qualifications staff of The Nasdaq Stock Market LLC (“Nasdaq”)

indicating that, the Company no longer met the requirement to maintain a minimum bid price of $ 1

per share, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).

accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided a period of 180

calendar days, or until April 14, 2024, in which to regain compliance with the Minimum Bid Price Requirement.

In the event that the Company does not regain compliance

within this 180 -day

period, the Company may be eligible to seek an additional compliance period of 180

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

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

of its intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary.

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

Nasdaq will provide notice to the Company that its common stock will be subject to delisting.

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

What changed 10-Q

Item 1. Financial Statements