What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-16 compared with 2024-05-13 · 709 added, 521 removed, 94 unchanged (93% of the section changed)

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s

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

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

You can identify these statements by

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

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

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

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

You can identify these statements

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

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

Those statements include statements regarding the intent,

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

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

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

Readers are urged

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

and Exchange Commission.

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

in forward-looking statements.

Those statements include statements regarding the intent, belief

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

investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties,

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

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

Securities and Exchange Commission.

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

those in forward-looking statements.

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

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

We believe that its assumptions are

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

No assurances are made that actual results

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

Factors that could cause

differences include, but are not limited to:

our need for additional financing;

risks related to the failure to

obtain FDA clearances or approvals and noncompliance with FDA regulations;

risks related to the failure to successfully market any of

our products;

risks related to the timing and progress of clinical development of our product candidates;

uncertainties of patent protection

and litigation;

We believe that its assumptions are based

upon reasonable data derived from and known about our business and operations.

No assurances are made that actual results of operations

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

Factors that could cause differences include,

but are not limited to:

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

our possible need for additional

uncertainties of patent protection and litigation;

uncertainties of government or third party payor reimbursement;

limited research and development efforts and dependence

upon third parties;

and substantial competition.

Business Overview

We are a fully-integrated biopharmaceutical company focused on developing,

licensing and commercializing therapeutics to treat and prevent human disease and alleviate suffering.

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 Tonmya™, a product candidate for which two pivotal Phase 3 studies have been completed for the management of fibromyalgia.

Tonix has a pre-NDA meeting scheduled with the FDA in the second quarter of 2024.

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

reaction as well as fibromyalgia-type Long COVID.

Tonix’s CNS portfolio includes TNX-1300 (cocaine esterase), a biologic designed

to treat cocaine intoxication that has Breakthrough Therapy designation.

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.

also has product candidates in development in the areas of rare disease and infectious disease.

Tonix Medicines, our commercial subsidiary,

markets Zembrace® SymTouch® (sumatriptan injection) 3 mg and Tosymra® (sumatriptan nasal spray) 10 mg for the treatment of

research and development efforts and dependence upon third parties;

and risks related to failure to obtain clearances or approvals from

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

fully-integrated biopharmaceutical company focused on developing, licensing and commercializing therapeutics to treat and prevent

human disease and alleviate suffering.

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, a product

candidate for which two statistically significant Phase 3 studies have been completed for the management of fibromyalgia.

for fibromyalgia was granted Fast Track designation by the FDA.

Tonix expects a decision on marketing approval from the FDA in 2025.

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 includes TNX-1300 (cocaine esterase), a biologic designed to treat cocaine intoxication that

has FDA Breakthrough Therapy designation.

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.

has product candidates in development in the areas of rare disease and infectious disease.

Tonix’s infectious disease

portfolio includes TNX-4200, an oral CD45 antagonist in development as a broad-spectrum antiviral.

The program was awarded a

contract for up to $34 million of funding by the U.S.

Department of Defense (DoD), Defense Threat Reduction Agency (DTRA), to

establish physicochemical properties, pharmacokinetics, and safety attributes to support an Investigational New Drug (IND)

submission and to fund a first-in-human Phase 1 clinical study.

Tonix is developing TNX-801 (recombinant horsepox virus), for

preventing mpox (formerly known as monkeypox).

On August 14, 2024, the World Health Organization determined that the upsurge of mpox

in a growing number of countries in Africa constitutes a public health emergency of international concern.

Tonix owns and operates a

state-of-the art infectious disease research facility in Frederick, MD.

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.

All of our product

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

Tonmya has been conditionally accepted by the U.S.

Food and Drug Administration

(FDA) as the tradename for TNX-102 SL for the management of fibromyalgia.

Tonmya has not been approved for any indication.

Zembrace SymTouch and

Tosymra are registered trademarks of Tonix Medicines.

All other marks are the property of their respective owners.

Results of Operations

We anticipate that

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

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

Due to these uncertainties,

accurate predictions of future operations are difficult or impossible to make.

Since the acquisition of Zembrace and Tosymra on

June 30, 2023, we are now reporting product revenue and related costs.

Three Months Ended March 31, 2024

Compared to Three Months Ended March 31, 2023

The following table sets forth our operating

expenses for the quarter ended March 31, 2024 and 2023 (in thousands):

Quarter Ended March 31,

Product revenue, net

COSTS AND EXPENSES:

Cost of sales

Research and development

General and administrative

Total operating expenses

Operating loss

Other income, net

Company recognized revenue beginning in July 2023, as a result of the acquisition of two marketed products.

Revenue recognized

for the quarter ended March 31, 2024, was $2.5 million.

The Company’s net product revenues are summarized below:

Quarter Ended March 31,

Zembrace Symtouch

Total product revenues

Cost of Sales .

Company recognized cost of sales beginning in July 2023 as a result of the acquisition of Zembrace and Tosymra from Upsher Smith.

Cost of sales recognized for the quarter ended March 31, 2024, was $1.7 million.

Development Expenses .

Research and development expenses for the three months ended March 31,

2024, were $12.9 million, a decrease of $13.6 million, or 51%, from $26.5 million for the three months ended March 31, 2023.

is predominately due to decreased clinical expenses of $5.0 million, non-clinical expenses of $4.2 million, and manufacturing expenses

of $0.9 million as a result of fewer trials in the clinic and pipeline prioritization period over period, employee-related expenses of

$0.8 million and lab supplies of $1.8 million, due to a reduction in expenditures.

The table below summarizes

our direct research and development expenses for our product candidates and development platform for the quarters ended March 31,

2024, and 2023.

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

Medicines has contracted to acquire the Zembrace SymTouch and Tosymra registered trademarks.

Intravail is a registered trademark of Aegis

Therapeutics, LLC, a wholly owned subsidiary of Neurelis, Inc.

of Operations

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

and Tosymra®, the progress of our research and development efforts and the timing and outcome of regulatory submissions.

uncertainties, accurate predictions of future operations are difficult or impossible to make.

Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

following table sets forth our operating expenses for the quarter ended June 30, 2024 and 2023 (in thousands):

ended June 30,

AND EXPENSES:

and development

and administrative

Asset impairment charges

operating expenses

on change in fair value of warrant liabilities

(expense) income, net

recognized revenue beginning in July 2023, as a result of the acquisition of two marketed products.

Revenue recognized for the quarter

ended June 30, 2024, was $2.2 million.

Company’s net product revenues are summarized below:

ended June 30,

product revenues

We recognized cost of sales beginning in July 2023 as a result of the acquisition of Zembrace and Tosymra

from Upsher Smith.

Cost of sales recognized for the quarter ended June 30, 2024, was $3.4 million, including 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.

and Development Expenses .

Research and development expenses for the three months ended June 30, 2024 were $9.7 million,

a decrease of $12.3 million, or 56%, from $22.0 million for the three months ended June 30, 2023.

This decrease is predominately due

to decreased clinical expenses of $3.8 million, non-clinal expenses of $3.9 million, manufacturing expenses of $1.5 million as a result

of fewer trials in the clinic and pipeline prioritization period over period, employee-related expenses of $1.6 and lab supplies of $1.4

million due to a reduction in expenditures.

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

months ended June 30, 2023, and 2022.

Months Ended June 30,

and development expenses:

expenses – TNX – 102 SL

expenses – TNX – 601 ER

expenses – TNX – 801

expenses – TNX – 1500

expenses – TNX – 1800

expenses – TNX – 1900

expenses – TNX – 3900

expenses – Other programs

staffing, overhead and other

research & development

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

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

Included in “Internal Staffing, Overhead and

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

and Administrative Expenses .

General and administrative expenses for the three months ended June 30, 2024 were $7.5 million,

an increase of $0.5 million, or 7%, from $7.0 million incurred in the three months ended June 30, 2023.

The increase in primarily an

increase in financial reporting expenses of $0.4 million, related to the shareholder meetings, an increase in sales and marketing of

$0.5 million, offset by a decrease in employee-related expenses of $0.5 million.

impairment charges .

We recognized a non-cash impairment charge of $48.8 million related to property and equipment,

a non-cash impairment of $1.0 million related to goodwill, and a non-cash impairment charge of $9.2 million related to intangible assets,

which is reflected in asset impairment charges in the consolidated statements of operations for the three months ended June 30, 2024.

The impairment of the Tosymra

and Zembrace inventory, intangibles and goodwill was driven by our delayed investment in the sales personnel required to drive growth

in the business as we are focusing our cash resources to further our efforts to bring TNX-102 SL through the approval process and to market.

However, we believe that the benefits and long-term value proposition of the 2023 acquisition of Tosymra and Zembrace remain, in that

we now have the infrastructure to be ready to manufacture and sell TNX-102 SL under an expedited timeline pending FDA approval for which

we expect an FDA decision in 2025.

As a result of the foregoing, the net loss for the three months ended June 30, 2024 was $78.8 million, an

increase of $50.4 million, or 177%, compared to a net loss of $28.4 million for the three months ended June 30, 2023.

Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

following table sets forth our operating expenses for the six months ended June 30, 2024 and 2023 (in thousands):

months ended June 30,

AND EXPENSES:

and development

and administrative

Asset impairment charges

operating expenses

on change in fair value of warrant liabilities

(expense) income, net

recognized revenue beginning in July 2023, as a result of the acquisition of two marketed products.

Revenue recognized for the six months

ended June 30, 2024, was $4.7 million.

Company’s net product revenues are summarized below:

months ended June 30,

product revenues

We recognized cost of sales beginning in July 2023 as a result of the acquisition of Zembrace and Tosymra

from Upsher Smith.

Cost of sales recognized for the six months ended June 30, 2024, was $5.0 million, including 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.

and Development Expenses .

Research and development expenses for the six months ended June 30, 2024 were $22.6 million, a

decrease of $25.9 million, or 53%, from $48.5 million for the six months ended June 30, 2023.

This decrease is predominately due to decreased

clinical expenses of $8.8 million, non-clinal expenses of $8.1 million, manufacturing expenses of $2.4 million as a result of fewer trials

in the clinic and pipeline prioritization period over period, employee-related expenses of $2.4 and lab supplies of $3.2 million due

to a reduction in expenditures.

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

ended June 30, 2024, and 2023.

Six Months Ended June 30,

(in thousands)

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Direct expenses – TNX - 3900

Direct expenses – Other programs

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Total research & development

Our direct research

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

contractors, consultants and contract research organizations in connection with our development work.

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

paid to contractors, consultants and contract research organizations in connection with our development work.

Included in “Internal

1 unchanged sentence

travel, regulatory and legal.

General and Administrative

General and administrative expenses for the three months ended March

31, 2024, were $9.3 million, an increase of $1.9 million, or 26%, from $7.4 million incurred in the three months ended March 31, 2023.

The increase is primarily due to an increase in financial reporting expenses of $0.6 million, related to the special shareholder meetings

in Q1 2024, an increase in sales and marketing of $0.4 million, and transition services agreement fees payable to Upsher Smith of $0.7

a result of the forgoing, the net loss for the three months ended March 31, 2024, was $14.9 million, compared to a net loss of

$33.0 million for the three months ended March 31, 2023, a decrease of $18.1 million or 55%.

February 13, 2023, we exercised an option to obtain an exclusive license from Columbia for

the development of a portfolio of 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 us and Columbia.

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

or paid in relation to this agreement.

and Administrative Expenses .

General and administrative expenses for the six months ended June 30, 2024 were $16.8 million,

an increase of $2.4 million, or 17%, from $14.4 million incurred in the six months ended June 30, 2023.

The increase is primarily due

to an increase in financial reporting expenses of $1.0 million, related to the special shareholder meetings in 2024, an increase in sales

and marketing of $0.8 million, and transition services agreement fees payable to Upsher Smith of $0.7 million.

impairment charges .

We recognized a non-cash impairment charge of $48.8 million related to property and equipment,

a non-cash impairment of $1.0 million related to goodwill, and a non-cash impairment charge of $9.2 million related to intangible

assets, which is reflected in asset impairment charges in the consolidated statements of operations for the six months ended

June 30, 2024.

The impairment of the Tosymra

and Zembrace inventory, intangibles and goodwill was driven by our delayed investment in the sales personnel required to drive growth

in the business as we are focusing our cash resources to further our efforts to bring TNX-102 SL through the approval process and to market.

However, we believe that the benefits and long-term value proposition of the 2023 acquisition of Tosymra and Zembrace remain, in that

we now have the infrastructure to be ready to manufacture and sell TNX-102 SL under an expedited timeline pending FDA approval for which

we expect an FDA decision in 2025.

As a result of the foregoing, the net loss for the six months ended June 30, 2024 was $93.7 million, an increase of

$32.3 million, or 53%, compared to a net loss of $61.4 million for the six months ended June 30, 2023.

February 13, 2023, we exercised an option to obtain an exclusive license from Columbia for the development of a portfolio of 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 us and Columbia.

As of June 30, 2024,

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

Purchase Agreements

On June 23, 2023, we entered into an asset purchase agreement with

Upsher Smith for the acquisition of certain assets related to Zembrace and Tosymra (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 (such transaction, the “USL Acquisition”).

June 23, 2023, we entered into an asset purchase agreement with Upsher Smith for the acquisition of certain assets related to Zembrace

and Tosymra (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 (such transaction, the “USL Acquisition”).

The transaction closed on June 30, 2023.

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manage certain government rebates, and Upsher Smith will be reimbursed by us at cost for any rebates they pay on our behalf.

the assets acquired from Upsher Smith met the definition of a business under the current accounting guidance, the total purchase

price was allocated to the acquired inventory and other tangible assets, and the developed technology intangible assets related

to Zembrace and Tosymra based on their estimated fair values on the acquisition date.

The excess of the purchase price over the

fair value of the acquired assets was recorded as goodwill.

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

the Business in the U.S.

the assets acquired from Upsher Smith met the definition of a business under the current accounting guidance, the total purchase price

was allocated to the acquired inventory and other tangible assets, and the developed technology intangible assets related to Zembrace

and Tosymra based on their estimated fair values on the acquisition date.

The excess of the purchase price over the fair value of the

acquired assets was recorded as goodwill.

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

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

9% for net sales of $75 to $100 million;

9% for net sales of

$75 to $100 million;

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

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

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.

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.

For 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 will be reduced by 90% percent for Zembrace, and by 66.7% percent for Tosymra.

addition, we have 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.

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 will be reduced

by 90% percent for Zembrace, and by 66.7% percent for Tosymra.

addition, we have 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.

February 2, 2023, we entered into an asset purchase agreement with Healion Bio Inc., pursuant

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and Capital Resources

As of March 31, 2024, we had working capital of $9.6 million, comprised

primarily of cash and cash equivalents of $7.0 million, inventory of $12.4 million, and prepaid expenses and other of $10.7 million, offset

by $6.6 million of accounts payable, $10.7 million of accrued expenses and other current liabilities, $2.8 million of term loan payable,

short term and $0.3 million of lease liabilities, short term.

A significant portion of the accounts payable and accrued expenses are due

to work performed in relation to our clinical programs, and the acquisition of Zembrace and Tosymra.

During the fourth quarter of 2023,

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

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

we do not have a commitment in place to sell the building.

following table provides a summary of operating, investing and financing cash flows for the quarters ended March 31, 2024, and

of June 30, 2024, we had working capital of $3.2 million, comprised primarily of cash and cash equivalents of $4.2 million, Accounts

receivable, net of $3.3 million, Inventory of $9.4 million and prepaid expenses and other of $8.3 million, offset by $10.4 million

of accounts payable, $8.5 million of accrued expenses, short-term loan payable of $2.8 million, and current lease liabilities of

$0.3 million.

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

clinical programs, and the operations related to Zembrace and Tosymra.

During the fourth quarter of 2023, we engaged CBRE, an international

real estate brokerage firm, to potentially find a strategic partner for, or buyer of, our Advanced Development Center in North

Dartmouth, Massachusetts (“ADC”), to align with our current business objectives and priorities.

Currently, we do not

have a commitment in place to sell the ADC.

following table provides a summary of operating, investing and financing cash flows for the six months ended June 30, 2024, and 2023,

respectively (in thousands):

1 unchanged sentence

cash used in investing activities

cash used in financing activities

the three months ended March 31, 2024, and 2023, we used approximately $17.6 million and $32.9 million of cash in operating activities,

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

The decrease in cash outlays principally resulted from a decrease in research and development activities.

For the three months

ended March 31, 2024, net cash used by financing activities were $0.2 million, predominately from the repayment of the term loan.

For the three months ended March 31, 2023, net cash used by financing activities were $11.5 million, predominately from the repurchase

of our common stock.

Cash used by investing activities for the three months ended March 31, 2024, and 2023, was $0.1 million and

$3.8 million respectively, related to the purchase of property and equipment.

The decrease is predominately due to less property

and equipment purchases as the ADC and RDC were placed in service during 2022.

believe that our cash resources at March 31, 2024, and the proceeds that we raised from equity offerings subsequent to the end

of the first quarter of 2024, will not meet our operating and capital expenditure requirements through the second quarter of 2024.

cash provided (used) by financing activities

For the six months ended June, 2024 and 2023, we used approximately $27.5

million and $56.3 million of cash in operating activities, respectively, which represents cash outlays for research and development and

general and administrative expenses in such periods.

The decrease in cash outlays principally resulted from a decrease in research and

development activities.

For the six months ended June 30, 2024, net cash provided from financing activities was $6.8 million predominately

from the issuance of common stock offset by the deferred payment to USL.

For the six months ended June 30, 2023, net cash used from financing

activities was $10.5 million, predominately from the repurchase of our common stock.

Cash used in investing activities for the six months

ended June 30, 2024 was $0.1 million related to the purchase of property and equipment, and $27.8 million for the six months ended June

30, 2023 related to the purchase of the USL assets and property and equipment.

believe that our cash resources at June 30, 2024, and the proceeds that we raised from equity offerings subsequent to the end of the

second quarter of 2024 will meet our operating and capital expenditure requirements into the third quarter of 2024, but not beyond.

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

2 unchanged sentences

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

We must obtain additional funding through public or private financing or collaborative arrangements with strategic partners

to increase the funds available to fund operations.

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

some of our research and development activities, or other operations and potentially delay product development to provide sufficient

funds to continue our operations.

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

goals would be adversely affected and we may be forced to cease operations.

We have the ability to obtain additional funding through public or private financing or collaborative arrangements with

strategic partners to increase the funds available to fund operations.

Without additional funds, we may be forced to delay, scale

back or eliminate some or all of our research and development activities or other operations and potentially delay product

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

If any of these events occurs, our ability to

achieve our development and commercialization goals will be adversely affected.

Liquidity Requirements

expect to incur losses from operations for the near future.

We expect to incur increasing research and development expenses, including

expenses related to additional clinical trials and the build out of our research and development operations and manufacturing.

We expect to incur

losses from operations for the near future.

We expect to decrease our operating costs to align the Company’s capital and human

resources with its previously announced strategic prioritization of TNX-102 SL product candidate for the management of fibromyalgia.

We will not have enough resources to meet our operating requirements for the one-year period from filing date of this report.

Our future capital requirements

will depend on a number of factors, including the availability of financing, the timing and outcome of regulatory approvals, the progress

of our research and development of product candidates, the costs involved in preparing, filing, prosecuting, maintaining, defending and

enforcing patent claims and other intellectual property rights, the status of competitive products, and our success in developing markets

for our product candidates.

will need to obtain additional capital in order to fund future research and development activities.

Future financing may include

the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.

Even if we are able to

raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts

owed to us, or experience unexpected cash requirements that would force us to seek alternative financing.

Furthermore, if we issue

additional equity or debt securities, shareholders may experience additional dilution or the new equity securities may have rights,

future capital requirements will depend on a number of factors, including the progress of our research and development of product candidates,

the timing and outcome of regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing

patent claims and other intellectual property rights, the status of competitive products, the availability of financing and our success

in developing markets for our product candidates.

will need to obtain additional capital in order to fund future research and development activities and future capital expenditures.

financing may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.

we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant

amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing.

Furthermore, if we

issue additional equity or debt securities, shareholders may experience additional dilution or the new equity securities may have rights,

preferences or privileges senior to those of existing holders of our common stock.

additional financing is not available or is not available on acceptable terms, we may be required to delay, reduce the scope of

or eliminate our research and development programs, reduce our commercialization efforts or obtain funds through arrangements

with collaborative partners or others that may require us to relinquish rights to certain product candidates that we might otherwise

seek to develop or commercialize independently.

2024 Financing

March 28, 2024, we 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.

additional financing is not available or is not available on acceptable terms, we may be required to delay, reduce the scope of or eliminate

our research and development programs, reduce our commercialization efforts or obtain funds through arrangements with collaborative partners

or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize

independently.

2024 At-the-Market Offering

On July 30, 2024, we

entered into a Sales Agreement with AGP pursuant to which we may issue and sell, from time to time, shares of our common stock

having an aggregate offering price of up to $50.0 million in the ATM.

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

on each sale under the Sales Agreement.

Our 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.

July 2024 Financing

July 9, 2024, we entered into a securities purchase agreement with certain institutional and retail investors, pursuant to which we sold

3,393,600 shares of common stock and pre-funded warrants to purchase up to 3,703,140 shares of common stock.

The 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 July 10, 2024.

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

$0.3 million.

We received net proceeds of approximately $3.5 million, after deducting the underwriting discount and other offering expenses.

2024 Financings

June 12, 2024, we entered into a securities purchase agreement with certain investors, pursuant to which we 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.

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

$0.3 million.

We received net proceeds of approximately $3.5 million, after deducting the underwriting discount and other offering expenses.

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

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

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

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.

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

$0.3 million.

We received net proceeds of approximately $3.5 million, after deducting the underwriting discount and other offering expenses.

2024 Financing

March 28, 2024, we 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 of $10,56

per share and expiring five and a half years from date of issuance in a public offering, which closed on April 1, 2024.

price per share of common stock was $9.60 and the offering price per share of pre-funded warrants

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

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, we entered into warrant amendments with certain holders of our Common Warrants.

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.

stockholder approval, the termination date for Common Warrants to purchase up to an aggregate of 6,950,000 shares will be amended to

April 1, 2029;

the termination date for Series A Warrants to purchase up to an aggregate of approximately 8,900,000 shares will be

April 1, 2029;

the termination date for Series B Warrants to purchase up to an aggregate of approximately 8,900,000 shares will be

April 1, 2029;

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 our 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 34,823,928 shares will

be April 1, 2029.

We 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, we entered into warrant amendments (collectively, the “Warrant Amendments”) with certain

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

We agreed to amend the exercise price of each

Existing Warrant to $10.56 upon approval by our 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, we agreed to automatically amend the exercise

price of the Existing Warrants to the Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) of our common stock on October 1, 2024

if and only if the Minimum Price is below the then current exercise price.

Upon stockholder approval on May 22, 2024, 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,

the termination date for Series B Warrants to purchase up to an aggregate of approximately 278,125 shares is April 1, 2025;

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 we to the Series C Warrant holder of our public announcement of the FDA’s acknowledgement

and acceptance of our 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 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.

On May 22, 2024, at the annual meeting of stockholders, our stockholders approved the proposal to amend the exercise prices of the Existing

Warrants to $10.56 per share and extend the expiration dates.

2023 Financing

December 20, 2023, we issued (i) 25,343,242 shares of our 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”) in a registered direct

The securities 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.

closed on December 22, 2023, generating gross proceeds of approximately $30.0 million, before deducting offering expenses of $2.3

million payable by us.

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

investors, pursuant to which we sold and issued (i) 791,977 shares of our 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”).

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 $17.76, and the

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

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 us.

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

of the FDA’s acknowledgement and acceptance of the NDA relating to TNX-102 SL in patients with fibromyalgia.

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

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

on the later of approval by our stockholders of (i) a proposal to approve the filing of an amendment to our 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 our 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.

September 2023 Financing

On September 28, 2023, we sold 4,050,000

shares of common stock;

pre-funded warrants to purchase up to 4,950,000 shares of common stock, and accompanying common warrants to purchase

up to 9,000,000 shares of common stock with an exercise price of $0.50 per share and expiring one year from date of issuance, and common

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 in a public offering which closed on October 3, 2023.

The offering price per share of common stock and accompanying common

warrant was $0.50, and the offering price per share of pre-funded warrant and accompanying common warrant was $0.4999.

We incurred other offering expenses of

approximately $0.5 million, including a placement agent discount.

We received net proceeds of approximately $4.0 million, after deducting

the underwriting discount and other offering expenses.

July 2023 Financing

On July 27, 2023,

we sold securities consisting of 2,530,000 shares of common stock;

pre-funded warrants to purchase up to 4,470,000 shares of common stock

and common warrants to purchase up to 7,000,000 shares of common stock in a public offering that closed on August 1, 2023.

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

common warrant was $0.9999.

We incurred offering expenses of approximately

$0.7 million, including placement agent fees of approximately $0.5 million.

We received net proceeds of approximately $6.3 million, after

deducting the underwriting discount and other offering expenses.

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

to the lack of sufficient authorized and unissued shares to settle the instruments.

We have 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, our 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, we 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

$30.0 million in gross proceeds received by us was 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.

January 25, 2024, our stockholders approved the proposal to file an amendment to our 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, we 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

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

We received net

proceeds of approximately $4.0 million, after deducting the underwriting discount and other offering expenses.

2023 Financing

July 27, 2023, we 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.

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

We received net

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

Lincoln Park Transaction

1 unchanged sentence

(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 us up to $50,000,000 of our common stock

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

Pursuant to the terms of the

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

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

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

Agreement, we issued 100,000 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of

our common stock under the 2022 Purchase Agreement.

The commitment shares were valued at $1,000,000 and recorded as an addition

to equity for the issuance of the common stock and treated as a reduction to equity as a cost of capital to be raised under the

2022 Purchase Agreement.

sales under the 2022 Purchase Agreement occurred during the quarter ended March 31, 2024.

During the quarter ended March 31, 2023,

we sold 0.1 million shares of common stock under the 2022 Purchase Agreement, for net proceeds of approximately $0.4 million.

the terms of the 2022 Purchase Agreement, Lincoln Park has agreed to purchase from us up to $50,000,000 of our common stock (subject

to certain limitations) from time to time during the term of the 2022 Purchase Agreement.

Pursuant to the terms of the 2022 Registration

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

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

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

we issued 3,125 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of our common stock under

the 2022 Purchase Agreement.

The commitment shares were valued at $1,000,000 and recorded as an addition to equity for the issuance of

the common stock and treated as a reduction to equity as a cost of capital to be raised under the 2022 Purchase Agreement.

the three and six months ended June 30, 2023, we 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 Agreement.

At-the-Market

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

sell, from time to time, shares of our Common stock having an aggregate offering price of up to $320.0 million in at-the-market

offerings (“ATM”) sales.

AGP will act as sales agent and will be paid a 3% commission on each sale under the Sales

Our common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices will vary.

No shares of common stock under the Sales Agreement were sold during the quarter ended March 31, 2024.

During the quarter ended

March 31, 2023, we 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, 2024, no shares of common stock under the Sales Agreement were sold.

April 8, 2020, we entered into a sales agreement (the “Sales Agreement”) with AGP pursuant to which we may issue and sell,

from time to time, shares of our common stock having an aggregate offering price of up to $320.0 million in at-the-market offerings (“ATM”)

AGP will act as sales agent and will be paid a 3% commission on each sale under the Sales Agreement.

Our 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.

During the three and six months ended June 30, 2023, we 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.

Repurchase Program

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

of our shares of common stock outstanding under a $12.5 million share purchase program at

prices ranging from $2.75 to $8.61 per share for a gross aggregate cost of approximately

$12.5 million.

the first quarter of 2023, we repurchased 78,502 of our shares of common stock outstanding under the 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 .

In addition, we incurred expenses of $0.3 million.

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

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

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

During the quarter ended March 31, 2023,

we repurchased 160,000 of our shares of common stock

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

December 8, 2023, we executed a Loan and Guaranty Agreement (the “Loan Agreement”) to issue a 36-month term loan (the

“Term Loan”) in the principal amount of $11.0 million with a maturity date of December 8, 2026 (the “Maturity

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%.

to which we may repurchase up to an additional $12.5 million in value of our 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 first quarter of 2023, we repurchased 5,000 of our 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 .

December 8, 2023, we executed a Loan and Guaranty Agreement (the “Loan Agreement”) to issue a 36-month term loan (the “Term

Loan”) in the principal amount of $11.0 million with a maturity date of December 8, 2026 (the “Maturity Date”).

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 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% and (ii) 12%.

Interest is payable monthly in arrears commencing in December 2023.

In connection with the Term Loan,

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

deposit is reflected as prepaid and other current assets on the consolidated balance sheet.

on March 8, 2024 and continuing monthly through the Maturity Date, the outstanding principal will be 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

In addition, we 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.

We 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.

In connection with the Term Loan, we deposited

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

The deposit is reflected

as prepaid and other current assets on the consolidated balance sheet.

on March 8, 2024 and continuing monthly through the Maturity Date, the outstanding principal will be 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.

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

We 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.

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

Loan Agreement contains customary affirmative and negative covenants by us, which among other things, will require us to provide

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

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.

Our obligations 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 our R&D Center in Frederick, Maryland, the Advanced Development Center in North Dartmouth, Massachusetts,

and substantially all of the relevant deposit accounts.

of March 31, 2024, 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.

Incentive Plans

The Loan Agreement

contains customary affirmative and negative covenants by us, which among other things, will require us to provide certain financial reports

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

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

Our obligations 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 our 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, 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.

May 1, 2020, our 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, we may issue (1) stock options (incentive and nonstatutory), (2) restricted stock, (3)

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

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 31 st 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.

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.

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 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

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

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

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

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

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

The fair value of

the award is measured on the grant date.

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.

As of June 30,

2024, 55,544 options were available for future grants under the Amended and Restated 2020 Plan.

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

less than our 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.

measure 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 our common stock on the date of the grant.

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

In addition, we issue options to

directors which vest over a one-year period.

We also issue 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.

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.

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.

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, we 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.

Stock Purchase Plan

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 our historical stock price volatility.

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, we had approximately $5.5 million of total unrecognized compensation cost related to non-vested awards granted under

the Plans, which we expect to recognize over a weighted average period of 1.87 years.

Stock Purchase Plans

May 6, 2022, our stockholders approved the Tonix Pharmaceuticals Holdings Corp.

2022 Employee Stock Purchase Plan (the “2022

2022 Employee Stock Purchase Plan.

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 ESPP allows eligible employees to purchase up to an aggregate of 800,000 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.

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.

2023 Employee Stock Purchase Plan (the “2023 ESPP”,

and together with the 2022 ESPP, the “ESPP Plans”), which was approved by our stockholders on May 5, 2023.

2023 ESPP allows eligible employees to purchase up to an aggregate of 25,000 shares of our 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 our common stock at the end of the offering period.

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 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 2022 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.

and Development Contracts

have entered into contracts with various contract research organizations with outstanding commitments aggregating approximately $16.9

$20.8 million at March 31, 2024 for future work to be performed.

of March 31, 2024, future minimum lease payments are as follows (in thousands):

million at June 30, 2024 for future work to be performed.

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,

Accounting Policies and Estimates

discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements,

which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of

these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities

and expenses.

We evaluate our estimates and judgments on an ongoing basis.

We base our estimates on historical experience and

on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments

about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ

from these estimates.

believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation

of our consolidated financial statements.

discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which

have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these financial

statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses.

our estimates and judgments on an ongoing basis.

We base our estimates on historical experience and on assumptions that we believe to

be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and

liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates.

believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our

consolidated financial statements.

Combinations.

We apply the acquisition method of accounting for business combinations.

Under the acquisition method, the acquiring

entity recognizes all of the identifiable assets acquired and liabilities assumed at their acquisition date fair values.

our best estimates and assumptions to estimate the fair values of these tangible and intangible assets.

Any excess of the purchase

price over amounts allocated to the assets acquired is recorded as goodwill.

The acquired intangible assets are amortized using

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

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.

Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in

the same period that the revenues are recognized.

Such variable consideration represents chargebacks, rebates, prompt pay and

other sales discounts, and product returns.

These deductions represent estimates of the related obligations and, as such, knowledge

and judgment are required when estimating the impact of these revenue deductions on gross sales for a reporting period.

recognizing revenue following the completion of the USL Acquisition, beginning July 1, 2023, and required variable consideration

estimates are currently primarily based on the acquired products historical results.

Adjustments to these estimates to reflect

actual results or updated expectations will be assessed each period.

If any of our ratios, factors, assessments, experiences,

or judgments are not indicative or accurate estimates of our future experience, our results could be materially affected.

potential of our estimates to vary differs by program, product, type of customer and geographic location.

In addition, estimates

associated with U.S.

Medicare and Medicaid governmental rebate programs are at risk for material adjustment because of the extensive

Under the acquisition method, the acquiring entity

recognizes all of the identifiable assets acquired and liabilities assumed at their acquisition date fair values.

We use our best estimates

and assumptions to estimate the fair values of these tangible and intangible assets.

Any excess of the purchase price over amounts allocated

to the assets acquired is recorded as goodwill.

The acquired intangible assets are amortized using the straight-line method over the

estimated useful lives of the respective assets.

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.

Asset impairment charges.

certain assets for impairment, including goodwill, indefinite-lived intangibles, long-lived assets and amortizing intangibles.

is reviewed for impairment by comparing the carrying value of a reporting unit to its fair value on an annual basis as of June 30, or

more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may be impaired.

We evaluate long-lived

assets for impairment, including property and equipment and finite-lived intangibles assets whenever events or changes in circumstances

indicate that their net book value may not be recoverable.

When such factors and circumstances exist, we compare the projected undiscounted

future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying

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.

We completed the required annual

impairment test for goodwill as of June 30, 2024, primarily using an income approach or discounted cash flow analysis.

Additionally, due

to a sustained decline in revenues and continued delays in building out the sales team for its commercialized products, we also tested

the commercialized products asset group for recoverability as of June 30, 2024, and determined that the carrying value was not recoverable

and therefore estimated the fair value of the asset group using a discounted cash flow analysis.

The significant assumptions used in the

discounted cash flow model included revenue growth, long-term growth rate, and discounts rate.

The impairment assessments resulted in

full non-cash impairment of $965,000 of goodwill and $9.2 million, consisting of $6.2 million and $3.0 million for the Zembrace and Tosymra

developed technology, intangible assets, which are reflected in asset impairment charges in the consolidated statements of operations

for the three and six months ended June 30, 2024.

During the three months ended

June 30, 2024, we 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.

We engaged independent appraisers

to value the building and land, using sales comparison and income capitalization approaches, and the related fixed assets using a indirect

cost approach and market approach.

The assessments resulted in 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.

Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same

period that the revenues are recognized.

Such variable consideration represents chargebacks, rebates, prompt pay and other sales discounts,

and product returns.

These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required

when estimating the impact of these revenue deductions on gross sales for a reporting period.

We began recognizing revenue following

the completion of the USL Acquisition, beginning July 1, 2023, and required variable consideration estimates are currently primarily

based on the acquired products historical results.

Adjustments to these estimates to reflect actual results or updated expectations will

be assessed each period.

If any of our ratios, factors, assessments, experiences, or judgments are not indicative or accurate estimates

of our future experience, our results could be materially affected.

The potential of our estimates to vary differs by program, product,

type of customer and geographic location.

In addition, estimates associated with U.S.

Medicare and Medicaid governmental rebate programs

are at risk for material adjustment because of the extensive time delay.

and Development.

We outsource certain of our research and development efforts and expense the related costs as incurred, including

the cost of manufacturing product for testing, licensing fees and costs associated with planning and conducting clinical trials.

The value ascribed to patents and other intellectual property acquired was expensed as research and development costs, as it related

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

We outsource certain of our research and development efforts and expense the related costs as incurred, including the

cost of manufacturing product for testing, licensing fees and costs associated with planning and conducting clinical trials.

ascribed to patents and other intellectual property acquired was expensed as research and development costs, as it related to particular

research and development projects and had no alternative future uses.

estimate our accrued expenses.

Our clinical trial accrual process is designed to account for expenses resulting from our obligations

under contracts with vendors, consultants and clinical research organizations and 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 to us under such contracts.

We account for trial expenses according to the progress of the trial as measured by participant progression and the timing of

various aspects of the trial.

We determine accrual estimates that take into account discussions with applicable personnel and

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

During the course of

a clinical trial, we adjust our clinical expense recognition if actual results differ from our estimates.

We make estimates of

our accrued expenses as of each balance sheet date based on the facts and circumstances known to us at that time.

trial accruals and prepaid assets are dependent upon the timely and accurate reporting of contract research organizations and

other third-party vendors.

under contracts with vendors, consultants and clinical research organizations and 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 to us under such contracts.

We account for

trial expenses according to the progress of the trial as measured by participant progression and the timing of various aspects of the

We determine accrual estimates that take into account discussions with applicable personnel and outside service providers as to

the progress or state of completion of trials, or the services completed.

During the course of a clinical trial, we adjust our clinical

expense recognition if actual results differ from our estimates.

We make estimates of our accrued expenses as of each balance sheet date

based on the facts and circumstances known to us at that time.

Our clinical trial accruals and prepaid assets are dependent upon the

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

Compensation.

All stock-based payments to employees and to nonemployee directors for their services as directors consisted of

grants of restricted stock and stock options, which are measured at fair value on the grant date and recognized in the consolidated

statements of operations as compensation expense over the relevant vesting period.

In addition, for awards that vest immediately

and are nonforfeitable, the measurement date is the date the award is issued.

All stock-based payments to employees and to nonemployee directors for their services as directors consisted of grants

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

of operations as compensation expense over the relevant vesting period.

In addition, for awards that vest immediately and are nonforfeitable,

the measurement date is the date the award is issued.

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.

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 is included in interest expense on the consolidated statements of operations.

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.

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 is included

in interest expense on the consolidated statements of operations.

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 original issue discounts are

included in interest expense on the consolidated statements of operations.

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.

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.

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.

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 a 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.

If 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.

of identical issuance dates, shares are then allocated to equity beginning with instruments with the latest maturity date first.

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

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

variable interest in an unconsolidated entity.

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.

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.

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 a 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.

If 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.

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

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

interest in an unconsolidated entity.

Accounting Pronouncements Not Yet Adopted

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

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

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 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.

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.

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.

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.

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.

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 events and transition activities impact line items above a threshold amount on a registrant’s

consolidate financial statements, including the impact of the financial estimates and the assumptions used.

This new rule will

first be effective in the Company’s disclosures for the year ending December 31, 2027.

The Company is in the process of

assessing the impact on our consolidated financial statements and disclosures.

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

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

events and transition activities impact line items above a threshold amount on a registrant’s consolidate financial statements,

including the impact of the financial estimates and the assumptions used.

This new rule will first be effective in the Company’s

disclosures for the year ending December 31, 2027.

The Company is in the process of assessing the impact on our consolidated financial

statements and disclosures.

3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis