# Tonix Pharmaceuticals Holding Corp. (TNXP) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Tonix Pharmaceuticals Holding Corp.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1430306/000199937125002786/tnxp-10k_123124.htm
Accession: 0001999371-25-002786
Filing date: 2025-03-18
Report date: 2024-12-31
Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization.
Confidence: high

Company profile: /company/TNXP/
All MD&A years: /company/TNXP/mda/
Previous year: /company/TNXP/mda/fy2023/ (FY 2023)
Next year: /company/TNXP/mda/fy2025/ (FY 2025)

ITEM
7 – 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 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
Drug Abuse. 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.

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. 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.

 101

 Results
of Operations

We
anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, such as the sale of
our commercialized assets, progress of our research and development efforts and the timing and outcome of regulatory submissions.
Due to these uncertainties, accurate predictions of future operations are difficult or impossible to make. Since the acquisition
of Zembrace and Tosymra on June 30, 2023, we are now reporting product revenue and related costs. 

Fiscal
year Ended December 31, 2024 Compared to Fiscal year Ended December 31, 2023

The
following table sets forth our operating expenses for the fiscal years ended December 31, 2024 and 2023 (in thousands):

[[GREPCENT_TABLE]]
[["","","Year ended December 31,"],["","","2024","","","2023"],["REVENUE"],["Product revenue, net","","$","10,094","","","$","7,768"],["COSTS AND EXPENSES:"],["Cost of sales","","$","7,765","","","$","4,741"],["Research and development","","","39,972","","","","86,655"],["Selling, general and administrative","","","40,101","","","","34,752"],["Asset impairment charges","","","58,957","","","","\u2014"],["Total operating expenses","","","146,795","","","","126,148"],["Operating loss","","","(136,701",")","","","(118,380",")"],["Grant income","","","2,594","","","","\u2014"],["Gain on change in fair value of warrant liabilities","","","6,150","","","","\u2014"],["Other (expense) income, net","","","(2,079",")","","","1,722"],["Net loss","","$","(130,036",")","","$","(116,658",")"]]
[[/GREPCENT_TABLE]]

Revenues. The
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.

The
Company’s net product revenues are summarized below:  

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","","2023"],["Zembrace Symtouch","","$","8,546","","","$","6,304"],["Tosymra","","","1,548","","","$","1,464"],["Total product revenues","","$","10,094","","","$","7,768"]]
[[/GREPCENT_TABLE]]

Cost of
Sales. 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.

Research
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.

 102

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 year ended December 31, 2024 and 2023, we recorded $1.6 and $2.9 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, 2024, and 2023.

[[GREPCENT_TABLE]]
[["","","December 31, (in thousands)"],["","","2024","","","2023","","","Change"],["Research and development expenses:"],["Direct expenses \u2013 TNX - 102 SL","","$","4,616","","","$","12,250","","","$","(7,634",")"],["Direct expenses \u2013 TNX - 1800","","","319","","","","1,608","","","","(1,289",")"],["Direct expenses \u2013 TNX - 601 ER","","","577","","","","8,531","","","","(7,954",")"],["Direct expenses \u2013 TNX - 801","","","599","","","","2,931","","","","(2,332",")"],["Direct expenses \u2013 TNX - 1500","","","2,772","","","","7,044","","","","(4,272",")"],["Direct expenses \u2013 TNX - 1900","","","1,427","","","","5,254","","","","(3,827",")"],["Direct expenses \u2013 Other programs","","","1,716","","","","6,826","","","","(5,110",")"],["Internal staffing, overhead and other","","","27,946","","","","42,211","","","","(14,265",")"],["Total research & development","","$","39,972","","","$","86,655","","","$","(46,683",")"]]
[[/GREPCENT_TABLE]]

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, 2024, were $40.1 million, an increase of $5.3 million, or 15%, from $34.8 million incurred in the fiscal year ended December 31,
2023. 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.

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.

The
impairment of the Tosymra and Zembrace inventory, intangibles and goodwill was driven by our delayed investment in the sales personnel
required to drive growth in the business as we are focusing our cash resources to further our efforts to bring TNX-102 SL through
the approval process and to market. However, we believe that the benefits and long-term value proposition of the 2023 acquisition
of Tosymra and Zembrace remain, in that we now have the infrastructure to be ready to manufacture and sell TNX-102 SL under an
expedited timeline pending FDA approval for which we expect an FDA decision in 2025.

Net
Loss. As a result of the foregoing, the net loss for the year ended December 31, 2024, was $130.0 million, compared to
a net loss of $116.7 million for the year ended December 31, 2023.

 103

License
Agreements

On
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.

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 (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.

As
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.

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 are payable until July 19, 2025. Upon the entry of a generic version of the
relevant product, the applicable royalty rates will be reduced by 90% percent for Zembrace, and by 66.7% percent for Tosymra.

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.

 On
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. 

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

 104

The
following table provides a summary of operating, investing, and financing cash flows for the years ended December 31, 2024, and
2023, respectively (in thousands):

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","2024","","","2023"],["Net cash used in operating activities","","$","(60,925",")","","$","(102,003",")"],["Net cash used in investing activities","","","(120",")","","","(29,070",")"],["Net cash provided by financing activities","","","134,872","","","","36,517"]]
[[/GREPCENT_TABLE]]

For
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.

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. Cash used by investing activities for the year ended December 31, 2023, was approximately $29.1 million related
to the purchase of Zembrace and Tosymra assets and property and equipment.

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. 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.

We
believe that our cash resources at December 31, 2024 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. 

We
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
10-K. 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. 

Future
Liquidity Requirements

We
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.

Our
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.

We
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.

 105

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.

2024
At-the-Market Offering

On
July 30, 2024, we entered into a Sales Agreement with AGP pursuant to which we may issue and sell, from time to time, shares of
our common stock having an aggregate offering price of up to $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.

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 the underwriting discount
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 the underwriting discount 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 the underwriting discount 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.

 106

We
incurred offering expenses of approximately $0.5 million, including placement agent fees of approximately $0.3 million. We received
net proceeds of approximately $3.9 million, after deducting the underwriting discount and other offering expenses.

Additionally,
with the closing of the financing on April 1, 2024, we entered into warrant amendments (collectively, the “Warrant Amendments”)
with certain holders of our common warrants (referred to herein as the “Existing Warrants”). We agreed to amend the
exercise price of each Existing Warrant to $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 on May 22, 2024, 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 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.

December
2023 Financing

On
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. The offering
closed on December 22, 2023, generating gross proceeds of approximately $30.0 million, before deducting offering expenses of $2.3
million payable by us. At the closing of the offering, 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. The Series
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
of the U.S. Food and Drug Administration’s (“FDA”) acknowledgement and acceptance of the New Drug Application (“NDA”)
relating to the Company’s TNX-102 SL product candidate in patients with fibromyalgia. The Series D Warrants have an exercise price
of $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
instruments. The Company has adopted a sequencing approach under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own
Equity to determine the classification of its contracts at issuance and at each subsequent reporting date, whereby shares are allocated
based on the earliest issuance date of potentially dilutive instruments, with the earliest issuance date receiving the first allocation
of shares. In the event of identical issuance dates, shares are then allocated beginning with instruments with the latest maturity date
first. Pursuant to this sequencing approach, 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.

 107

The
$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.

On
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.

September
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.

We
incurred offering expenses of approximately $0.5 million, including placement agent fees of approximately $0.3 million. We received
net proceeds of approximately $4.0 million, after deducting the underwriting discount and other offering expenses.

July
2023 Financing

On
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.

We
incurred offering expenses of approximately $0.7 million, including placement agent fees of approximately $0.5 million. We received
net proceeds of approximately $6.3 million, after deducting the underwriting discount and other offering expenses.

2020
At-the-Market Offerings

On
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.

During
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. 

Share
Repurchase Program

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 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. No
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.

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During
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.

In
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. During
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.

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 is 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 is payable monthly in arrears commencing in December 2023. In connection with the Term Loan,
we deposited into a reserve account $1.8 million to be used exclusively to fund interest payments related to the Term Loan. 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 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.

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 is secured by first priority
security interests in our R&D Center in Frederick, Maryland, the Advanced Development Center in North Dartmouth, Massachusetts,
and substantially all of the relevant deposit accounts.

As
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.

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
(“Amended and Restated 2020 Plan”).

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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) restricted stock units, (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 31st of such preceding calendar year
(including shares subject to outstanding awards, issued pursuant to awards or available for future awards). The Board of Directors
determines the exercise price, vesting and expiration period of the grants under the Amended and Restated 2020 Plan. However,
the exercise price of an incentive stock option may not be less than 110% of fair value of the common stock at the date of the
grant for a 10% or more shareholder and 100% of fair value for a grantee who is not a 10% shareholder. The fair value of the common
stock is determined based on quoted market price or in absence of such quoted market price, by the Board of Directors in good
faith. Additionally, the expiration period of grants under the Amended and Restated 2020 Plan may not be more than ten years.
As of December 31, 2024, no options were available for future grants under the Amended and Restated 2020 Plan.

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 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 1/36th each month thereafter for 24 months and expire ten years from the date of grant. In addition,
the Company issues options to directors which vest over a one-year period. The Company also issues premium options to executive
officers which have an exercise price greater than the grant date fair value and has issued performance-based options which vest
when target parameters are met or probable of being met, subject in each case to a one year minimum service period prior to vesting.
Stock-based compensation expense related to awards is amortized over the applicable service period using the straight-line method.

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 the Company’ historical stock
price volatility.

The
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.

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. Stock-based compensation
expense relating to options granted of $9.3 million, of which $6.4 million and $2.9 million, related to General and Administration
and Research and Development, respectively was recognized for the year ended December 31, 2023.

As
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.

Employee
Stock Purchase Plan

On
May 6, 2022, our stockholders approved the Tonix Pharmaceuticals Holdings Corp. 2022 Employee Stock Purchase Plan. (the “2022
ESPP”), which was replaced by the Tonix Pharmaceuticals Holdings Corp. 2023 Employee Stock Purchase Plan (the “2023
ESPP”, and together with the 2022 ESPP, the “ESPP Plans”), which was approved by our stockholders on May 5,
2023.

 110

The
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.

The
ESPP Plans are considered compensatory plans with the related compensation cost expensed over the six-month offering period. For
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. In January
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. As of
June 30, 2024, approximately $33,000 of employee payroll deductions had accumulated and had been recorded in accrued expenses. In
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.

Commitments

Research
and Development Contracts

We
have entered into contracts with various contract research organizations with outstanding commitments aggregating approximately
$12.7 million at December 31, 2024 for future work to be performed.

Operating
leases

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

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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.

 111

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

Business
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. We use
our best estimates and assumptions to estimate the fair values of these tangible and intangible assets. Any excess of the purchase
price over amounts allocated to the assets acquired is recorded as goodwill. The acquired intangible assets are amortized using
the straight-line method over the estimated useful lives of the respective assets. Goodwill is reviewed for impairment on an annual
basis, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may be impaired.

Asset
impairment charges. 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.

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. 

 112

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 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.

Deferred
financing costs. Deferred financing costs represent the cost of obtaining financing arrangements and are amortized over the term
of the related debt agreement using the effective interest method. 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.

Original
issue discount. Certain term debt issued by the Company provides the debt holder with an original issue discount. Original issue
discounts are reflected as a direct reduction of the related debt liability on the consolidated balance sheets and are amortized
over the term of the related debt agreement using the effective interest method. Amortization of original issue discounts are
included in interest expense on the consolidated statements of operations.

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 Black-Scholes option pricing model to value the derivative
instruments at inception and subsequent valuation dates, which is adjusted for instrument-specific terms as applicable.

From
time to time, certain equity-linked instruments may be classified as derivative liabilities due to the Company having insufficient
authorized shares to fully settle the equity-linked financial instruments in shares. In such 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.

 113

The
classification of derivative instruments is reassessed at each reporting date. If the classification changes as a result of events
during a reporting period, the instrument is reclassified as of the date of the event that caused the reclassification. There
is no limit on the number of times a contract may be reclassified.

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 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
expenses. 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

In
December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information
about our effective tax rate reconciliation as well as information on income taxes paid. The guidance will first be effective
in our annual disclosures for the year ending December 31, 2025, and should be applied on a prospective basis with the option
to apply retrospectively. Early adoption is permitted. The Company is in the process of assessing the impact of ASU 2023-09 on
our disclosures.

In
March 2024, the SEC adopted new rules relating to the disclosure of a range of climate-change-related physical and transition
risks, data, and opportunities. The adopted rule contains several new disclosure obligations, including, (i) disclosure on how
the board of directors and management oversee climate-related risks and certain climate-related governance items, (ii) disclosure
of information related 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.