What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-12 compared with 2025-03-18 · 372 added, 469 removed, 242 unchanged (78% of the section changed)

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regarding the intent, belief or current expectations of us and members of its management team as well as the assumptions on which

such statements are based and should be read together with the “Risk Factors” section of this Annual Report on Form 10-K

for a discussion of important factors that could cause actual results to differ materially from the results described in or implied

by the forward-looking statements contained in the following discussion and analysis.

Our actual results could differ materially

from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and

elsewhere in this Annual Report and in other reports we file with the Securities and Exchange Commission, particularly those under

“Risk Factors.”.

We are a fully-integrated biopharmaceutical company focused on transforming

therapies for pain management and vaccines for public health challenges.

Our development portfolio is focused on central nervous system

(CNS) disorders.

Our priority is to advance TNX-102 SL, a product candidate for the management of fibromyalgia, for which an NDA was submitted

based on two statistically significant Phase 3 studies for the management of fibromyalgia and for which a PDUFA (Prescription Drug User

Fee act) goal date of August 15, 2025 has been assigned for a decision on marketing authorization.

The FDA has also granted Fast Track

designation to TNX-102 SL for the management of fibromyalgia.

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

stress disorder under a Physician-Initiated IND at the University of North Carolina in the OASIS study funded by the U.S.

Department of

Defense (DoD).

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

intoxication that has FDA Breakthrough Therapy designation, and its development is supported by a grant from the National Institute on

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

cancer, including TNX-1500, which is an Fc-modified humanized monoclonal antibody targeting CD40-ligand (CD40L or CD154) being developed

for the prevention of allograft rejection and for the treatment of autoimmune diseases.

Tonix also has product candidates in development

in infectious disease, including a vaccine for mpox, TNX-801.

We 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.

We own and operate a state-of-the art infectious disease research facility in Frederick, Maryland.

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.

such statements are based and should be read together with the “Risk Factors” section of this Annual Report on Form

10-K for a discussion of important factors that could cause actual results to differ materially from the results described in

or implied by the forward-looking statements contained in the following discussion and analysis.

Our actual results could differ

materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed

below and elsewhere in this Annual Report and in other reports we file with the Securities and Exchange Commission, particularly

those under “Risk Factors”.

are a fully-integrated biopharmaceutical company commercializing and developing innovative therapies for central nervous system

(“CNS”) disorders, immunology, infectious diseases, and rare diseases.

Our portfolio consists of both commercial and

development-stage programs.

August 2025, we received approval from the FDA for TONMYA™ (cyclobenzaprine

HCl sublingual tablets) for the treatment of fibromyalgia.

TONMYA, our first internally developed product to become FDA approved,

was commercially launched by us in the United States on November 17, 2025.

TONMYA is the first new medicine for fibromyalgia in

more than 15 years and is a centrally acting, non-opioid analgesic designed for bedtime administration and long-term use.

approval and launch of TONMYA marked major milestones in our evolution.

We hold worldwide commercialization rights to TONMYA.

In addition to TONMYA, we market two FDA-approved prescription products for the treatment of acute migraine:

Zembrace® SymTouch®

(sumatriptan injection) and Tosymra® (sumatriptan nasal spray).

Our commercial platform includes sales, marketing, market

access, distribution, and patient support capabilities.

We maintain a diversified development pipeline generated through internal

discovery, in-licensing, acquisitions, and collaborations with academic and non-profit institutions.

The Company’s pipeline addresses

conditions that span central nervous system (“CNS”), infectious disease, immunology, and rare disease, with multiple programs

in clinical and preclinical development.

The proprietary cyclobenzaprine HCl sublingual tablet formulation contained in TONMYA is referred

to as “TNX-102 SL” outside of the fibromyalgia indication.

We are exploring the utility of TNX-102 SL (sublingual cyclobenzaprine)

in Phase 2 clinical trials for major depressive disorder and acute stress disorder.

TNX-102 SL is being developed to treat acute stress

reaction and acute stress disorder under an Investigator-Initiated investigational new drug application (“IND”) at the University

of North Carolina in the ongoing OASIS study funded by the U.S.

Department of Defense (“DoD”).

A Phase 2 study of TNX-102

SL for major depressive disorder is expected to commence mid-2026 under a Tonix IND that has been cleared by FDA.

Our clinical stage infectious

disease portfolio includes monoclonal antibody TNX-4800 (anti-OspA from Borrelia burgdorferi ) for seasonal prevention of Lyme disease,

for which initiation of a Phase 2 field study is planned for the first half of 2027 and a Phase 2 human challenge study is planned for

2028, pending FDA clearances.

Our clinical-stage immunology development portfolio consists of biologics

to address organ transplant rejection and autoimmunity, including TNX-1500, which is a Phase 2- ready Fc-modified humanized monoclonal

antibody targeting CD40-ligand (CD40L or CD154) being developed for the prevention of allograft rejection and for the treatment of autoimmune

Another CNS candidate in clinical

development is TNX-1300 (double-mutant cocaine esterase), which is in Phase 2 for the treatment of cocaine intoxication.

been granted Breakthrough Therapy designation by the FDA.

Our clinical-stage rare disease

portfolio includes TNX-2900, intranasal oxytocin potentiated with magnesium, in development for Prader-Willi syndrome and expected to

start a Phase 2 study in the first quarter of 2027.

Our pre-clinical, pre-IND infectious disease portfolio includes TNX-801

(horsepox, live virus vaccine), as vaccine for mpox and smallpox.

We own a facility in Dartmouth, MA that was purpose-built to manufacture

TNX-801 under Good Manufacturing Practices (GMP) to support clinical development and potential commercialization.

The facility was decommissioned

in 2024 and may be reactivated on the earlier of 2027 or in the case of a national or international emergency.

Our pre-IND infectious disease

portfolio also includes TNX-4200, which is a small molecule broad-spectrum antiviral agent targeting CD45 for the prevention or treatment

of high lethality infections to improve the medical readiness of military personnel in biological threat environments.

The TNX-4200 program

is supported by a $34 million contract over five years from the U.S.

DoD’s Defense Threat Reduction Agency (DTRA).

We own and operate

a state-of-the art research facility in Frederick, Maryland that supports this research.

Our pre-IND pre-clinical immunology

portfolio includes TNX-1700, which is a fusion protein of TFF2 and albumin is in preclinical development for the treatment of gastric

and colorectal cancer in combination with PD-1 blockade in collaboration with Columbia University.

Our pre-clinical, pre-IND CNS

portfolio also includes TNX-4900, a highly selective small-molecule Sigma-1 receptor (“S1R”) antagonist for neuropathic pain.

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

SymTouch and Tosymra are registered trademarks of Tonix Medicines.

All other marks are the property of their respective owners.

We are led by a management team with significant industry experience in drug development.

TONMYA is a registered trademark of Tonix Pharma Limited.

other marks are the property of their respective owners.

We are led by a management team with significant industry experience

in drug development.

complement our management team with a network of scientific, clinical, and regulatory advisors that includes recognized experts

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

Since the acquisition

of Zembrace and Tosymra on June 30, 2023, we are now reporting product revenue and related costs.

Year Ended December 31, 2025 Compared to Fiscal Year Ended December 31, 2024

following table sets forth our operating expenses for the fiscal years ended December 31, 2025 and 2024 (in thousands):

Year ended December 31,

Product revenue, net

COSTS AND EXPENSES:

Cost of sales

Research and development

Selling, general and administrative

Asset impairment charges

Total operating expenses

Operating loss

Gain on change in fair value of warrant liabilities

Other (expense) income, net

Company recognized revenue beginning in the year ended December 31, 2023, as a result of the acquisition of two marketed products.

See discussion at Note 11 to our financial statements appearing in this Annual Report on Form 10-K.

Revenue recognized for the

year ended December 31, 2024 and 2023 was $10.1 and $7.8 million, respectively.

ended December 31,

AND EXPENSES:

and development

general and administrative

impairment charges

Total operating

on change in fair value of warrant liabilities

on extinguishment of debt

Interest expense

Revenue recognized for the year ended December 31, 2025 and 2024 was $13.1 and $10.1 million, respectively.

Company’s net product revenues are summarized below:

Year Ended December 31,

Zembrace Symtouch

Total product revenues

The Company recognized cost of sales beginning in the year ended December 31, 2023 as a result of the acquisition of

Zembrace and Tosymra from Upsher-Smith Laboratories (“Upsher Smith”).

See discussion at Note 11 to our financial

statements appearing in this Annual Report on Form 10-K.

Cost of goods sold during the year ended December 31, 2024, was $7.8

million, including write-downs related to Tosymra and Zembrace finished goods inventory of approximately $1.5 million based on an

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

Cost of sales recognized for the year

ended December 31, 2023, was $4.7 million.

Total product

Cost of goods sold during the year ended December 31, 2025, was $6.6 million, including write-downs related to Tosymra

and Zembrace finished goods inventory of approximately $0.7 million based on an assessment of inventory on hand and projected

sales prior to the respective expiration dates.

Cost of sales recognized for the year ended December 31, 2024, was $7.8 million,

including write-downs related to Tosymra and Zembrace finished goods inventory of approximately $1.5 million based on an assessment

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

and Development Expenses .

Research and development expenses for the fiscal year ended December 31, 2024, were $40.0

million, a decrease of $46.7 million, or 54%, from $86.7 million for the fiscal year ended December 31, 2023.

This decrease is

predominately due to decreased clinical expenses of $18.8 million, non-clinical expenses of $10.5 million, manufacturing expenses

of $3.1 million as a result of fewer trials in the clinic and pipeline prioritization period over period, employee-related expenses

of $7.1 and lab supplies of $4.1 million due to a reduction in expenditures, predominately as a result of the decommission of the ADC and reduction in force earlier in 2024.

Research and development expenses for the fiscal year ended December 31, 2025, were $44.5 million,

an increase of $4.5 million, or 11%, from $40.0 million for the fiscal year ended December 31, 2024.

This increase is predominately

due to increased manufacturing expenses of $6.8 million and non-clinical expenses of $2.9 million as a result of pipeline prioritization

period over period, and in employee-related expenses of $0.6 million due to increased headcount, offset by a decrease in regulatory

expenses of $1.7 million and office-related expenses of $1.8 million due to a reduction in expenditures, as well as a decrease

in clinical expenses of $2.0 million as a result of fewer clinical trials.

August 2022, we 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 year ended December 31, 2024 and 2023, we recorded $1.6 and $2.9 million, respectively in funding as a reduction of

During the years ended December 31, 2025 and 2024, we recorded $0.6 and $1.6 million, respectively in funding as a reduction of

related research and development expenses.

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Research and development expenses:

Direct expenses – TNX - 102 SL

Direct expenses – TNX

Direct expenses – TNX - 601 ER

Direct expenses – TNX - 1500

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Direct expenses – TNX - 1900

Direct expenses – TNX - 4200

Direct expenses – TNX - 4800

Direct expenses – Other programs

Internal staffing, overhead and other

Total research & development

Internal staffing,

overhead and other

Total research

and development

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

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2025, were $87.7 million, an increase of $47.6 million, or 119%, from $40.1 million incurred in the fiscal year ended December

The increase is primarily due to an increase in financial reporting expenses of $1.2 million, related to the special

shareholder meetings in 2024, an increase in sales and marketing of $1.2 million, an increase in professional fees of $2.7 million,

an increase in depreciation of property and equipment of $0.4 million and an increase in fees and permits of $0.4 million, related

to licenses obtained to sell the migraine products, offset by a decrease in employee-related costs of $1.0 million, due to fewer employees.

The increase is primarily due to increase in sales and marketing of $37.7 million, an increase in professional legal

fees of $1.5 million, and an increase in employee related costs of $7.6 million.

All increases are related to our marketed migraine

products as well as the launch of TONMYA in November 2025.

impairment charges .

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

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

which is reflected in asset impairment charges in the consolidated statements of operations for the year ended December 31, 2024.

We recognized a non-cash impairment charge of $48.8 million related to property and equipment, a non-cash impairment of $1.0 million

related to goodwill, and a non-cash impairment charge of $9.2 million related to intangible assets, which is reflected in asset impairment

charges in the consolidated statements of operations for the year ended December 31, 2024.

No impairment charges were incurred during

impairment of the Tosymra and Zembrace inventory, intangibles and goodwill was driven by our delayed investment in the sales personnel

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of Tosymra and Zembrace remain, in that we now have the infrastructure to be ready to manufacture and sell TNX-102 SL under an

expedited timeline pending FDA approval for which we expect an FDA decision in 2025.

expedited timeline.

As a result of the foregoing, the net loss for the year ended December 31, 2025, was $124.0 million, compared to

a net loss of $130.0 million for the year ended December 31, 2024.

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

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

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

The licensed mAbs were developed as part of a research collaboration

and option agreement between us and Columbia.

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

or paid in relation to this agreement.

June 26, 2025, we obtained an exclusive worldwide license from the University of Massachusetts (“UMass”) Chan Medical School for the development of TNX-4800 (formerly

known as mAb 2217LS).

As of December 31, 2025, other than an upfront fee of $1.3 million, no payments have been accrued or paid

in relation to this agreement.

Purchase Agreements

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

Zembrace and Tosymra (such businesses collectively, the “Business”) and certain inventory related to the Business

for an aggregate purchase price of approximately $26.5 million, including certain deferred payments (such transaction, the “USL

Acquisition”).

The transaction closed on June 30, 2023.

Additionally,

in connection with the acquisition from Upsher Smith, we and Upsher Smith entered into a transition services agreement pursuant

to which Upsher Smith agreed to provide certain transition services to us for base fees equal to $100,000 per month for the first

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

totaling up to $150,000 per month.

We have signed an amendment to the transitional services agreement with Upsher Smith so that

Upsher Smith will continue to manage certain government rebates, and Upsher Smith will be reimbursed by us at cost for any rebates

they pay on our behalf.

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

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

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

The excess of the purchase price over the

fair value of the acquired assets was recorded as goodwill.

Zembrace and Tosymra.

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

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of greater than $100 million.

Such royalty payments are payable until July 19, 2025.

Such royalty payments were payable until July 19, 2025.

Upon the entry of a generic version of the

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licensed patent, and up to $15 million per Tosymra product on the achievement of sales milestones.

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

to which we acquired all the pre-clinical infectious disease assets of Healion for $1.2 million.

Because the Healion intellectual

property was acquired prior to FDA approval, the $1.2 million cash consideration was expensed as research and development costs

since there is no alternative future use and the acquired intellectual property does not constitute a business.

and Capital Resources

As of December 31, 2024, we had working capital of $100.7 million, comprised

primarily of cash and cash equivalents of $98.8 million, accounts receivable, net of $3.7 million, inventory of $8.4 million, and prepaid

expenses and other of $8.1 million, offset by $4.5 million of accounts payable, $10.7 million of accrued expenses and other current liabilities,

$2.8 million of term loan payable, short term and $0.3 million of lease liabilities, short term.

of December 31, 2025, we had working capital of $198.0 million, comprised primarily of cash and cash equivalents of $207.6 million, accounts

receivable, net of $6.3 million, inventory of $6.0 million and prepaid expenses and other of $9.0 million, offset by $8.1 million of

accounts payable, $22.6 million of accrued expenses, and current lease liabilities of $0.1 million.

A significant portion of the accounts

payable and accrued expenses are due to work performed in relation to our clinical programs.

payable and accrued expenses are due to work performed in relation to our clinical programs, accruals for gross to net deductions related

to our commercial products and product launch of TONMYA.

following table provides a summary of operating, investing, and financing cash flows for the years ended December 31, 2025, and

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cash provided by financing activities

the years ended December 31, 2024, and 2023, we used approximately $60.9 million and $102.0 million of cash in operating activities,

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

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

used by investing activities for the year ended December 31, 2024, was approximately $0.1 million related to the purchase of property

and equipment.

the years ended December 31, 2025, and 2024, we used approximately $99.8 million and $60.9 million in operating activities, respectively,

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

in cash outlays principally resulted from an increase in selling, general and administrative expenses as a result of the product

launch of TONMYA.

Cash used by investing activities for the year ended December 31, 2025, was approximately $4.5 million related

to the purchase of Zembrace and Tosymra assets and property and equipment.

the year ended December 31, 2024, net proceeds from financing activities were $134.9 million, primarily related to the sale of

common stock and warrants.

For the year ended December 31, 2023, net proceeds from financing activities were $36.5 million, predominately

from the sale of our common stock and warrants;

and debt raised which was offset by repurchase of common stock.

to the issuance of a note and purchase of property and equipment repayment.

Cash used by investing activities for the year ended

December 31, 2024, was approximately $0.1 million related to the purchase of property and equipment.

the year ended December 31, 2025, net proceeds from financing activities were $214.5 million, predominately from the sale of our

common stock and warrants, which was offset by repurchase of common stock and repayment of debt.

For the year ended December 31,

2024, net proceeds from financing activities were $134.9 million, primarily related to the sale of common stock and warrants.

believe that our cash resources at December 31, 2025 and the proceeds that we raised from equity offerings in the first quarter

of 2025, will meet our operating and capital expenditure requirements into the first quarter of 2026, but not beyond.

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

rapidly than currently expected due to changes we may make in our research and development spending plans.

These factors raise

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

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

to increase the funds available to fund operations.

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

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

funds to continue our operations.

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

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

of 2026, will meet our operating and capital expenditure requirements into the first quarter of 2027.

continue to face significant challenges and uncertainties and must successfully launch TONMYA and obtain additional funding through

public and private financing and collaborative arrangements with strategic partners to increase the funds available to fund operations.

However, we may not be able to raise capital on terms acceptable to us, or at all.

Without the successful product launch of TONMYA

and obtaining additional funds, we may be forced to delay, scale back or eliminate some or all of our research and development

activities or other operations, and potentially delay product development in an effort to maintain sufficient funds to continue

If any of these events occurs, our ability to achieve development and commercialization goals will be adversely affected

and we may be forced to cease operations.

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

of this uncertainty.

Liquidity Requirements

expect to incur losses from operations for the near future.

We expect to incur increasing research and development expenses, including

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

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

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

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

defending and enforcing patent claims and other intellectual property rights, the status of competitive products, the availability

of financing and our success in developing markets for our product candidates.

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

Future financing may include

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

Even if we are able to

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

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

Furthermore, if we issue

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

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

We expect to increase our operating costs to align the Company’s

capital and human resources with its previously announced strategic prioritization of the commercial launch of TONMYA for the

treatment of fibromyalgia.

future capital requirements will depend on a number of factors, including the successful product launch of TONMYA, the progress

of our research and development of product candidates, the timing and outcome of regulatory approvals, the costs involved in preparing,

filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights, the status of

competitive products, the availability of financing and our success in developing markets for our product candidates.

will need to successfully launch TONMYA and obtain additional capital in order to fund future research and development activities

and future capital expenditures.

Future financing may include the issuance of equity or debt securities, obtaining credit facilities,

or other financing mechanisms.

Even if we are able to raise the funds required, it is possible that we could incur unexpected

costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force

us to seek alternative financing.

Furthermore, if we issue additional equity or debt securities, shareholders may experience additional

dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common

the product launch of TONMYA is unsuccessful and additional financing is not available or is not available on acceptable terms,

we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization

efforts or obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to

certain product candidates that we might otherwise seek to develop or commercialize independently.

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

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seek to develop or commercialize independently.

2025 Financing

December 29, 2025, we entered into a securities purchase agreement with an institutional investor, pursuant to which we sold 615,025

shares of common stock and pre-funded warrants to purchase up to 615,025 shares of common stock.

The offering price per share

of common stock was $16.26, and the offering price per share of pre-funded warrant was $16.259.

offering closed on December 30, 2025.

We incurred offering expenses of approximately $1.5 million, including placement agent fees

of approximately $1.2 million.

We received net proceeds of approximately $18.5 million, after deducting placement agent fees

and other offering expenses.

Lincoln Park Transaction

June 11, 2025, we entered into a purchase agreement (the “2025 Purchase Agreement”) and a registration rights agreement

(the “2025 Registration Rights Agreement”) with Lincoln Park.

Pursuant to the terms of the 2025 Purchase Agreement,

Lincoln Park has agreed to purchase us up to $75,000,000 of our common stock (subject to certain limitations) from time to time

during the term of the 2025 Purchase Agreement.

Pursuant to the terms of the 2025 Registration Rights Agreement, we filed with

the SEC a registration statement to register for resale under the Securities Act the shares that have been or may be issued to

Lincoln Park under the 2025 Purchase Agreement.

to the terms of the 2025 Purchase Agreement, at the time we signed the 2025 Purchase Agreement and the 2025 Registration Rights

Agreement, we issued 48,708 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of our

common stock under the 2025 Purchase Agreement.

The commitment shares were valued at $1.8 million and recorded as an addition

to equity for the issuance of the common stock and treated as other expense, net on the consolidated statement of operations under

the 2025 Purchase Agreement.

No shares were sold during the year ended December 31, 2025, under the 2025 Purchase Agreement.

evaluated the 2025 Purchase Agreement under ASC 815-40 Derivatives and Hedging-Contracts on an Entity’s Own Equity

as it represents the right to require Lincoln Park to purchase shares of common stock in the future, similar to a put option.

We concluded that the 2025 Purchase Agreement represents a freestanding derivative instrument that does not qualify for equity

classification and therefore requires fair value accounting.

We analyzed the terms of the contract and concluded that the derivative

instrument had insignificant value as of December 31, 2025.

At-the-Market Offering

July 30, 2024, we entered into a Sales Agreement with AGP pursuant to which we may issue and sell, from time to time, shares of

our common stock having an aggregate offering price of up to $250.0 million in the ATM.

AGP will act as sales agent and will be

paid a 3% commission on each sale under the Sales Agreement.

Our common stock will be sold at prevailing market prices at the

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

During the year ended December 31, 2024, we sold approximately 4.2 million

shares of common stock under the Sales Agreement, for net proceeds of approximately $128.4 million.

Subsequent to December 31,

2024, we sold 2.3 million shares of common stock under the Sales Agreement, for net proceeds of approximately $46.3 million.

On June 11, 2025, we entered into a Sales Agreement (the “2025 Sales

Agreement”), with A.G.P./Alliance Global Partners (“AGP”) pursuant to which we may issue and sell, from time to time,

shares of common stock having an aggregate offering price of up to $400.0 million in sales.

AGP is sales agent under the ATM and paid

a 3% commission on each sale under the 2025 Sales Agreement.

Our common stock is sold at prevailing market prices at the time of the sale,

and, as a result, prices will vary.

During the year ended December 31, 2025, we sold 4.1 million shares of common stock under the 2025

Sales Agreement, for net proceeds of approximately $104.2 million.

Subsequent to December 31, 2025, we sold 0.6 million shares of common

stock under the 2025 Sales Agreement, for net proceeds of approximately $8.6 million.

At-the-Market Offering

July 30, 2024, we entered into a Sales Agreement (the “2024 Sales Agreement”), with AGP pursuant to which we could sell,

from time to time, shares of common stock having an aggregate offering price of up to $250.0 million in sales.

AGP is sales agent

under the ATM and paid a 3% commission on each sale under the 2024 Sales Agreement.

Our common stock is sold at prevailing market

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

During the year ended December 31, 2025, we sold approximately

4.5 million shares of common stock under the Sales Agreement for net proceeds of approximately $112.9 million.

During the year ended

December 31, 2024, we sold approximately 4.2 million shares of common stock under the Sales Agreement, as defined below, for net

proceeds of approximately $128.4 million.

We can no longer sell shares under the 2024 Sales Agreement as the

Company has reached the aggregate $250 million in sales.

2024 Financing

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of approximately $0.3 million.

We received net proceeds of approximately $3.5 million, after deducting the underwriting discount

and other offering expenses.

We received net proceeds of approximately $3.5 million, after deducting placement agent fees and other offering expenses.

2024 Financings

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stock was $106.50, and the offering price per share of pre-funded warrant was $106.40.

The offering closed on June 13, 2024.

We incurred offering expenses of

approximately $0.6 million, including placement agent fees of approximately $0.3 million.

We received net proceeds of approximately $3.4

million, after deducting the underwriting discount and other offering expenses.

offering closed on June 13, 2024.

We incurred offering expenses of approximately $0.6 million, including placement agent fees

of approximately $0.3 million.

We received net proceeds of approximately $3.4 million, after deducting placement agent fees and other offering expenses.

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

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per share of common stock was $57.00, and the offering price per share of pre-funded warrant was $56.99.

The offering closed on June 28, 2024.

We incurred offering expenses of

approximately $0.6 million, including placement agent fees of approximately $0.3 million.

We received net proceeds of approximately $3.4

million, after deducting the underwriting discount and other offering expenses.

offering closed on June 28, 2024.

We incurred offering expenses of approximately $0.6 million, including placement agent fees

of approximately $0.3 million.

We received net proceeds of approximately $3.4 million, after deducting placement agent fees and other offering expenses.

2024 Financing

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The offering price per share of common stock was $960.00, and the offering price per share of pre-funded warrants was $959.68.

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

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

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

We received net

proceeds of approximately $3.9 million, after deducting placement agent fees and other offering expenses.

Additionally,

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

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

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

We agreed to amend the

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we agreed to automatically amend the exercise price of the Existing Warrants to the Minimum Price (as defined in Nasdaq Listing

Rule 5635(d)) of our common stock on October 1, 2024 if and only if the Minimum Price is below the then current exercise price.

Upon stockholder approval on May 22, 2024, the termination date for the warrants issued August 2023 (the “August Warrants”)

Rule 5635(d)) of our common stock on October 1, 2024, if and only if the Minimum Price is below the then current exercise

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

to purchase up to an aggregate of 2,172 shares was amended to April 1, 2029;

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

of approximately 10,884 shares is the earlier of (i) April 1, 2026 and (ii) 10 trading days following notice by we to the Series

C Warrant holder of our public announcement of the FDA’s acknowledgement and acceptance of our NDA relating to TNX-102 SL

in patients with Fibromyalgia;

the termination date for Series D Warrants to purchase up to an aggregate of approximately 10,884

shares is April 1, 2029.

The other terms of the Existing Warrants will remain unchanged.

On May 22, 2024, at the annual meeting

of stockholders, our stockholders approved the proposal to amend the exercise prices of the Existing Warrants to $1,056.00 per

share and extend the expiration dates.

2023 Financing

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

investors, pursuant to which we sold and issued (i) 7,920 shares of our common stock, (ii) pre-funded warrants (the “Pre-Funded

Warrants”) to purchase up to 8,973 shares of common stock and (iii) Series C warrants to purchase up to 25,338 shares of

common stock (the “Series C Warrants”), and (iv) Series D warrants to purchase up to 25,338 shares of common stock

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

The securities

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

The offering price per share of common stock and accompanying Common

Warrants was $1,776.00, and the offering price per Pre-Funded Warrant and accompanying Common Warrants was $1,775.68.

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

million payable by us.

At the closing of the offering, 2,034 Pre-Funded Warrants were immediately exercised into shares of common

stock for nominal proceeds.

The Pre-Funded Warrants have an exercise price of $0.32 per share,

were immediately exercisable subject to certain ownership limitations, and can be exercised at any time until exercised in full.

C Warrants have an exercise price of $1,776.00 per share, and were exercisable on the later of approval by our stockholders of (i) a proposal

to approve the filing of an amendment to our Articles of Incorporation, increasing the number of authorized shares of common stock from

160,000,000 to 1,000,000,000 and (ii) a proposal to allow the Warrants to become exercisable in accordance with Nasdaq Listing Rule 5635

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

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

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

relating to the Company’s TNX-102 SL product candidate in patients with fibromyalgia.

The Series D Warrants have an exercise price

of $2,720.00 per share and were exercisable beginning on the Approval Date through the five-year anniversary of the Approval Date.

Upon the closing of the offering, we determined that certain of the Common

Warrants did not meet the criteria for equity classification due to the lack of sufficient authorized and unissued shares to settle the

The Company has adopted a sequencing approach under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own

Equity to determine the classification of its contracts at issuance and at each subsequent reporting date, whereby shares are allocated

based on the earliest issuance date of potentially dilutive instruments, with the earliest issuance date receiving the first allocation

In the event of identical issuance dates, shares are then allocated beginning with instruments with the latest maturity date

Pursuant to this sequencing approach, we determined that the authorized shares were sufficient to settle all remaining Pre-Funded

Warrants and 15,917 Series D Warrants and were therefore classified in equity.

The remaining 9,422 Series D Warrants and the Series C

Warrants associated with the deficit shares were initially classified as liabilities at fair value and presented within non-current liabilities

on the consolidated balance sheet as of December 31, 2023.

$30.0 million in gross proceeds received by us were first allocated to the Series C Warrants and the liability-classified Series

D Warrants at their respective fair values, and the residual proceeds were allocated between the shares of common stock, the Pre-Funded

Warrants, and the equity-classified Series D Warrants on a relative fair value basis.

The issuance costs were allocated between

the equity and liability-classified instruments on a relative fair value basis, resulting in issuance costs of $1.4 million recognized

as a discount to the equity-classified instruments, and $0.9 million allocated to the liability-classified instruments and immediately

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

January 25, 2024, the date our 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, the liability-classified Series

D Warrants and the Series C Warrants were adjusted to fair value and reclassified to equity.

2023 Financing

On September 28, 2023, we

sold 1,266 shares of common stock;

pre-funded warrants to purchase up to 1,549 shares of common stock, and accompanying Series A warrants

to purchase up to 2,813 shares of common stock with an exercise price of $1,600.00 per share and expiring five years from date of issuance,

and Series B warrants to purchase up to 2,813 shares of common stock with an exercise price of $1,600.00 per share and expiring one year

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

The offering price per share of common stock and accompanying

warrants was $1,600.00, and the offering price per share of pre-funded warrant and accompanying warrants was $1,599.68.

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

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

2023 Financing

July 27, 2023, we sold 791 shares of common stock;

pre-funded warrants to purchase up to 1,399 shares of common stock and accompanying

common warrants to purchase up to 2,188 shares of common stock with an exercise price of $3,200.00 per share in a public offering

that closed on August 1, 2023.

The offering price per share of common stock and accompanying common warrant was $3,200.00, and

the offering price per share of pre-funded warrant and accompanying common warrant was $3,199.68.

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

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

At-the-Market Offerings

April 8, 2020, we entered into a sales agreement with AGP pursuant to which we may issue and sell shares of our common stock having an

aggregate offering price of up to $320.0 million in at-the-market offerings (“ATM”) sales at prevailing market prices at

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

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

the year ended December 31, 2023, we sold approximately 322 shares of common stock under the Sales Agreement, for net proceeds of approximately

$3.0 million.

Repurchase Program

September 2024, the Board of Directors approved a 2024 share repurchase program pursuant

to which we may repurchase up to $10.0 million in value of our outstanding common stock from time to time on the open

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

repurchases occurred during the year ended December 31, 2024.

Subsequent to December 31, 2024,

we repurchased 250,000 of shares of our common stock outstanding under the 2024 share repurchase at prices ranging from $9.98

to $14.33 per share for a gross aggregate cost of approximately $3.0 million.

the first quarter of 2023, we repurchased 786 of our shares of common stock outstanding under the 2022 share repurchase program

for $12.5 million at prices ranging from $8,800.00 to $27,552.00 per share for a gross aggregate cost of approximately $12.5 million .

In addition, we incurred expenses of $0.3 million.

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

to which we may repurchase up to an additional $12.5 million in value of our outstanding common stock from time to time

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

the first quarter of 2023, we repurchased 50 of our shares of common stock outstanding

under the new 2023 share repurchase program at $22,784 per share for a gross aggregate cost of $1.1 million .

of approximately 10,884 shares is the earlier of (i) April 1, 2026 and (ii) 10 trading days following notice by the Company to

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

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

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

of approximately 10,884 shares is April 1, 2029.

The other terms of the Existing Warrants remained unchanged.

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

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

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

We accounted for the incremental fair value of the Warrant Amendments

of $3.0 million as a direct and incremental cost of the March 2024 financing as an offset to the proceeds received.

the Existing Warrants were equity-classified prior to the Warrant Amendments, the net impact to the consolidated statement of

stockholders’ equity was zero.

We then reclassified the Existing Warrants from equity to liabilities at post-modification

fair value on April 1, 2024.

On May 22, 2024, the date of our stockholders approved the proposal to fix the exercise prices at

$1,056.00 per share, the Existing Warrants were adjusted to fair value and reclassified back to equity.

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

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

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

statement of operations.

September 2024, the Board of Directors approved a 2024 share repurchase program pursuant to which we 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.

In November 2025, the amount increased to $35.0 million.

the year ended December 31, 2025, we repurchased 847,903 shares of its common stock outstanding under the 2024 share repurchase

at prices ranging from $9.98 to $20.47 per share for a gross aggregate cost of approximately $13.8 million.

The repurchased shares

were immediately retired.

timing and amount of any shares repurchased will be determined based on our evaluation of market conditions and other factors

and the share repurchase program may be discontinued or suspended at any time.

Repurchases will be made in accordance with

the rules and regulations promulgated by the Securities and Exchange Commission and certain other legal requirements to which

we may be subject.

Repurchases may be made, in part, under a Rule 10b5-1 plan, which allows stock repurchases when we might otherwise

be precluded from doing so.

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

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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

million, which was 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.

Interest was payable monthly in arrears commencing in December 2023.

In connection with the Term Loan,

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

In addition, we must pay a monthly collateral monitoring charge equal to 0.23% of the outstanding principal amount of the

term loan as of the date of payment.

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

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

In addition, we paid a monthly collateral monitoring charge equal to 0.23% of the outstanding principal amount of the term

loan as of the date of payment.

We incurred $1.1 million in issuance costs, which was 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.

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judgements, inaccuracy of representations and warranties, invalidity of guarantees.

The Term Loan is secured by first priority

The Term Loan was secured by first priority

security interests in our R&D Center in Frederick, Maryland, the Advanced Development Center in North Dartmouth, Massachusetts,

and substantially all of the relevant deposit accounts.

of December 31, 2024, the carrying amount of the Term Loan approximated its fair value as the contractual interest rate for the

Term Loan was representative of the then market interest rate.

the first quarter of 2025, we paid $9.6 million as a result of a pay-off of the above-mentioned loan.

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of $1.0 million in accordance with the terms and provisions of the Loan Agreement.

May 1, 2020, our stockholders approved the Tonix Pharmaceuticals Holding Corp.

Amended and Restated 2020 Stock Incentive Plan

On May 1, 2020, our stockholders approved the Tonix Pharmaceuticals Holding

Amended and Restated 2020 Stock Incentive Plan, and May 8, 2025, our stockholders approved an amendment to this plan (as amended,

“Amended and Restated 2020 Plan”).

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

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

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

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

provided in the Amended and Restated 2020 Plan).

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

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

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

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

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

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

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

The Board of Directors

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

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

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

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

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

As of December 31, 2024, no options were available for future grants under the Amended and Restated 2020 Plan.

(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 50,000 shares of common stock, which amount will be increased

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

in the Amended and Restated 2020 Plan).

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

providing for an annual increase in the number of shares of our common stock available for issuance under the Amended and Restated

2020 Plan on January 1 of each year for a period of ten years, commencing on January 1, 2021 and ending on (and including) January

1, 2030, in an amount equal to the difference between (x) twenty percent (20%) of the total number of shares of common stock outstanding

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

and Restated 2020 Plan on December 31 st of such preceding calendar year (including shares subject to outstanding awards,

issued pursuant to awards or available for future awards).

On May 8, 2025, our stockholders approved the addition of 1,000,000

shares to the Company’s Amended and Restated 2020 Plan.

Board of Directors determines the exercise price, vesting and expiration period of the grants under the Amended and Restated 2020

However, the exercise price of an incentive stock option may not be less than 110% of fair value of the common stock at

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

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 December 31, 2025, there were 726,433 options available for future grants under the Amended and Restated

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 year ended December 31, 2025, and December 31, 2024 was $13.10 and $868.00

per share, respectively.

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

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

The fair value of

the award is measured on the grant date.

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

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

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

The Company also issues premium options to executive

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

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

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

discussed below, and the closing market price of our common stock on the date of the grant.

The fair value of the award is measured

on the grant date.

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

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

In addition, we issue options to directors which

vest over a one-year period.

We also issue premium options to executive officers which have an exercise price greater than the

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

met, subject in each case to a one year minimum service period prior to vesting.

Stock-based compensation expense related to awards

is amortized over the applicable service period using the straight-line method.

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

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the options as of the grant date.

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

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

price volatility.

weighted average fair value of options granted during the year ended December 31, 2024, was $868.00 per share.

The weighted average

fair value of options granted during the year ended December 31, 2023, was $12,768.00 per share.

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

Staff Accounting Bulletin, and the expected stock price volatility is based on our historical stock price volatility.

compensation expense relating to options granted of $6.0 million, of which $4.1 million and $1.9 million, related to General and

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and Research and Development, respectively was recognized for the year ended December 31, 2024.

of December 31, 2024, the Company had approximately $3.4 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 1.57 years.

Stock Purchase Plan

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

2022 Employee Stock Purchase Plan.

ESPP”), which was replaced by the Tonix Pharmaceuticals Holdings Corp.

2023 Employee Stock Purchase Plan (the “2023

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

2023 ESPP allows eligible employees to purchase up to an aggregate of 250 shares of our common stock.

Under the 2023

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

offering period, which allows the eligible employees to purchase shares of our common stock at the end of the offering period.

Each offering period under the 2023 ESPP is for six months, which can be modified from time-to-time.

Subject to limitations, each

participant will be permitted to purchase a number of shares determined by dividing the employee’s accumulated payroll

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

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

A participant must designate in

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

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

As of December 31, 2024, 159 shares were available

for future sales under the 2023 ESPP.

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

the year ended December 31, 2024 and 2023, $27,000 and $34,000, respectively, was expensed.

In January 2023, 5 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, 21 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.

June 30, 2024, approximately $33,000 of employee payroll deductions had accumulated and had been recorded in accrued expenses.

July 2024, 70 shares that were purchased as of June 30, 2024, under the 2022 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.

of December 31, 2025, we had approximately $12.3 million of total unrecognized compensation cost related to non-vested awards

granted under the Plans, which we expect to recognize over a weighted average period of 2.82 years.

and Development Contracts

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$52.3 million at December 31, 2025 for future work to be performed.

have entered into various exclusive license agreements with various institutions with the right to sublicense, certain patents,

technical information and material, and to develop and commercialize products thereunder.

In addition to any upfront payments

already paid, we may be obligated to pay milestone fees ranging from $25,000 to $5.0 million based on the potential achievement

of certain development milestones, as well as milestone fees ranging from $55,000 to $20.0 million based on certain potential

commercial achievements, as specified in the respective license agreement.

Additionally, for licensed products sold during the

applicable royalty term, we must pay royalties in the low-to-mid single digits, beginning in the year after we complete our first

commercial sale of a licensed product.

Finally, we have the right to grant sublicenses to third parties under each license agreement

and is required to pay a sublicense income share based on the stage of development of the licensed product at the time the sublicense

of December 31, 2025, future minimum lease payments are as follows (in thousands):

Ending December 31,

2030 and thereafter

Included interest

Accounting Policies and Estimates

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of our consolidated financial statements.

Combinations.

We apply the acquisition method of accounting for business combinations.

Under the acquisition method, the acquiring

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

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

Any excess of the purchase

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

The acquired intangible assets are amortized using

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

Goodwill is reviewed for impairment on an annual

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

impairment charges.

We test certain assets for impairment, including goodwill, indefinite-lived intangibles, long-lived assets

and amortizing intangibles.

Goodwill is reviewed for impairment by comparing the carrying value of a reporting unit to its fair

value on an annual basis as of June 30, or more frequently if events or changes in circumstances indicate that the carrying amount

of goodwill may be impaired.

We evaluate long-lived assets for impairment, including property and equipment and finite-lived intangibles

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

When such factors

and circumstances exist, we compare the projected undiscounted future cash flows associated with the related asset or group of

assets over their estimated useful lives against their respective carrying 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.

We completed the required annual impairment test for goodwill as of

June 30, 2024, primarily using an income approach or discounted cash flow analysis.

Additionally, due to a sustained decline in revenues

and continued delays in building out the sales team for our commercialized products, we also tested the commercialized products asset

group for recoverability as of June 30, 2024, and determined that the carrying value was not recoverable and therefore estimated the fair

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

The significant assumptions used in the discounted cash flow model included

revenue growth, long-term growth rate, and discounts rate.

The impairment assessments resulted in full non-cash impairment of $965,000

of goodwill and $9.2 million, consisting of $6.2 million and $3.0 million for the Zembrace and Tosymra developed technology, intangible

assets, which are reflected in asset impairment charges in the consolidated statements of operations for the year ended December 31, 2024.

During the second quarter

of 2024, we identified certain triggering events related to the ADC and the decommissioning of the ADC.

The Company determined that the

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

We engaged independent appraisers to

value the building and land, using sales comparison and income capitalization approaches, and the related equipment using a indirect cost

approach and market approach.

The assessments resulted in a non-cash impairment charge of $48.8 million, which is reflected in asset impairment

charges in the consolidated statements of operations for the year ended December 31, 2024.

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

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

estimate our accrued expenses.

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

under contracts with vendors, consultants and clinical research organizations and clinical site agreements in connection with

conducting clinical trials.

The financial terms of these contracts are subject to negotiations, which vary from contract to contract

and may result in payment flows that do not match the periods over which materials or services are provided to us under such contracts.

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

various aspects of the trial.

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

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

During the course of

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

We make estimates of

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

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

other third-party vendors.

estimate our research and development accrued expenses.

Our clinical trial accrual process is designed to account for expenses

resulting from our obligations under contracts with vendors, consultants and clinical research organizations and clinical site

agreements in connection with conducting clinical trials.

The financial terms of these contracts are subject to negotiations,

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

are provided to us under such contracts.

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

progression and the timing of various aspects of the trial.

We determine accrual estimates that take into account discussions

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

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

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

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

organizations and other third-party vendors.

Compensation.

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

financing costs.

Deferred financing costs represent the cost of obtaining financing arrangements and are amortized over the term

of the related debt agreement using the effective interest method.

Deferred financing costs related to term debt arrangements

are reflected as a direct reduction of the related debt liability on the consolidated balance sheet.

Amortization of deferred

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

issue discount.

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

Original issue

discounts are reflected as a direct reduction of the related debt liability on the consolidated balance sheets and are amortized

over the term of the related debt agreement using the effective interest method.

Amortization of original issue discounts are

included in interest expense on the consolidated statements of operations.

Instruments and Warrant Liabilities.

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reported in the consolidated statements of operations.

The Company uses the Black-Scholes option pricing model to value the derivative

The Company uses the Monte Carlo pricing model to value the derivative

instruments at inception and subsequent valuation dates, which is adjusted for instrument-specific terms as applicable.

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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.

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

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variable interest in an unconsolidated entity.

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”)

issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures,

which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment

Effective January 1, 2024, the Company adopted the new standard on a retrospective basis for annual periods, and interim periods

beginning for the first quarter of 2025.

The Company does not believe the impact of the new guidance and related codification improvements

had a material impact to its financial position, results of operations and cash flows.

Recently Issued Accounting Pronouncements

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.

Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax

Disclosures, which requires entities to disclose disaggregated information about their effective tax rate reconciliations as well as expanded

information on income taxes by jurisdiction.

The standard is effective for fiscal years beginning after December 15, 2024 on a prospective

The Company discloses its income tax rate reconciliation in its annual consolidated financial statements only.

The Company adopted

the ASU on January 1, 2025 and the impact of the adoption was enhanced disclosure in Note 18.

Issued Accounting Pronouncements

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

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The Company is in the process of assessing the impact of ASU 2024-03 on our disclosures.

December 2025, the FASB issued ASU 2025-10, Government grants – Accounting for Government grants by Business entities,

that includes requirements for recognition of government grants in a Company’s financial statements as well as disclosure

requirements, including the nature of the government grant received, the accounting policies used to account for the grant, and

significant terms and conditions of the grant.

The guidance is effective for 2029 interim and annual reporting on a modified prospective,

modified retrospective or retrospective approach.

Early adoption is permitted as of the beginning of an annual reporting period.

The Company is currently evaluating the impact of adoption on its consolidated financial statements.

7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

What changed 10-K

Item 7. Management’s Discussion and Analysis