NOTE 17 – SALE OF COMMON STOCK

December 2023 Financing

On December 20, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional investors, pursuant to which the Company sold and issued (i) 25,343,242 shares of the Company’s common stock, (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 28,710,812 shares of common stock and (iii) Series C warrants to purchase up to 81,081,081 shares of common stock (the “Series C Warrants”), and (iv) Series D warrants to purchase up to 81,081,081 shares of common stock (the “Series D Warrants” and, together with the Series C Warrants, the “Common Warrants”). 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 $0.555, and the offering price per Pre-Funded Warrant and accompanying Common Warrants was $0.5549. 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 the Company. At the closing of the offering, 6,509,010 Pre-Funded Warrants were immediately exercised into shares of common stock for nominal proceeds.

The Pre-Funded Warrants have an exercise price of $0.0001 per share, are immediately exercisable subject to certain ownership limitations, and can be exercised at any time until exercised in full. The Series C Warrants have an exercise price of $0.555 per share, and are exercisable on the later of approval by the Company’s stockholders of (i) a proposal to approve the filing of an amendment to the Company’s Articles of Incorporation, increasing the number of authorized shares of common stock from 160,000,000 to 1,000,000,000 and (ii) a proposal to allow the Warrants to become exercisable in accordance with Nasdaq Listing Rule 5635 (the later of such events, the “Approval Date”) and will expire on the later of (a) 10 trading days following the Approval Date and (b) the earlier of (x) the two year anniversary of the Approval Date and (y) 10 trading days following the public announcement of the 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 $0.85 per share and are exercisable beginning on the Approval Date through the five-year anniversary of the Approval Date.

Upon the closing of the offering, the Company 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, the Company’s authorized and unissued shares were applied to the Pre-Funded Warrants and the Common Warrants in the following order: (i) the Pre-Funded Warrants, (ii) the Series D Warrants, and (iii) the Series C Warrants. Based on this analysis, the Company determined that the authorized shares are sufficient to settle the remaining Pre-Funded Warrants and 50,933,271 Series D Warrants and were therefore classified in equity. The remaining 30,147,810 Series D Warrants and the Series C Warrants associated with the deficit shares were classified as liabilities and are accounted for at fair value.

The $30.0 million in gross proceeds received by the Company were first allocated to the Series C Warrants and the liability-classified Series D Warrants at their respective fair values of approximately $14.4 million and $8.1 million, respectively. The residual proceeds of approximately $7.5 million were allocated to the shares of common stock, the Pre-Funded Warrants, and the equity-classified Series D Warrants on a relative fair value basis. The issuance costs totaling $2.3 million were allocated between the equity and liability-classified instruments on a relative fair value basis. Issuance costs of $1.4 million allocated to the shares, the Pre-Funded Warrants, and the equity-classified Series D Warrants were recognized as a discount to the proceeds allocated to the equity-classified instruments. Issuance costs of $0.9 million were allocated to the liability-classified Series D Warrants and the Series C Warrants and expensed within Selling, general and administrative expense on the consolidated statements of operations.

The liability-classified Series D Warrants and all of the Series C Warrants are presented within non-current liabilities on the consolidated balance sheets as of December 31, 2023, and will be adjusted to fair value at each subsequent balance sheet date until the warrants are reclassified to equity or settled. Changes in the fair value of the liability-classified warrants are recognized as a component of other income, net in the consolidated statement of operations.

On January 25, 2024, the Company’s stockholders approved the proposal to file an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of common stock from 160,000,000 to 1,000,000,000.

September 2023 Financing

On September 28, 2023, the Company sold 4,050,000 shares of common stock; pre-funded warrants to purchase up to 4,950,000 shares of common stock, and accompanying Series A warrants to purchase up to 9,000,000 shares of common stock with an exercise price of $0.50 per share and expiring five years from date of issuance, and Series B warrants to purchase up to 9,000,000 shares of common stock with an exercise price of $0.50 per share and expiring one year from date of issuance in a public offering, which closed on October 3, 2023. The offering price per share of common stock and accompanying warrants was $0.50, and the offering price per share of pre-funded warrant and accompanying warrants was $0.4999.

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

July 2023 Financing

On July 27, 2023, the Company sold 2,530,000 shares of common stock; pre-funded warrants to purchase up to 4,470,000 shares of common stock and accompanying common warrants to purchase up to 7,000,000 shares of common stock with an exercise price of $1.00 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 $1.00, and the offering price per share of pre-funded warrant and accompanying common warrant was $0.9999.

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

2022 Lincoln Park Transaction

On August 16, 2022, the Company entered into an equity line of credit with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park agreed to purchase up to $50,000,000 of the Company’s common stock (subject to certain limitations) from time to time. The Company filed with the SEC a registration statement to register for resale under the Securities Act the shares that have been or may be issued to Lincoln Park under the 2022 Purchase Agreement. The Company issued 100,000 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of the Company’s common stock. The commitment shares were valued at $1,000,000 and recorded as an addition to equity for the issuance of the common stock and treated as a reduction to equity as a cost of capital to be raised under the equity line of credit.

During the year ended December 31, 2023, the Company sold 0.1 million shares of common stock under the equity line of credit with Lincoln Park, for net proceeds of approximately $0.4 million. During the year ended December 31, 2022, the Company sold 0.2 million shares of common stock under the equity line of credit with Lincoln Park, for net proceeds of approximately $0.5 million.

Purchase Agreement with Lincoln Park

On December 3, 2021, the Company entered into a purchase agreement (the “Purchase Agreement with Lincoln Park”) and a registration rights agreement (the “Lincoln Park Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”). Pursuant to the terms of the Purchase Agreement with Lincoln Park, Lincoln Park agreed to purchase from the Company up to $80,000,000 of the Company’s common stock (subject to certain limitations) from time to time during the term of the Purchase Agreement with Lincoln Park. Pursuant to the terms of the Lincoln Park Registration Rights Agreement, the Company 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 Purchase Agreement with Lincoln Park.

Pursuant to the terms of the Purchase Agreement with Lincoln Park, at the time the Company signed the Purchase Agreement with Lincoln Park and the Lincoln Park Registration Rights Agreement, the Company issued 14,546 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of our common stock under the Purchase Agreement with Lincoln Park. The commitment shares were valued at $1.6 million and recorded as an addition to equity for the issuance of the common stock and treated as a reduction to equity as a cost of capital to be raised under the Purchase Agreement with Lincoln Park.

During the year ended December 31, 2022, the Company sold 0.5 million shares of common stock under the Purchase Agreement with Lincoln Park, for net proceeds of approximately $8.7 million. No sales occurred in 2023.

Under applicable rules of the NASDAQ Global Market, the Company could not issue or sell more than 19.99% of the shares of its common stock outstanding immediately prior to the execution of the Purchase Agreement with Lincoln Park (approximately 0.5 million shares) to Lincoln Park under the Purchase Agreement with Lincoln Park without stockholder approval, unless the average price of all applicable sales of its common stock to Lincoln Park under the Purchase Agreement with Lincoln Park equals or exceeds a threshold amount. As the Company has issued approximately 0.5 million shares to Lincoln Park, by December 31, 2022, under the Purchase Agreement with Lincoln Park at less than the threshold amount, the Company will not sell any additional shares under the Purchase Agreement with Lincoln Park without shareholder approval.

TONIX PHARMACEUTICALS HOLDING CORP. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

At-the-Market Offerings

  On April 8, 2020, the Company entered into a sales agreement with AGP pursuant to which the Company may issue and sell shares of its 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, the Company sold approximately 1.0 million shares of common stock under the Sales Agreement, for net proceeds of approximately $3.0 million. During the year ended December 31, 2022, the Company sold approximately 9.1 million shares of common stock under the Sales Agreement, for net proceeds of approximately $85.3 million.

Stock Repurchases

During the first quarter of 2023, the Company has repurchased 2,512,044 of its shares of common stock outstanding under the 2022 share repurchase program for up to $12.5 million at prices ranging from $2.75 to $8.61 per share for a gross aggregate cost of approximately $12.5 million. In addition, the Company incurred expenses of $0.3 million.

In January 2023, the Board of Directors approved a new 2023 share repurchase program pursuant to which the Company may repurchase up to an additional $12.5 million in value of its outstanding common stock from time to time on the open market and in privately negotiated transactions subject to market conditions, share price and other factors. During the first quarter of 2023, the Company has repurchased 160,000 of our shares of common stock outstanding under the new 2023 share repurchase program at $7.12 per share for a gross aggregate cost of $1.1 million. No additional repurchases have occurred since the first quarter of 2023.

The timing and amount of any shares repurchased will be determined based on the Company’s evaluation of market conditions and other factors and the New 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 the Company may be subject. Repurchases may be made, in part, under a Rule 10b5-1 plan, which allows stock repurchases when the Company might otherwise be precluded from doing so.