Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

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

This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as "may" "will," "expect," "anticipate," "believe," "estimate" and "continue," or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of its management team as well as the assumptions on which such statements are 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 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.

In 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. The 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 diseases.

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

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

Zembrace SymTouch and Tosymra are registered trademarks of Tonix Medicines. TONMYA is a registered trademark of Tonix Pharma Limited. All other marks are the property of their respective owners. We are led by a management team with significant industry experience in drug development.

We complement our management team with a network of scientific, clinical, and regulatory advisors that includes recognized experts in their respective fields.

Results of Operations

We anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, such as the sale of our commercialized assets, progress of our research and development efforts and the timing and outcome of regulatory submissions. Due to these uncertainties, accurate predictions of future operations are difficult or impossible to make.

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

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

		Year ended December 31,
		2025				2024
REVENUE
Product revenue, net		$	13,107			$	10,094
COSTS AND EXPENSES:
Cost of sales		$	6,640			$	7,765
Research and development			44,486				39,972
Selling, general and administrative			87,684				40,101
Asset impairment charges			-				58,957
Total operating expenses			138,810				146,795
Operating loss			(125,703	)			(136,701	)
Grant income			3,012				2,594
Gain on change in fair value of warrant liabilities			-				6,150
Loss on extinguishment of debt			(2,092)				-
Interest income			4,146				22
Interest expense			(89	)			(1,234	)
Other expense, net			(3,295	)			(867	)
Net loss		$	(124,021	)		$	(130,036	)

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

The Company's net product revenues are summarized below:

		Year ended December 31,
		2025			2024
Tonmya		$	1,421		$	-
Zembrace Symtouch			9,314			8,546
Tosymra			2,372			1,548
Total product revenues		$	13,107		$	10,094

Cost of Sales. 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.

Research and Development Expenses. 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.

In 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 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.

The table below summarizes our direct research and development expenses for our product candidates and development platform for the years ended December 31, 2025, and 2024.

		December 31, (in thousands)
		2025				2024				Change
Research and development expenses:
Direct expenses - TNX - 102 SL		$	5,601			$	4,616			$	985
Direct expenses - TNX - 1500			5,810				2,772				3,038
Direct expenses - TNX - 801			2,038				599				1,439
Direct expenses - TNX - 1900			1,043				1,427				(384	)
Direct expenses - TNX - 4200			1,082				-				1,082
Direct expenses - TNX - 4800			1,458				-				1,458
Direct expenses - Other programs			2,719				2,612				107
Internal staffing, overhead and other			24,735				27,946				(3,211	)
Total research and development		$	44,486			$	39,972			$	4,514

Our direct research and development expenses consist principally of external costs for clinical, nonclinical, and manufacturing, such as fees paid to contractors, consultants and CROs in connection with our development work. Included in "Internal Staffing, Overhead and Other" is overhead, supplies, research and development employee costs (including stock option expenses), travel, regulatory and legal.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the fiscal year ended December 31, 2025, were $87.7 million, an increase of $47.6 million, or 119%, from $40.1 million incurred in the fiscal year ended December 31, 2024. 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.

Asset 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. No impairment charges were incurred during 2025.

The impairment of the Tosymra and Zembrace inventory, intangibles and goodwill was driven by our delayed investment in the sales personnel required to drive growth in the business as we are focusing our cash resources to further our efforts to bring TNX-102 SL through the approval process and to market. However, we believe that the benefits and long-term value proposition of the 2023 acquisition of Tosymra and Zembrace remain, in that we now have the infrastructure to be ready to manufacture and sell TNX-102 SL under an expedited timeline.

Net Loss. 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.

License Agreement

On 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.

Asset Purchase Agreements

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

We have assumed certain obligations of Upsher Smith, including the payment of quarterly royalty payments on annual net sales from the Business in the U.S. as follows: for Tosymra, 4% for net sales of $0 to $30 million, 7% of net sales of $30 to $75 million; 9% for net sales of $75 to $100 million; 12% for net sales of $100 to $150 million; and 15% for net sales greater than $150 million. Royalty payments with respect to Tosymra are payable until the expiration or termination of the product's Orange Book listed patent(s) with respect to the United States or, outside the United States, the expiration of the last valid claim covering the product in the relevant country of the territory. For Zembrace, royalty payments on annual net sales in the U.S. are 3% for net sales of $0 to $30 million, 6% of net sales of $30 to $75 million; 12% for net sales of $75 to $100 million; 16% for net sales of greater than $100 million. Such royalty payments were payable until July 19, 2025. Upon the entry of a generic version of the relevant product, the applicable royalty rates will be reduced by 90% percent for Zembrace, and by 66.7% percent for Tosymra.

In addition, we have assumed the obligation to pay an additional 3% royalty on net sales of Tosymra, plus an additional 3% if a patent containing certain claims related to Tosymra issues in the U.S., for 15 years from the first commercial sale of Tosymra in the applicable country or for as long as the manufacture, use or sale of Tosymra in such country is covered by a valid claim of a licensed patent, and up to $15 million per Tosymra product on the achievement of sales milestones.

Liquidity and Capital Resources

As 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, accruals for gross to net deductions related to our commercial products and product launch of TONMYA.

The following table provides a summary of operating, investing, and financing cash flows for the years ended December 31, 2025, and 2024, respectively (in thousands):

		December 31,
		2025				2024
Net cash used in operating activities		$	(99,844	)		$	(60,925	)
Net cash used in investing activities			(4,528	)			(120	)
Net cash provided by financing activities			214,530				134,872

For 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. The increase 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 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.

For 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.

We believe that our cash resources at December 31, 2025 and the proceeds that we raised from equity offerings in the first quarter of 2026, will meet our operating and capital expenditure requirements into the first quarter of 2027.

We 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 operations. 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.

Future Liquidity Requirements

We expect to incur losses from operations for the near future. 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.

Our 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.

We 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 stock.

If 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.

If 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.

December 2025 Financing

On 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.

The 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.

2025 Lincoln Park Transaction

On 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.

Pursuant 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.

We 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.

2025 At-the-Market Offering

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.

2024 At-the-Market Offering

On 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.

July 2024 Financing

On July 9, 2024, we entered into a securities purchase agreement with certain institutional and retail investors, pursuant to which we sold 33,936 shares of common stock and pre-funded warrants to purchase up to 37,032 shares of common stock. The offering price 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 July 10, 2024. We incurred offering expenses of approximately $0.5 million, including placement agent fees of approximately $0.3 million. We received net proceeds of approximately $3.5 million, after deducting placement agent fees and other offering expenses.

June 2024 Financings

On June 12, 2024, we entered into a securities purchase agreement with certain investors, pursuant to which we sold 11,995 shares of common stock and pre-funded warrants to purchase up to 25,682 shares of common stock. The offering price per share of common 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 placement agent fees and other offering expenses.

On June 27, 2024, we entered into a securities purchase agreement with certain institutional and retail investors, pursuant to which we sold 28,339 shares of common stock and pre-funded warrants to purchase up to 42,282 shares of common stock. The offering price 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 placement agent fees and other offering expenses.

March 2024 Financing

On March 28, 2024, we entered into an agreement to sell 3,365 shares of common stock, pre-funded warrants to purchase up to 1,219 shares of common stock, and accompanying Series E warrants to purchase up to 4,584 shares of common stock with an exercise price of $1,056.00 per share and expiring five and a half years from date of issuance in a public offering, which closed on April 1, 2024. The offering price per share of common stock was $960.00, and the offering price per share of pre-funded warrants was $959.68.

We 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 its common warrants (referred to herein as the "Existing Warrants"). We agreed to amend the exercise price of each Existing Warrant to $1,056.00 upon approval by our stockholders of a proposal to allow the Existing Warrants to become exercisable in accordance with Nasdaq Listing Rule 5635 or, if stockholder approval is not obtained by October 1, 2024, we agreed to automatically amend the exercise price of the Existing Warrants to the Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) of our common stock on October 1, 2024, if and only if the Minimum Price is below the then current exercise price. Upon stockholder approval, 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; the termination date for Series A Warrants to purchase up to an aggregate of approximately 2,782 shares is April 1, 2029; the termination date for Series B Warrants to purchase up to an aggregate of approximately 2,782 shares is April 1, 2025; 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 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.

We 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. As all of 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.

The liability-classified Series D Warrants and all of the Series C Warrants were presented within non-current liabilities on the consolidated balance sheets as of December 31, 2023, and were adjusted to fair value through January 25, 2024, when the warrants were reclassified to equity. Changes in the fair value of the liability-classified warrants were recognized as a separate component in the consolidated statement of operations.

Stock Repurchases

In 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.

During 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.

The 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.

Debt Financing

On December 8, 2023, we executed a Loan and Guaranty Agreement (the "Loan Agreement") to issue a 36-month term loan (the "Term Loan") in the principal amount of $11.0 million with a maturity date of December 8, 2026 (the "Maturity Date"). 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 was being amortized over the term of the debt as an adjustment to the effective interest rate on the outstanding borrowings.

Borrowings under the Term Loan bear interest at a fluctuating rate equal to the greater of (i) the prime rate as defined in the Loan Agreement plus 3.5% and (ii) 12%. Interest was payable monthly in arrears commencing in December 2023. In connection with the Term Loan, we deposited into a reserve account $1.8 million to be used exclusively to fund interest payments related to the Term Loan. The deposit is reflected as prepaid and other current assets on the consolidated balance sheet.

Commencing on March 8, 2024 and continuing monthly through the Maturity Date, the outstanding principal will be due and payable in monthly installments of $0.2 million, with the final remaining balance of unpaid principal and interest due and payable on the Maturity Date. 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.

The Loan Agreement provides for voluntary prepayments of the Term Loan, in whole or in part, subject to a prepayment premium. The Loan Agreement contains customary affirmative and negative covenants by us, which among other things, will require us to provide certain financial reports to the lenders, to maintain a deposit account to fund interest payments, and limit the ability of us to incur or guarantee additional indebtedness, pay dividends or make other equity distributions, sell assets, engage in certain transactions, and effect a consolidation or merger. Our obligations under the Loan Agreement may be accelerated upon customary events of default, including non-payment of principal, interest, fees and other amounts, covenant default, insolvency, material judgements, inaccuracy of representations and warranties, invalidity of guarantees. The Term Loan 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.

During the first quarter of 2025, we paid $9.6 million as a result of a pay-off of the above-mentioned loan. The pay-off amount paid by us in connection with the termination of the Loan Agreement was pursuant to a pay-off letter and includes a prepayment fee of $1.0 million in accordance with the terms and provisions of the Loan Agreement.

Stock Compensation

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

Under 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) RSUs, (5) other stock-based awards, and (6) cash-based awards. The Amended and Restated 2020 Plan initially provided for the issuance of up to 50,000 shares of common stock, which amount will be increased to the extent that awards granted under the Plans are forfeited, expire or are settled for cash (except as otherwise provided in the Amended and Restated 2020 Plan). In addition, the Amended and Restated 2020 Plan contains an "evergreen provision" providing for an annual increase in the number of shares of our common stock available for issuance under the Amended and Restated 2020 Plan on January 1 of each year for a period of ten years, commencing on January 1, 2021 and ending on (and including) January 1, 2030, in an amount equal to the difference between (x) twenty percent (20%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, and (y) the total number of shares of common stock reserved under the Amended and Restated 2020 Plan on December 31^st of such preceding calendar year (including shares subject to outstanding awards, issued pursuant to awards or available for future awards). On May 8, 2025, our stockholders approved the addition of 1,000,000 shares to the Company's Amended and Restated 2020 Plan.

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 December 31, 2025, there were 726,433 options available for future grants under the Amended and Restated 2020 Plan.

The 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.

The 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.

We measure the fair value of stock options on the date of grant, based on the Black Scholes option pricing model using certain assumptions discussed below, and the closing market price of our common stock on the date of the grant. The fair value of the award is measured on the grant date. One-third of most stock options granted pursuant to the Plans vest 12 months from the date of grant and 1/36th each month thereafter for 24 months and expire ten years from the date of grant. In addition, we issue options to directors which vest over a one-year period. We also issue premium options to executive officers which have an exercise price greater than the grant date fair value and has issued performance-based options which vest when target parameters are met or probable of being met, subject in each case to a one year minimum service period prior to vesting. Stock-based compensation expense related to awards is amortized over the applicable service period using the straight-line method.

The 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 our historical stock price volatility.

Stock-based compensation expense relating to options granted of $6.0 million, of which $4.1 million and $1.9 million, related to General and Administration and Research and Development, respectively was recognized for the year ended December 31, 2025. Stock-based compensation expense relating to options granted of $4.8 million, of which $3.4 million and $1.4 million, related to General and Administration and Research and Development, respectively was recognized for the year ended December 31, 2024.

As 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.

Commitments

Research and Development Contracts

We have entered into contracts with various contract research organizations with outstanding commitments aggregating approximately $52.3 million at December 31, 2025 for future work to be performed.

We 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 is granted.

Operating leases

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

Year Ending December 31,
2026			$	142
2027				480
2028				451
2029				366
2030 and thereafter				31
				1,470
Included interest				(161	)
			$	1,309

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition. Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized. Such variable consideration represents chargebacks, rebates, prompt pay and other sales discounts, and product returns. These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on gross sales for a reporting period. We began recognizing revenue following the completion of the USL Acquisition, beginning July 1, 2023, and required variable consideration estimates are currently primarily based on the acquired products historical results. Adjustments to these estimates to reflect actual results or updated expectations will be assessed each period. If any of our ratios, factors, assessments, experiences, or judgments are not indicative or accurate estimates of our future experience, our results could be materially affected. The potential of our estimates to vary differs by program, product, type of customer and geographic location. In addition, estimates associated with U.S. Medicare and Medicaid governmental rebate programs are at risk for material adjustment because of the extensive time delay.

Research and Development. We outsource certain of our research and development efforts and expense the related costs as incurred, including the cost of manufacturing product for testing, licensing fees and costs associated with planning and conducting clinical trials. The value ascribed to patents and other intellectual property acquired was expensed as research and development costs, as it related to particular research and development projects and had no alternative future uses.

We 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 time. Our clinical trial accruals and prepaid assets are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors.

Stock-Based Compensation. All stock-based payments to employees and to nonemployee directors for their services as directors consisted of grants of restricted stock and stock options, which are measured at fair value on the grant date and recognized in the consolidated statements of operations as compensation expense over the relevant vesting period. In addition, for awards that vest immediately and are nonforfeitable, the measurement date is the date the award is issued.

Derivative Instruments and Warrant Liabilities. The Company evaluates all of its financial instruments, including issued warrants to purchase common stock under ASC 815 - Derivatives and Hedging, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. 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 Monte Carlo pricing model to value the derivative instruments at inception and subsequent valuation dates, which is adjusted for instrument-specific terms as applicable.

From time to time, certain equity-linked instruments may be classified as derivative liabilities due to the Company having insufficient authorized shares to fully settle the equity-linked financial instruments in shares. In such a case, the Company has adopted a sequencing approach under ASC 815-40, Derivatives and Hedging - Contracts in Entity's Own Equity to determine the classification of its contracts at issuance and at each subsequent reporting date. If reclassification of contracts between equity and assets or liabilities is necessary, the Company first allocates remaining authorized shares to equity on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest issuance date receiving the first allocation of shares. In the event of identical issuance dates, shares are then allocated to equity beginning with instruments with the latest maturity date first.

Other than contractual obligations incurred in the normal course of business, we do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retain or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity.

Recently 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 basis. 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.

Recently Issued Accounting Pronouncements

In March 2024, the SEC adopted new rules relating to the disclosure of a range of climate-change-related physical and transition risks, data, and opportunities. The adopted rule contains several new disclosure obligations, including, (i) disclosure on how the board of directors and management oversee climate-related risks and certain climate-related governance items, (ii) disclosure of information related to a registrant's climate-related targets, goals, and/or transition plans, and (iii) disclosure on whether and how climate-related events and transition activities impact line items above a threshold amount on a registrant's consolidate financial statements, including the impact of the financial estimates and the assumptions used. This new rule will first be effective in the Company's disclosures for the year ending December 31, 2027. The Company is in the process of assessing the impact on our consolidated financial statements and disclosures.

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 Statement. 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.

In 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.