What changed in this filing

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Item 1. Financial Statements

2024-08-16 compared with 2024-05-13 · 1203 added, 1140 removed, 243 unchanged (91% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Inventory, net

Accounts receivable, net

Prepaid expenses and other current assets

19 unchanged sentences

Preferred stock, $ 0.001 par value;

5,000,000 shares authorized, 0 shares designated as of both March 31, 2024, and December 31, 2023;

0 shares issued and outstanding - as of both March 31, 2024 and December 31, 2023

5,000,000 shares authorized, 0 shares designated as of both June 30, 2024, and December 31, 2023;

0 shares issued and outstanding - as of both June 30, 2024 and December 31, 2023

Common stock, $ 0.001 par value;

1,000,000,000 shares authorized;

73,724,196 and 58,614,593 shares issued and outstanding as of March 31, 2024, and December 31, 2023, respectively and 66,359 shares to be issued as of December 31, 2023

9,832,587 and 2,077,088 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively and 2,074 shares to be issued as of December 31, 2023

Additional paid in capital

7 unchanged sentences

(In Thousands, Except Share and Per Share Amounts)

Three Months Ended March 31,

Three Months Ended

Six Months Ended

Product revenue, net

COSTS AND EXPENSES:

Cost of sales

Cost of revenue

Research and development

General and administrative

Total operating expenses

Selling, general and administrative

Asset impairment charges

Operating loss

Gain on change in fair value of warrant liabilities

(Loss) gain on change in fair value of warrant liabilities

Other (expense) income, net

Net loss available to common stockholders

Net loss to common stockholders per common share, basic and diluted

Net loss per common share, basic and diluted

Weighted average common shares outstanding, basic and diluted

1 unchanged sentence

PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

(In Thousands)

Three Months Ended March 31,

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive loss:

Foreign currency translation loss

Total other comprehensive loss

Comprehensive loss

1 unchanged sentence

PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’

THREE MONTHS ENDED MARCH 31, 2024

(In Thousands, Except Share and Per Share Amounts)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Thousands, Except Share and Per Share Amounts)

Comprehensive

5 unchanged sentences

Stock-based compensation

Foreign currency translation loss

Foreign currency transaction loss

Balance, March 31, 2024

Issuance of common stock, net of transactional expenses of $ 1,704

Issuance of common stock upon exercise of prefunded common warrants

Fair value of warrants reclassified from equity to liabilities

Fair value of warrants reclassified from liabilities to equity

Stock-based compensation

Foreign currency transaction loss

Balance, June 30, 2024

$ ( 694,373 )

1 unchanged sentence

PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’

THREE MONTHS ENDED MARCH 31, 2023

(In Thousands, Except Share and Per Share Amounts)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Thousands, Except Share and Per Share Amounts)

Comprehensive

2 unchanged sentences

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

( 2,672,044 )

Issuance of common stock under 2022 Purchase agreement with Lincoln Park

2 unchanged sentences

Stock-based compensation

Foreign currency translation loss

Foreign currency transaction loss

Balance, March 31, 2023

Issuance of common stock net of transactional expenses of $ 36

Stock-based compensation

Foreign currency transaction loss

Balance, June 30, 2023

$ ( 545,361 )

1 unchanged sentence

PHARMACEUTICALS HOLDING CORP .

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

Three Months Ended March 31,

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

Depreciation and amortization

Amortization of debt discount

Asset impairment charges

Change in fair value of warrant liabilities

Inventory write-off

Amortization of debt discount

Stock-based compensation

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other

Accounts payable

Operating lease liabilities and ROU asset, net

Lease liabilities and ROU asset, net

Accrued expenses and other current liabilities

1 unchanged sentence

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of a business

Purchase of property and equipment

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of term loan

Deferred payment related to purchase a business

Repurchase of common stock

Proceeds from ESPP

Proceeds, net of expenses of $ 0 and $ 101 , from sale of common stock and warrants

Net cash used in financing activities

Payment of term loan

Proceeds, net of $ 1,704 and $ 137 expenses, from sale of common stock and warrants

Net cash provided by (used in) financing activities

Effect of currency rate change on cash

3 unchanged sentences

Supplemental disclosures of cash flow information:

Non-cash financing activities:

Interest expense paid

Non-cash financing and investing activities:

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

the accompanying notes to the condensed consolidated financial statements

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

NOTE 1 – BUSINESS

Tonix Pharmaceuticals

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

(“Tonix Sub”), is a fully-integrated

biopharmaceutical company focused on developing and commercializing therapeutics to treat and prevent human disease and alleviate

The therapeutics under development include both small molecules and biologics.

markets Zembrace® SymTouch® (sumatriptan injection) 3 mg (“Zembrace”) and Tosymra® (sumatriptan nasal spray)

10 mg (“Tosymra”).

Zembrace 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.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

Tonix Pharmaceuticals Holding Corp., through its wholly owned subsidiary

Tonix Pharmaceuticals, Inc.

(“Tonix Sub”), is a fully-integrated biopharmaceutical company focused on developing and commercializing

therapeutics to treat and prevent human disease and alleviate suffering.

Tonix aims to transform therapies for pain management and modernize

solutions for public health challenges.

Tonix’s development

portfolio is focused on central nervous system (“CNS”) disorders.

Tonix’s priority is to submit a New Drug Application (“NDA”) to the

FDA in the second half of 2024 for TNX-102 SL for the management of fibromyalgia.

The FDA has granted Fast Track designation to TNX-102

SL for fibromyalgia.

TNX-102 SL is also expected to be tested by the University of North Carolina under a physician IND for Acute Stress

Reaction in a trial funded by the U.S.

Department of Defense (DoD), Congressionally Directed Medical Research Program, or CDMRP for approximately

Tonix’s CNS portfolio also includes TNX-1300 (cocaine esterase), a biologic designed to treat cocaine intoxication that

has FDA Breakthrough Therapy designation, in Phase 2 development that is funded by the U.S.

National Institute of Drug Abuse or NIDA.

Tonix’s immunology development portfolio consists of biologics to address organ transplant rejection, autoimmunity and cancer, including

TNX-1500, which is a humanized monoclonal antibody targeting CD40-ligand (CD40L or CD154) being developed for the prevention of allograft

rejection and for the treatment of autoimmune diseases.

Tonix also has product candidates in development in the areas of rare disease

and infectious disease.

Tonix is developing a broad-spectrum antiviral termed TNX-4200 under a contract for up to $34 million from the

DoD Defense Threat Reduction Agency.

Tonix’s development candidates are investigational drugs or biologics and are not approved

for any indication.

Tonix Medicines, our commercial subsidiary, markets Zembrace® SymTouch® (sumatriptan injection) 3 mg and

Tosymra® (sumatriptan nasal spray) 10 mg for the treatment of acute migraine with or without aura in adults.

The consolidated financial

statements include the accounts of Tonix Pharmaceuticals Holding Corp.

and its wholly owned subsidiaries, Tonix Sub, Krele LLC,

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

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

intercompany balances and transactions have been eliminated in consolidation.

Going Concern

The accompanying

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

and its wholly owned subsidiaries, Tonix Sub, Krele LLC, Tonix

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

Tonix Pharma Limited (collectively, the “Company” or “Tonix”).

All intercompany balances and transactions have

been eliminated in consolidation.

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

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

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

At March 31, 2024, the Company had

working capital of approximately $ 9.6

At March 31, 2024, the Company had an accumulated deficit of approximately $ 615.6

The Company held cash and cash equivalents of approximately $ 7.0

million as of March 31, 2024.

During the fourth quarter of 2023, the Company engaged CBRE, an international real estate brokerage firm, to potentially find

a strategic partner for, or buyer of, its Advanced Development Center in North Dartmouth, Massachusetts (“ADC”), to align with the Company’s current business objectives and priorities.

As of March 31, 2024, the Company does not have a commitment in place to sell the building.

The Company believes

that its cash resources at March 31, 2024 and the gross proceeds of $ 4.4 million, that it raised from an equity offering in the second quarter of 2024

(See Note 18), will not meet its operating and capital expenditure requirements through the second quarter of 2024.

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

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 maintain sufficient funds to continue operations.

of these events occurs, its ability to achieve 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

Interim financial statements

The unaudited condensed

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

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

8 of Regulation S-X.

At June 30, 2024, the Company had working

capital of approximately $ 3.2 million.

At June 30, 2024, the Company had an accumulated deficit of approximately $ 694.4 million.

Company held cash and cash equivalents of approximately $ 4.2 million as of June 30, 2024.

During the fourth quarter of 2023, the Company

engaged CBRE, an international real estate brokerage firm, to potentially find a strategic partner for, or buyer of, its Advanced Development

Center in North Dartmouth, Massachusetts (“ADC”), to align with the Company’s current business objectives and priorities.

As of June 30, 2024, the Company does not have a commitment in place to sell the ADC.

Company believes that its cash resources at June 30, 2024 and the gross proceeds of $ 4.4 million that it raised from an equity offering

in the third quarter of 2024 (See Note 18), will not meet its operating and capital expenditure requirements through the third quarter

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 or all of its research and development activities or other operations, and potentially delay product development in

an effort to maintain sufficient funds to continue operations.

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

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

Moreover, the

Company may default under the terms of its existing indebtedness.

The financial statements do not include any adjustments that might

result from the outcome of this uncertainty.

2 – SIGNIFICANT ACCOUNTING POLICIES

financial statements

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

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

Article 8 of Regulation S-X.

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

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

fair presentation have been included.

The condensed consolidated

balance sheet as of December 31, 2023, contained herein has been derived from audited financial statements.

Operating results for

the three months ended March 31, 2024 are not necessarily indicative of results that may be expected for the year ending December

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

statements and notes thereto for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K,

In the opinion of management, all

adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

condensed consolidated balance sheet as of December 31, 2023, contained herein has been derived from audited financial statements.

results for the three and six months ended June 30, 2024 are not necessarily indicative of results that may be expected for the year

ending December 31, 2024.

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

financial statements and notes thereto for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K,

filed with the Securities and Exchange Commission (“SEC”) on April 1, 2024.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

Reverse Stock Split

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.

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

All authorized, issued

and outstanding common stock, common stock warrants, stock option awards, exercise prices and per share data have been adjusted

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

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

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 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.

Use of estimates

The preparation of financial

statements in accordance with 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.

On June 10, 2024, the Company

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

split on a retrospective basis pursuant to ASC 260, Earnings Per Share.

All issued and outstanding common stock, common stock warrants,

stock option awards, exercise prices and per share data have been adjusted in these condensed consolidated financial statements, on a

retrospective basis, to reflect the reverse stock split for all periods presented.

Authorized common and preferred stock were not adjusted

because of the reverse stock split.

and uncertainties

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

to address public health challenges.

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

expects these conditions to continue for the foreseeable future.

Further, the Company 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.

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.

preparation of financial statements in accordance with 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

The Company accounts

for business combinations in accordance with the provisions of ASC 805, Business Combinations and ASU No.

2017-01, Business Combinations

Significant estimates include, but are not limited to, impairments, 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.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

Company accounts for business combinations in accordance with the provisions of ASC 805, Business Combinations and ASU No.

Business Combinations (Topic 805):

Clarifying the Definition of a Business.

Business combinations are accounted for using the acquisition method, whereby

the consideration transferred is allocated to the net assets acquired based on their respective fair values measured on the acquisition

The difference between the fair value of these assets and the purchase price is recorded as goodwill.

Transaction costs other

than those associated with the issue of debt or equity securities, and other direct costs of a business combination are not considered

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 quarter ended March 31, 2024.

These products collectively

accounted for 100 % of revenues during the quarter ended March 31, 2024.

As of March 31, 2024,

accounts receivable from five customers accounted for 23 % , 22 % , 21 % , 19 % and 13 % of total accounts receivable.

For the quarter

ended March 31, 2024, revenues from five customers accounted for 22 % , 21 % , 21 % , 20 % and 14 % of net product revenues, respectively.

The Company had no commercialized products for the quarter ended March 31, 2023, and therefore had no accounts receivable or revenues

in the comparative period.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

Cash, Cash Equivalents and Restricted Cash

The Company considers

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

three months or less when purchased.

At March 31, 2024, and March 31, 2023, cash equivalents, which consisted of money market funds,

amounted to approximately $ 24,000 and $ 71.2 million, respectively.

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

on the consolidated balance sheet at March 31, 2024, of approximately $ 0.9 million collateralizes a letter of credit issued in

connection with the lease of office space in Chatham, New Jersey (see Note 16) and restricted cash held by vendors in escrow accounts

for patient support services.

Restricted cash at March 31, 2023, of approximately $ 242,000 , collateralizes a letter of credit issued

in connection with the lease of office space in Chatham, New Jersey and New York, New York.

The following table

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

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

(in thousands)

Cash and cash equivalents

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.

10 for further details.

The Company had no accounts receivable as of March 31, 2023.

of March 31, 2024 , the Company did not have an allowance for credit losses, as the Company’s

exposure to credit losses is deminimis.

An allowance for credit losses 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.

The 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.

We monitor the financial

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

Business combinations are accounted for using the

acquisition method, whereby the consideration transferred is allocated to the net assets acquired based on their respective fair

values measured on the acquisition date.

The difference between the fair value of these assets and the purchase price is recorded as

Transaction costs other than those associated with the issue of debt or equity securities, and other direct costs of a

business combination are not considered part of the business acquisition transaction and are expensed as incurred.

Information and Concentrations

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

operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company considers its chief executive officer to be the Company’s CODM.

The CODM manages its operations and allocates resources

based on the Company’s consolidated results and therefore operates as one segment.

Company has two products that each accounted for more than 10 % of total revenues during the three and six months ended June 30, 2024.

These products collectively accounted for 100 % of revenues during the three and six months ended June 30, 2024.

of June 30, 2024, accounts receivable from five customers accounted for 31 % , 26 % , 23 % , 11 % and 9 % of total accounts receivable.

three months ended June 30, 2024, revenues from five customers accounted for 27 % , 26 % , 23 % , 18 % and 5 % of net product revenues, respectively.

For the six months ended June 30, 2024, revenues from five customers accounted for 24 % , 24 % , 22 % , 16 % and 13 % of net product revenues,

respectively.

The Company had no commercialized products for the three and six months ended June 30, 2023, and therefore had no accounts

receivable or revenues in the comparative period.

Cash Equivalents and Restricted Cash

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

maturity of three months or less when purchased.

At June 30, 2024 and June 30, 2023, cash equivalents, which consisted of money market

funds, amounted to $ 24,000 and $ 19.2 million, respectively.

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

consolidated balance sheet, at June 30, 2024, of approximately $ 0.9 million collateralizes a letter of credit issued in connection with

the lease of office space in Chatham, New Jersey (see Note 16) and restricted cash held by vendors in escrow accounts for patient support

Restricted cash at June 30, 2023, of approximately $ 243,000 , collateralizes a letter of credit issued in connection with the

lease of office space in Chatham, New Jersey and New York, New York.

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

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

and cash equivalents

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

Receivable, net

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 cash discounts, chargebacks and customer rebates.

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.

of June 30, 2024 , the Company did not have an allowance for credit losses, as the

Company’s exposure to credit losses is de minimis .

An allowance for credit losses 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

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

We attempt 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 liquidity.

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

of customers using our products, as well as their dispersion across different geographic areas.

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.

Acquired inventory was

valued at estimated selling price less reasonable margin.

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

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

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

The Company’s

reserves were approximately $ 21,000 for both March 31, 2024, and December 31, 2023.

The Company did not have inventory on hand

prior to the acquisition of Zembrace and Tosymra on June 30, 2023.

Property and equipment

are stated at cost, less accumulated depreciation.

Depreciation and amortization is calculated using the straight-line method over

the asset’s estimated useful life, which ranges from 20

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

inventory was valued at estimated selling price less a reasonable margin.

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.

During the three months ended June 30, 2024, the Company recorded write-downs related to Tosymra and

Zembrace finished goods inventory of approximately $ 1.7 million based on an assessment of inventory on hand and projected sales

prior to the respective expiration dates.

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.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

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

and equipment

and equipment are stated at cost, less accumulated depreciation.

Depreciation and amortization is calculated using the straight-line

method over the asset’s estimated useful life, which ranges from 20

years for buildings, 15

years for land improvements and laboratory equipment, three

years for land improvements and laboratory equipment,

years for computer assets, five

years for furniture and all other equipment and the shorter

of the useful life or term of lease for leasehold improvements.

Depreciation and amortization on assets begin when the asset

is placed in service.

Depreciation and amortization expense for the quarters ended March 31, 2024, and 2023 was $ 1.0

years for furniture and all other

equipment and the shorter

of the useful life or term of lease for leasehold

improvements.

Depreciation and amortization on assets begin when the asset is placed in service.

Depreciation and amortization expense

for the three months ended June 30, 2024, and 2023 was $ 0.9

million, for both reporting periods.

and amortization expense for the six months ended June 30, 2024, and 2023 was $ 1.9

million and $ 1.8

million, respectively.

The Company’s property and equipment is located in the United States.

testing of long-lived assets

Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may

not be recoverable.

When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated

with the related asset or group of assets over their estimated useful lives against their respective carrying amount.

Impairment, if

any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected

cash flows, of those assets and is recorded in the period in which the determination is made.

Intangible assets, net

Intangible assets deemed

to have finite lives are carried at acquisition-date fair value less accumulated amortization and impairment, if any.

intangible assets consist of developed technology intangible assets acquired in connection with the acquisition of certain products

from Upsher Smith Laboratories, LLC (“Upsher Smith”) consummated on June 30, 2023 (See Note 5).

The acquired intangible

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

Amortization expense

for the quarter ended March 31, 2024, was $ 0.2

The annual impairment assessment date for indefinite lived intangible assets is June 30.

No triggering events were

identified during the period of July 1, 2023, through March 31, 2024.

During the year ended

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

intangibles with indefinite lives, which are included in Intangible assets, net on the consolidated balance sheet, are not amortized

but are tested for impairment annually or whenever events or changes in circumstances indicate that their carrying amount may be

less than fair value.

As of March 31, 2024, 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

The Company’s property

and equipment is located in the United States.

assets deemed to have finite lives are carried at acquisition-date fair value less accumulated amortization and impairment, if any.

intangible assets consist of developed technology intangible assets acquired in connection with the acquisition of certain products from

Upsher Smith Laboratories, LLC (“Upsher Smith”) consummated on June 30, 2023 (See Note 5).

The acquired intangible assets

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

Amortization expense for the three

and six months ended June 30, 2024, was $ 0.2 million and $ 0.5 million, respectively.

The Company recorded a full impairment of its developed technology

assets during the three months ended June 30, 2024, discussed further below.

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

Identifiable intangibles with indefinite lives, which are included in Intangible assets, net on the consolidated balance

sheet, are not amortized but are tested for impairment annually or whenever events or changes in circumstances indicate that their

carrying amount may be less than fair value.

The Company completed the required annual impairment test for the indefinite-lived

intangible as of June 30, 2024, its annual impairment assessment date, by performing a qualitative assessment to evaluate whether it

is more likely than not that the fair value of its indefinite-lived intangible is less than its carrying amount, resulting in no

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

Impairment testing of long-lived

The Company evaluates

long-lived assets for impairment, including property and equipment, finite-lived intangibles assets and operating lease right-to-use

assets whenever events or changes in circumstances indicate that their net book value may not be recoverable.

When such factors and

circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of

assets over their estimated useful lives against their respective carrying amount.

Impairment, if any, is based on the excess of the

carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is

recorded in the period in which the determination is made.

During the three months ended June 30, 2024, the Company identified

certain triggering events related to the ADC and the decommissioning of the ADC.

The Company determined that the carrying value of the

ADC was not recoverable and that the carrying value exceeded its fair value.

As such, the Company recorded a non-cash impairment charge

of $ 48.8 million,

which is reflected in asset impairment charges in the consolidated statements of operations for the three and six months ended June

Additionally, due to a

sustained decline in revenues and continued delays in building out the sales team for its commercialized products, the Company also

tested its commercialized products asset group for recoverability as of June 30, 2024.

The Company determined that the carrying

value was not recoverable and therefore estimated the fair value of the asset group using a discounted cash flow analysis.

Company recorded a non-cash impairment charge for the amount of $ 9.2

million, representing the excess carrying value over the fair value, consisting of $ 6.2

million and $ 3 .0

million for the Zembrace and Tosymra developed technology intangible assets, respectively, which is reflected in asset impairment

charges in the consolidated statements of operations for the three and six months ended June 30, 2024.

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 March 31, 2024, the Company has recognized goodwill in connection with

the USL Acquisition consummated on June 30, 2023 (See Note 5).

The annual impairment assessment date is June 30.

No triggering

events were identified during the period of July 1, 2023 through March 31, 2024.

The Company determines

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

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

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

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

its obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement

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

As the Company’s leases do not provide an implicit

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

commencement dates in determining the present value of lease payments.

This is the rate the Company would have to pay if borrowing

on a collateralized basis over a similar term to each lease.

The operating lease ROU asset excludes lease incentives.

The Company’s

lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that

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

Deferred financing costs

Deferred financing

costs represent the cost of obtaining financing arrangements and are amortized over the term of the related debt agreement using

the effective interest method.

The Company previously recognized goodwill in connection with the USL Acquisition

consummated on June 30, 2023 (See Note 5).

The Company completed the required annual impairment test for goodwill as of June 30, 2024,

which resulted in full non-cash impairment of the Company’s $ 965,000 of goodwill, which is reflected in asset impairment charges in the consolidated statements of operations for the three and six months ended June 30, 2024.

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

Operating leases are included in operating lease

right-of-use (“ROU”) assets, operating lease liabilities, current and operating lease liabilities, noncurrent in the

Company’s consolidated balance sheets.

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

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

Operating lease ROU assets and

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

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

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

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

The operating lease

ROU asset excludes lease incentives.

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

reasonably certain that the Company will exercise that option.

Lease expense for lease payments made under operating leases is

recognized on a straight-line basis over the lease term.

financing costs

financing costs represent the cost of obtaining financing arrangements and are amortized over the term of the related debt agreement

using the effective interest method.

Deferred financing costs related to term debt arrangements are reflected as a direct reduction of

the related debt liability on the consolidated balance sheet.

Amortization of deferred financing costs are included in interest

expense on the consolidated statements of operations.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

Original issue discount

Certain term debt issued

by the Company provides the debt holder with an original issue discount.

Original issue discounts are reflected as a direct reduction

of the related debt liability on the consolidated balance sheets and are amortized over the term of the related debt agreement

using the effective interest method.

Amortization of deferred financing costs are included in interest expense

on the consolidated statements of operations.

issue discount

term debt issued by the Company provides the debt holder with an original issue discount.

Original issue discounts are reflected as a

direct reduction of the related debt liability on the consolidated balance sheets and are amortized over the term of the related debt

agreement using the effective interest method.

Amortization of original issue discounts are included in interest expense on the consolidated

statements of operations.

Revenue Recognition

The 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

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,

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

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.

contractual payment terms are typically 30 to 90 days .

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.

Our contractual payment

terms are typically 30 to 90 days .

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

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.

Shipping and handling activities

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

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 -

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:

- 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.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

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

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.

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.

- 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.

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.

earned but not paid are estimated by the Company according to historical payments trended for market growth assumptions.

and State Agency rebates are based upon historical experience of claims submitted by various states.

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.

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.

Applicable 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.

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.

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.

Applicable 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

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

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

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.

Consumer sales

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

This includes copay buy down and eVoucher programs.

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.

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 customers.

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

The Company outsources

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

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

The value ascribed to

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

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 customers.

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

Adjustments are made to the current provision for returns when data suggests product returns may differ from original estimates.

and Development Costs

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

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

The value ascribed

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

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

The Company estimates

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

clinical site agreements in connection with conducting clinical trials.

The financial terms of these contracts are subject to negotiations,

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

are provided under such contracts.

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

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

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

The financial terms of these contracts are subject

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

or services are provided under such contracts.

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

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

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

During the course of

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

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

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

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

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

and other third-party vendors.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

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

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

development activities.

The Company is reimbursed for costs incurred that are associated with specified research and development activities

included in the grant application approved by the government authority.

The Company classifies government grants received under

these arrangements as a reduction to the related research and development expense in the same period as the relevant expenses are

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.

Included in Prepaid expenses and other current assets is $ 0.3

million which was received in April 2024, and resulted in a reduction of research and development expense during the quarter ended

March 31, 2024.

No funding was received during the quarter ended March 31, 2023.

Stock-based Compensation.

All stock-based payments

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

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

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 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 six months ended June 30, 2024, we received $ 0.5 million in funding as a reduction of related research and development

Included in prepaid expenses and other current assets is an additional $ 0.3 million which was received in July 2024 and resulted

in a further reduction of research and development expense during the six months ended June 30, 2024.

During the six months ended June

30, 2023, we received $ 1.9 million in funding as a reduction of related research and development expense.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

Compensation.

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

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

expense over the requisite service period.

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

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

Foreign Currency Translation

Operations of the Company’s

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

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

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

Currency Translation

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

functional currency.

dollar is the functional currency of the other foreign subsidiaries.

Balance sheet accounts of the Canadian subsidiary

were translated from foreign currency into U.S.

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

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

Translation adjustments resulting from this

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

Comprehensive Income (Loss)

Comprehensive income

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

Balance sheet accounts of the Canadian

subsidiary were translated from foreign currency into U.S.

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

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

Translation adjustments resulting from

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

Comprehensive

Income (Loss)

Comprehensive

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

non-owners sources.

1 unchanged sentence

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

Deferred income tax

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

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

at the current enacted tax rates.

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

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

The Company recognizes

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

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

The tax benefits recognized in the consolidated financial

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

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

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

the current enacted tax rates.

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

not that these deferred income tax assets will be realized.

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

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

The tax benefits recognized in the consolidated

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

upon ultimate settlement.

As of March 31, 2024, the Company has not recorded any unrecognized tax benefits.

The Company’s

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

Derivative Instruments and Warrant Liabilities

The Company evaluates

all of its financial instruments, including issued warrants to purchase common stock under ASC 815 – Derivatives and Hedging,

to determine if such instruments are derivatives or contain features that qualify as embedded derivatives (See Note 13).

For derivative

financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value

and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations.

The Company uses the Black-Scholes option pricing model to value the derivative instruments at inception and subsequent valuation

dates, which is adjusted for instrument-specific terms as applicable.

From time to time,

certain equity-linked instruments may be classified as derivative liabilities due to the Company having insufficient authorized

shares to fully settle the equity-linked financial instruments in shares.

In such case, the Company has adopted a sequencing approach

under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity to determine the classification of its contracts

at issuance and at each subsequent reporting date.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

In the event that reclassification

of contracts between equity and assets or liabilities is necessary, the Company first allocates remaining authorized shares to

equity on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest issuance date receiving

the first allocation of shares.

In the event of identical issuance dates, shares are then allocated to equity beginning with instruments

with the latest maturity date first.

Per Share Data

The computation of

basic and diluted loss per share for the quarter ended March 31, 2024, and 2023 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

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

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

For the purposes of computing earnings per share (“EPS”), these warrants are considered to participate with common stock in earnings of the Company.

Therefore, the Company calculates basic and diluted

EPS using the two-class method.

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

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

The weighted average

number of outstanding shares of common stock used in the denominator for the calculation of basic loss per share for the quarter

ended March 31, 2024 include pre-funded warrants that are accounted for as equity instruments, beginning with their respective

issuance dates, as their stated exercise price of $ 0.0001 is non-substantive and there are no further vesting conditions or limitations

No income was allocated to the warrants for the quarter ended March 31, 2024, and 2023, 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 March 31, 2024, and 2023, are as follows:

Warrants to purchase common stock

Options to purchase common stock

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

Recent Accounting Pronouncements Not

In November 2023, the

Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment

Reporting--Improvements to Reportable Segment Disclosures , which requires incremental disclosures about a public entity’s

As of June 30, 2024, the Company has not recorded any unrecognized tax benefits.

The Company’s policy

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

Instruments and Warrant Liabilities

Company evaluates all of its financial instruments, including issued warrants to purchase common stock under ASC 815 – Derivatives

and Hedging, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives (See Note 13).

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair

value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations.

The Company uses the Black-Scholes option pricing model to value the derivative instruments at inception and subsequent valuation dates,

which is adjusted for instrument-specific terms as applicable.

From time to time, certain equity-linked instruments may be classified

as derivative liabilities due to the variable exercise price of the shares to fully settle the equity-linked financial instruments in

In such case, the Company has adopted a sequencing approach under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s

Own Equity to determine the classification of its contracts at issuance and at each subsequent reporting date.

the event that reclassification of contracts between equity and assets or liabilities is necessary, the Company first allocates remaining

authorized shares to equity on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest issuance

date receiving the first allocation of shares.

In the event of identical issuance dates, shares are then allocated to equity beginning

with instruments with the latest maturity date first.

classification of derivative instruments is reassessed at each reporting date.

If the classification changes as a result of events during

a reporting period, the instrument is reclassified as of the date of the event that caused the reclassification.

There is no limit on

the number of times a contract may be reclassified.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

computation of basic and diluted loss per share for the quarters ended June 30, 2024 and 2023 excludes potentially dilutive securities

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

during the period.

Prefunded warrants are assumed exercised on date of issuance and are included in the basic EPS calculation.

All warrants issued

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

Directors, on the Company’s common stock.

For purposes of computing EPS, these warrants are considered to participate with

common stock in earnings of the Company.

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

the two-class method, net income for the period is allocated between common stockholders and participating securities according to

dividends declared and participation rights in undistributed earnings.

No income was allocated to the warrants for the three and six

months ended June 30, 2024, and 2023, as results of operations were a loss for the periods.

dilutive securities excluded from the computation of basic and diluted net loss per share, as of June 30, 2024 and 2023, are as follows:

to purchase common stock

Accounting Pronouncements Not Yet Adopted

November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07,

Segment Reporting--Improvements to Reportable Segment Disclosures , which requires incremental disclosures about a public entity’s

reportable segments but does not change the definition of a segment or the guidance for determining reportable segments.

guidance requires disclosure of significant segment expenses that are (1) regularly provided to (or easily computed from information

regularly provided to) the chief operating decision maker and (2) included in the reported measure of segment profit or loss.

new standard also allows companies to disclose multiple measures of segment profit or loss if those measures are used to assess

performance and allocate resources.

The guidance will first be effective in our annual disclosures for the year ending December

31, 2024, and will be adopted retrospectively unless impracticable.

The new guidance

requires disclosure of significant segment expenses that are (1) regularly provided to (or easily computed from information regularly

provided to) the chief operating decision maker and (2) included in the reported measure of segment profit or loss.

The new standard

also allows companies to disclose multiple measures of segment profit or loss if those measures are used to assess performance and allocate

The guidance will first be effective in our annual disclosures for the year ending December 31, 2024, and will be adopted

retrospectively unless impracticable.

Early adoption is permitted.

The Company is in the process

of assessing the impact of ASU 2023-07 on our disclosures.

In December 2023, the

FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information about our effective

tax rate reconciliation as well as information on income taxes paid.

The guidance will first be effective in our annual disclosures

for the year ending December 31, 2025, and should be applied on a prospective basis with the option to apply retrospectively.

adoption is permitted.

The Company is in the process of assessing the impact of ASU 2023-07

on our disclosures.

December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information about

our effective tax rate reconciliation as well as information on income taxes paid.

The guidance will first be effective in our annual

disclosures for the year ending December 31, 2025, and should be applied on a prospective basis with the option to apply retrospectively.

Early adoption is permitted.

The Company is in the process of assessing the impact of ASU 2023-09 on our disclosures.

In March 2024, the

SEC adopted new rules relating to the disclosure of a range of climate-change-related physical and transition risks, data, and

opportunities.

The adopted rule contains several new disclosure obligations, including, (i) disclosure on how the board of directors

and management oversee climate-related risks and certain climate-related governance items, (ii) disclosure of information related

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

March 2024, the SEC adopted new rules relating to the disclosure of a range of climate-change-related physical and transition risks,

data, and opportunities.

The adopted rule contains several new disclosure obligations, including, (i) disclosure on how the board of

directors and management oversee climate-related risks and certain climate-related governance items, (ii) disclosure of information related

to a registrant’s climate-related targets, goals, and/or transition plans, and (iii) disclosure on whether and how climate-related

5 unchanged sentences

statements and disclosures.

NOTE 3 – INVENTORY

The components of inventory

consisted of the following (in thousands):

(in thousands)

Raw Materials

3 – INVENTORY

components of inventory consisted of the following (in thousands):

Work-in-process

Finished Goods

Inventory reserves

Total Inventory

NOTE 4 – PROPERTY AND EQUIPMENT,

Property and equipment,

net consisted of the following (in thousands):

(in thousands)

During the three months ended

June 30, 2024, the Company recorded write-downs related to Tosymra and Zembrace finished goods inventory of approximately $ 1.7 million

based on an assessment of inventory on hand and projected sales prior to the respective expiration dates.

4 – PROPERTY AND EQUIPMENT, NET

Land improvements

Office furniture and equipment

Laboratory equipment

Leasehold improvements

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

and equipment, net:

furniture and equipment

Property and equipment gross

Accumulated depreciation and amortization

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

On October 1, 2021,

the Company completed the acquisition of its approximately 45,000 square foot research and development facility in Frederick, Maryland

totaling $ 17.5 million, to process development activities.

Property and equipment, net

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

the three months ended June 30, 2024, primarily as a result of the Company’s decision to decommission its ADC facility in Dartmouth,

Massachusetts, the Company recognized a non-cash impairment charge of $ 48.8 million, which is reflected in asset impairment charges in the consolidated statements of operations for the three and six months ended June 30, 2024.

The 45,000 square foot facility was

purchased on September 28, 2020, for $ 4 .0 million and incurred approximately $ 61.6 million to the build-out of the facility.

October 1, 2021, the Company completed the acquisition of its approximately 45,000 square foot research and development facility in Frederick,

Maryland totaling $ 17.5 million, to process development activities.

Of the total purchase price, $ 2.1 million was allocated to the value

of land acquired, and $ 13.9 million was allocated to buildings, and approximately $ 1.5 million was allocated to office furniture

and equipment and laboratory equipment.

of land acquired, and $ 13.9 million was allocated to buildings, and approximately $ 1.5 million was allocated to office furniture and

equipment and laboratory equipment.

As of August 1, 2022, the assets became ready for the intended use and were placed in service.

On September 28, 2020,

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

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

Of the total purchase price, $ 1.2

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

Additionally, the Company incurred

approximately $ 38.8 million of costs during the year ended December 31, 2022, bringing total costs incurred-to-date to $ 61.6 million,

of which the majority related to the build-out of the facility.

As of October 1, 2022, the assets became ready for the intended

use and were placed in service.

On December 23, 2020,

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

of a vaccine development and commercial scale manufacturing facility.

As of March 31, 2024, the asset was not ready for its intended

NOTE 5 – GOODWILL AND INTANGIBLE ASSETS

The following table

provides the gross carrying value of goodwill as follows:

(in thousands)

Balance at December 31, 2023

Acquired during the period

Balance at March 31, 2024

The following table

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

(in thousands)

Intangible assets subject to amortization

Developed technology

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

construction of a vaccine development and commercial scale manufacturing facility.

As of June 30, 2024, the asset was not ready for

its intended use.

5 – GOODWILL AND INTANGIBLE ASSETS

following table provides the gross carrying value of goodwill as follows:

at December 31, 2023

at June 30, 2024

Company completed its annual impairment test for goodwill as of June 30, 2024, which resulted in full impairment of the Company’s

$ 965,000 of goodwill, which is reflected in asset impairment charges in the consolidated statements of operations for the three

and six months ended June 30, 2024.

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

assets subject to amortization

Impairment charge

Accumulated amortization

Intangible assets not subject to amortization

Internet domain rights

Total intangible assets, net

During the quarter ended March 31, 2024, the

Company recorded amortization of $ 238,000 .

No amortization was recorded during the quarter ended March 31, 2023.

At March 31, 2024,

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

Year Ending December 31,

Remainder of 2024

2028 and beyond

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023 (UNAUDITED)

NOTE 6 – FAIR VALUE MEASUREMENTS

assets not subject to amortization

domain rights

intangible assets, net

the three and six months ended June 30, 2024, the Company recorded amortization of $ 238,000

and $ 476,000 ,

respectively.

No amortization was recorded during the same periods in 2023.

a result of certain triggering events identified impacting the Company’s commercialized products asset group during the three months

ended June 30, 2024, the Company tested the asset group for impairment as of June 30, 2024, resulting in a full impairment of its Zembrace

and Tosymra developed technology intangible assets, of $ 6.2 million and $ 3 .0 million, respectively, which is reflected in asset impairment

charges in the consolidated statements of operations for the three and six months ended June 30, 2024.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

6 – 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

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

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

As of March 31, 2024,

and December 31, 2023, the Company used Level 1 quoted prices in active markets to value cash equivalents which were deminimis for

both periods presented.

The Company did not have any Level 2 or Level 3 assets or liabilities as of March 31, 2024.

As of December

31, 2023, Level 3 liabilities included a portion of the Series D Warrants and all Series C Warrants issued in December 2023, which

did not meet the criteria for equity classification due to insufficient authorized shares to settle the instruments and were therefore

accounted for as liabilities at fair value.

After the Company received stockholder approval to increase the number of authorized

shares on January 25, 2024, the liability classified Series D Warrants and the Series C Warrants met all requirements for equity

classification and, as a result, the Company reclassified them to equity as of January 25, 2024.

The Company used the

Black-Scholes option pricing model to estimate the fair value of the Series D Warrants and the Series C Warrants using significant

unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

For periods prior to the receipt of

stockholder approval, the fair value was then adjusted by applying a discount for lack of marketability (“DLOM”) based

on the expected timing of receipt of stockholder approval to increase the number of authorized shares and to allow the Warrants

to become exercisable in accordance with Nasdaq Listing Rule 5635.

The significant unobservable

inputs used in the valuation models as of January 25, 2024, the reclassification date, and as of December 31, 2023, to measure

the fair value of the Series D Warrants and the Series C Warrants are as follows:

Series C Warrants

Series D Warrants

Valuation Date:

Common stock price

Risk-free rate

Expected term (in years)

Expected volatility

Dividend yield

Discount for lack of marketability

From December 31, 2023

to the reclassification date, the Company recognized a change in fair value resulting in a gain of $ 7 .0 million related to the

liability-classified warrants prior to meeting the criteria for equity classification.

Changes in the fair value of the liability-classified

warrants are recognized as a separate component in the consolidated statement of operations.

NOTE 7 – DEBT FINANCING

Long-term debt consists of the following:

March 31, 2024

inputs in which there is little or no market data.

As of June 30, 2024, and December

31, 2023, the Company used Level 1 quoted prices in active markets to value cash equivalents which were de minimis for both periods

The Company did not have any Level 2 or Level 3 assets or liabilities as of June 30, 2024.

As of December 31, 2023, Level 3

liabilities included a portion of the Company’s outstanding Series D Warrants and all of the Company’s outstanding Series

C Warrants issued in December 2023, which did not meet the criteria for equity classification due to insufficient authorized shares to

settle the instruments and were therefore accounted for as liabilities at fair value.

After the Company received stockholder approval

to increase the number of authorized shares on January 25, 2024, the liability classified Series D Warrants and the Series C Warrants

met all requirements for equity classification and, as a result, the Company reclassified them to equity as of January 25, 2024.

Company used the Black-Scholes option pricing model to estimate the fair value of the Series D Warrants and the Series C Warrants

using significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

For periods prior to

the receipt of stockholder approval, the fair value was then adjusted by applying a discount for lack of marketability

(“DLOM”) based on the expected timing of receipt of stockholder approval to increase the number of authorized shares and

to allow the Warrants to become exercisable in accordance with Nasdaq Listing Rule 5635.

Additionally, between April 1, 2024

and May 22, 2024, Level 3 liabilities included a portion of the Company’s outstanding August 2023 Warrants, Series A Warrants,

Series B Warrants, Series C Warrants, and Series D Warrants (collectively, the “Existing Warrants”), as a result of

certain Warrant Amendments entered into upon the closing of an equity financing on April 1, 2024, which provided for adjustments to

the exercise prices of the Existing Warrants, contingent on approval by the Company’s stockholders of a proposal to allow the

Existing Warrants to become exercisable in accordance with Nasdaq Listing Rule 5635.

The Company determined that the exercise price

adjustment provision that is contingent on stockholder approval precluded the Existing Warrants from being indexed to the

Company’s own stock, and therefore were reclassified to liabilities at post-modification fair value on April 1, 2024.

the Company received stockholder approval on May 22, 2024, thereby reducing the exercise prices of each of the Existing Warrants to

per share, the Existing Warrants met all requirements for equity classification and the Company reclassified them to equity as of

May 22, 2024.

To estimate the fair value of the Existing Warrants on the reclassification dates, the Company used a Black-Scholes

option pricing model, probability weighted for different scenarios as applicable.

following table summarizes the range of significant assumptions used in determining the fair value of liability-classified warrants as

of December 31, 2023 and on the respective reclassification dates for the three and six months ended June 30, 2024:

4.39 %- 5.37 %

term (in years)

for lack of marketability

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

reconciliation of the beginning and ending balances for the liability-classified warrants measured at fair value on a recurring basis

using significant unobservable inputs (Level 3) is as follows for the three and six months ended June 30, 2024:

Warrant liabilities

Balance at December 31, 2023

Fair value - mark to market adjustment

Warrants reclassified from liabilities to equity

Balance at March 31, 2024

Warrants reclassified from equity to liabilities

Fair value - mark to market adjustment

Warrants reclassified from liabilities to equity

Balance at June 30, 2024

were no liability-classified warrants measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for

the three or six months ended June 30, 2023.

Changes in the fair value of the liability-classified warrants are recognized as a separate

component in the consolidated statement of operations.

7 – DEBT FINANCING

debt consists of the following:

June 30, 2024

December 31, 2023

3 unchanged sentences

Total long-term debt, net

On December 8, 2023, the Company entered

into a Loan and Guaranty Agreement (the “Loan Agreement”) by and among the Company, Krele LLC, Tonix Pharmaceuticals, Inc.,

Jenner and Tonix R&D Center (“Loan Parties”), with JGB Capital, LP, JGB Partners, LP, JGB (Cayman) Port Ellen Ltd., and

any other lender from time to time party hereto (collectively, the “Lenders”), and JGB Collateral LLC, as administrative agent

and collateral agent for the Lenders (in such capacity, “JGB Agent”) for a 36 -month term loan (the “Term Loan”)

in the aggregate principal amount of $ 11 .0 million, with a maturity date of December 8, 2026 (the “Maturity Date”).

Loan was funded with an original issue discount of 9 % of the principal amount of the Term Loan, or $ 1 .0 million, which is being amortized

over the term of the debt as an adjustment to the effective interest rate on the outstanding borrowings.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023 (UNAUDITED)

Borrowings under the Term Loan bear

interest at a fluctuating rate equal to the greater of (i) the prime rate as defined in the Loan Agreement plus 3.5 %

December 8, 2023, the Company entered into a Loan and Guaranty Agreement (the “Loan Agreement”) by and among the

Company, Krele LLC, Tonix Pharmaceuticals, Inc., Jenner and Tonix R&D Center (collectively, the “Loan Parties”),

with JGB Capital, LP, JGB Partners, LP, JGB (Cayman) Port Ellen Ltd., and any other lender from time to time party hereto

(collectively, the “Lenders”), and JGB Collateral LLC, as administrative agent and collateral agent for the Lenders (in

such capacity, “JGB Agent”) for a 36 -month

term loan (the “Term Loan”) in the aggregate principal amount of $ 11.0

million, with a maturity date of December

8, 2026 (the “Maturity Date”).

The Term Loan was funded with an original issue discount of 9 %

of the principal amount of the Term Loan, or $ 1.0

million, which is being amortized over the term of the debt as an adjustment to the effective interest rate on the outstanding

under the Term Loan bear interest at a fluctuating rate equal to the greater of (i) the prime rate as defined in the Loan Agreement plus

3.5 % and (ii) 12 %.

Interest is payable monthly in arrears commencing in December 2023.

In connection with the Term Loan, the Company deposited into a

reserve account $ 1.8

million to be used exclusively to fund interest payments related to the Term Loan.

The remaining deposit as of March 31, 2024 totals

$ 1.3 million, which is reflected in Prepaid expenses and other current assets on the consolidated balance sheet.

Commencing on March 8, 2024 and continuing

monthly through the Maturity Date, the outstanding principal is due and payable in monthly installments of $ 0.2 million, with the final

remaining balance of unpaid principal and interest due and payable on the Maturity Date.

In addition, the Company must pay a monthly collateral

monitoring charge equal to 0.23 % of the outstanding principal amount of the term loan as of the date of payment.

The Company incurred

$ 1.1 million in issuance costs, which is being amortized over the term of the debt as an adjustment to the effective interest rate on

the outstanding borrowings.

The Loan Agreement provides for voluntary

prepayments of the Term Loan, in whole or in part, subject to a prepayment premium.

The Loan Agreement contains customary affirmative

and negative covenants by the Company, which among other things, will require the Borrowers to provide certain financial reports to the

lenders, to maintain a deposit account to fund interest payments, and limit the ability of the Company to incur or guarantee additional

indebtedness, pay dividends or make other equity distributions, sell assets, engage in certain transactions, and effect a consolidation

The obligations of the Company under the Loan Agreement may be accelerated upon customary events of default, including non-payment

of principal, interest, fees and other amounts, covenant default, insolvency, material judgements, inaccuracy of representations and warranties,

invalidity of guarantees.

The Term Loan is secured by first priority security interests in the Company’s R&D Center in Frederick,

Maryland, the Advanced Development Center in North Dartmouth, Massachusetts, and substantially all of the relevant deposit accounts.

As of March 31, 2024 and December 31,

2023, the carrying amount of the Term Loan approximated its fair value as the contractual interest rate for the Term Loan was representative

of the then market interest rate.

Annual future principal payments due on

the Term Loan as of March 31, 2024 are as follows (in thousands):

Fiscal years ending

Remainder of 2024

NOTE 8 – STOCKHOLDERS’ EQUITY

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

The 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 did not regain compliance within this 180 -day period, the Company was eligible to seek an additional 180 day compliance

period if it met 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 provided written notice to Nasdaq of

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

16, 2024, the Company received a letter from Nasdaq, stating that the Company was successful in receiving an additional 180-day compliance

On January 25, 2024,

the Company filed a Certificate of Amendment to its Articles of Incorporation, as amended, with the Secretary of State of the State

of Nevada to increase the number of authorized shares of the Company’s common stock from 160,000,000 to 1,000,000,000 shares

(the “Charter Amendment”).

In connection with the Term Loan, the Company

deposited into a reserve account $ 1.8 million to be used exclusively to fund interest payments related to the Term Loan.

The remaining

deposit as of June 30, 2024 totals $ 0.9 million, which is reflected in Prepaid expenses and other current assets on the consolidated

balance sheet.

on March 8, 2024 and continuing monthly through the Maturity Date, the outstanding principal is due and payable in monthly installments

of $ 0.2 million, with the final remaining balance of unpaid principal and interest due and payable on the Maturity Date.

the Company must pay a monthly collateral monitoring charge equal to 0.23 % of the outstanding principal amount of the term loan as of

the date of payment.

The Company incurred $ 1.1 million in issuance costs, which is being amortized over the term of the debt as

an adjustment to the effective interest rate on the outstanding borrowings.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

Loan Agreement provides for voluntary prepayments of the Term Loan, in whole or in part, subject to a prepayment premium.

The Loan Agreement

contains customary affirmative and negative covenants by the Company, which among other things, will require the Borrowers to provide

certain financial reports to the lenders, to maintain a deposit account to fund interest payments, and limit the ability of the Company

to incur or guarantee additional indebtedness, pay dividends or make other equity distributions, sell assets, engage in certain transactions,

and effect a consolidation or merger.

The obligations of the Company under the Loan Agreement may be accelerated upon customary events

of default, including non-payment of principal, interest, fees and other amounts, covenant default, insolvency, material judgements,

inaccuracy of representations and warranties, invalidity of guarantees.

The Term Loan is secured by first priority security interests

in the Company’s R&D Center in Frederick, Maryland, the Advanced Development Center in North Dartmouth, Massachusetts, and

substantially all of the relevant deposit accounts.

of June 30, 2024 and December 31, 2023, the carrying amount of the Term Loan approximated its fair value as the contractual interest

rate for the Term Loan was representative of the then market interest rate.

future principal payments due on the Term Loan as of March 31, 2024 are as follows (in thousands):

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

8 – STOCKHOLDERS’ EQUITY

June 10, 2024, the Company effected a 1-for-32 reverse stock split of its issued and outstanding shares of common stock, whereby 95,543,805

outstanding shares of the Company’s common stock were exchanged for 2,985,924 shares of the Company’s common stock.

In connection

with the reverse stock split, the Company issued an additional 245,205 shares of the Company’s common stock due to fractional shares.

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

restated to reflect the reverse stock split.

As a result of the reverse-stock-split, on June 26, 2024, 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).

January 25, 2024, the Company filed a Certificate of Amendment to its Articles of Incorporation, as amended, with the Secretary of State

of the State of Nevada to increase the number of authorized shares of the Company’s common stock from 160,000,000 to 1,000,000,000

shares (the “Charter Amendment”).

The Charter Amendment was approved by the Company’s shareholders at a special meeting

of shareholders held on January 25, 2024.

NOTE 9 – REVENUES

Disaggregation of Net Revenues

The Company’s net product revenues

are summarized below:

Three months ended

Zembrace Symtouch

Total product revenues

All sales are generated

in the United States.

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 $ 3.0 million at March 31, 2024, $ 0.6 million of which was recorded as a reduction to accounts receivable and $ 2.4

million recorded as a component of accrued expenses.

NOTE 10 – ASSET PURCHASE AGREEMENT WITH UPSHER-SMITH

On June 30, 2023, the

Company completed the acquisition of certain assets from Upsher Smith 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 Upsher Smith entered into a Transition Services Agreement (the “Transition

Services Agreement”), pursuant to which Upsher Smith 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.

The Company has amended the transitional services agreement with Upsher

Smith so that Upsher Smith can continue to provide for the management of certain government rebates.

Upsher Smith will be reimbursed by the Company at cost for any rebates

they pay on the Company’s behalf.

Disaggregation

of Net Revenues

Company’s net product revenues are summarized below:

product revenues

Sales Accruals

record gross-to-net sales accruals for chargebacks, rebates, sales and other discounts, and product returns, which are all customary

to the pharmaceutical industry.

provision for gross-to-net allowances was $ 4.3 million at June 30, 2024, $ 0.6 million of which was recorded as a reduction to accounts

receivable and $ 3.7 million recorded as a component of accrued expenses.

10 – ASSET PURCHASE AGREEMENT WITH UPSHER-SMITH

June 30, 2023, the Company completed the acquisition of certain assets from Upsher Smith 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”).

June 30, 2023, in connection with the USL Acquisition, the Company and Upsher Smith entered into a Transition Services Agreement (the

“Transition Services Agreement”), pursuant to which Upsher Smith provided 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.

The Company has amended the transitional services

agreement with Upsher Smith so that Upsher Smith can continue to provide for the management of certain government rebates.

will be reimbursed by the Company at cost for any rebates they pay on the Company’s behalf.

Company has assumed certain obligations of Upsher Smith, including the payment of quarterly royalty payments on annual net sales from

1 unchanged sentence

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;

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.

Royalty 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.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

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.

Zembrace, royalty 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;

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 royalty payments are

payable until July 19, 2025.

Upon the entry of a generic version of the relevant product, the applicable royalty 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 royalty payment rates annual net sales tiers that will apply for such country, based on the market opportunity for the

product in such country.

If the parties fail to agree, then the royalty payment rates and annual net sales tiers described above

addition, 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.

As 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 Upsher Smith, 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 as of March 31, 2024.

The Company paid the deferred payment to the Seller

in full at the beginning of April 2024.

The following table

summarizes the components of the purchase consideration (in thousands):

Purchase consideration

Closing cash consideration

Inventory adjustment payment liability

Deferred payment liability

Purchase price to be allocated

The USL Acquisition

was accounted for as a business combination using the acquisition method, in accordance with the provisions of ASC 805, Business

Combinations and ASU No.

Such royalty payments are payable until July

Upon the entry of a generic version of the relevant product, the applicable royalty 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 royalty payment rates

annual net sales tiers that will apply for such country, based on the market opportunity for the product in such country.

If the parties

fail to agree, then the royalty payment rates and annual net sales tiers described above will apply.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

addition, 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.

In April 2024, the Company paid the additional deferred payment of $ 3.0 million in cash.

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

consideration

cash consideration

adjustment payment liability

payment liability

price to be allocated

USL Acquisition was accounted for as a business combination using the acquisition method, in accordance with the provisions of ASC 805,

Business Combinations and ASU No.

2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business.

and intangible assets acquired were recorded at their estimated fair values on the acquisition date, and the difference between

the fair value of these assets and the purchase price has been recorded as goodwill.

The tangible and intangible assets acquired were recorded at their estimated fair values on the acquisition date, and the difference

between the fair value of these assets and the purchase price has been recorded as goodwill.

The purchase price allocation is based upon

preliminary valuations and estimates and assumptions which are subject to change.

As the Company receives additional information

about facts and circumstances that existed at the acquisition date, the fair values of the acquired inventory and intangible assets

may be adjusted, with the offset recorded to goodwill.

The following table

represents the allocation of the purchase price to the assets acquired by the Company in the USL Acquisition recognized in the

Company’s consolidated balance sheets (in thousands):

Purchase price allocation

Prepaid expenses and other

Intangible assets, net

Fair value of assets acquired

The acquired inventory

consists of Upsher Smith’s raw materials, semi-finished goods, and finished goods inventory as of the Closing date.

value was determined based on the estimated selling price of the inventory, less the estimated total costs to complete, disposal

effort and holding costs.

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

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

Intangible assets eligible

for recognition separate from goodwill were those that satisfied either the contractual or legal criterion or the separability

As the Company receives additional information about

facts and circumstances that existed at the acquisition date, the fair values of the acquired inventory and intangible assets may be

adjusted, with the offset recorded to goodwill.

following table represents the allocation of the purchase price to the assets acquired by the Company in the USL Acquisition recognized

in the Company’s consolidated balance sheets (in thousands):

price allocation

expenses and other

value of assets acquired

acquired inventory consists of Upsher Smith’s raw materials, semi-finished goods, and finished goods inventory as of the Closing

The fair value was determined based on the estimated selling price of the inventory, less the estimated total costs to complete,

disposal effort and holding costs.

assets eligible for recognition separate from goodwill were those that satisfied either the contractual or legal criterion or the separability

criterion in the accounting guidance.

The identifiable intangible assets acquired and their estimated useful lives for amortization

are as follows (in thousands):

Developed technology - Tosymra

Developed technology - Zembrace

The developed technology

intangible assets related to Zembrace and Tosymra includes the value associated with the acquired patents, customer relationships,

and trademarks and trade names associated with the technology.

The developed technology intangible assets were valued as composite

assets under the premise that each asset is reliant on one another to generate cash flow, is not considered separable from the

technology, and are assumed to have similar useful lives.

The identifiable intangible assets acquired and their estimated useful lives for amortization are

as follows (in thousands):

technology - Tosymra

technology - Zembrace

developed technology intangible assets related to Zembrace and Tosymra includes the value associated with the acquired patents, customer

relationships, and trademarks and trade names associated with the technology.

The developed technology intangible assets were valued

as composite assets under the premise that each asset is reliant on one another to generate cash flow, is not considered separable from

the technology, and are assumed to have similar useful lives.

The composite intangible assets were valued using a multi-period excess

earnings method and are being amortized over their estimated useful lives using the straight-line method of amortization.

assumptions used in estimating the fair values of intangible assets include forecasted financial information, the weighted average

cost of capital, customer retention rates, and certain other assumptions.

The fair values assigned

to the assets acquired are based on reasonable assumptions and estimates that market participants would use.

Actual results may

differ from these estimates and assumptions.

Supplemental Pro Forma Information

The following unaudited

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

31, 2023 as if the USL Acquisition had occurred as of January 1, 2023, and gives effect to transactions that are

directly attributable to the acquisition, including additional amortization expense related to the fair value

of intangible assets acquired and an increase in Cost of Sales related to the acquisition-date fair value adjustment to inventory.

an unaudited pro forma basis, consolidated Net Product Sales and Net Loss for the three months ended March 31, 2023, would have been $ 4 .0

million and $ 35.4 million, respectively.

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.

The net loss of USL Acquisition business is included

in the Company’s consolidated results since the date of acquisition.

The revenue and net loss of the USL Acquisition business

reflected in the condensed consolidated statements for the three months ended March 31, 2024, is $ 2.5 million and $ 1.5 million,

respectively.

As described above, in connection

with the USL Acquisition, the Company and Upsher Smith entered into a Transition Services Agreement with Upsher Smith 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.

Upsher Smith 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 Company.

The amount due to Upsher

Smith for reimbursement of services performed under the transition services agreement was $ 0.4 million

as of March 31, 2024.

The transition service fees were netted against the receivables collected of $ 3.3

million and liabilities paid of $ 0.4

million, including gross-to-net on behalf of the Company with the net amount due to the Company of $ 2.5

million recorded within prepaid expenses and other on the consolidated balance sheet as of March 31, 2024.

The amount due to USL for reimbursement of services performed under the transition services

agreement was $ 0.5 million as of December 31, 2023.

The transition service fees were netted against the receivables collected of $ 5.1

million and liabilities paid of $ 4.4 million, including gross-to-net on behalf of the Company with the net amount due to the Company of

$ 0.2 million recorded within prepaid expenses and other on the consolidated balance sheet as of December 31, 2023.

The key assumptions

used in estimating the fair values of intangible assets include forecasted financial information, the weighted average cost of capital,

customer retention rates, and certain other assumptions.

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

fair values assigned to the assets acquired are based on reasonable assumptions and estimates that market participants would use.

results may differ from these estimates and assumptions.

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.

Pro Forma Information

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

directly attributable to the acquisition, including additional amortization expense related to the fair value of intangible assets acquired

and an increase in Cost of Sales related to the acquisition-date fair value adjustment to inventory.

On an unaudited pro forma basis,

consolidated Net Product Sales and Net Loss for the three and six months ended June 30, 2023, would have been $ 3.5 million and $ 29.7

million, and $ 7.6 million and $ 64.2 million, respectively.

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.

The net loss of USL Acquisition business is included

in the Company’s consolidated results since the date of acquisition.

The revenue and net loss of the USL Acquisition business reflected

in the condensed consolidated statements for the three and six months ended June 30, 2024, is $ 2.2 million and $ 13.3 million, and $ 4.7

million and $ 14.8 million, respectively.

described above, in connection with the USL Acquisition, the Company and Upsher Smith entered into a Transition Services Agreement

with Upsher Smith 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.

Smith 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 Company.

April 1, 2024, the Company amended the transitional services agreement with Upsher Smith so that Upsher Smith will only provide for

the management of certain government rebates.

Upsher Smith will be reimbursed by the Company at cost for any rebates they pay on the

Company’s behalf.

11 – ASSET PURCHASE AGREEMENT WITH 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.

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.

12 – LICENSE AGREEMENTS WITH COLUMBIA UNIVERSITY

February 13, 2023, Tonix exercised an option to obtain an exclusive license from Columbia University (“Columbia) for the

development of a portfolio of both fully human and murine mAbs for the treatment or prophylaxis of SARS-CoV-2 infection, including

our TNX-3600 and TNX-4100 product candidates, respectively.

The licensed mAbs were developed as part of a research collaboration

and option agreement between Tonix and Columbia.

As of March 31, 2024, other than the upfront fee, no payments have been accrued

or paid in relation to this agreement.

February 13, 2023, Tonix exercised an option to obtain an exclusive license from Columbia University (“Columbia) for the development

of a portfolio of both fully human and murine mAbs for the treatment or prophylaxis of SARS-CoV-2 infection, including our TNX-3600 and

TNX-4100 product candidates, respectively.

The licensed mAbs were developed as part of a research collaboration and option agreement

between Tonix and Columbia.

As of June 30, 2024, other than the upfront fee, no payments have been accrued or paid in relation to this

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

13 – SALE AND PURCHASE OF COMMON STOCK

2024 Financings

June 12, 2024, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company sold 1,199,448

shares of common stock and pre-funded warrants to purchase up to 2,568,110 shares of common stock.

The offering price per share of common

stock was $ 1.065 , and the offering price per share of pre-funded warrant was $ 1.064 .

offering closed on June 13, 2024.

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 $ 3.5 million, after deducting the underwriting discount

and other offering expenses.

June 27, 2024, the Company entered into a securities purchase agreement with certain institutional and retail investors, pursuant to

which the Company sold 2,833,900 shares of common stock and pre-funded warrants to purchase up to 4,228,158 shares of common stock.

offering price per share of common stock was $ 0.57 , and the offering price per share of pre-funded warrant was $ 0.5699 .

offering closed on June 28, 2024.

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 $ 3.5 million, after deducting the underwriting discount

and other offering expenses.

2024 Financing

December 20, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain

institutional investors, pursuant to which the Company sold and issued (i) 25,343,242 shares of the Company’s common stock,

(ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 28,710,812 shares of common stock and (iii)

Series C warrants to purchase up to 81,081,081 shares of common stock (the “Series C Warrants”), and (iv) Series D

warrants to purchase up to 81,081,081 shares of common stock (the “Series D Warrants” and, together with the Series

C Warrants, the “Common Warrants”).

The securities sold in the offering were sold in fixed combinations as units.

The offering price per share of common stock and accompanying Common Warrants was $ 0.555 , and the offering price per Pre-Funded

Warrant and accompanying Common Warrants was $ 0.5549 .

The offering closed on December 22, 2023, generating gross proceeds of approximately

$ 30 .0 million, before deducting offering expenses of $ 2.3 million payable by the Company.

At the closing of the offering, 6,509,010

Pre-Funded Warrants were immediately exercised into shares of common stock for nominal proceeds.

March 28, 2024, the Company entered into an agreement to sell 336,459

shares of common stock, pre-funded warrants to

purchase up to 121,875

shares of common stock, and accompanying Series

E warrants to purchase up to 458,334

shares of common stock with an exercise price

per share and expiring five

and a half years from date of issuance in a public

offering, which closed on April 1, 2024.

The offering price per share of common stock was $ 9.60 ,

and the offering price per share of pre-funded warrants was $ 9.5968 .

Company incurred offering expenses of approximately $ 0.5 million, including placement agent fees of approximately $ 0.3 million.

received net proceeds of approximately $ 3.9 million, after deducting the underwriting discount and other offering expenses.

Additionally,

with the closing of the financing on April 1, 2024, the Company entered into warrant amendments (collectively, the “Warrant Amendments”)

with certain holders of its common warrants (referred to herein as the “Existing Warrants”).

The Company agreed to amend

the exercise price of each Existing Warrant to $ 10.56 upon approval by the Company’s stockholders of a proposal to allow the Existing

Warrants to become exercisable in accordance with Nasdaq Listing Rule 5635 or, if stockholder approval is not obtained by October 1,

2024, the Company agreed to automatically amend the exercise price of the Existing Warrants to the Minimum Price (as defined in Nasdaq

Listing Rule 5635(d)) of the Company’s common stock on October 1, 2024, if and only if the Minimum Price is below the then current

exercise price.

Upon stockholder approval, the termination date for the warrants issued August 2023 (the “August Warrants”)

to purchase up to an aggregate of 217,188 shares was amended to April 1, 2029 ;

the termination date for Series A Warrants to purchase

up to an aggregate of approximately 278,125 shares is April 1, 2029 ;

the termination date for Series B Warrants to purchase up to

an aggregate of approximately 278,125 shares is April 1, 2025 ;

the termination date for Series C Warrants to purchase up to an aggregate

of approximately 1,088,248 shares is the earlier of (i) April 1, 2026 and (ii) 10 trading days following notice by the Company to

the Series C Warrant holders of the Company’s public announcement of the FDA’s acknowledgement and acceptance of the Company’s

NDA relating to TNX-102 SL in patients with Fibromyalgia;

the termination date for Series D Warrants to purchase up to an aggregate of

approximately 1,088,248 shares is April 1, 2029 .

The other terms of the Existing Warrants remained unchanged.

Company evaluated the Warrant Amendments as of April 1, 2024, and determined that the potential adjustment to the exercise price that

is contingent on stockholder approval precluded the Existing Warrants from being indexed to the Company’s own stock, and as a result,

did not meet the criteria for equity classification under ASC 815-40.

The Company accounted for the Warrant Amendments as a direct and

incremental cost of the March 2024 financing and recognized the incremental fair value resulting from the modified terms of approximately

$ 3 .0 million as an offset to the proceeds received.

As all of the Existing Warrants were equity-classified prior to the Warrant Amendments,

the net impact to the condensed consolidated statement of stockholders’ equity was zero.

The Company then reclassified the Existing

Warrants from equity to liabilities at post-modification fair value on April 1, 2024.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

May 22, 2024, at the annual meeting of the Company’s stockholders, the Company’s stockholders approved the proposal to amend

the exercise prices of the Existing Warrants to $ 10.56 per share and extend the expiration dates.

The Company determined the Existing

Warrants met all of the criteria for equity classification as of the approval date.

The Existing Warrants were adjusted to fair value

through May 22, 2024, when the warrants were reclassified to equity.

Changes in the fair value of the liability-classified warrants were

recognized as a separate component in the consolidated statement of operations.

2023 Financing

December 20, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional

investors, pursuant to which the Company sold and issued (i) 791,977 shares of the Company’s common stock, (ii) pre-funded warrants

(the “Pre-Funded Warrants”) to purchase up to 897,213 shares of common stock and (iii) Series C warrants to purchase up to

2,533,784 shares of common stock (the “Series C Warrants”), and (iv) Series D warrants to purchase up to 2,533,784 shares

of common stock (the “Series D Warrants” and, together with the Series C Warrants, the “Common Warrants”).

securities sold in the offering were sold in fixed combinations as units.

The offering price per share of common stock and accompanying

Common Warrants was $ 17.76 , and the offering price per Pre-Funded Warrant and accompanying Common Warrants was $ 17.7568 .

closed on December 22, 2023, generating gross proceeds of approximately $ 30 .0 million, before deducting offering expenses of $ 2.3 million

payable by the Company.

At the closing of the offering, 203,407 Pre-Funded Warrants were immediately exercised into shares of common

stock for nominal proceeds.

Pre-Funded Warrants have an exercise price of $ 0.0001 per share, are immediately exercisable subject to certain ownership limitations,

and can be exercised at any time until exercised in full.

The Series C Warrants have an exercise price of $ 0.555 per share, and

are exercisable on the later of approval by the Company’s stockholders of (i) a proposal to approve the filing of an amendment

to the Company’s Articles of Incorporation, increasing the number of authorized shares of common stock from 160,000,000

to 1,000,000,000 and (ii) a proposal to allow the Warrants to become exercisable in accordance with Nasdaq Listing Rule 5635 (the

later of such events, the “Approval Date”) and will expire on the later of (a) 10 trading days following the Approval

Date and (b) the earlier of (x) the two year anniversary of the Approval Date and (y) 10 trading days following the public announcement

Food and Drug Administration’s (“FDA”) acknowledgement and acceptance of the New Drug Application

(“NDA”) relating to the Company’s TNX-102 SL product candidate in patients with fibromyalgia.

The Series D Warrants

have an exercise price of $ 0.85 per share and are exercisable beginning on the Approval Date through the five-year anniversary

of the Approval Date.

The Series C Warrants have an exercise price of $ 17.76 per share, and are exercisable

on the later of approval by the Company’s stockholders of (i) a proposal to approve the filing of an amendment to the Company’s

Articles of Incorporation, increasing the number of authorized shares of common stock from 160,000,000 to 1,000,000,000 and (ii) a proposal

to allow the Warrants to become exercisable in accordance with Nasdaq Listing Rule 5635 (the later of such events, the “Approval

Date”) and will expire on the later of (a) 10 trading days following the Approval Date and (b) the earlier of (x) the two year

anniversary of the Approval Date and (y) 10 trading days following the public announcement of the U.S.

Food and Drug Administration’s

(“FDA”) acknowledgement and acceptance of the New Drug Application (“NDA”) relating to the Company’s TNX-102

SL product candidate in patients with fibromyalgia.

The Series D Warrants have an exercise price of $ 27.20 per share and are exercisable

beginning on the Approval Date through the five-year anniversary of the Approval Date.

the closing of the offering, the Company determined that certain of the Common Warrants did not meet the criteria for equity classification

1 unchanged sentence

The Company has adopted a sequencing approach

under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity to determine the classification of its contracts

at issuance and at each subsequent reporting date, whereby shares are allocated based on the earliest issuance date of potentially

dilutive instruments, with the earliest issuance date receiving the first allocation of shares.

In the event of identical issuance

dates, shares are then allocated beginning with instruments with the latest maturity date first.

Pursuant to this sequencing approach,

the Company’s authorized and unissued shares were applied to the Pre-Funded Warrants and the Common Warrants in the following

(i) the Pre-Funded Warrants, (ii) the Series D Warrants, and (iii) the Series C Warrants.

Based on this analysis, the Company

determined that the authorized shares are sufficient to settle the remaining Pre-Funded Warrants and 50,933,271 Series D Warrants

and were therefore classified in equity.

The remaining 30,147,810 Series D Warrants and the Series C Warrants associated with

the deficit shares were classified as liabilities and are accounted for at fair value.

under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity to determine the classification of its contracts at

issuance and at each subsequent reporting date, whereby shares are allocated based on the earliest issuance date of potentially dilutive

instruments, with the earliest issuance date receiving the first allocation of shares.

In the event of identical issuance dates, shares

are then allocated beginning with instruments with the latest maturity date first.

Pursuant to this sequencing approach, the Company’s

authorized and unissued shares were applied to the Pre-Funded Warrants and the Common Warrants in the following order:

(i) the Pre-Funded

Warrants, (ii) the Series D Warrants, and (iii) the Series C Warrants.

Based on this analysis, the Company determined that the authorized

shares are sufficient to settle the remaining Pre-Funded Warrants and 1,591,665 Series D Warrants and were therefore classified in equity.

The remaining 942,120 Series D Warrants and the Series C Warrants associated with the deficit shares were classified as liabilities and

are accounted for at fair value.

$ 30 .0 million in gross proceeds received by the Company were first allocated to the Series C Warrants and the liability-classified Series

D Warrants at their respective fair values of approximately $ 14.4 million and $ 8.1 million, respectively.

The residual proceeds of approximately

$ 7.5 million were allocated to the shares of common stock, the Pre-Funded Warrants, and the equity-classified Series D Warrants on a

relative fair value basis.

The issuance costs totaling $ 2.3 million were allocated between the equity and liability-classified instruments

on a relative fair value basis.

Issuance costs of $ 1.4 million allocated to the shares, the Pre-Funded Warrants, and the equity-classified

Series D Warrants were recognized as a discount to the proceeds allocated to the equity-classified instruments.

Issuance costs of $ 0.9

million were allocated to the liability-classified Series D Warrants and the Series C Warrants and expensed within Selling, general and

administrative expense on the consolidated statements of operations.

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

$ 30 .0 million in gross proceeds received by the Company were first allocated to the Series C Warrants and the liability-classified

Series D Warrants at their respective fair values of approximately $ 14.4 million and $ 8.1 million, respectively.

proceeds of approximately $ 7.5 million were allocated to the shares of common stock, the Pre-Funded Warrants, and the equity-classified

Series D Warrants on a relative fair value basis.

The issuance costs totaling $ 2.3 million were allocated between the equity and

liability-classified instruments on a relative fair value basis.

Issuance costs of $ 1.4 million allocated to the shares, the Pre-Funded

Warrants, and the equity-classified Series D Warrants were recognized as a discount to the proceeds allocated to the equity-classified

Issuance costs of $ 0.9 million were allocated to the liability-classified Series D Warrants and the Series C Warrants

and expensed within Selling, general and administrative expense on the consolidated statements of operations.

January 25, 2024, the Company’s stockholders approved the proposal to file an amendment to the Company’s Articles

of Incorporation to increase the number of authorized shares of common stock from 160,000,000 to 1,000,000,000 .

liability-classified Series D Warrants and all of the Series C Warrants were presented within non-current liabilities on the

consolidated balance sheets as of December 31, 2023, and were adjusted to fair value through January 25, 2024, when the warrants

were reclassified to equity.

Changes in the fair value of the liability-classified warrants were recognized as a separate component

in the consolidated statement of operations.

September 2023 Financing

On 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 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.

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.

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.

January 25, 2024, the Company’s stockholders approved the proposal to file an amendment to the Company’s Articles of Incorporation

to increase the number of authorized shares of common stock from 160,000,000 to 1,000,000,000 .

liability-classified Series D Warrants and all of the Series C Warrants were presented within non-current liabilities on the consolidated

balance sheets as of December 31, 2023, and were adjusted to fair value through January 25, 2024, when the warrants were reclassified

Changes in the fair value of the liability-classified warrants were recognized as a separate component in the consolidated

statement of operations.

2023 Financing

September 28, 2023, the Company sold 126,563 shares of common stock;

pre-funded warrants to purchase up to 154,687 shares of common stock,

and accompanying Series A warrants to purchase up to 281,250 shares of common stock with an exercise price of $ 16.00 per share and expiring

five years from date of issuance, and Series B warrants to purchase up to 281,250 shares of common stock with an exercise price of $ 16.00

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 $ 16.00 , and the offering price per share of pre-funded warrant and accompanying warrants

was $ 15.99 .

Company incurred offering expenses of approximately $ 0.5 million, including placement agent fees of approximately $ 0.3 million.

received net proceeds of approximately $ 4 .0 million, after deducting the underwriting discount and other offering expenses.

2023 Financing

July 27, 2023, the Company sold 79,062 shares of common stock;

pre-funded warrants to purchase up to 139,688 shares of common stock and

accompanying common warrants to purchase up to 218,750 shares of common stock with an exercise price of $ 32.00 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 $ 32.00 , and

the offering price per share of pre-funded warrant and accompanying common warrant was $ 31.99 .

Company incurred offering expenses of approximately $ 0.7 million, including placement agent fees of approximately $ 0.5 million.

received net proceeds of approximately $ 6.3 million, after deducting the underwriting discount and other offering expenses.

Lincoln Park Transaction

August 16, 2022, the Company entered into a purchase agreement (the “2022 Purchase Agreement”) and a registration

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

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

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

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

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

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.

the quarter ended March 31, 2023, the Company sold 0.1 million shares of common stock under the 2022 Purchase Agreement, for net

proceeds of approximately $ 0.4 million.

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”).

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

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

Pursuant to the terms

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

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

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 3,125 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.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

the three and six months ended June 30, 2023, the Company sold 0 and 3,000 shares, respectively, of common stock under the 2022 Purchase

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

No shares were sold during 2024 under the 2022 Purchase

At-the-Market

2 unchanged sentences

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.

There were no sales under the Sales Agreement during the quarter ended March

During the quarter ended March 31, 2023, the Company sold approximately 0.5 million shares of common stock under the

Sales Agreement, for net proceeds of approximately $ 2 .0 million.

During the quarter ended March 31 , 2023, the Company had repurchased 2,512,044

of its shares of common stock outstanding under its 2022 share repurchase program for up to $ 12.5 million at prices ranging from

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.

There were no sales under the Sales Agreement during the three and six months ended June 30, 2024.

the three and six months ended June 30, 2023, the Company sold approximately 13,766 and 29,855 shares, respectively, of common stock

under the Sales Agreement, for net proceeds of approximately $ 1 .0 million and $ 3 .0 million, respectively.

There will be no more sales under the 2020 ATM.

the quarter ended March 31, 2023, the Company repurchased 78,502

of its shares of common stock outstanding under its 2022 share repurchase program for $ 12.5 million at prices ranging from $ 88.00

to $ 275.52 per share for a gross aggregate cost of approximately $ 12.5 million.

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

to which the Company may repurchase up to $ 12.5 million in value of its outstanding common stock from time to time on

the open market and in privately negotiated transactions subject to market conditions, share price and other factors.

During the quarter ended March 31 , 2023, the Company had repurchased 160,000 of its 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.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 AND 2023 (UNAUDITED)

to which the Company may repurchase up to $ 12.5 million in value of its outstanding common stock from time to time on the open

market and in privately negotiated transactions subject to market conditions, share price and other factors.

the quarter ended March 31, 2023, the Company repurchased 5,000 of its shares of common

stock outstanding under the new 2023 share repurchase program at $ 227.84 per share for a gross aggregate cost of $ 1.1 million.

timing and amount of any shares repurchased will

2 unchanged sentences

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.

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.

14 – STOCK-BASED COMPENSATION

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”).

Amended and Restated 2020 Stock Incentive

Plan (“Amended and Restated 2020 Plan”).

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

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

The Amended and Restated 2020 Plan initially provided for the issuance of up to 50,000 shares of common stock, which amount will

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

provided in the Amended and Restated 2020 Plan).

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

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

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

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

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

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

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

The Board of Directors determines

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

However, the exercise

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

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

The fair value of the common stock

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

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

31, 2024, 1,973,136 options were available for future grants under the Amended and Restated 2020 Plan.

summary of the stock option activity and related information for the Plans for the three months ended March 31, 2024, is as follows:

and Restated 2020 Plan initially provided for the issuance of up to 1,563 shares of common stock, which amount will be increased

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

Amended and Restated 2020 Plan).

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

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

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

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

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

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

awards or available for future awards).

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

under the Amended and Restated 2020 Plan.

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

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

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

by the Board of Directors in good faith.

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

be more than ten years .

As of June 30, 2024, 55,544 options were available for future grants under the Amended and Restated 2020 Plan.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

summary of the stock option activity and related information for the Plans for the six months ended June 30, 2024, is as follows:

Weighted-Average

4 unchanged sentences

or expirations

at March 31, 2024

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

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

weighted average fair value of options granted for the three-month periods ended March 31, 2024 and 2023 was $ 0.33 and $ 4.13 per

share, respectively.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 AND 2023 (UNAUDITED)

at June 30, 2024

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

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

weighted average fair value of options granted during the three and six months ended June 2024 was $ 5.06 per share and $ 10.16 per share,

respectively.

The weighted average fair value of options granted during the three and six months ended June 2023 was $ 87.36 per share

and $ 128.32 per share, respectively.

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

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

value of the award is measured on the grant date.

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

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

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

The Company also issues premium options to executive

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

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

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

assumptions used in the valuation of stock options granted during the three months ended March 31, 2024, and 2023 were as follows:

March 31, 2024

March 31, 2023

The fair value

of the award is measured on the grant date.

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

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

In addition, the Company issues

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

The Company also issues premium options to executive officers which have an exercise

price greater than the grant date fair value and has issued performance-based options which vest when target parameters are met or probable

of being met, subject in each case to a one year minimum service period prior to vesting.

Stock-based compensation expense related to

awards is amortized over the applicable service period using the straight-line method.

assumptions used in the valuation of stock options granted during the six months ended June 30, 2024, and 2023 were as follows:

June 30, 2024

June 30, 2023

interest rate

1 unchanged sentence

to 10.00 years

to 6.00 years

stock price volatility

1 unchanged sentence

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

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

the options as of the grant date.

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

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

compensation expense relating to options granted of $ 1.7 million, of which $ 1.2 million and $ 0.5 million, related to General and

Administration and Research and Development, respectively was recognized for the quarter ended March 31, 2024.

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 March 31, 2023.

of March 31, 2024, the Company had approximately $ 6.9 million of total unrecognized compensation cost related to non-vested awards

granted under the Plans, which the Company expects to recognize over a weighted average period of 2.05 years.

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

as of the grant date.

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

Bulletin, and the expected stock price volatility is based on the Company’ historical stock price volatility.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

compensation expense relating to options granted of $ 1.1 million, of which $ 0.8 million and $ 0.3 million, related to General and Administration

and Research and Development, respectively was recognized for the quarter ended June 30, 2024.

Stock-based compensation expense

relating to options granted of $ 2.4 million, of which $ 1.6 million and $ 0.8 million, related to General and Administration and Research

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

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 six-month period ended June 30, 2024.

Stock-based compensation expense

relating to options granted of $ 5.2 million, of which $ 3.6 million and $ 1.6 million, related to General and Administration and Research

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

of June 30, 2024, the Company had approximately $ 5.5 million of total unrecognized compensation cost related to non-vested awards granted

under the Plans, which the Company expects to recognize over a weighted average period of 1.87 years.

Stock Purchase Plans

May 6, 2022, the Company’s stockholders approved the Tonix Pharmaceuticals Holdings Corp.

2022 Employee Stock Purchase

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.

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.

2023 ESPP allows eligible employees to purchase up to an aggregate of 25,000 shares of the Company’s common stock.

Under the 2023 ESPP, on the first day of each offering period, each eligible employee for that offering period has the option

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

at the end of the offering period.

the 2023 ESPP, on the first day of each offering period, each eligible employee for that offering period has the option to enroll for

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

Each offering period under the 2023 ESPP is for six months, which can be modified from time-to-time.

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

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

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

A participant must

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

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

As of March 31, 2024, 733,641 shares

were available for future sales under the 2023 ESPP.

Subject to limitations,

each participant will be permitted to purchase a number of shares determined by dividing the employee’s accumulated payroll

deductions for the offering period by the applicable purchase price, which is equal to 85 percent of the fair market value

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

A participant must designate in his or her enrollment

package the percentage (if any) of compensation to be deducted during that offering period for the purchase of stock under the 2023 ESPP,

subject to the statutory limit under the Code.

As of June 30, 2024, 22,926 shares were available for future sales under the 2023 ESPP.

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

the quarter ended March 31, 2024 and 2023, $ 27,000 and $ 0 , respectively, was expensed.

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.

six months ended June 30, 2024 and 2023, $ 27,000 and $ 0 , respectively, was expensed.

In January 2023, 469 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 December 31, 2023,

approximately $ 44,000 of employee payroll deductions had accumulated and had been recorded in accrued expenses.

2024, 66,359 shares that were purchased as of December 31, 2023, under the 2022 ESPP, were issued.

Accordingly, during the first

quarter of 2024, approximately $ 24,000 of employee payroll deductions accumulated at December 31, 2023, related to acquiring such

shares, was transferred from accrued expenses to additional paid in capital.

As of December 31, 2023, approximately $ 44,000 of employee payroll

deductions had accumulated and had been recorded in accrued expenses.

In January 2024, 2,074 shares that were purchased as of December

31, 2023, under the 2022 ESPP, were issued.

Accordingly, during the first quarter of 2024, approximately $ 24,000 of employee payroll

deductions accumulated at December 31, 2023, related to acquiring such shares, was transferred from accrued expenses to additional paid

The remaining $ 20,000 was returned to the employees.

As of June 30, 2024, approximately $ 33,000 of employee payroll deductions

had accumulated and had been recorded in accrued expenses.

In July 2024, 6,927 shares that were purchased as of June 30, 2024, under

the 2023 ESPP, were issued.

Accordingly, during the third quarter of 2024, approximately $ 5,000 of employee payroll deductions accumulated

at June 30, 2024, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital.

The remaining

$ 28,000 was returned to the employees.

PHARMACEUTICALS HOLDING CORP.

2 unchanged sentences

15 – WARRANTS TO PURCHASE COMMON STOCK

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

the quarter ended March 31, 2024, 15,043,244 prefunded common warrants were exercised.

Subsequent to the quarter ended March 31,2024,

following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at June 30, 2024:

the six months ended June 30, 2024, 3,383,792 prefunded common warrants were exercised.

Subsequent to the quarter ended June 30, 2024,

4,228,158 prefunded warrants were exercised.

warrants were exercised during the quarter ended March 31, 2023.

warrants were exercised during the six months ended June 30, 2023.

Additionally,

with the closing of the financing on April 1, 2024, the Company entered into the Warrant Amendments (as defined in Note 13) with certain

holders of its warrants to purchase common stock, agreeing to amend the exercise price of each Existing Warrant to $ 10.56 upon approval

by the Company’s stockholders of a proposal to allow the warrants to become exercisable in accordance with Nasdaq Listing Rule

5635 or, if stockholder approval is not obtained by October 1, 2024, the exercise price would be automatically amended to the Minimum

Price (as defined in Nasdaq Listing Rule 5635(d)) of the Company’s common stock on October 1, 2024, if and only if the Minimum

Price is below the then current exercise price.

The Company’s stockholders approved the proposal to amend the exercise prices of

the Existing Warrants to $ 10.56 per share and extend the termination dates at the annual meeting of the Company’s stockholders held

on May 22, 2024.

As such, the table above reflects the modified terms of the Existing Warrants in effect as of June 30, 2024.

13 for further details.

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

These agreements frequently include one

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

No lease agreement

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

At March 31, 2024, the Company has right-of-use assets of $ 0.8 million and a total lease liability for operating leases of $ 0.8

million of which $ 0.5 million is included in long-term lease liabilities and $ 0.3 million is included in current lease liabilities.

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

At March 31, 2024,

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

These agreements frequently include one or more

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

No lease agreement imposes a

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

At June 30, 2024,

the Company has right-of-use assets of $ 0.7 million and a total lease liability for operating leases of $ 0.7 million of which $ 0.4 million

is included in long-term lease liabilities and $ 0.3 million is included in current lease liabilities.

June 30, 2024, future minimum lease payments for operating leases with non-cancelable terms of more than one year were as follows (in

Year Ending December 31,

Remainder of 2024

2028 and beyond

Included interest

No new leases or amendments

were entered into during the quarter ended March 31, 2024.

During the quarter ended March 31, 2023, the Company entered into lease

amendments, resulting in the Company recognizing an additional operating lease liability of approximately $ 528,000 based on the

present value of the minimum rental payments.

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

Operating lease expenses

were $ 0.1 for both the quarters ended March 31, 2024, and 2023.

Other information related to leases is as follows:

As of and for the

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

Three Months Ended

March 31, 2024

Three Months Ended

March 31, 2023

Operating cash flow from operating leases (in thousands)

Weighted Average Remaining Lease Term

Operating leases

Weighted Average Discount Rate

Operating leases

NOTE 17 – COMMITMENTS

Contractual agreements

The Company has entered

into contracts with various contract research organizations with outstanding commitments aggregating approximately $ 20.8 million

at March 31, 2024 for future work to be performed.

Defined contribution plan

The Company established

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

employees may participate.

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

subject to defined limitations.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

new leases or amendments were entered into during the six months ended June 30, 2024.

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.

The Company also recognized a corresponding increase

to ROU assets of approximately $ 898,000 , which represents a non-cash investing and financing activity.

lease expense was $ 0.1 and $ 0.2 million for the quarter ended June 30, 2024, and 2023, respectively.

lease expense was $ 0.2 million and $ 0.3 million for the six-months ended June 30, 2024, and 2023, respectively.

information related to leases is as follows:

paid for amounts included in the measurement of lease liabilities:

June 30, 2024

June 30, 2023

cash flow from operating leases (in thousands)

Average Remaining Lease Term

Average Discount Rate

17 – COMMITMENTS

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

$ 16.9 million at June 30, 2024 for future work to be performed.

contribution plan

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

all eligible employees may participate.

Participants may elect to defer a percentage of their annual pretax compensation to the 401(k)

Plan, subject to defined limitations.

The Company is required to make contributions to the 401(k) Plan equal to 100 percent of each participant’s

1 unchanged sentence

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

For the three

months ended March 31, 2024 and 2023, the Company charged operations $ 300,000 for both periods for contributions under the 401(k)

TONIX PHARMACEUTICALS HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

MARCH 31, 2024 AND 2023 (UNAUDITED)

NOTE 18 – SUBSEQUENT EVENTS

On March 28, 2024,

the Company entered into an agreement to sell 10,766,666 shares of common stock, pre-funded warrants to purchase up to 3,900,000 shares of common stock, and

accompanying Series E warrants to purchase up to 14,666,666 shares of common stock with an exercise price of $ 0.33 per share and

expiring five and a half years from date of issuance in a public offering, which closed on April 1, 2024.

The offering price per

share of common stock was $ 0.30 , accompanying warrants was $ 0.33 , and the offering price per share of pre-funded warrants was $ 0.2999 .

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 $ 3.9 million, after deducting the underwriting discount and other offering expenses.

Additionally, with the closing of the financing on April 1, 2024, the

Company entered into warrant amendments with certain holders of its Common Warrants.

The exercise price of each Existing Warrant

will be amended to $ 0.33

upon approval by the Company’s stockholders of a proposal to allow the Existing Warrants to become exercisable in accordance

with Nasdaq Listing Rule 5635, or as otherwise provided in the Amendment if stockholder approval is not obtained by October 1, 2024.

Stockholders will vote on this proposal on May 22, 2024.

Upon stockholder approval, the termination date for Common Warrants to

purchase up to an aggregate of 6,950,000

shares will be amended to April

the termination date for Series A Warrants to purchase up to an aggregate of approximately 8,900,000

shares will be April

the termination date for Series B Warrants to purchase up to an aggregate of approximately 8,900,000

shares will be April

the termination date for Series C Warrants to purchase up to an aggregate of approximately 34,823,928

shares will be the earlier of (i) April

1, 2026 and (ii) 10

trading days following notice by the Company to the Series C Warrant holder of the Company’s public announcement of the

FDA’s acknowledgement and acceptance of the Company’s NDA relating to TNX-102 SL in patients with Fibromyalgia;

termination date for Series D Warrants to purchase up to an aggregate of approximately 34,823,928

shares will be April

The other terms of the Existing Warrants will remain unchanged.

If stockholder approval is not obtained on or by

October 1, 2024, then the Company has agreed to automatically amend the exercise price of the Existing Warrants to the Minimum Price

(as defined in Nasdaq Listing Rule 5635(d)) of the Common Stock on October 1, 2024 if and only if the Minimum Price is below the

then current exercise price.

The Company charged

operations $ 200,000 and $ 500,000 for the three and six months ended June 30, 2024, respectively, and $ 200,000 and $ 500,000 for the three

and six months ended June 30, 2023, respectively, for contributions under the 401(k) Plan.

18 – SUBSEQUENT EVENTS

July 9, 2024, the Company entered into a securities purchase agreement with certain institutional and retail investors, pursuant to which

the Company sold 3,393,600 shares of common stock and pre-funded warrants to purchase up to 3,703,140 shares of common stock.

price per share of common stock was $ 0.57 , and the offering price per share of pre-funded warrant was $ 0.5699 .

offering closed on July 10, 2024.

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 $ 3.5 million, after deducting the underwriting discount

and other offering expenses.

On July 30, 2024, the

Company entered into a 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 $ 50 .0 million in 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.

Subsequent to June 30, 2024, the Company has sold 0.8 million shares

of common stock under the Sales Agreement, for net proceeds of approximately $ 0.4 million.

On August 9, 2024, the Company received a letter from 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”).

The Company was initially

provided with a 180 calendar day period, or until February 5, 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.

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