What changed in this filing

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Item 1. Financial Statements

2024-11-12 compared with 2024-08-16 · 1010 added, 879 removed, 567 unchanged (77% of the section changed)

3 unchanged sentences

(In Thousands, Except Par Value and Share Amounts)

September 30,

Current assets:

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Preferred stock, $ 0.001 par value;

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

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

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

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

Common stock, $ 0.001 par value;

1,000,000,000 shares authorized;

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

155,631,049 and 2,077,088 shares issued and outstanding as of September 30, 2024, and December 31, 2023, respectively and 2,074 shares to be issued as of December 31, 2023

Additional paid in capital

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PHARMACEUTICALS HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

(In Thousands, Except Share and Per Share Amounts)

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Product revenue, net

5 unchanged sentences

Operating loss

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

Gain on change in fair value of warrant liabilities

Other (expense) income, net

Net loss available to common stockholders

$ ( 107,928 )

Net loss per common share, basic and diluted

3 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

$ ( 107,928 )

Other comprehensive loss:

1 unchanged sentence

Comprehensive loss

$ ( 107,946 )

the accompanying notes to the condensed consolidated financial statements

3 unchanged sentences

Comprehensive

Balance, December 31, 2023

$ ( 600,658 )

Issuance of common stock upon exercise of prefunded common warrants

Fair value of warrants reclassified from liabilities to equity

Employee stock purchase plan

Stock-based compensation

Foreign currency transaction loss

Balance, March 31, 2024

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

Issuance of common stock upon exercise of prefunded common warrants

Fair value of warrants reclassified from equity to liabilities

Fair value of warrants reclassified from liabilities to equity

Stock-based compensation

Foreign currency transaction loss

Balance, June 30, 2024

$ ( 694,373 )

December 31, 2023

of common stock upon exercise of prefunded common warrants

value of warrants reclassified from liabilities to equity

stock purchase plan

currency transaction loss

March 31, 2024

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

of common stock upon exercise of prefunded common warrants

value of warrants reclassified from equity to liabilities

value of warrants reclassified from liabilities to equity

currency transaction loss

June 30, 2024

of common stock, net of transactional expenses of $ 557

of common stock upon exercise of prefunded common warrants

of common stock under the At-the-Market agreement, net of transactional expenses of $ 1,681

stock purchase plan

currency transaction loss

September 30, 2024

the accompanying notes to the condensed consolidated financial statements

3 unchanged sentences

Comprehensive

Balance, December 31, 2022

$ ( 470,038 )

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

Issuance of common stock under 2022 Purchase agreement with Lincoln Park

Issuance of common stock net of transactional expenses of $ 101

Employee stock purchase plan

Stock-based compensation

Foreign currency transaction loss

Balance, March 31, 2023

Issuance of common stock net of transactional expenses of $ 36

Stock-based compensation

Foreign currency transaction loss

Balance, June 30, 2023

$ ( 545,361 )

December 31, 2022

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

of common stock under 2022 Purchase agreement with Lincoln Park

of common stock net of transactional expenses of $ 101

stock purchase plan

currency transaction loss

March 31, 2023

of common stock net of transactional expenses of $ 36

currency transaction loss

June 30, 2023

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

of common stock upon exercise of prefunded warrants under AGP Financing

currency transaction loss

September 30, 2023

the accompanying notes to the condensed consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

$ ( 107,928 )

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

1 unchanged sentence

Asset impairment charges

Gain on disposal of property and equipment

Change in fair value of warrant liabilities

11 unchanged sentences

Purchase of a business

Disposal of property and equipment

Purchase of property and equipment

8 unchanged sentences

Effect of currency rate change on cash

Net decrease in cash, cash equivalents and restricted cash

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

Cash, cash equivalents and restricted cash beginning of the period

3 unchanged sentences

Non-cash financing and investing activities:

At-the-market

agreement receivable

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

3 unchanged sentences

30, 2024 AND 2023 (UNAUDITED)

Tonix Pharmaceuticals Holding Corp., through its wholly owned subsidiary

Tonix Pharmaceuticals, Inc.

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

therapeutics to treat and prevent human disease and alleviate suffering.

Tonix aims to transform therapies for pain management and modernize

solutions for public health challenges.

Tonix’s development

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

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

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

The FDA has granted Fast Track designation to TNX-102

SL for fibromyalgia.

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

Reaction in a trial funded by the U.S.

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

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

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

National Institute of Drug Abuse or NIDA.

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

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

Pharmaceuticals Holding Corp.

(“Tonix” or the “Company”), through its wholly owned subsidiary Tonix

Pharmaceuticals, Inc.

(“Tonix Sub”), is a fully integrated biopharmaceutical company focused on transforming therapies

for pain management and vaccines for public health challenges.

Tonix’s priority is

to advance its TNX-102 SL product candidate for the management of fibromyalgia, for which a New Drug Application (“NDA”)

was submitted to the U.S.

Food and Drug Administration (“FDA”) based on two statistically significant Phase 3 studies.

FDA granted Fast Track designation to TNX-102 SL for the management of fibromyalgia in the third quarter 2024.

The Company expects an

FDA decision on the acceptance of the NDA for review and PDUFA date in December and if accepted, a decision on NDA approval in 2025.

Fibromyalgia is

a common chronic pain condition that affects mostly women.

Fibromyalgia is now recognized as the prototypic nociplastic pain syndrome.

TNX-102 SL is a non-opioid, centrally acting analgesic developed for long-term use in fibromyalgia.

If approved, TNX-102 SL would be

the first new drug therapy for fibromyalgia in more than 15 years.

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

and acute stress disorder under a Physician-Initiated Investigational New Drug application (“IND”) at the University of North

Carolina in the OASIS study funded by the U.S.

Department of Defense (“DoD”).

We expect to initiate enrollment in the OASIS

study in the fourth quarter.

Tonix’s CNS portfolio includes TNX-1300 (cocaine esterase), a biologic drug candidate in Phase 2 development

designed to treat cocaine intoxication that has FDA Breakthrough Therapy designation, and its development is supported by a grant from

National Institute of Drug Abuse.

Tonix’s immunology development portfolio includes TNX-1500, which is an

Fc-modified humanized monoclonal antibody targeting CD40-ligand (CD40L or CD154) in Phase 1 development for the prevention of allograft

rejection and for the treatment of autoimmune diseases.

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

and infectious disease.

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

DoD Defense Threat Reduction Agency.

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

for any indication.

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

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

The consolidated financial

statements include the accounts of Tonix Pharmaceuticals Holding Corp.

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

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

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

All intercompany balances and transactions have

been eliminated in consolidation.

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

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

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

At June 30, 2024, the Company had working

capital of approximately $ 3.2 million.

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

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

During the fourth quarter of 2023, the Company

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

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

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

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

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

TNX-1700 is a fusion protein of TFF2 and albumin and is in the pre-IND stage

of development to treat gastric and pancreatic cancer.

Tonix also has pre-clinical product candidates in development in the areas of

rare disease, including TNX-2900 for Prader-Willi syndrome, and infectious disease, including TNX-801, a potential vaccine to prevent

mpox and smallpox.

Tonix recently announced a contract with the U.S.

DoD’s Defense Threat Reduction Agency (“DTRA”)

for up to $ 34 million over five years to develop TNX-4200, small molecule broad-spectrum antiviral agents targeting CD45 for the prevention

or treatment of infections to improve the medical readiness of military personnel in biological threat environments.

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.

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

and its wholly owned subsidiaries,

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

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

All intercompany balances and transactions have been eliminated in consolidation.

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

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

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

At September 30,

2024, the Company had working capital of approximately $ 35.4 million.

At September 30, 2024, the Company had an accumulated deficit

of approximately $ 708.6 million.

The Company held unrestricted cash and cash equivalents of approximately $ 28.2 million as of September 30,

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

find a strategic partner for, or buyer of, its Advanced Development Center in North Dartmouth, Massachusetts (“ADC”),

to align with the Company’s current business objectives and priorities.

As of September 30, 2024, the Company does not have

a commitment in place to sell the ADC.

Company believes that its cash resources at September 30, 2024 and the net proceeds of $ 5.1 million that it raised from an equity

offering in the fourth quarter of 2024 (See Note 19), will not meet its operating and capital expenditure requirements through

the first quarter of 2025.

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

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

However, the Company may not be able to

raise capital on terms acceptable to the Company, or at all.

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

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

an effort to maintain sufficient funds to continue operations.

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

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

Moreover, the

Company may default under the terms of its existing indebtedness.

The financial statements do not include any adjustments that might

result from the outcome of this uncertainty.

2 – SIGNIFICANT ACCOUNTING POLICIES

financial statements

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

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

Article 8 of Regulation S-X.

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

In the opinion of management, all

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

However, the Company may not be able

to raise capital on terms acceptable to the Company, or at all.

Without additional funds, it may be forced to delay, scale back

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

in an effort to maintain sufficient funds to continue operations.

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

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

Moreover, the Company may default under the terms of its existing indebtedness.

The financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

PHARMACEUTICALS HOLDING CORP.

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30, 2024 AND 2023 (UNAUDITED)

2 – SIGNIFICANT ACCOUNTING POLICIES

financial statements

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

principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions

to Form 10-Q and Article 8 of Regulation S-X.

Accordingly, they do not include all of the information and footnotes required by

GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals)

considered necessary for a fair presentation have been included.

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

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

ending December 31, 2024.

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

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

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

On June 10, 2024, the Company

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

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

All issued and outstanding common stock, common stock warrants,

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

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

Authorized common and preferred stock were not adjusted

because of the reverse stock split.

results for the three and nine months ended September 30, 2024 are not necessarily indicative of results that may be expected

for the year ending December 31, 2024.

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

audited consolidated financial statements and notes thereto for the year ended December 31, 2023, included in the Company’s

Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on April 1, 2024.

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

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

All issued and outstanding

common stock, common stock warrants, stock option awards, exercise prices and per share data have been adjusted in these condensed

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

common and preferred stock were not adjusted because of the reverse stock split.

and uncertainties

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

to address public health challenges.

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

expects these conditions to continue for the foreseeable future.

Further, the Company now has commercial products available for sale,

and generates revenue from the sale of its Zembrace SymTouch and Tosymra products, with no assurance that the Company will be able to

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

there can be no assurance that the Company’s research and development will be successfully completed or that any product will be

approved or commercially viable.

preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the

reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial

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

products to address public health challenges.

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

inception and expects these conditions to continue for the foreseeable future.

Further, the Company now has commercial products

available for sale, and generates revenue from the sale of its Zembrace SymTouch and Tosymra products, with no assurance that

the Company will be able to generate sufficient cash flow to fund operations from its commercial products or products in development

if and when approved.

In addition, there can be no assurance that the Company’s research and development will be successfully

completed or that any product will be approved or commercially viable.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial

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

4 unchanged sentences

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

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

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

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values measured on the acquisition date.

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

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

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

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

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

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

Information and Concentrations

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

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

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

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

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

The CODM manages its operations and allocates resources

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

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

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

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

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

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

respectively.

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

receivable or revenues in the comparative period.

The CODM manages its operations

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

Company has two products that each accounted for more than 10 % of total revenues during the three and nine months ended September

30, 2024 and 2023.

These products collectively accounted for 100 % of revenues during the three and nine months ended September

30, 2024 and 2023.

of September 30, 2024, accounts receivable from four customers accounted for 29 %, 27 %, 27 %, and 11 % of accounts receivable.

the three months ended September 30, 2024, revenues from five customers accounted for 26 %, 23 %, 22 %, 16 % and 10 % of net product

revenues, respectively.

For the nine months ended September 30, 2024, revenues from five customers accounted for 24 %, 24 %, 22 %,

16 % and 12 % of net product revenues, respectively.

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

accounted for 25 %, 21 %, 18 % and 14 % of net product revenues, respectively.

Cash Equivalents and Restricted Cash

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maturity of three months or less when purchased.

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

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

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

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

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

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

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

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

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

and cash equivalents

At September 30, 2024 and September 30, 2023, cash equivalents, which consisted

of money market funds, amounted to $ 24,000 and $ 3.7 million, respectively.

Restricted cash, which is included in Other non-current

assets on the condensed consolidated balance sheet, at September 30, 2024, of approximately $ 0.9 million collateralizes a letter

of credit issued in connection with the lease of office space in Chatham, New Jersey (see Note 17) and restricted cash held by

vendors in escrow accounts for patient support services.

Restricted cash at September 30, 2023, of approximately $ 1 .0 million,

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

York and restricted cash held by vendors in escrow accounts for patient support services.

PHARMACEUTICALS HOLDING CORP.

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30, 2024 AND 2023 (UNAUDITED)

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

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

September 30,

(in thousands)

Cash and cash equivalents

Restricted cash

Receivable, net

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

that generally require payment within 30 to 90 days.

For certain customers, the accounts receivable for the customer is net of cash discounts, chargebacks and customer rebates.

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

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

We provide reserves against accounts receivable

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

Amounts determined to be uncollectible are charged or

written-off against the reserve.

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

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

terms that generally require payment within 30 to 90 days.

For certain customers, the accounts receivable for the customer is

net of cash discounts, chargebacks and customer rebates.

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

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

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

Amounts determined

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

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

Company’s exposure to credit losses is de minimis .

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

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

established over a longer period.

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

are established over a longer period.

Concentration

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

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

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

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

monitor the financial performance and creditworthiness of our customers so that we can properly assess and respond to changes in their

credit profile.

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

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

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

monitor the financial performance and creditworthiness of our customers so that we can properly assess and respond to changes

in their credit profile.

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

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sales compared with quantities on hand, and the remaining shelf life of goods on hand.

If non-saleable items are observed and there

are no alternate uses for the inventory, the Company records a write-down to net realizable value in the period that the decline in

value is first recognized.

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

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

prior to the respective expiration dates.

Although the Company makes every effort to ensure the accuracy of forecasts of future

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

and reported operating results.

If non-saleable items are observed and

there are no alternate uses for the inventory, the Company records a write-down to net realizable value in the period that the

decline in value is first recognized.

During the three and nine months ended September 30, 2024, the Company recorded write-downs

related to Tosymra and Zembrace finished goods inventory of approximately $ 0.3 million and $ 2 .0 million, respectively, based on

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

Although the Company makes every

effort to ensure the accuracy of forecasts of future product demand, any significant unanticipated decreases in demand could have

a material impact on the carrying value of inventories and reported operating results.

PHARMACEUTICALS HOLDING CORP.

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Depreciation and amortization is calculated using the straight-line

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

years for buildings, 15

years for land improvements and laboratory equipment,

years for computer assets, five

years for furniture and all other

equipment and the shorter

of the useful life or term of lease for leasehold

improvements.

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

Depreciation and amortization expense

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

million, for both reporting periods.

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

million and $ 1.8

method over the asset’s estimated useful life, which ranges from 20 to 40 years for buildings, 15 years for land improvements

and laboratory equipment, three years for computer assets, five years for furniture and all other equipment and the shorter of

the useful life or term of lease for leasehold improvements.

Depreciation and amortization on assets begin when the asset is placed

Depreciation and amortization expense for the three months ended September 30, 2024, and 2023 was $ 0.5 million and

$ 1 .0 million, respectively.

The Company’s property

and equipment is located in the United States.

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

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

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

The acquired intangible assets

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

Amortization expense for the three

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

The Company recorded a full impairment of its developed technology

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

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

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

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

carrying amount may be less than fair value.

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

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

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

Depreciation and amortization expense for the nine months ended September 30, 2024, and 2023 was $ 2.4

million and $ 2.8 million, respectively.

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

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

Finite-lived intangible assets consist of developed technology intangible assets acquired in connection with the acquisition

of certain products from Upsher Smith Laboratories, LLC (“Upsher Smith”) consummated on June 30, 2023 (See Note 6).

The acquired intangible assets are amortized using the straight-line method over the estimated useful lives of the respective

Amortization expense for the three and nine months ended September 30, 2024, was $ 0 and $ 0.5 million, respectively.

Company recorded a full impairment of its developed technology assets during the second quarter of 2024, discussed further below.

Amortization expense for the three months ended September 30, 2023, was $ 0.2 million.

testing of long-lived assets

Company evaluates long-lived assets for impairment, including property and equipment, finite-lived intangibles assets and operating

lease right-to-use assets whenever events or changes in circumstances indicate that their net book value may not be recoverable.

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

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

Impairment, if any,

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

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

the second quarter of 2024, the Company identified certain triggering events related to and the decommissioning of the

The Company determined that the carrying value of the ADC was not recoverable and that the carrying value exceeded its fair

As such, the Company recorded a non-cash impairment charge of $ 48.8 million, which is reflected in asset impairment charges

in the consolidated statements of operations for the nine months ended September 30, 2024.

No new triggering events were identified during the third quarter ended September 30, 2024.

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

Impairment testing of long-lived

The Company evaluates

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

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

When such factors and

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

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

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

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

recorded in the period in which the determination is made.

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

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

The Company determined that the carrying value of the

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

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

of $ 48.8 million,

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

Additionally, due to a

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

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

The Company determined that the carrying

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

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

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

million and $ 3 .0

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

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

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

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

that the carrying amount of goodwill may be impaired.

The Company previously recognized goodwill in connection with the USL Acquisition

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

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

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

Additionally,

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

Company also tested its commercialized products asset group for recoverability during the second quarter of 2024.

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 Company recorded a non-cash impairment charge for the amount of $ 9.2 million, representing the excess

carrying value over the fair value, consisting of $ 6.2 million and $ 3 .0 million for the Zembrace and Tosymra developed technology

intangible assets, respectively, which is reflected in asset impairment charges in the consolidated statements of operations for

the nine months ended September 30, 2024.

As the carrying value of these intangibles is $ 0 , there were no further impairment considerations during the third quarter ended September 30, 2024.

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

a business combination.

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.

The Company previously recognized goodwill in connection with the

USL Acquisition consummated on June 30, 2023 (See Note 6).

The Company completed the required annual impairment test for goodwill

during the second quarter of 2024, which resulted in full non-cash impairment of the Company’s $ 965,000 of goodwill, which

is reflected in asset impairment charges in the consolidated statements of operations for the nine months ended September 30,

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

Operating leases are included in operating lease

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

Company’s consolidated balance sheets.

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

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

Operating lease ROU assets and

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

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

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

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

The operating lease

ROU asset excludes lease incentives.

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

reasonably certain that the Company will exercise that option.

Lease expense for lease payments made under operating leases is

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

Operating leases are included in operating lease right-of-use

(“ROU”) assets, operating lease liabilities, current and operating lease liabilities, noncurrent in the Company’s

consolidated balance sheets.

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

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

Operating lease ROU assets and liabilities

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

As the Company’s leases

do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the transition

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

This is the rate the Company

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

The operating lease ROU asset excludes

lease incentives.

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

that the Company will exercise that option.

Lease expense for lease payments made under operating leases is recognized on a straight-line

basis over the lease term.

financing costs

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using the effective interest method.

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

the related debt liability on the consolidated balance sheet.

Amortization of deferred financing costs are included in interest expense

on the consolidated statements of operations.

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

of the related debt liability on the consolidated balance sheet.

Amortization of deferred financing costs are included in interest

expense on the consolidated statements of operations.

issue discount

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

Original issue discounts are reflected as a

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

agreement using the effective interest method.

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

statements of operations.

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

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

The Company’s

revenues primarily result from contracts with customers, which are generally short-term and have a single performance obligation - the

delivery of product.

The Company’s performance obligation to deliver products is satisfied at the point in time that the goods

are received by the customer, which is when the customer obtains title to and has the risks and rewards of ownership of the products,

which is generally upon shipment or delivery to the customer as stipulated by the terms of the sale agreements.

The transaction price

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

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

Our contractual payment

terms are typically 30 to 90 days .

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.

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

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

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

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

obligation - the delivery of product.

The Company’s performance obligation to deliver products is satisfied at the point

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

of ownership of the products, which is generally upon shipment or delivery to the customer as stipulated by the terms of the sale

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring

promised goods to a customer.

The consideration promised in a contract with a customer may include fixed amounts, variable amounts,

Our contractual payment terms are typically 30 to 90 days .

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

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

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

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

Shipping and handling activities

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

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

of the Company’s products sold are subject to a variety of deductions.

Revenues are recognized net of estimated rebates and chargebacks,

cash discounts, distributor fees, sales return provisions and other related deductions.

Deductions to product sales are referred to as

gross-to-net deductions and are estimated and recorded in the period in which the related product sales occur.

Accruals for these provisions

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

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

Amounts recorded for revenue deductions

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

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

are estimated:

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

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

purchase these products.

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

the Company provides a credit, called a chargeback, to the wholesaler for the difference between the contractual price with the indirect

customers and the wholesale customer’s purchase price.

The Company’s provision for chargebacks is based on expected sell-through

levels by the Company’s wholesale customers to the indirect customers and estimated wholesaler inventory levels as well as historical

chargeback rates.

The Company continually monitors its reserve for chargebacks and adjusts the reserve accordingly when expected chargebacks

differ from actual experience.

- The Company participates in certain government and specific sales rebate programs which provides discounted prescription drugs

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

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

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

The managed care reporting entity submits

utilization data after the end of the quarter and the Company processes the payment in accordance with contract terms.

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

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

The Company monitors Medicaid

legislative changes to determine what impact such legislation may have on the provision for Medicaid rebates.

The accrual of State

Agency reserves is based on historical payment rates.

Revenues are recognized net of estimated rebates

and chargebacks, cash discounts, distributor fees, sales return provisions and other related deductions.

Deductions to product

sales are referred to as gross-to-net deductions and are estimated and recorded in the period in which the related product sales

Accruals for these provisions are presented in the consolidated financial statements as reductions to gross sales in determining

net sales, and as a contra asset within accounts receivable, net (if settled via credit) and other current liabilities (if paid

Amounts recorded for revenue deductions can result from a complex series of judgements about future events and uncertainties

and can rely heavily on estimates and assumptions.

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

for variable consideration and how such provisions are estimated:

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

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

independently purchase these products.

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

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

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

The Company’s provision for chargebacks

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

inventory levels as well as historical chargeback rates.

The Company continually monitors its reserve for chargebacks and adjusts

the reserve accordingly when expected chargebacks differ from actual experience.

- The Company participates in certain government and specific sales rebate programs which provides discounted prescription

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

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

Managed Care Rebates

are processed in the quarter following the quarter in which they are earned.

The managed care reporting entity submits utilization

data after the end of the quarter and the Company processes the payment in accordance with contract terms.

All rebates earned

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

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

Medicaid and State

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

The Company monitors Medicaid legislative

changes to determine what impact such legislation may have on the provision for Medicaid rebates.

The accrual of State Agency

reserves is based on historical payment rates.

There is an approximate three-month lag from the time of product sale until

the rebate is paid.

represents a regionally managed health care program for active duty and retired members, dependents and survivors of the US military.

The Tri-Care program supplements health care resources of the US military with civilian health care professionals for greater access

and quality healthcare coverage.

Through the Tri-Care program, the Company provides pharmaceuticals on a direct customer basis.

of pharmaceuticals sold under the Tri-Care program are pre-negotiated and a reserve amount is established to represent the proportionate

rebate amount associated with product sales.

Gap refers to the Medicare prescription drug program and represents specifically the period between the initial Medicare Part D prescription

Tri-Care represents

a regionally managed health care program for active duty and retired members, dependents and survivors of the US military.

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

access and quality healthcare coverage.

Through the Tri-Care program, the Company provides pharmaceuticals on a direct customer

Prices of pharmaceuticals sold under the Tri-Care program are pre-negotiated and a reserve amount is established to

represent the proportionate rebate amount associated with product sales.

Coverage Gap refers

to the Medicare prescription drug program and represents specifically the period between the initial Medicare Part D prescription

drug program coverage limit and the catastrophic coverage threshold.

1 unchanged sentence

gap timeframe are discounted by the Company.

Since the nature of the program is that coverage limits are reset at the beginning of

the calendar year;

the payments escalate each quarter as the participants reach the coverage limit before reaching the catastrophic

coverage threshold.

Since the nature of the program is that coverage limits are reset at the beginning

of the calendar year;

the payments escalate each quarter as the participants reach the coverage limit before reaching the

catastrophic coverage threshold.

The Company has determined that the cost of this reserve will be viewed as an annual cost.

Therefore, the accrual

will be incurred evenly during the year with quarterly review of the liability based on payment trends and any revision to the projected

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

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

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

Consumer sales

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

This includes copay buy down and eVoucher programs.

Therefore, the accrual will be incurred evenly during the year with quarterly review of the liability based on payment trends

and any revision to the projected annual cost.

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

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

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

This includes copay

buy down and eVoucher programs.

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

1 unchanged sentence

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

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

The Company estimates the amount

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

period the related product revenue is recognized.

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

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

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

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

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

reduction of revenue in the period the related product revenue is recognized.

The Company estimates products returns as a percentage

of sales to its customers.

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

into the inventory remaining in the distribution channel.

Adjustments are made to the current provision for returns when data

suggests product returns may differ from original estimates.

and Development Costs

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

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

The value ascribed

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

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

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

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

The financial terms of these contracts are subject

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

or services are provided under such contracts.

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

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

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

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

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

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

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

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

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

The financial terms of these contracts

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

over which materials or services are provided under such contracts.

The Company accounts for trial expenses according to the timing

of various aspects of the trial.

The Company determines accrual estimates taking into account discussion with applicable personnel

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

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

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

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

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

and other third-party vendors.

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

development activities.

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

included in the grant application approved by the government authority.

The Company classifies government grants received under these

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

In August 2022, the Company received a Cooperative Agreement grant from the National Institute on Drug Abuse (“NIDA”),

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

it at that time.

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

research organizations and other third-party vendors.

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

and development activities.

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

activities included in the grant application approved by the government authority and, in certain arrangements.

not have specific accounting standards covering government grants to business entities.

The Company applies International Accounting

Standards 20 (“IAS 20”), Accounting for Government Grants and Disclosure of Government Assistance by analogy when

accounting for government grants.

Under IAS 20, government grants are initially recognized when there is reasonable assurance

the conditions of the grant will be met and the grant will be received.

After initial recognition, government grants received

are recognized in earnings in the same period the underlying costs for which the grant is intended to compensate are incurred.

The Company classifies government grants received under these arrangements as either a reduction to the related research and development

expense or as grant income in the consolidated statements of operations, depending on the fee structure of the arrangement.

The Company also applies the disclosure requirements of ASC 832, Government Assistance.

August 2022, the Company received a Cooperative Agreement grant from the National Institute on Drug Abuse (“NIDA”),

part of the National Institutes of Health, to support the development of its TNX-1300 product candidate for the treatment of cocaine

intoxication.

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

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

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

During the six months ended June

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

During the nine months ended September 30, 2024, we received $ 1.1 million in funding as a reduction of related research

and development expense .

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

in October 2024 and resulted in a further reduction of research and development expense during the nine months ended September

During the nine months ended September 30, 2023, we received $ 2.3 million in funding as a reduction of related

research and development expense.

June 2024, the Company was awarded a prototype Other Transaction Agreement from the Defense Threat Reduction Agency (“DTRA”),

an agency within the U.S.

Department of Defense, to fund the Company’s TNX-4200 program for the development of a small molecule

broad-spectrum antiviral for the prevention or treatment of viral infections to improve the medical readiness of military personnel

in biological threat environments.

The DTRA grant provides for payments totaling up to $ 34.1 million over five years, which is subject to adjustment based

on costs, scope, budget, and other factors as the program advances.

Funding under the DTRA grant is earned and recognized under

a cost-plus-fixed-fee arrangement in which the Company is reimbursed for all direct costs incurred plus allowable indirect costs

and a fixed fee.

During the nine months ended September

30, 2024, $ 1.7 million was recognized in grant income related to the DTRA grant ($ 0 for the nine months ended September 30, 2023).

As of September 30, 2024, $ 1.2 million of grant income, included above, was earned but not yet received and is presented in prepaid

expenses and other current assets.

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

Compensation.

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

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

expense over the requisite service period.

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

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

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

compensation expense over the requisite service period.

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

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

Currency Translation

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

functional currency.

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

its functional currency.

dollar is the functional currency of the other foreign subsidiaries.

Balance sheet accounts of the Canadian

subsidiary were translated from foreign currency into U.S.

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

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

Translation adjustments resulting from

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

Balance sheet accounts

of the Canadian subsidiary were translated from foreign currency into U.S.

dollars at the exchange rate in effect at the balance

sheet date and income statement accounts were translated at the average rate of exchange prevailing during the period.

adjustments resulting from this process were included in accumulated other comprehensive loss on the condensed consolidated balance sheets.

Comprehensive

1 unchanged sentence

Comprehensive

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

non-owners sources.

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

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

from non-owners sources.

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

distributions to owners.

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

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

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

the current enacted tax rates.

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

not that these deferred income tax assets will be realized.

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

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

The tax benefits recognized in the consolidated

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

upon ultimate settlement.

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

The Company’s policy

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

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

at the current enacted tax rates.

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

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

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

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

The tax benefits recognized

in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than

50% likelihood of being realized upon ultimate settlement.

As of September 30, 2024, the Company has not recorded any unrecognized

tax benefits.

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

component of income tax expense.

Instruments and Warrant Liabilities

1 unchanged sentence

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

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

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

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

which is adjusted for instrument-specific terms as applicable.

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

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

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

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

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

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

date receiving the first allocation of shares.

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

with instruments with the latest maturity date first.

classification of derivative instruments is reassessed at each reporting date.

If the classification changes as a result of events during

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

There is no limit on

the number of times a contract may be reclassified.

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 variable exercise price

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

In such case, the Company has adopted a sequencing

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

its contracts at issuance and at each subsequent reporting date.

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

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

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

during the period.

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

All warrants issued

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

Directors, on the Company’s common stock.

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

common stock in earnings of the Company.

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

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

dividends declared and participation rights in undistributed earnings.

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

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

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

to purchase common stock

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

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

earliest issuance date receiving the first allocation of shares.

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

to equity beginning with instruments with the latest maturity date first.

classification of derivative instruments is reassessed at each reporting date.

If the classification changes as a result of events

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

is no limit on the number of times a contract may be reclassified.

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

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

of the common stock during the period.

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

earnings per share (“EPS”) calculation.

warrants (See Note 16) issued participate on a one-for-one basis with common stock in the distribution of dividends, if and when

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

For purposes of computing EPS, these warrants are

considered to participate with common stock in earnings of the Company.

Therefore, the Company calculates basic and diluted EPS

using the two-class method.

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

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

No income was allocated

to the warrants for the three and nine months ended September 30, 2024, and 2023, as results of operations were a loss for the

dilutive securities excluded from the computation of basic and diluted net loss per share, as of September 30, 2024 and 2023,

are as follows:

Warrants to purchase common stock

Options to purchase common stock

Accounting Pronouncements Not Yet Adopted

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

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.

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.

Early adoption is permitted.

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

on our disclosures.

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

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

The guidance will first be effective in our annual

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

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.

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

our disclosures.

PHARMACEUTICALS HOLDING CORP.

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30, 2024 AND 2023 (UNAUDITED)

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

data, and opportunities.

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

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

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

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

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

consolidated 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.

In November 2024, the FASB issued

ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, to improve transparency

in financial reporting by requiring entities to present more detailed information about the nature of expenses included within the Income

The guidance will first be effective for annual reporting periods beginning after December 15, 2026, and interim reporting

periods beginning after December 15, 2027.

Early adoption is permitted.

The Company is in the process of assessing the impact of ASU 2024-03

on our disclosures.

3 – INVENTORY

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

September 30,

(in thousands)

Raw Materials

Work-in-process

During the three months ended

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

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

Finished Goods

Total Inventory

the nine months ended September 30, 2024, the Company recorded write-downs related to Tosymra and Zembrace finished goods inventory

of approximately $ 2.0 million based on an assessment of inventory on hand and projected sales prior to the respective expiration

4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

expenses and other current assets consisted of the following (in thousands):

September 30,

(in thousands)

Contract-related

Government grants

At-the-market receivable

Non-trade receivables

Debt interest and fees

5 – PROPERTY AND EQUIPMENT, NET

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

and equipment, net:

furniture and equipment

Property and equipment gross

Accumulated depreciation and amortization

September 30,

(in thousands)

Property and equipment, net:

Land improvements

Office furniture and equipment

Laboratory equipment

Leasehold improvements

Property Plant And Equipment Gross

Accumulated depreciation and amortization

Property Plant And Equipment Net

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

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

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

the second quarter of 2024, primarily as a result of the Company’s decision to decommission its ADC facility in Dartmouth,

Massachusetts, the Company recognized a non-cash impairment charge of $ 48.8 million, which is reflected in asset impairment charges

in the consolidated statements of operations for the nine months ended September 30, 2024.

The 45,000 square foot facility was

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

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

Maryland totaling $ 17.5 million, to process development activities.

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

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

equipment and laboratory equipment.

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

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

construction of a vaccine development and commercial scale manufacturing facility.

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

its intended use.

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

in Frederick, Maryland totaling $ 17.5 million, to process development activities.

Of the total purchase price, $ 2.1 million was

allocated to the value of land acquired, and $ 13.9 million was allocated to buildings, and approximately $ 1.5 million was allocated

to office furniture and equipment and laboratory equipment.

As of August 1, 2022, the assets became ready for the intended use

and were placed in service.

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

for the construction of a vaccine development and commercial scale manufacturing facility.

As of September 30, 2024, the asset

was not ready for its intended use.

6 – GOODWILL AND INTANGIBLE ASSETS

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

at December 31, 2023

at June 30, 2024

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

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

and six months ended June 30, 2024.

Balance at December 31, 2023

Impairment of goodwill

Balance at September 30, 2024

Company completed its annual impairment test for goodwill during the second quarter of 2024, which resulted in full impairment

of the Company’s $ 965,000 of goodwill, which is reflected in asset impairment charges in the consolidated statements of

operations for the nine months ended September 30, 2024.

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

assets subject to amortization

September 30,

(in thousands)

Intangible assets subject to amortization

Developed technology

Impairment charge

Accumulated amortization

assets not subject to amortization

domain rights

intangible assets, net

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

and $ 476,000 ,

respectively.

No amortization was recorded during the same periods in 2023.

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

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

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

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

Intangible assets not subject to amortization

Internet domain rights

Total intangible assets, net

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

the three and nine months ended September 30, 2024, the Company recorded amortization of $ 0 and $ 476,000 , respectively.

the three and nine months ended September 30, 2023, the Company recorded amortization of $ 238,000 .

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

second quarter of 2024, the Company tested the asset group for impairment as of June 30, 2024, resulting in a full impairment

of its Zembrace and Tosymra developed technology intangible assets, of $ 6.2 million and $ 3 .0 million, respectively, which is reflected

in asset impairment charges in the consolidated statements of operations for the nine months ended September 30, 2024.

7 – FAIR VALUE MEASUREMENTS

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

Fair value is defined as the price that

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

date and is measured according to a hierarchy that includes:

Fair value is defined as the price

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

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

inputs, such as quoted prices in active markets.

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

Level 2 assets and liabilities include

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

This category includes

Level 2 assets and liabilities

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

This category

includes U.S.

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

inputs in which there is little or no market data.

As of June 30, 2024, and December

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

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

As of December 31, 2023, Level 3

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

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

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

After the Company received stockholder approval

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

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

of September 30, 2024, and December 31, 2023, the Company used Level 1 quoted prices in active markets to value cash equivalents

which were de minimis for both periods presented.

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

as of September 30, 2024.

As of December 31, 2023, Level 3 liabilities included a portion of the Company’s outstanding Series

D Warrants and all of the Company’s outstanding Series C Warrants issued in December 2023, which did not meet the criteria

for equity classification due to insufficient authorized shares to settle the instruments and were therefore accounted for as

liabilities at fair value.

After the Company received stockholder approval to increase the number of authorized shares on January

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

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

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

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

For periods prior to

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

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

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

Additionally, between April 1, 2024

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

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

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

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

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

The Company determined that the exercise price

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

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

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

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

May 22, 2024.

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

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

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

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

4.39 %- 5.37 %

For periods prior

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

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

to become exercisable in accordance with Nasdaq Listing Rule 5635.

Additionally, between April 1, 2024 and May 22, 2024,

Level 3 liabilities included a portion of the Company’s outstanding August 2023 Warrants, Series A Warrants, Series B Warrants,

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

entered into upon the closing of an equity financing on April 1, 2024, which provided for adjustments to the exercise prices of

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

to become exercisable in accordance with Nasdaq Listing Rule 5635.

The Company determined that the exercise price adjustment provision

that is contingent on stockholder approval precluded the Existing Warrants from being indexed to the Company’s own stock,

and therefore were reclassified to liabilities at post-modification fair value on April 1, 2024.

After the Company received stockholder

approval on May 22, 2024, thereby reducing the exercise prices of each of the Existing Warrants to $ 10.56 per share, the Existing

Warrants met all requirements for equity classification and the Company reclassified them to equity as of May 22, 2024.

the fair value of the Existing Warrants on the reclassification dates, the Company used a Black-Scholes option pricing model,

probability weighted for different scenarios as applicable.

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

as of December 31, 2023 and on the respective reclassification dates for the nine months ended September 30, 2024:

term (in years)

for lack of marketability

Discount for lack

of marketability

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

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

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

Warrant liabilities

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

basis using significant unobservable inputs (Level 3) is as follows for the nine months ended September 30, 2024:

Balance at December 31, 2023

Fair value - mark to market adjustment

Warrants reclassified from liabilities to equity

Warrants reclassified from

liabilities to equity

Balance at March 31, 2024

1 unchanged sentence

Fair value - mark to market adjustment

Warrants reclassified from liabilities to equity

Warrants reclassified from

liabilities to equity

Balance at June 30, 2024

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

the three or six months ended June 30, 2023.

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

component in the consolidated statement of operations.

Warrants reclassified

from equity to liabilities

Fair value - mark to market

reclassified from liabilities to equity

Balance at September

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

3) for the three or nine months ended September 30, 2023.

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

as a separate component of income and expense in the consolidated statement of operations.

8 – DEBT FINANCING

debt consists of the following:

June 30, 2024

September 30, 2024

December 31, 2023

4 unchanged sentences

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

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

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

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

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

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

million, with a maturity date of December

8, 2026 (the “Maturity Date”).

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

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

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

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

3.5 % and (ii) 12 %.

Interest is payable monthly in arrears commencing in December 2023.

In connection with the Term Loan, the Company

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

The remaining

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

balance sheet.

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

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

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

the date of payment.

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

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

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

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

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

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

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

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

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

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

plus 3.5 % and (ii) 12 %.

Interest is payable monthly in arrears commencing in December 2023.

In connection with the Term Loan,

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

The remaining deposit as of September 30, 2024 totals $ 0.5 million, which is reflected in Prepaid expenses and other current

assets on the consolidated balance sheet.

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

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

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

as of the date of payment.

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

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

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

The Loan Agreement

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

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

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

and effect a consolidation or merger.

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

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

inaccuracy of representations and warranties, invalidity of guarantees.

The Term Loan is secured by first priority security interests

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

substantially all of the relevant deposit accounts.

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

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

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

Loan Agreement contains customary affirmative and negative covenants by the Company, which among other things, will require the

Borrowers to provide certain financial reports to the lenders, to maintain a deposit account to fund interest payments, and limit

the ability of the Company to incur or guarantee additional indebtedness, pay dividends or make other equity distributions, sell

assets, engage in certain transactions, and effect a consolidation or merger.

The obligations of the Company under the Loan Agreement

may be accelerated upon customary events of default, including non-payment of principal, interest, fees and other amounts, covenant

default, insolvency, material judgements, inaccuracy of representations and warranties, invalidity of guarantees.

The Term Loan

is secured by first priority security interests in the Company’s R&D Center in Frederick, Maryland, the Advanced Development

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

future principal payments due on the Term Loan as of September 30, 2024 are as follows (in thousands):

Fiscal years ending

Remainder of 2024

PHARMACEUTICALS HOLDING CORP.

3 unchanged sentences

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

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

In connection

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

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

restated to reflect the reverse stock split.

As a result of the reverse-stock-split, on June 26, 2024, the Company’s stock regained

compliance with the minimum bid price requirement of $ 1.00 per share for continued listing on the NASDAQ Capital Market, as set forth

in NASDAQ Listing Rule 5550(a)(2).

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

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

shares (the “Charter Amendment”).

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

of shareholders held on January 25, 2024.

95,543,805 outstanding shares of the Company’s common stock were exchanged for 2,985,924 shares of the Company’s common

In connection with the reverse stock split, the Company issued an additional 245,205 shares of the Company’s common

stock due to fractional shares.

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

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

As a result of the reverse-stock-split,

on June 26, 2024, the Company’s stock regained compliance with the minimum bid price requirement of $ 1.00 per share for

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

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

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

to 1,000,000,000 shares (the “Charter Amendment”).

The Charter Amendment was approved by the Company’s shareholders

at a special meeting of shareholders held on January 25, 2024.

On August 9, 2024, the Company received notice from the Listing Qualifications

staff of The Nasdaq Stock Market LLC (“Nasdaq”) that the Company no longer met the requirement to maintain a minimum bid price

of $ 1 per share, as set forth in Nasdaq Listing Rule 55450(a)(1) (the “Minimum

Bid Price Requirement”).

The Company was initially provided with a 180 calendar day period, or until February 5, 2024, in which

to regain compliance.

In the event that the Company does not regain compliance within this 180 -day period, the Company may be eligible

to seek an additional 180 day compliance period if it meets the continued listing requirement for market value of publicly held shares

and all other initial listing standards for the Nasdaq Capital Market.

10 – REVENUES

Disaggregation

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Company’s net product revenues are summarized below:

product revenues

Zembrace Symtouch

Total product

Zembrace Symtouch

Total product

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

Sales Accruals

1 unchanged sentence

to the pharmaceutical industry.

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

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

provision for gross-to-net allowances was $ 4.8

million at September 30, 2024, of which $ 1 .0

million was recorded as a reduction to accounts receivable and $ 3.8

million was recorded as a component of accrued expenses.

11 – ASSET PURCHASE AGREEMENT WITH UPSHER-SMITH

June 30, 2023, the Company completed the acquisition of certain assets from Upsher Smith related to Zembrace SymTouch (sumatriptan injection)

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

the “Business”) and certain inventory related to the Business for an aggregate purchase price of approximately $ 26.5 million,

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

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

“Transition Services Agreement”), pursuant to which Upsher Smith provided certain transition services to the Company

for base fees equal to $ 100,000 per month for the first six months, and $ 150,000 per months for the seventh through ninth months, plus

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

The Company has amended the transitional services

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

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

June 30, 2023, the Company completed the acquisition of certain assets from Upsher Smith related to Zembrace SymTouch (sumatriptan

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

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

$ 26.5 million, including certain deferred payments and subject to customary adjustments (such transaction, the “USL Acquisition”).

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

(the “Transition Services Agreement”), pursuant to which Upsher Smith provided certain transition services to the

Company for base fees equal to $ 100,000 per month for the first six months, and $ 150,000 per months for the seventh through ninth

months, plus additional monthly fees for each service category totaling up to $ 150,000 per month.

The Company has amended the

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

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

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

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technology - Zembrace

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

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

The developed technology intangible assets were valued

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

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

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

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

The key assumptions

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

customer retention rates, and certain other assumptions.

PHARMACEUTICALS HOLDING CORP.

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30, 2024 AND 2023 (UNAUDITED)

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

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

The developed technology intangible assets

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

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

The composite intangible assets were valued using

a multi-period excess earnings method and are being amortized over their estimated useful lives using the straight-line method

of amortization.

The key assumptions used in estimating the fair values of intangible assets include forecasted financial information,

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

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

results may differ from these estimates and assumptions.

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

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

Actual results may differ from these estimates and assumptions.

Due to a sustained decline in revenues and continued delays in building

out the sales team for its commercialized products, the Company also tested its commercialized products asset group for recoverability

during the second quarter of 2024.

The Company determined that the carrying value was not recoverable and therefore estimated the fair

value of the asset group using a discounted cash flow analysis.

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

million, representing the excess carrying value over the fair value, consisting of $ 6.2 million and $ 3 .0 million for the Zembrace and

Tosymra developed technology intangible assets, respectively, which is reflected in asset impairment charges in the consolidated statements

of operations for the nine months ended September 30, 2024.

As the carrying value of these intangibles is $ 0 , there were no further impairment

considerations during the third quarter ended September 30, 2024.

Pro Forma Information

following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the three and

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

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

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

On an unaudited pro forma basis,

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

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

These amounts are based on financial information of the acquired business

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

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

following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the three

and nine months ended September 30, 2023 as if the USL Acquisition had occurred as of January 1, 2023, and gives effect to transactions

that are directly attributable to the acquisition, including additional amortization expense related to the fair value of intangible

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

On an unaudited

pro forma basis, consolidated Net Product Sales and Net Loss for the nine months ended September 30, 2023, would have been $ 11.6

million and $ 91.3 million, respectively.

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

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

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

The net loss of USL Acquisition business is included

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

The revenue and net loss of the USL Acquisition business reflected

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

million and $ 14.8 million, respectively.

The revenue and net loss of the USL Acquisition business

reflected in the condensed consolidated statements for the three and nine months ended September 30, 2024, is $ 2.8 million and

$ 1 .0 million, and $ 7.5 million and $ 15.8 million, respectively.

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

1 unchanged sentence

therapy products, providing accounting, and billing services and collecting accounts receivable and paying trade payables.

Smith collected and will continue to collect cash on behalf of Tonix for revenue generated by sales of the assets acquired from June

30, 2023, through the transition period and the Seller is obligated to transfer cash generated by such sales to the Company.

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

the management of certain government rebates.

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

Company’s behalf.

Smith collected and will continue to collect cash on behalf of Tonix for revenue generated by sales of the assets acquired from

June 30, 2023, through the transition period and the Seller is obligated to transfer cash generated by such sales to the Company.

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

for the management of certain government rebates.

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

pay on the Company’s behalf.

12 – ASSET PURCHASE AGREEMENT WITH HEALION

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

Bio Inc., (“Healion”) pursuant to which the Company acquired all the pre-clinical infectious disease assets of Healion, including

its portfolio of next-generation antiviral technology assets.

Healion’s drug portfolio includes a class of broad-spectrum small

molecule oral antiviral drug candidates with a novel host-directed mechanism of action, including TNX-3900, formerly known as HB-121.

As consideration for entering into the Healion Asset Purchase Agreement, the Company paid $ 1.2 million to Healion.

Because the Healion

intellectual property was acquired prior to U.S.

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

was expensed as research and development costs since there is no alternative future use and the acquired intellectual property does not

constitute a business.

12 – LICENSE AGREEMENTS WITH COLUMBIA UNIVERSITY

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

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

TNX-4100 product candidates, respectively.

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

between Tonix and Columbia.

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

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

Healion Bio Inc., (“Healion”) pursuant to which the Company acquired all the pre-clinical infectious disease assets

of Healion, including its portfolio of next-generation antiviral technology assets.

Healion’s drug portfolio includes a

class of broad-spectrum small molecule oral antiviral drug candidates with a novel host-directed mechanism of action, including

TNX-3900, formerly known as HB-121.

As consideration for entering into the Healion Asset Purchase Agreement, the Company paid

$ 1.2 million to Healion.

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

Food and Drug Administration (FDA)

approval, the cash consideration totaling $ 1.2 million, was expensed as research and development costs since there is no alternative

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

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

13 – LICENSE AGREEMENTS WITH COLUMBIA UNIVERSITY

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

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

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

The licensed mAbs were developed as part of a research collaboration

and option agreement between Tonix and Columbia.

As of September 30, 2024, other than the upfront fee, no payments have been accrued

or paid in relation to this agreement.

14 – SALE AND PURCHASE OF COMMON STOCK

2024 Financing

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

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

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

offering closed on July 10, 2024.

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

of approximately $ 0.3 million.

The Company received net proceeds of approximately $ 3.5 million, after deducting the underwriting discount

and other offering expenses.

2024 Financings

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

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

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

97 unchanged sentences

administrative expense on the consolidated statements of operations.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

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

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

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

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

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

2 unchanged sentences

statement of operations.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

2023 Financing

35 unchanged sentences

30, 2024 AND 2023 (UNAUDITED)

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

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

No shares were sold during 2024 under the 2022 Purchase

the three and nine months ended September 30, 2023, the Company sold 0 and 3,000 shares, respectively, of common stock under the

2022 Purchase Agreement, for net proceeds of approximately $ 0 and $ 0.4 million, respectively.

No shares were sold during

2024 under the 2022 Purchase Agreement.

At-the-Market

July 30, 2024, the Company entered into a Sales Agreement ( the “2024 Sales Agreement”), with AGP pursuant to which the

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

million in ATM sales.

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

commission on each sale under the 2024 Sales Agreement.

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

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

During the three months ended September 30, 2024, the Company sold

approximately 134.5

million shares of common stock under the Sales Agreement, as defined below, for net proceeds of approximately $ 41.8

Subsequent to September 30, 2024, the Company has sold 31.3

million shares of common stock under the Sales Agreement, for net proceeds of approximately $ 5.1

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

1 unchanged sentence

$ 320 .0 million in at-the-market offerings (“ATM”) sales.

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

under the Sales Agreement.

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

a result, prices will vary.

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

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

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

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

on each sale under the Sales Agreement.

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

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

There were no sales under the Sales Agreement during the three and nine months

ended September 30, 2024.

During the three and nine months ended September 30, 2023, the Company sold approximately 0 and 29,855

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

respectively.

There will be no more sales under the 2020 ATM.

September 2024, the Board of Directors approved a 2024 share repurchase program pursuant

to which the Company may repurchase up to $ 10 .0 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.

repurchases occurred during the three and nine months ended September 30, 2024.

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

2 unchanged sentences

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

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

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

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

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

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

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

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

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

timing and amount of any shares repurchased will

2 unchanged sentences

Repurchases will

be made in accordance with the rules and regulations promulgated by the Securities and Exchange Commission and certain other legal requirements

to which the Company may be subject.

Repurchases may be made, in part, under a

Rule 10b5-1 plan, which allows stock repurchases when the Company might otherwise

be precluded from doing so.

be made in accordance with the rules and regulations promulgated by the Securities and Exchange Commission and certain other legal

requirements to which the Company may be subject.

Repurchases may be made,

in part, under a Rule 10b5-1 plan, which allows stock repurchases when

the Company might otherwise be precluded from doing so.

15 – STOCK-BASED COMPENSATION

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

Amended and Restated 2020 Stock Incentive

Plan (“Amended and Restated 2020 Plan”).

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

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

and Restated 2020 Plan initially provided for the issuance of up to 1,563 shares of common stock, which amount will be increased

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

Amended and Restated 2020 Plan).

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

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

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

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

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

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

awards or available for future awards).

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

under the Amended and Restated 2020 Plan.

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

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

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

by the Board of Directors in good faith.

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

be more than ten years .

As of June 30, 2024, 55,544 options were available for future grants under the Amended and Restated 2020 Plan.

Amended and Restated 2020 Stock

Incentive Plan (“Amended and Restated 2020 Plan”).

PHARMACEUTICALS HOLDING CORP.

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30, 2024 AND 2023 (UNAUDITED)

summary of the stock option activity and related information for the Plans for the six months ended June 30, 2024, is as follows:

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

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

The Amended and Restated 2020 Plan initially provided for the issuance of up to 1,563 shares of common stock, which amount will

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

provided in the Amended and Restated 2020 Plan).

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

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

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

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

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

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

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

The Board of Directors determines

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

However, the exercise

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

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

The fair value of the common stock

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

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

As of September

30, 2024, 10,168 options were available for future grants under the Amended and Restated 2020 Plan.

summary of the stock option activity and related information for the Plans for the nine months ended September 30, 2024, is as

Weighted-Average

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Contractual Term

at December 31, 2023

or expirations

at June 30, 2024

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

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

weighted average fair value of options granted during the three and six months ended June 2024 was $ 5.06 per share and $ 10.16 per share,

respectively.

The weighted average fair value of options granted during the three and six months ended June 2023 was $ 87.36 per share

and $ 128.32 per share, respectively.

Outstanding at December 31,

Forfeitures or expirations

Outstanding at September 30, 2024

Exercisable at September 30, 2024

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

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

weighted average fair value of options granted during the three and nine months ended September 2024 was $ 0.15 per share and $ 8.68

per share, respectively.

The weighted average fair value of options granted during the three and nine months ended September 2023

was $ 26.88 per share and $ 127.68 per share, respectively.

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

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

The fair value

of the award is measured on the grant date.

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

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

In addition, the Company issues

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

The Company also issues premium options to executive officers which have an exercise

price greater than the grant date fair value and has issued performance-based options which vest when target parameters are met or probable

of being met, subject in each case to a one year minimum service period prior to vesting.

Stock-based compensation expense related to

awards is amortized over the applicable service period using the straight-line method.

assumptions used in the valuation of stock options granted during the six months ended June 30, 2024, and 2023 were as follows:

June 30, 2024

June 30, 2023

interest rate

term of option

to 10.00 years

stock price volatility

dividend yield

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

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

as of the grant date.

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

Bulletin, and the expected stock price volatility is based on the Company’ historical stock price volatility.

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.

PHARMACEUTICALS HOLDING CORP.

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30, 2024 AND 2023 (UNAUDITED)

compensation expense relating to options granted of $ 1.1 million, of which $ 0.8 million and $ 0.3 million, related to General and Administration

and Research and Development, respectively was recognized for the quarter ended June 30, 2024.

Stock-based compensation expense

relating to options granted of $ 2.4 million, of which $ 1.6 million and $ 0.8 million, related to General and Administration and Research

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

compensation expense relating to options granted of $ 2.8 million, of which $ 2 .0 million and $ 0.8 million, related to General and Administration

and Research and Development, respectively was recognized for the six-month period ended June 30, 2024.

Stock-based compensation expense

relating to options granted of $ 5.2 million, of which $ 3.6 million and $ 1.6 million, related to General and Administration and Research

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

of June 30, 2024, the Company had approximately $ 5.5 million of total unrecognized compensation cost related to non-vested awards granted

under the Plans, which the Company expects to recognize over a weighted average period of 1.87 years.

assumptions used in the valuation of stock options granted during the nine months ended September 30, 2024, and 2023 were as follows:

September 30, 2024

September 30, 2023

interest rate

Expected term

to 10.00 years

Expected stock

price volatility

Expected dividend

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

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

the options as of the grant date.

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

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

compensation expense relating to options granted of $ 1 .0 million, of which $ 0.7 million and $ 0.3 million, related to General and

Administration and Research and Development, respectively, was recognized for the quarter ended September 30, 2024.

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

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

compensation expense relating to options granted of $ 3.9 million, of which $ 2.8 million and $ 1.1 million, related to General and

Administration and Research and Development, respectively was recognized for the nine-month period ended September 30, 2024.

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

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

of September 30, 2024, the Company had approximately $ 4.3 million of total unrecognized compensation cost related to non-vested

awards granted under the Plans, which the Company expects to recognize over a weighted average period of 1.73 years.

Stock Purchase Plans

May 6, 2022, the Company’s stockholders approved the Tonix Pharmaceuticals Holdings Corp.

2022 Employee Stock Purchase Plan.

2022 Employee Stock Purchase

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

2023 Employee Stock Purchase Plan (the

“2023 ESPP”, and together with the 2022 ESPP, the “ESPP Plans”), which was approved by the Company’s stockholders

on May 5, 2023.

2023 Employee Stock Purchase

Plan (the “2023 ESPP”, and together with the 2022 ESPP, the “ESPP Plans”), which was approved by the Company’s

stockholders on May 5, 2023.

2023 ESPP allows eligible employees to purchase up to an aggregate of 25,000 shares of the Company’s common stock.

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

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 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.

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.

In January 2024, 2,074 shares that were purchased as of December

31, 2023, under the 2022 ESPP, were issued.

Accordingly, during the first quarter of 2024, approximately $ 24,000 of employee payroll

deductions accumulated at December 31, 2023, related to acquiring such shares, was transferred from accrued expenses to additional paid

The remaining $ 20,000 was returned to the employees.

As of June 30, 2024, approximately $ 33,000 of employee payroll deductions

had accumulated and had been recorded in accrued expenses.

In July 2024, 6,927 shares that were purchased as of June 30, 2024, under

the 2023 ESPP, were issued.

Accordingly, during the third quarter of 2024, approximately $ 5,000 of employee payroll deductions accumulated

at June 30, 2024, related to acquiring such shares, was transferred from accrued expenses to additional paid in capital.

The remaining

$ 28,000 was returned to the employees.

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 September 30, 2024, 22,926

shares were available for future sales under the 2023 ESPP.

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

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

the nine months ended September 30, 2024 and 2023, $ 27,000 and $ 34,000 , 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, 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 in capital.

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.

July 2024, 6,927 shares that were purchased as of June 30, 2024, under the 2023 ESPP, were issued.

Accordingly, during the third

quarter of 2024, approximately $ 4,000 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 $ 29,000 was returned to the employees.

16 – WARRANTS TO PURCHASE COMMON STOCK

following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at June 30, 2024:

the six months ended June 30, 2024, 3,383,792 prefunded common warrants were exercised.

Subsequent to the quarter ended June 30, 2024,

4,228,158 prefunded warrants were exercised.

warrants were exercised during the six months ended June 30, 2023.

following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at September

December 2025

December 2028

November 2024

February 2025

the nine months ended September 30, 2024, 11,315,090 prefunded common warrants were exercised.

common warrants were exercised during the nine months ended September 30, 2023.

Additionally,

with the closing of the financing on April 1, 2024, the Company entered into the Warrant Amendments (as defined in Note 13) with certain

holders of its warrants to purchase common stock, agreeing to amend the exercise price of each Existing Warrant to $ 10.56 upon approval

by the Company’s stockholders of a proposal to allow the warrants to become exercisable in accordance with Nasdaq Listing Rule

5635 or, if stockholder approval is not obtained by October 1, 2024, the exercise price would be automatically amended to the Minimum

Price (as defined in Nasdaq Listing Rule 5635(d)) of the Company’s common stock on October 1, 2024, if and only if the Minimum

Price is below the then current exercise price.

The Company’s stockholders approved the proposal to amend the exercise prices of

the Existing Warrants to $ 10.56 per share and extend the termination dates at the annual meeting of the Company’s stockholders held

on May 22, 2024.

As such, the table above reflects the modified terms of the Existing Warrants in effect as of June 30, 2024.

13 for further details.

with the closing of the financing on April 1, 2024, the Company entered into the Warrant Amendments (as defined in Note 13) with

certain holders of its warrants to purchase common stock, agreeing to amend the exercise price of each Existing Warrant to $ 10.56

upon approval by the Company’s stockholders of a proposal to allow the warrants to become exercisable in accordance with

Nasdaq Listing Rule 5635 or, if stockholder approval is not obtained by October 1, 2024, the exercise price would be automatically

amended to the Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) of the Company’s common stock on October 1, 2024,

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

The Company’s stockholders approved the proposal

to amend the exercise prices of the Existing Warrants to $ 10.56 per share and extend the termination dates at the annual meeting

of the Company’s stockholders held on May 22, 2024.

As such, the table above reflects the modified terms of the Existing

Warrants in effect as of September 30, 2024.

See Note 13 for further details.

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

These agreements frequently include one or more

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

No lease agreement imposes a

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

At June 30, 2024,

the Company has right-of-use assets of $ 0.7 million and a total lease liability for operating leases of $ 0.7 million of which $ 0.4 million

is included in long-term lease liabilities and $ 0.3 million is included in current lease liabilities.

June 30, 2024, future minimum lease payments for operating leases with non-cancelable terms of more than one year were as follows (in

Year Ending December 31,

These agreements frequently include one

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

No lease agreement

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

At September 30, 2024, the Company has right-of-use assets of $ 0.6 million and a total lease liability for operating leases of

$ 0.7 million of which $ 0.3 million is included in long-term lease liabilities and $ 0.4 million is included in current lease liabilities.

PHARMACEUTICALS HOLDING CORP.

1 unchanged sentence

30, 2024 AND 2023 (UNAUDITED)

new leases or amendments were entered into during the six months ended June 30, 2024.

During the six months ended June 30, 2023, the

Company entered into new operating leases and lease amendments, resulting in the Company recognizing an additional operating lease liability

of approximately $ 898,000 based on the present value of the minimum rental payments.

The Company also recognized a corresponding increase

to ROU assets of approximately $ 898,000 , which represents a non-cash investing and financing activity.

lease expense was $ 0.1 and $ 0.2 million for the quarter ended June 30, 2024, and 2023, respectively.

lease expense was $ 0.2 million and $ 0.3 million for the six-months ended June 30, 2024, and 2023, respectively.

September 30, 2024, future minimum lease payments for operating leases with non-cancelable terms of more than one year were as

follows (in thousands):

Year Ending December 31,

Remainder of 2024

2028 and beyond

Included interest

new leases or amendments were entered into during the nine months ended September 30, 2024.

During the nine months ended September

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

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

The Company also

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

lease expense was $ 0.1 million for both the three months ended September 30, 2024, and 2023, respectively.

lease expense was $ 0.2 million and $ 0.4 million for the nine-months ended September 30, 2024, and 2023, respectively.

information related to leases is as follows:

paid for amounts included in the measurement of lease liabilities:

June 30, 2024

June 30, 2023

Cash paid for amounts

included in the measurement of lease liabilities:

September 30, 2024

September 30, 2023

cash flow from operating leases (in thousands)

Average Remaining Lease Term

Average Discount Rate

Weighted Average Remaining Lease Term

Weighted Average Discount Rate

18 – COMMITMENTS

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

$ 16.9 million at June 30, 2024 for future work to be performed.

$ 15.1 million at September 30, 2024 for future work to be performed.

PHARMACEUTICALS HOLDING CORP.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 AND 2023 (UNAUDITED)

contribution plan

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

all eligible employees may participate.

Participants may elect to defer a percentage of their annual pretax compensation to the 401(k)

Plan, subject to defined limitations.

The Company is required to make contributions to the 401(k) Plan equal to 100 percent of each participant’s

pretax contributions of up to six percent of his or her eligible compensation, and the Company is also required to make a contribution

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

The Company charged

operations $ 200,000 and $ 500,000 for the three and six months ended June 30, 2024, respectively, and $ 200,000 and $ 500,000 for the three

and six months ended June 30, 2023, respectively, for contributions under the 401(k) Plan.

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

whereby all eligible employees may participate.

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

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

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

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

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

subject to limitations under the Code.

The Company charged operations $ 100,000 and $ 600,000 for the three and nine months ended

September 30, 2024, respectively, and $ 200,000 and $ 700,000 for the three and nine months ended September 30, 2023, respectively,

for contributions under the 401(k) Plan.

19 – SUBSEQUENT EVENTS

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

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

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

offering closed on July 10, 2024.

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

of approximately $ 0.3 million.

The Company received net proceeds of approximately $ 3.5 million, after deducting the underwriting discount

and other offering expenses.

On July 30, 2024, the

Company entered into a Sales Agreement with AGP pursuant to which the Company may issue and sell, from time to time, shares of the Company’s

common stock having an aggregate offering price of up to $ 50 .0 million in ATM sales.

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

commission on each sale under the Sales Agreement.

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

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

Subsequent to June 30, 2024, the Company has sold 0.8 million shares

of common stock under the Sales Agreement, for net proceeds of approximately $ 0.4 million.

On August 9, 2024, the Company received a letter from Nasdaq indicating that, based upon the closing bid price of the Company’s

common stock for the last 30 consecutive business days, the Company no longer meets the requirement to maintain a minimum bid price of

$ 1 per share, as set forth in Nasdaq Listing Rule 55450(a)(1) (the “Minimum Bid Price Requirement”).

The Company was initially

provided with a 180 calendar day period, or until February 5, 2024, in which to regain compliance.

In the event that the Company does

not regain compliance within this 180 -day period, the Company may be eligible to seek an additional 180 day compliance period if it meets

the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital

Market, with the exception of the Minimum Bid Price Requirement, and provides written notice to Nasdaq of its intent to cure the deficiency

during this second compliance period, by effecting a reverse stock split, if necessary.

Subsequent to September

30, 2024, the Company sold 31.3

million shares of common stock under the 2024 Sales Agreement, for net proceeds of approximately $ 5.1

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

What changed 10-Q

Item 1. Financial Statements