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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">As filed with the Securities and Exchange
Commission on January 25, 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">Registration No. 333-</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">UNITED STATES SECURITIES AND EXCHANGE COMMISSION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">WASHINGTON D.C. 20549</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">FORM S-1</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">REGISTRATION STATEMENT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">UNDER</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">THE SECURITIES ACT OF 1933</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Name of registrant in its charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<TR>
    <TD STYLE="width: 6%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 26%; border-bottom: Black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt"><B>Nevada</B></FONT></TD>
    <TD STYLE="width: 6%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 25%; border-bottom: Black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt"><B>1000</B></FONT></TD>
    <TD STYLE="width: 6%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 25%; border-bottom: Black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt"><B>26-1434750</B></FONT></TD>
    <TD STYLE="width: 6%; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(State or other Jurisdiction</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">of Incorporation or<BR>
Organization)</P></TD>
    <TD>&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Primary Standard Industrial</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Classification Code<BR>
Number)&nbsp;&nbsp;</P></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: top">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(I.R.S. Employer</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Identification No.)</P></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>509 Madison Avenue, Suite 306</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>New York, New York</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(212) 980-9155</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Address and telephone number of principal
executive offices and principal place of business)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Seth Lederman, Chief Executive Officer</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Tonix Pharmaceuticals Holding Corp.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>509 Madison Avenue, Suite 306</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>New York, New York</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(212) 980-9155</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;(Name, address and telephone number
of agent for service)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Copies to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Marc J. Ross, Esq.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>James M. Turner, Esq.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Sichenzia Ross Friedman Ference LLP</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>61 Broadway, 32nd Flr.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>New York, New York 10006</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(212) 930-9700</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(212) 930-9725 (fax)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>APPROXIMATE DATE OF PROPOSED SALE TO
THE PUBLIC:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">From time to time after this Registration
Statement becomes effective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt">If any securities
being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box:
</FONT><FONT STYLE="font-family: Wingdings; color: black">x</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings 2">&#163;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings 2">&#163;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Wingdings 2">&#163;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.&nbsp;&nbsp;See definitions
of &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filed,&rdquo; and &ldquo;smaller reporting company&rdquo; in Rule
12b-2 of the Exchange Act. (Check one):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white">
<TR>
    <TD STYLE="width: 50%"><FONT STYLE="font-size: 10pt">&nbsp;Large accelerated filer <FONT STYLE="font-family: Wingdings">o</FONT></FONT></TD>
    <TD STYLE="width: 50%"><FONT STYLE="font-size: 10pt">&nbsp;Accelerated filer <FONT STYLE="font-family: Wingdings">o</FONT>&nbsp;</FONT></TD></TR>
<TR>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;Non-accelerated filer <FONT STYLE="font-family: Wingdings">o</FONT>&nbsp; </FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;Smaller reporting company <FONT STYLE="font-family: Wingdings">x</FONT></FONT></TD></TR>
<TR>
    <TD><FONT STYLE="font-size: 10pt">(Do not check if a smaller reporting company)</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CALCULATION OF REGISTRATION FEE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Title of Each Class Of <BR>Securities To Be Registered</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount To <BR>Be <BR>Registered <BR>(1)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Proposed <BR>Maximum <BR>Offering Price <BR>Per Security <BR>(2)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Proposed <BR>Maximum <BR>Aggregate <BR>Offering Price</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount Of <BR>Registration <BR>Fee</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%">Common Stock, $.001 par value</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">8,904,167</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">0.50</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">4,452,083.50</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">607.26</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Common Stock, $.001 par value issuable upon exercise of warrants exercisable at $0.60 per share</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,904,167</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.60</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5,342,500.20</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">728.72</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Total</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,808,334</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">9,794,583.70</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,335.98</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-size: 10pt">(1)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Includes shares of our common stock, par value $0.001 per share,
which may be offered pursuant to this registration statement, which shares are issuable upon exercise of warrants held by the selling
stockholders. In addition to the shares set forth in the table, the amount to be registered includes an indeterminate number of
shares issuable upon exercise of the warrants, as such number may be adjusted as a result of stock splits, stock dividends and
similar transactions in accordance with Rule 416. The number of shares of common stock registered hereunder represents a good faith
estimate by us of the number of shares of common stock issuable upon exercise of the warrants. For purposes of estimating the number
of shares of common stock to be included in this registration statement, we calculated a good faith estimate of the number of shares
of our common stock that we believe will be issuable upon exercise of the warrants to account for market fluctuations, and antidilution
and price protection adjustments, respectively. Should the conversion ratio result in our having insufficient shares, we will not
rely upon Rule 416, but will file a new registration statement to cover the resale of such additional shares should that become
necessary. In addition, should a decrease in the exercise price as a result of an issuance or sale of shares below the then current
market price, result in our having insufficient shares, we will not rely upon Rule 416, but will file a new registration statement
to cover the resale of such additional shares should that become necessary.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD STYLE="text-align: justify">Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c)
and Rule 457(g) under the Securities Act of 1933, using the average of the high and low price as reported on the OTCQB on January
24, 2013, which was $0.50 per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Pursuant to Rule 429 promulgated under
the Securities Act of 1933, the enclosed prospectus constitutes a combined prospectus also relating to an aggregate of up to 14,543,807
shares of our common stock that were previously registered for sale in a Registration Statement on Form S-1, Registration No. 333-180964.
As such, this prospectus also constitutes post-effective amendment No. 1 to the Registration Statement on Form S-1, Registration
No. 333-180964, which shall hereafter become effective concurrently with the effectiveness of this Registration Statement on Form
S-1 in accordance with Section 8(c) of the Securities Act of 1933.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; color: #DE1A1E"><B>The information in this
prospectus is not complete and may be changed.&nbsp;The selling stockholders may not sell these securities under this prospectus
until the registration statement of which it is a part and filed with the Securities and Exchange Commission is effective.&nbsp;This
prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; color: #DE1A1E"><B>SUBJECT TO COMPLETION,
DATED JANUARY 25, 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="tlogo.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Up to 17,808,334 Shares of Common Stock</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This prospectus relates
to the offering by the selling stockholders of Tonix Pharmaceuticals Holding Corp. of up to 17,808,334 shares of common stock,
par value $0.001 per share.&nbsp;All of the shares of common stock offered by this prospectus are being sold by the selling stockholders.
These shares consist of (i) 8,904,167 shares of common stock issued to investors in our December 2012 Financing and (ii) 8,904,167
shares of common stock issuable upon exercise of warrants to purchase 8,904,167 shares issued to investors in our December 2012
Financing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The selling stockholders
have advised us that they will sell the shares of common stock from time to time in the open market, on the OTCQB, in privately
negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at prices related
to the prevailing market prices or at negotiated prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 23pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The selling stockholders
may sell the common shares to or through underwriters, brokers or dealers or directly to purchasers. Underwriters, brokers or dealers
may receive discounts, commissions or concessions from the selling stockholders, purchasers in connection with sales of the common
shares, or both. Additional information relating to the distribution of the common shares by the selling stockholders can be found
in this prospectus under the heading &ldquo;Plan of Distribution.&rdquo; If underwriters or dealers are involved in the sale of
any securities offered by this prospectus, their names, and any applicable purchase price, fee, commission or discount arrangement
between or among them, will be set forth, or will be calculable from the information set forth, in a supplement to this prospectus.
We will pay the expenses of registering these shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 23pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We will not receive
any proceeds from the sale of common stock by the selling stockholders. We will receive proceeds from the selling stockholders
from any exercise of their warrants on a cash basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 23pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.4in">We are a reporting
company pursuant to Section 12(g) of the Securities Exchange Act of 1934, or the Exchange Act, and our common stock is traded on
the OTCQB under the symbol &ldquo;TNXP&rdquo;.&nbsp;On January 22, 2013, the closing price of our common stock was $0.55 per share.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.4in"><B>Investing in our
common stock involves a high degree of risk.&nbsp;Before making any investment in our common stock, you should read and carefully
consider the risks described in this prospectus under &ldquo;<U>Risk Factors</U> &rdquo; beginning on page&nbsp;8 of this prospectus.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 23pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.4in"><B>You should rely
only on the information contained in this prospectus or any prospectus supplement or amendment thereto.&nbsp;We have not authorized
anyone to provide you with different information.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 23pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.4in"><B>Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete.&nbsp;Any representation to the contrary is a criminal offense.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>This prospectus is dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>&nbsp;&nbsp;&nbsp;&nbsp;</U> &nbsp;, 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><U>TABLE OF CONTENTS</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="width: 94%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 2%">&nbsp;</TD>
    <TD STYLE="text-align: right; width: 4%; border-bottom: windowtext 1pt solid; font-weight: bold; vertical-align: top"><FONT STYLE="font-size: 10pt"><B>Page</B>&nbsp;</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt; font-weight: normal">Special Note Regarding Forward-Looking Statements </FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">About this Prospectus</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Prospectus Summary</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">2</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Risk Factors</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Use of Proceeds</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">27</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Market For Common Stock and Related Stockholder Matters</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">28</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">29</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Business</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">40</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Description of Property</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">61</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Legal Proceedings</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">61</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Management</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">62</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Executive Compensation</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">67</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Certain Relationships and Related Transactions</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">70</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Security Ownership of Certain Beneficial Owners and Management</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">71</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Description of Securities</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">73</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Indemnification for Securities Act Liabilities</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">75</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Plan of Distribution</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">76</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Selling Stockholders</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">78</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Legal Matters</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">81</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Experts</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">81</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Additional Information</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">81</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Index to Financial Statements</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">82</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>You should rely
only on the information contained in this prospectus. We have not, and the underwriter has not, authorized anyone to provide you
with information that is different. If anyone provides you with different or inconsistent information, you should not rely on it.
We are offering to sell, and are seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time
of delivery of this prospectus or of any sale of the common stock. Our business, financial conditions, results of operations and
prospects may have changed since that date. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This prospectus contains
&ldquo;forward-looking statements&rdquo; within the meaning of Section&nbsp;27A of the Securities Act of 1933, as amended, or Securities
Act, and Section&nbsp;21E of the Securities Exchange Act of 1934, or Exchange Act. Forward-looking statements reflect the current
view about future events. When used in this prospectus, the words &ldquo;anticipate,&rdquo; &ldquo;believe,&rdquo; &ldquo;estimate,&rdquo;
&ldquo;expect,&rdquo; &ldquo;future,&rdquo; &ldquo;intend,&rdquo; &ldquo;plan,&rdquo; or the negative of these terms and similar
expressions, as they relate to us or our management, identify forward-looking statements. Such statements, include, but are not
limited to, statements contained in this prospectus relating to our business strategy, our future operating results and liquidity
and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business,
the economy and other future conditions. Because forward&ndash;looking statements relate to the future, they are subject to inherent
uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from
those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance
of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factors that
could cause actual results to differ materially from those in the forward-looking statements include, without limitation, a continued
decline in general economic conditions nationally and internationally; decreased demand for our products and services; market acceptance
of our products and services; our ability to protect our intellectual property rights; the impact of any infringement actions or
other litigation brought against us; competition from other providers and products; our ability to develop and commercialize new
and improved products and services; our ability to raise capital to fund continuing operations; changes in government regulation;
our ability to complete customer transactions and capital raising transactions; and other factors (including the risks contained
in the section of this prospectus entitled &ldquo;Risk Factors&rdquo;) relating to our industry, our operations and results of
operations and any businesses that may be acquired by us. Should one or more of these risks or uncertainties materialize, or should
the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated,
expected, intended or planned.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Factors or events that
could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We
cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including
the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements
to actual results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ABOUT THIS PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">You should rely only
on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell and seeking offers to buy shares of our common stock,
including shares they acquire upon exercise of their warrants, only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery
of this prospectus or of any sale of our common stock. The prospectus will be updated and updated prospectuses made available for
delivery to the extent required by the federal securities laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">No person is authorized
in connection with this prospectus to give any information or to make any representations about us, the selling stockholders, the
securities or any matter discussed in this prospectus, other than the information and representations contained in this prospectus.
If any other information or representation is given or made, such information or representation may not be relied upon as having
been authorized by us or any selling stockholder. This prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy the securities in any circumstances under which the offer or solicitation is unlawful. Neither the delivery of this
prospectus nor any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there
has been no change in our affairs since the date of this prospectus. The prospectus will be updated and updated prospectuses made
available for delivery to the extent required by the federal securities laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>This summary highlights information
contained throughout this prospectus and is qualified in its entirety to the more detailed information and financial statements
included elsewhere in this prospectus. This summary does not contain all of the information that should be considered before investing
in our common stock.&nbsp;Investors should read the entire prospectus carefully, including the more detailed information regarding
our business, the risks of purchasing our common stock discussed in this prospectus under &ldquo;Risk Factors&rdquo; beginning
on page 8 of this prospectus and our financial statements and the accompanying notes beginning on page F-1 of this prospectus.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Unless otherwise indicated or unless the
context requires otherwise, this prospectus includes the accounts of Tonix Pharmaceuticals Holding Corp. (&ldquo;Tonix&rdquo;)
and its wholly-owned subsidiaries, as follows, collectively referred to as &ldquo;we&rdquo;, &ldquo;us&rdquo; or the &ldquo;Company&rdquo;:
Tonix Pharmaceuticals, Inc., a Delaware corporation (&ldquo;Tonix Sub&rdquo;) and Krele LLC, a Delaware limited liability company
(&ldquo;Krele&rdquo;). Tonix Sub is a wholly-owned subsidiary of Tonix and Krele is a wholly-owned subsidiary of Tonix Sub.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 22.3pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Our Company</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Corporate Structure</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We were incorporated
on November 16, 2007 under the laws of the State of Nevada as Tamandare Explorations Inc. From inception through October 2011,
we were involved in the acquisition, exploration and development of natural resource properties in the State of Nevada. On October
7, 2011 (&ldquo;Closing Date&rdquo; and the closing of the share exchange transaction, the &ldquo;Closing&rdquo;), we executed
and consummated a share exchange agreement by and among Tonix Sub and the stockholders of 100% of the equity securities of Tonix
Sub, including, the holders of 5,207,500 shares of common stock, 1,500,000 shares of Series A Preferred Stock and 2,275,527 shares
of Series B Preferred Stock (the &ldquo;Tonix Shareholders&rdquo;), on the one hand, and us and David Moss (&ldquo;Moss&rdquo;),
our then sole officer and director and majority shareholder, on the other hand (the &ldquo;Share Exchange Agreement&rdquo; and
the transaction, the &ldquo;Share Exchange&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the Share Exchange,
the Tonix Shareholders exchanged their shares of Tonix Sub for newly issued shares of our common stock (&ldquo;Common Stock&rdquo;).
As a result, upon completion of the Share Exchange, Tonix Sub became our wholly-owned subsidiary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Upon completion of
the Share Exchange, the Tonix Shareholders received an aggregate of 22,666,667 shares of our Common Stock. Moss returned 1,500,000
shares of Common Stock to us, which were retired, and our existing stockholders retained 4,000,000 shares of Common Stock. The
22,666,667 shares issued to the Tonix Shareholders constituted approximately 85% of our 26,666,667 issued and outstanding shares
of Common Stock post-Closing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result of the
Share Exchange, we acquired 100% of the capital stock of Tonix Sub and consequently, control of the business and operations of
Tonix Sub and Krele. From and after the Closing Date of the Share Exchange, our primary operations consist of the business and
operations of Tonix Sub and Krele.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 11, 2011,
we changed our name to Tonix Pharmaceuticals Holding Corp. to reflect our new business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Corporate Background</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 1996, Seth Lederman,
MD, and Donald Landry, MD, PhD, formed L&amp;L Technologies, LLC, (&ldquo;L&amp;L&rdquo;), to develop medications for central nervous
system (&ldquo;CNS&rdquo;) conditions. Dr. Lederman is our Chairman and Chief Executive Officer and Dr. Landry is a Director. L&amp;L
was a founder of Janus Pharmaceuticals, Inc., later renamed Vela Pharmaceuticals, Inc., (&ldquo;Vela&rdquo;), which developed various
therapeutics, including a very low dose, or VLD, version of cyclobenzaprine, or CBP, under an agreement with L&amp;L. Vela decided
to focus its resources on other programs and transferred the rights in VLD CBP and certain other technologies to L&amp;L in March
2006.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Tonix Sub formed in
June 2007 as Krele Pharmaceuticals, Inc. by L&amp;L and Krele Pharmaceuticals, LLC (now known as Plumbline LLC) (&ldquo;Plumbline&rdquo;).
Dr. Lederman is managing partner of Plumbline. Plumbline possessed rights to certain technology for the treatment of alcohol dependence
and abuse. In connection with founding Tonix Sub, L&amp;L and Plumbline entered into an intellectual property transfer and assignment
agreement with Tonix Sub for the purpose of assigning patents and transferring intellectual property and know-how in exchange for
shares of common stock of Tonix Sub. As a result of economic conditions related to the financial crisis of 2007 and 2008, Tonix
Sub was not successful in raising money to fund its programs until 2009. As a result, Tonix Sub was unable to advance the development
programs and had little activity except for prosecuting and maintaining patents and maintaining contracts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2009, Tonix Sub
contracted with the Toronto Psychiatric Research Foundation to analyze the sleep data from the 2001 Phase 2a study of 36 patients
with fibromyalgia syndrome, or FM (the &ldquo;Moldofsky Study&rdquo;), who were treated with bedtime VLD CBP or placebo. The Moldofsky
Study was conducted in Canada by the Toronto Psychiatric Research Foundation, and Tonix Sub obtained the data from this study from
L&amp;L. In addition, in 2009, Tonix Sub contracted with Caliper Life Sciences (formerly, NovaScreen Bioscience Corp.) (&ldquo;Caliper&rdquo;)
to analyze the interactions of CBP with certain receptors. In June 2010, Tonix Sub entered into consulting agreements with L&amp;L
and Lederman &amp; Co, LLC (&ldquo;Lederman &amp; Co&rdquo;) and also acquired certain rights to develop isometheptene mucate as
a treatment for certain types of headaches from Lederman &amp; Co., which we are developing as TNX-201. Dr. Lederman is managing
partner of Lederman &amp; Co. Between June 2010 and October 2011, Tonix Sub was active in recruiting new officers and directors
and initiating preclinical and clinical development of novel CBP formulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Lederman &amp; Co predominantly
provides us with clinical development expertise. L&amp;L predominantly provided us with scientific development expertise until
the termination of the consulting agreement in June 2012. Relative to traditional pharmaceutical development companies, we can
be considered a virtual company, since we contract with third-party vendors to provide many functions that are core to traditional
pharmaceutical companies. For example, we have contracted with PharmaNet Canada, Inc., or PharmaNet Canada, to develop methods
for analyzing CBP in the blood and to conduct human clinical studies to evaluate the performance of our formulation technology.
Lederman &amp; Co is responsible for overseeing the scientific and technical aspects of PharmaNet&rsquo;s contract work product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In July 2010, Tonix
Sub changed its name to Tonix Pharmaceuticals, Inc. In August 2010, Tonix Sub formed Krele.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Business Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a specialty
pharmaceutical company focused on developing novel pharmaceutical products for challenging disorders of the CNS. We search for
potential therapeutic solutions among known pharmaceutical agents that lack regulatory approval for the indications we seek, but
may be approved for use in other indications. The ongoing evolution in the understanding of certain CNS disorders provides us with
opportunities to develop such agents as proprietary products for new indications. We typically seek to create new dose and formulation
options that are tailored to the therapeutic uses to which we apply these agents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Many CNS drugs have
been identified by physicians who observe unexpected improvements in their patients&rsquo; CNS conditions despite being prescribed
for a different purpose. One of our goals is to establish formal clinical study programs to determine if such anecdotal observations
are, in fact, reflections of a compound&rsquo;s ability to treat a particular CNS condition. While some new applications can use
the commercially-available form of a given drug, in other cases, reformulating the active ingredient may improve the active ingredient&rsquo;s
safety or effectiveness in treating the condition. If we demonstrate success in our formal development programs, we will seek marketing
approval from the U.S. Food and Drug Administration, or FDA.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are currently devoting
the majority of our efforts to the development of our lead product candidate, TNX-102 sublingual tablet, or TNX-102 SL. TNX-102
SL is a novel dose and formulation of CBP, the active pharmaceutical ingredient of two widely prescribed muscle relaxant products,
Flexeril&reg; and Amrix&reg;. TNX-102 SL is distinct from these products as it is being developed at a dose level significantly
below the lowest marketed doses of Flexeril and Amrix. TNX-102 SL is also distinct from these products with regard to its route
of administration, as it is designed to be placed under the tongue and disintegrated to provide sublingual absorption, whereas
Flexeril and Amrix are designed to be swallowed. TNX-102 SL is also intended for chronic use, whereas Flexeril and Amrix are marketed
for two to three weeks of use. We are currently developing TNX-102 SL for the treatment of FM under a U.S. Investigational New
Drug application, or IND, and under three Clinical Trial Applications, or CTAs, filed in Canada. We are also developing TNX-102
SL for the treatment of post-traumatic stress disorder, or PTSD, for which we held a pre-IND meeting in October 2012. We expect
that any applications we submit for FDA approval of TNX-102 SL will be submitted under Section 505(b)(2) of the Federal Food, Drug,
and Cosmetic Act, or FDCA, which we believe will allow for a shorter timeline of clinical development as compared to that needed
to fulfill the requirements of Section 505(b)(1), under which new chemical entities, or NCEs, are generally reviewed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">TNX-102 SL is a small,
rapidly disintegrating tablet containing CBP for sublingual administration at bedtime. We designed TNX-102 SL to enable the efficient
delivery of CBP to the systemic circulation via sublingual transmucosal absorption and to avoid first-pass liver metabolism. We
also designed TNX-102 SL to provide CBP at doses lower than those currently available. We have conducted several clinical and pre-clinical
pharmacokinetic studies of TNX-102 SL which we believe support its development as a novel therapeutic product for FM and PTSD,
and which demonstrate a number of potentially advantageous characteristics as compared to current CBP-containing products, none
of which are approved for these indications. Based on our Phase 1 comparative study, we have observed that, as compared to oral
CBP tablets, TNX-102 SL results in faster systemic absorption and significantly higher plasma levels of CBP in the first hour following
administration. TNX-102 SL was generally well-tolerated, with no serious adverse events reported in this study. Some subjects experienced
transient numbness on the tongue after TNX-102 SL administration, and other side-effects reported were similar to those associated
with current CBP products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based on these promising
results, we are advancing TNX-102 SL for the management of FM. We believe that TNX-102 SL could be approved by the FDA for the
treatment of FM following two adequate, well-controlled safety and efficacy studies and, if required, a long-term safety exposure
study that, together, would confirm the safety and efficacy of TNX-102 SL in a sufficient number of FM patients to satisfy the
approval requirements under Section 505(b)(2). New drug products based on novel active ingredients, approved under Section 505(b)(1),
need significantly more clinical studies, e.g. drug-drug interaction, special population pharmacokinetic, and long-term safety
exposure studies, than will be required for TNX-102 SL. Under the IND, we plan to initiate a potential pivotal efficacy trial in
the first half of 2013 that will evaluate this candidate in FM. A Type B Pre-Phase 3 meeting has been scheduled with the FDA in
February 2013, at which we plan to discuss the design of the clinical program, including the acceptability of the pivotal study
design and the proposed registration plan, to support the approval of TNX-102 SL for the management of FM.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are also advancing
TNX-102 SL for the management of PTSD. We held a pre-IND meeting with the FDA in October 2012, and we plan to file an IND for this
indication in the first half of 2013. We then plan to conduct a clinical proof-of-concept trial of TNX-102 SL in PTSD in the second
half of 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">CBP is the active pharmaceutical
ingredient in our lead product candidate, TNX-102 SL. We are utilizing drug delivery technology to produce new formulations. In
addition to CBP, TNX-102 SL contains inactive ingredients, called excipients, which are well-characterized, are listed in the FDA
Inactive Ingredients Guide (IIG), and are approved for pharmaceutical use. As a result, we anticipate seeking FDA marketing approval
of TNX-102 SL through the NDA process under Section 505(b)(2) of the FDCA, which we also refer to as a 505(b)(2) NDA. As one of
three types of new drug applications, the 505(b)(2) NDA allows drug companies to obtain FDA approval of new drug products without
having to conduct the full complement of safety and efficacy trials, which is often the most time-consuming and expensive part
of the drug development process. As the 505(b)(2) NDA permits the drug manufacturer to rely on the agency&rsquo;s findings for
a previously-approved drug, published literature, or both, it permits the FDA to make some safety and effectiveness determinations
through the review of materials in the public domain or in already approved NDAs of products containing CBP. The 505(b)(2) regulatory
pathway would spare us some of the burden of generating all of this data for ourselves and may allow TNX-102 SL to progress through
a shorter development pathway than is typical for pharmaceutical products based on novel active ingredients. We have not filed
an NDA for TNX-102 SL for any indications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to TNX-102
SL, we have developed other innovative formulations of CBP, including TNX-102 promicellar gelatin capsule, or TNX-102 gelcap. We
have developed TNX-102 gelcap under an agreement with Lipocine, Inc. (&ldquo;Lipocine&rdquo;), a contract formulation developer
and small-scale manufacturer. Although we had met with the FDA to discuss the TNX-102 gelcap development program in August 2011
and we have generated clinical data that support the further development of TNX-102 gelcap, we currently do not plan to advance
this candidate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We also have a pipeline
of other product candidates, including TNX-201 and TNX-301. TNX-201 is based on isometheptene mucate and is under development as
a treatment for certain types of headaches. For competitive reasons, we do not disclose the identities of the active ingredients
or targeted indications in our pipeline until a U.S. patent has been allowed or issued. Consistent with our mission, these product
candidates are or likely will be reformulations of active ingredients that have been used in humans in other products and that
are designed for new CNS therapeutic indications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In other cases, the
products will be formulated to match earlier, or predicate, products closely enough to be considered generic copies or similarly
enough to other marketed products to rely (in part) on their regulatory review and approval, as well as available published data.
The predicate product may be approved by the FDA under an NDA or may have been reviewed for safety and effectiveness by the National
Academy of Sciences under the Drug Efficacy Study Implementation, or DESI, program, in which case they would be considered by FDA
to be &ldquo;unapproved products&rdquo;. For DESI products, it is our intent to develop NDA versions to meet the current Good Manufacturing
Practice, or cGMP, and the International Conference on Harmonization, or ICH, requirements to seek approval under the 505(b)(2)
regulatory pathway.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because of our size
and being in the development stage, we do not currently devote a significant amount of time or resources towards our other pipeline
candidates. We anticipate that sometime in 2013 we will begin developing formulations for TNX-201 and possibly TNX-301, but do
not expect to start clinical trials until 2014 at the earliest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The process of taking
a new drug formulation from concept through testing to approval for a new indication by the FDA is a time-consuming, costly and
a high-risk process. Once a drug formulation has been tested in laboratories, we need to conduct clinical trials of the product
candidate to test its uptake into the blood stream, elimination, effectiveness and safety. Neither laboratory nor animal studies
predict the properties of drugs in humans, so designing new formulations can result in a large number of unexpected outcomes. The
first set of clinical trials, which are sometimes referred to as Phase 1 studies, are performed by administering new drug formulations
to a limited number of healthy human volunteers and are designed to test the initial concept of the drug formulation and to determine
the correct dosage to be tested subsequently on patients affected with the target disorder. The initial Phase 1 studies can take
up to a year to complete, however, since we reformulate versions of approved drugs for new uses, we may need to devote less time
to Phase I studies since our testing is informed by significant prior human research that we believe allows us to reduce the possible
safety-related outcomes. The next step in the process is to conduct a proof-of-concept efficacy study to identify the effective
dose(s). A small Phase 2a efficacy study in the representative patient population will be done either using a pilot formulation
or the formulation selected for further development. A larger study in which the selected formulation has been optimized for the
target population can be referred to as a Phase 2b study. If the results of this study are positive and are accepted by the FDA
as fulfilling the requirements of a registrational study, then it may be considered to be one of the two pivotal, or Phase 3, studies
typically required for drug approval. The first pivotal study for a condition like FM typically takes a year to complete and then
two to three months to interpret the data, but we believe we will be able to conduct our first potential pivotal study of TNX-102
SL in less time due to the nature of the trial design. If the first potential pivotal study suggests the drug is safe and effective,
then a second pivotal study, sometimes referred to as a confirmatory study, is conducted. The second pivotal study in FM typically
takes 18 months to complete if no additional long-term safety exposure data are necessary for an NDA filing. After the second pivotal
study is completed, and if the results are deemed a success, we would submit an NDA to the FDA seeking approval of the new drug
product. We believe it would take approximately six months to prepare and file the NDA and another 14 months for FDA approval.
The drug could be marketed shortly after FDA approval. Therefore, it typically takes more than five years to bring a new formulation
of a drug to market for a new indication, and any delays in the process, such as lack of capital necessary to run clinical trials,
unexpected results, adverse effects, or difficulty in recruiting willing subjects for trials, would result in additional time before
a drug could be approved for marketing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In August 2010, we
formed Krele to commercialize products that are generic versions of predicate NDA products. We anticipate that when our branded
products lose patent protection, Krele may market authorized generic versions of them. Krele also may develop or acquire generic
products approved under FDA abbreviated new drug applciations, or ANDAs, and we may market branded versions (branded generics)
of such products. Krele has been issued a state license in New York.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="vertical-align: top; width: 25%"><FONT STYLE="font-size: 10pt">Common stock offered by the selling stockholders</FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 73%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Up to 17,808,334&nbsp;shares of common stock, including the
        following:</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">-&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,904,167
        shares of common stock, and</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">-&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;up
        to 8,904,167 shares of common stock issuable upon the exercise of class A common stock purchase warrants at an exercise price of
        $0.60 per share (includes a good faith estimate of the shares underlying warrants to account for antidilution protection adjustments).</P></TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Common stock to be outstanding after the offering</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Up to&nbsp;52,086,766 shares.</FONT></TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Use of proceeds</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">We will not receive any proceeds from the sale of the common stock. However, we will receive the exercise price of any common stock we sell to the selling stockholder upon exercise of the Class A Warrants. The Class A Warrants entitle the holder to exercise their warrants on a cashless basis under certain conditions. In the event that any selling stockholder exercises their Class A Warrants on a cashless basis, then we will not receive any proceeds from the exercise of those warrants. We expect to use the proceeds received from the exercise of the Class A Warrants, if any, for general working capital purposes.</FONT></TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">OTCQB symbol</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">TNXP</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The above information
regarding common stock to be outstanding after the offering is based on <FONT STYLE="color: black">43,182,599 </FONT>shares of
common stock outstanding as of January 22, 2013 and includes the 8,904,167 shares of common stock that are issuable upon the exercise
of warrants that are registered pursuant to the registration statement that this prospectus is part of but does not include any
shares of common stock issuable upon exercise of other outstanding warrants or options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following is a
summary of the transactions relating to the securities being registered hereunder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>December 2012 Private Placement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2012, we
issued an aggregate of 8,904,167 units (&ldquo;Units&rdquo;) to certain accredited investors (the &ldquo;Purchasers&rdquo;) for
aggregate cash proceeds of $2,615,000, at a price per Unit of $0.40, and the exchange of $710,000 in previously issued convertible
debentures (the &ldquo;Prior Debentures&rdquo;) of the Company that were converted into Units at a price of $0.30 per Unit (the
&ldquo;December 2012 Financing&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each Unit consisted
of one share of our common stock, $0.001 par value (the &ldquo;Common Stock&rdquo;), a Class A Warrant to purchase one share of
Common Stock (the &ldquo;Class A Warrants&rdquo;), and a Class B Warrant to purchase one share of Common Stock (the &ldquo;Class
B Warrants&rdquo; and together with the Class A Warrants, the &ldquo;Warrants&rdquo;).The Class A Warrants have an exercise price
of $0.60 per share of Common Stock and will be exercisable for a period of five years from the date of issuance. The Class A Warrants
may be exercised on a cashless basis under certain circumstances. The Class B Warrants have an exercise price of $0.40 per share
of Common Stock and will be exercisable for a period of one year from the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
the December 2012 Financing, we granted each Purchaser registration rights.&nbsp;&nbsp;We are obligated to use our best efforts
to cause a registration statement registering for resale the Common Stock included in the Units and the Common Stock underlying
the Class A Warrants to be filed no later than 60 days from the date of the last closing of the December 2012 Financing and must
be declared effective no later than 120 days from the date of the last closing of the December 2012 Financing.&nbsp;&nbsp;Moreover,
we will maintain the effectiveness of the registration statement from its effective date unless all securities registered under
the registration statement have been sold or are otherwise able to be sold pursuant to Rule 144 of the Securities Act of 1933,
as amended (the &ldquo;Securities Act&rdquo;).&nbsp;&nbsp;If we fail to comply with the registration statement filing or effective
date requirements, we are required to pay the investors a fee equal to 1.0% of the Purchaser&rsquo;s investment, for each 30-day
period of delay, subject to a maximum payment of 10% to each Purchaser.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
the December 2012 Financing, we paid Kema Partners LLC, a FINRA registered broker-dealer (&ldquo;Kema Partners&rdquo;) a cash payment
of $70,000, which represented a 7% commission of the gross proceeds delivered by Purchasers introduced by Kema Partners in the
December 2012 Financing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The shares included
in the Units and shares underlying the Class A Warrants are registered pursuant to this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Plan of Distribution</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This offering is not
being underwritten.&nbsp;The selling stockholders will sell their shares of our common stock at prevailing market prices or privately
negotiated prices.&nbsp;The selling stockholders themselves directly, or through their agents, or through their brokers or dealers,
may sell their shares from time to time, in (i)&nbsp;privately negotiated transactions, (ii)&nbsp;in one or more transactions,
including block transactions in accordance with the applicable rules of the OTCQB or (iii)&nbsp;otherwise in accordance with the
section of this prospectus entitled &ldquo;Plan of Distribution.&rdquo;&nbsp;To the extent required, the specific shares to be
sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agent,
broker or dealer and any applicable commission or discounts with respect to a particular offer will be described in an accompanying
prospectus supplement.&nbsp;In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144
may be sold under Rule 144 rather than pursuant to this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For additional information
on the methods of sale, you should refer to the section of this prospectus entitled &ldquo;Plan of Distribution,&rdquo; beginning
on page 76.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This investment has
a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other
information in this prospectus. If any of the following risks actually occur, our business, operating results and financial condition
could be harmed and the value of our stock could go down. This means you could lose all or a part of your investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>RISKS RELATED TO OUR BUSINESS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have a history of operating losses
and expect to incur losses for the foreseeable future. We may never generate revenues or, if we are able to generate revenues,
achieve profitability. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are focused on product
development, and we have not generated any revenues to date. We have incurred losses in each year of our operations, and we expect
to continue to incur operating losses for the foreseeable future. These operating losses have adversely affected and are likely
to continue to adversely affect our working capital, total assets and shareholders&rsquo; equity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company and its
prospects should be examined in light of the risks and difficulties frequently encountered by new and early stage companies in
new and rapidly evolving markets. These risks include, among other things, the speed at which we can scale up operations, our complete
dependence upon development of products that currently have no market acceptance, our ability to establish and expand our brand
name, our ability to expand our operations to meet the commercial demand of our clients, our development of and reliance on strategic
and customer relationships and our ability to minimize fraud and other security risks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The process of developing
our products requires significant clinical, development and laboratory testing and clinical trials. In addition, commercialization
of our product candidates will require that we obtain necessary regulatory approvals and establish sales, marketing and manufacturing
capabilities, either through internal hiring or through contractual relationships with others. We expect to incur substantial losses
for the foreseeable future as a result of anticipated increases in our research and development costs, including costs associated
with conducting preclinical testing and clinical trials, and regulatory compliance activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our ability to generate
revenues and achieve profitability will depend on numerous factors, including success in:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>developing and testing product candidates;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>receiving regulatory approvals;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>commercializing our products; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>establishing a favorable competitive position.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Many of these factors
will depend on circumstances beyond our control. We cannot assure you that we will ever have a product approved by the FDA, that
we will bring any product to market or, if we are successful in doing so, that we will ever become profitable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect to incur
substantial additional operating expenses over the next several years as our research, development, pre-clinical testing, and clinical
trial activities increase. The amount of future losses and when, if ever, we will achieve profitability are uncertain. We have
no products that have generated any commercial revenue, do not expect to generate revenues from the commercial sale of products
in the near future, and might never generate revenues from the sale of products. Our ability to generate revenue and achieve profitability
will depend on, among other things, successful completion of the development of our product candidates; obtaining necessary regulatory
approvals from the FDA; establishing manufacturing, sales, and marketing arrangements with third parties; and raising sufficient
funds to finance our activities. We might not succeed at any of these undertakings. If we are unsuccessful at some or all of these
undertakings, our business, prospects, and results of operations may be materially adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We received a report from our independent
registered public accounting firm with an explanatory paragraph for the year ended December 31, 2011 with respect to our ability
to continue as a going concern.&nbsp;&nbsp;The existence of such a report may adversely affect our stock price and our ability
to raise capital.&nbsp;&nbsp;There is no assurance that we will not receive a similar report for our year ended December 31, 2012.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In their report dated
March 30, 2012, our independent registered public accounting firm expressed substantial doubt about our ability to continue as
a going concern as we have incurred losses since inception of development stage, have a negative cash flow from operations and
have working capital and stockholders&rsquo; deficiencies and require additional financing to fund future operations. Our ability
to continue as a going concern is subject to our ability to obtain necessary funding from outside sources, including obtaining
additional funding from the sale of our securities, obtaining loans and grants from various financial institutions where possible.
Our continued net operating losses increase the difficulty in meeting such goals and there can be no assurances that such methods
will prove successful.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have no approved products on the
market and therefore do not expect to generate any revenues from product sales in the foreseeable future, if at all. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To date, we have no
approved product on the market and have generated no product revenues. We have funded our operations primarily from sales of our
securities. We have not received, and do not expect to receive for at least the next several years, if at all, any revenues from
the commercialization of our product candidates. To obtain revenues from sales of our product candidates, we must succeed, either
alone or with third parties, in developing, obtaining regulatory approval for, manufacturing and marketing drugs with commercial
potential. We may never succeed in these activities, and we may not generate sufficient revenues to continue our business operations
or achieve profitability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We are largely dependent on the success
of our lead product candidate, TNX-102 SL, and we cannot be certain that this product candidate will receive regulatory approval
or be successfully commercialized.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We currently have no
products for sale, and we cannot guarantee that we will ever have any drug products approved for sale. We and our product candidates
are subject to extensive regulation by the FDA and comparable regulatory authorities in other countries governing, among other
things, research, testing, clinical trials, manufacturing, labeling, promotion, selling, adverse event reporting and recordkeeping.
We are not permitted to market any of our product candidates in the United States until we receive approval of an NDA for a product
candidate from the FDA or the equivalent approval from a foreign regulatory authority. Obtaining FDA approval is a lengthy, expensive
and uncertain process. We currently have one lead product candidate, TNX-102 SL for the treatment of FM, and the success of our
business currently depends on its successful development, approval and commercialization. Any projected sales or future revenue
predictions are predicated upon FDA approval and market acceptance of TNX-102 SL. If projected sales do not materialize for any
reason, it would have a material adverse effect on our business and our ability to continue operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">TNX-102 SL has not
completed the clinical development process; therefore, we have not yet submitted an NDA or foreign equivalent or received marketing
approval for this product candidate anywhere in the world. The clinical development program for TNX-102 SL may not lead to commercial
products for a number of reasons, including if we fail to obtain necessary approvals from the FDA or foreign regulatory authorities
because our clinical trials fail to demonstrate to their satisfaction that this product candidate is safe and effective or the
clinical program may be put on hold due to unexpected safety issues with marketed CBP products. We may also fail to obtain the
necessary approvals if we have inadequate financial or other resources to advance our product candidates through the clinical trial
process. Any failure or delay in completing clinical trials or obtaining regulatory approval for TNX-102 SL in a timely manner
would have a material adverse impact on our business and our stock price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We need additional capital. If additional
capital is not available or is available at unattractive terms, we may be forced to delay, reduce the scope of or eliminate our
research and development programs, reduce our commercialization efforts or curtail our operations. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In order to develop
and bring our product candidates to market, we must commit substantial resources to costly and time-consuming research, preclinical
and clinical trials and marketing activities. We anticipate that our existing cash and cash equivalents will enable us to maintain
our current operations for at least the next six months, and we anticipate that we will require additional capital to complete
the planned pivotal trial of TNX-102 SL in FM. We anticipate using our cash and cash equivalents to fund further research and development
with respect to our lead product candidates. We may, however, need to raise additional funding sooner if our business or operations
change in a manner that consumes available resources more rapidly than we anticipate. Our requirements for additional capital will
depend on many factors, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>successful commercialization of our product candidates;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the time and costs involved in obtaining regulatory approval for our product candidates;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>costs associated with protecting our intellectual property rights;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>development of marketing and sales capabilities;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>payments received under future collaborative agreements, if any; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>market acceptance of our products.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent we raise
additional capital through the sale of equity securities, the issuance of those securities could result in dilution to our shareholders.
In addition, if we obtain debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal
and interest on such indebtedness, thus limiting funds available for our business activities. If adequate funds are not available,
we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization
efforts or curtail our operations. In addition, we may be required to obtain funds through arrangements with collaborative partners
or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek
to develop or commercialize ourselves or license rights to technologies, product candidates or products on terms that are less
favorable to us than might otherwise be available.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We will require substantial
additional funds to support our research and development activities, and the anticipated costs of preclinical studies and clinical
trials, regulatory approvals and eventual commercialization. Such additional sources of financing may not be available on favorable
terms, if at all. If we do not succeed in raising additional funds on acceptable terms, we may be unable to initiate clinical trials
or obtain approval of any product candidates from the FDA and other regulatory authorities. In addition, we could be forced to
discontinue product development, forego sales and marketing efforts and forego attractive business opportunities. Any additional
sources of financing will likely involve the issuance of our equity securities, which will have a dilutive effect on our stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is no assurance
that we will be successful in raising the additional funds needed to fund our business plan. If we are not able to raise sufficient
capital in the near future, our continued operations will be in jeopardy and we may be forced to cease operations and sell or otherwise
transfer all or substantially all of our remaining assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We face intense competition in the
markets targeted by our lead product candidates. Many of our competitors have substantially greater resources than we do, and we
expect that all of our product candidates under development will face intense competition from existing or future drugs. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect that all
of our product candidates under development, if approved, will face intense competition from existing and future drugs marketed
by large companies. These competitors may successfully market products that compete with our products, successfully identify drug
candidates or develop products earlier than we do, or develop products that are more effective, have fewer side effects or cost
less than our products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, if a
competitor receives FDA approval before we do for a drug that is similar to one of our product candidates, FDA approval for our
product candidate may be precluded or delayed due to periods of non-patent exclusivity and/or the listing with the FDA by the competitor
of patents covering its newly-approved drug product. Periods of non-patent exclusivity for new versions of existing drugs such
as our current product candidates can extend up to three and one-half years. See &ldquo;Business&mdash;Government Regulation.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These competitive factors
could require us to conduct substantial new research and development activities to establish new product targets, which would be
costly and time consuming. These activities would adversely affect our ability to commercialize products and achieve revenue and
profits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Competition and technological change
may make our product candidates and technologies less attractive or obsolete.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We compete with established
pharmaceutical and biotechnology companies that are pursuing other forms of treatment for the same indications we are pursuing
and that have greater financial and other resources. Other companies may succeed in developing products earlier than us, obtaining
FDA approval for products more rapidly, or developing products that are more effective than our product candidates. Research and
development by others may render our technology or product candidates obsolete or noncompetitive, or result in treatments or cures
superior to any therapy we develop. We face competition from companies that internally develop competing technology or acquire
competing technology from universities and other research institutions. As these companies develop their technologies, they may
develop competitive positions that may prevent, make futile, or limit our product commercialization efforts, which would result
in a decrease in the revenue we would be able to derive from the sale of any products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There can be no assurance
that any of our product candidates will be accepted by the marketplace as readily as these or other competing treatments. Furthermore,
if our competitors' products are approved before ours, it could be more difficult for us to obtain approval from the FDA. Even
if our products are successfully developed and approved for use by all governing regulatory bodies, there can be no assurance that
physicians and patients will accept our product(s) as a treatment of choice.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, the pharmaceutical
research industry is diverse, complex, and rapidly changing. By its nature, the business risks associated therewith are numerous
and significant. The effects of competition, intellectual property disputes, market acceptance, and FDA regulations preclude us
from forecasting revenues or income with certainty or even confidence.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we fail to protect our intellectual
property rights, our ability to pursue the development of our technologies and products would be negatively affected. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our success will depend
in part on our ability to obtain patents and maintain adequate protection of our technologies and products. If we do not adequately
protect our intellectual property, competitors may be able to use our technologies to produce and market drugs in direct competition
with us and erode our competitive advantage. Some foreign countries lack rules and methods for defending intellectual property
rights and do not protect proprietary rights to the same extent as the United States. Many companies have had difficulty protecting
their proprietary rights in these foreign countries. We may not be able to prevent misappropriation of our proprietary rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have received, and
are currently seeking, patent protection for numerous compounds and methods of treating diseases. However, the patent process is
subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting our products
by obtaining and defending patents. These risks and uncertainties include the following: patents that may be issued or licensed
may be challenged, invalidated, or circumvented, or otherwise may not provide any competitive advantage; our competitors, many
of which have substantially greater resources than us and many of which have made significant investments in competing technologies,
may seek, or may already have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell
our potential products either in the United States or in international markets; there may be significant pressure on the United
States government and other international governmental bodies to limit the scope of patent protection both inside and outside the
United States for treatments that prove successful as a matter of public policy regarding worldwide health concerns; countries
other than the United States may have less restrictive patent laws than those upheld by United States courts, allowing foreign
competitors the ability to exploit these laws to create, develop, and market competing products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Moreover, any patents
issued to us may not provide us with meaningful protection, or others may challenge, circumvent or narrow our patents. Third parties
may also independently develop products similar to our products, duplicate our unpatented products or design around any patents
on products we develop. Additionally, extensive time is required for development, testing and regulatory review of a potential
product. While extensions of patent term due to regulatory delays may be available, it is possible that, before any of our product
candidates can be commercialized, any related patent, even with an extension, may expire or remain in force for only a short period
following commercialization, thereby reducing any advantages of the patent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the United
States Patent and Trademark Office (the &ldquo;PTO&rdquo;) and patent offices in other jurisdictions have often required that patent
applications concerning pharmaceutical and/or biotechnology-related inventions be limited or narrowed substantially to cover only
the specific innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges.
Thus, even if we or our licensors are able to obtain patents, the patents may be substantially narrower than anticipated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our success depends
on our patents, patent applications that may be licensed exclusively to us and other patents to which we may obtain assignment
or licenses. We may not be aware, however, of all patents, published applications or published literature that may affect our business
either by blocking our ability to commercialize our product candidates, by preventing the patentability of our product candidates
to us or our licensors, or by covering the same or similar technologies that may invalidate our patents, limit the scope of our
future patent claims or adversely affect our ability to market our product candidates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to patents,
we rely on a combination of trade secrets, confidentiality, nondisclosure and other contractual provisions, and security measures
to protect our confidential and proprietary information. These measures may not adequately protect our trade secrets or other proprietary
information. If they do not adequately protect our rights, third parties could use our technology, and we could lose any competitive
advantage we may have. In addition, others may independently develop similar proprietary information or techniques or otherwise
gain access to our trade secrets, which could impair any competitive advantage we may have.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Patent protection and
other intellectual property protection is crucial to the success of our business and prospects, and there is a substantial risk
that such protections will prove inadequate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may be involved in lawsuits to
protect or enforce our patents, which could be expensive and time consuming. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The pharmaceutical
industry has been characterized by extensive litigation regarding patents and other intellectual property rights, and companies
have employed intellectual property litigation to gain a competitive advantage. We may become subject to infringement claims or
litigation arising out of patents and pending applications of our competitors, or additional interference proceedings declared
by the PTO to determine the priority of inventions. The defense and prosecution of intellectual property suits, PTO proceedings,
and related legal and administrative proceedings are costly and time-consuming to pursue, and their outcome is uncertain. Litigation
may be necessary to enforce our issued patents, to protect our trade secrets and know-how, or to determine the enforceability,
scope, and validity of the proprietary rights of others. An adverse determination in litigation or interference proceedings to
which we may become a party could subject us to significant liabilities, require us to obtain licenses from third parties, or restrict
or prevent us from selling our products in certain markets. Although patent and intellectual property disputes might be settled
through licensing or similar arrangements, the costs associated with such arrangements may be substantial and could include our
paying large fixed payments and ongoing royalties. Furthermore, the necessary licenses may not be available on satisfactory terms
or at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Competitors may infringe
our patents, and we may file infringement claims to counter infringement or unauthorized use. This can be expensive, particularly
for a company of our size, and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of
ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds
that our patents do not cover its technology. An adverse determination of any litigation or defense proceedings could put one or
more of our patents at risk of being invalidated or interpreted narrowly.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Also, a third party
may assert that our patents are invalid and/or unenforceable. There are no unresolved communications, allegations, complaints or
threats of litigation related to the possibility that our patents are invalid or unenforceable. Any litigation or claims against
us, whether or not merited, may result in substantial costs, place a significant strain on our financial resources, divert the
attention of management and harm our reputation. An adverse decision in litigation could result in inadequate protection for our
product candidates and/or reduce the value of any license agreements we have with third parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Interference proceedings
brought before the U.S. Patent and Trademark Office may be necessary to determine priority of invention with respect to our patents
or patent applications. During an interference proceeding, it may be determined that we do not have priority of invention for one
or more aspects in our patents or patent applications and could result in the invalidation in part or whole of a patent or could
put a patent application at risk of not issuing. Even if successful, an interference proceeding may result in substantial costs
and distraction to our management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, because
of the substantial amount of discovery required in connection with intellectual property litigation or interference proceedings,
there is a risk that some of our confidential information could be compromised by disclosure. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments. If investors perceive these results
to be negative, the price of our common stock could be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we infringe the rights of third
parties we could be prevented from selling products, forced to pay damages, and defend against litigation.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If our products, methods,
processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and we may
have to: obtain licenses, which may not be available on commercially reasonable terms, if at all; abandon an infringing product
candidate; redesign our products or processes to avoid infringement; stop using the subject matter claimed in the patents held
by others; pay damages; and/or defend litigation or administrative proceedings which may be costly whether we win or lose, and
which could result in a substantial diversion of our financial and management resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If preclinical testing or clinical
trials for our product candidates are unsuccessful or delayed, we will be unable to meet our anticipated development and commercialization
timelines. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We rely and expect
to continue to rely on third parties, including clinical research organizations and outside consultants, to conduct, supervise
or monitor some or all aspects of preclinical testing or clinical trials involving our product candidates. We have less control
over the timing and other aspects of these preclinical testing or clinical trials than if we performed the monitoring and supervision
entirely on our own. Third parties may not perform their responsibilities for our preclinical testing or clinical trials on our
anticipated schedule or, for clinical trials, consistent with a clinical trial protocol. Delays in preclinical and clinical testing
could significantly increase our product development costs and delay product commercialization. In addition, many of the factors
that may cause, or lead to, a delay in the clinical trials may also ultimately lead to denial of regulatory approval of a product
candidate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The commencement of
clinical trials can be delayed for a variety of reasons, including delays in:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.75in">&nbsp;</TD>
    <TD STYLE="width: 0.25in; font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">demonstrating sufficient safety and efficacy to obtain regulatory approval to commence a clinical trial;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">reaching agreement on acceptable terms with prospective contract research organizations and trial sites;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">manufacturing sufficient quantities of a product candidate; and</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">obtaining institutional review board approval to conduct a clinical trial at a prospective site.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Once a clinical trial
has begun, it may be delayed, suspended or terminated by us or the FDA or other regulatory authorities due to a number of factors,
including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.75in">&nbsp;</TD>
    <TD STYLE="width: 0.25in; font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">ongoing discussions with the FDA or other regulatory authorities regarding the scope or design of our clinical trials;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">failure to conduct clinical trials in accordance with regulatory requirements;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">lower than anticipated recruitment or retention rate of patients in clinical trials;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify; padding-left: 0in"><FONT STYLE="font-size: 10pt">lack of adequate funding to continue clinical trials; </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">negative results of clinical trials; or</FONT></TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.75in">&nbsp;</TD>
    <TD STYLE="width: 0.25in; font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">side-effects of CBP.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If clinical trials
are unsuccessful, and we are not able to obtain regulatory approvals for our product candidates under development, we will not
be able to commercialize these products, and therefore may not be able to generate sufficient revenues to support our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are unable to file for approval
under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act or if we are required to generate additional data related to
safety and efficacy in order to obtain approval under Section 505(b)(2), we may be unable to meet our anticipated development and
commercialization timelines. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our current plans for
filing NDAs for our product candidates include efforts to minimize the data we will be required to generate in order to obtain
marketing approval for our product candidates and therefore possibly obtain a shortened review period for the applications. While
we met with the FDA at a pre-IND meeting in August 2011 to discuss initial plans for the future development of TNX-102 gelcap,
we have not yet met with the FDA to discuss the future development of our lead product candidate, TNX-102 SL, although a meeting
is scheduled in February 2013. We have also not yet come to full agreement with the FDA as to the nature or extent of any studies
we may be required to conduct in order to achieve approval for any of our product candidates. The timeline for filing and review
of our NDAs is based on our plan to submit those NDAs under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, wherein
we will rely in part on data in the public domain or elsewhere. We have not yet filed an NDA under Section 505(b)(2) for any of
our lead product candidates. Depending on the data that may be required by the FDA for approval, some of the data may be related
to products already approved by the FDA. If the data relied upon is related to products already approved by the FDA and covered
by third-party patents we would be required to certify that we do not infringe the listed patents or that such patents are invalid
or unenforceable. As a result of the certification, the third-party would have 45 days from notification of our certification to
initiate an action against us. In the event that an action is brought in response to such a certification, the approval of our
NDA could be subject to a stay of up to 30 months or more while we defend against such a suit. Approval of our product candidates
under Section 505(b)(2) may therefore be delayed until patent exclusivity expires or until we successfully challenge the applicability
of those patents to our product candidates. Alternatively, we may elect to generate sufficient additional clinical data so that
we no longer rely on data which triggers a potential stay of the approval of our product candidates. Even if no exclusivity periods
apply to our applications under Section 505(b)(2), the FDA has broad discretion to require us to generate additional data on the
safety and efficacy of our product candidates to supplement third-party data on which we may be permitted to rely. In either event,
we could be required, before obtaining marketing approval for any of our product candidates, to conduct substantial new research
and development activities beyond those we currently plan to engage in order to obtain approval of our product candidates. Such
additional new research and development activities would be costly and time consuming.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We may not be able
to obtain shortened review of our applications, and the FDA may not agree that our products qualify for marketing approval. If
CBP-containing products are withdrawn from the market by the FDA for any reason, we may not be able to reference such products
to support a 505(b)(2) NDA for TNX-102 SL, and we may need to fulfill the more extensive requirements of Section 505(b)(1). If
we are required to generate additional data to support approval, we may be unable to meet our anticipated development and commercialization
timelines, may be unable to generate the additional data at a reasonable cost, or at all, and may be unable to obtain marketing
approval of our product candidates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our executive officers and other
key personnel are critical to our business, and our future success depends on our ability to retain them. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our success depends
to a significant extent upon the continued services of Dr. Seth Lederman, our President and Chief Executive Officer. Dr. Lederman
has overseen Tonix Sub since inception and provides leadership for our growth and operations strategy as well as being an inventor
on many of our patents. Loss of the services of Dr. Lederman would have a material adverse effect on our growth, revenues, and
prospective business. We have key-man insurance on the life of Dr. Lederman.&nbsp;We are also highly dependent on the other principal
members of our management and scientific team. We are not aware of any present intention of any of our key personnel to leave our
company or to retire. However, we have no employment agreement with Dr. Lederman and while we have employment agreements with certain
of our employees, all of our employees may terminate their employment at any time. The loss of any of our key personnel, or the
inability to attract and retain qualified personnel, may significantly delay or prevent the achievement of our research, development
or business objectives and could materially adversely affect our business, financial condition and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any employment agreement
we enter into will not ensure the retention of the employee who is a party to the agreement. In addition, we have only limited
ability to prevent former employees from competing with us. Furthermore, our future success will also depend in part on the continued
service of our key scientific and management personnel and our ability to identify, hire, and retain additional personnel. We experience
intense competition for qualified personnel and may be unable to attract and retain the personnel necessary for the development
of our business. Moreover, our work force is located in the &ldquo;Pharmaceutical Corridor&rdquo; that spans New York, New Jersey
and Pennsylvania, where competition for personnel with the scientific and technical skills that we seek is extremely high and is
likely to remain high. Because of this competition, our compensation costs may increase significantly.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are unable to hire additional
qualified personnel, our ability to grow our business may be harmed.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Over time we will need
to hire additional qualified personnel with expertise in drug development, product registration, clinical and non-clinical research,
quality compliance, government regulation, formulation and manufacturing, financial matters and sales and marketing. We compete
for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions. Competition
for such individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and
retaining qualified personnel will be critical to our success.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We rely on third parties to manufacture
the compounds used in our trials, and we intend to rely on them for the manufacture of any approved products for commercial sale.
If these third parties do not manufacture our product candidates in sufficient quantities and at an acceptable cost, clinical development
and commercialization of our product candidates could be delayed, prevented or impaired. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have no manufacturing
facilities, and we have no experience in the clinical or commercial-scale manufacture of drugs or in designing drug manufacturing
processes. We intend to rely on third-party Contract Manufacturing Organizations, or CMOs, to manufacture some or all of our product
candidates in clinical trials and our products that reach commercialization. Completion of our clinical trials and commercialization
of our product candidates requires manufacturing of a sufficient supply of our product candidates. We have contracted with outside
sources to manufacture our development compounds, including TNX-102 SL. If, for any reason, we become unable to rely on our current
sources for the manufacture of our product candidates, either for clinical trials or, at some future date, for commercial quantities,
then we would need to identify and contract with additional or replacement third-party manufacturers to manufacture compounds for
pre-clinical, clinical, and commercial purposes. Although we are in discussions with other manufacturers we have identified as
potential alternative CMOs of TNX-102 SL, we may not be successful in negotiating acceptable terms with any of them.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that there
are a variety of manufacturers that we may be able to retain to produce these products. However, once we retain a manufacturing
source, if our manufacturers do not perform in a satisfactory manner, we may not be able to develop or commercialize potential
products as planned. Certain specialized manufacturers are expected to provide us with modified and unmodified pharmaceutical compounds,
including finished products, for use in our preclinical and clinical studies. Some of these materials are available from only one
supplier or vendor. Any interruption in or termination of service by such sole source suppliers could result in a delay or interruption
in manufacturing until we locate an alternative source of supply. Any delay or interruption in manufacturing operations (or failure
to locate a suitable replacement for such suppliers) could materially adversely affect our business, prospects, or results of operations.
We do not have any short-term or long-term manufacturing agreements with many of these manufacturers. If we fail to contract for
manufacturing on acceptable terms or if third-party manufacturers do not perform as we expect, our development programs could be
materially adversely affected. This may result in delays in filing for and receiving FDA approval for one or more of our products.
Any such delays could cause our prospects to suffer significantly.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Failure by our third-party manufacturers
to comply with the regulatory guidelines set forth by the FDA with respect to our product candidates could delay or prevent the
completion of clinical trials, the approval of any product candidates or the commercialization of our products. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Such third-party manufacturers
must be inspected by FDA for cGMP compliance before they can produce commercial product. We may be in competition with other companies
for access to these manufacturers' facilities and may be subject to delays in manufacture if the manufacturers give other clients
higher priority than they give to us. If we are unable to secure and maintain third-party manufacturing capacity, the development
and sales of our products and our financial performance may be materially affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Manufacturers are obligated
to operate in accordance with FDA-mandated requirements. A failure of any of our third-party manufacturers to establish and follow
cGMP requirements and to document their adherence to such practices may lead to significant delays in the availability of material
for clinical trials, may delay or prevent filing or approval of marketing applications for our products, and may cause delays or
interruptions in the availability of our products for commercial distribution following FDA approval. This could result in higher
costs to us or deprive us of potential product revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Complying with cGMP
and non-U.S. regulatory requirements will require that we expend time, money, and effort in production, recordkeeping, and quality
control to assure that the product meets applicable specifications and other requirements. We, or our contracted manufacturing
facility, must also pass a pre-approval inspection prior to FDA approval. Failure to pass a pre-approval inspection may significantly
delay FDA approval of our products. If we fail to comply with these requirements, we would be subject to possible regulatory action
and may be limited in the jurisdictions in which we are permitted to sell our products. As a result, our business, financial condition,
and results of operations may be materially harmed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Drug manufacturers
are subject to ongoing periodic unannounced inspections by the FDA, the DEA and corresponding state and foreign agencies to ensure
strict compliance with cGMP requirements and other requirements under Federal drug laws, other government regulations and corresponding
foreign standards. If we or our third-party manufacturers fail to comply with applicable regulations, sanctions could be imposed
on us, including fines, injunctions, civil penalties, failure by the government to grant marketing approval of drugs, delays, suspension
or withdrawal of approvals, seizures or recalls of product, operating restrictions and criminal prosecutions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Corporate and academic collaborators
may take actions to delay, prevent, or undermine the success of our products.</I></B><I> </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operating and financial
strategy for the development, clinical testing, manufacture, and commercialization of drug candidates is heavily dependent on our
entering into collaborations with corporations, academic institutions, licensors, licensees, and other parties. Our current strategy
assumes that we will successfully establish these collaborations, or similar relationships; however, there can be no assurance
that we will be successful establishing such collaborations. Some of our existing collaborations are, and future collaborations
may be, terminable at the sole discretion of the collaborator. Replacement collaborators might not be available on attractive terms,
or at all. The activities of any collaborator will not be within our control and may not be within our power to influence. There
can be no assurance that any collaborator will perform its obligations to our satisfaction or at all, that we will derive any revenue
or profits from such collaborations, or that any collaborator will not compete with us. If any collaboration is not pursued, we
may require substantially greater capital to undertake development and marketing of our proposed products and may not be able to
develop and market such products effectively, if at all. In addition, a lack of development and marketing collaborations may lead
to significant delays in introducing proposed products into certain markets and/or reduced sales of proposed products in such markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Data provided by collaborators and
others upon which we rely that has not been independently verified could turn out to be false, misleading, or incomplete.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We rely on third-party
vendors, scientists, and collaborators to provide us with significant data and other information related to our projects, clinical
trials, and our business. If such third parties provide inaccurate, misleading, or incomplete data, our business, prospects, and
results of operations could be materially adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our product candidates are novel
and still in development</I></B><I>. </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a pharmaceutical
company focused on the development of drug product candidates, all of which are still in development. Our drug development methods
may not lead to commercially viable drugs for any of several reasons. For example, we may fail to identify appropriate targets
or compounds, our drug candidates may fail to be safe and effective in clinical trials, or we may have inadequate financial or
other resources to pursue development efforts for our drug candidates. Our drug candidates will require significant additional
development, clinical trials, regulatory clearances and additional investment by us or our collaborators before they can be commercialized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Successful development of our products
is uncertain</I></B><I>.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our development of
current and future product candidates is subject to the risks of failure and delay inherent in the development of new pharmaceutical
products, including: delays in product development, clinical testing, or manufacturing; unplanned expenditures in product development,
clinical testing, or manufacturing; failure to receive regulatory approvals; emergence of superior or equivalent products; inability
to manufacture on its own, or through any others, product candidates on a commercial scale; and failure to achieve market acceptance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because of these risks,
our research and development efforts may not result in any commercially viable products. If a significant portion of these development
efforts are not successfully completed, required regulatory approvals are not obtained or any approved products are not commercially
successfully, our business, financial condition, and results of operations may be materially harmed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Clinical trials required for our
product candidates are expensive and time-consuming, and their outcome is uncertain</I></B><I>.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In order to obtain
FDA approval to market a new drug product, we must demonstrate proof of safety and effectiveness in humans. To meet these requirements,
we must conduct &ldquo;adequate and well controlled&rdquo; clinical trials. Conducting clinical trials is a lengthy, time-consuming,
and expensive process. The length of time may vary substantially according to the type, complexity, novelty, and intended use of
the product candidate, and often can be several years or more per trial. Delays associated with products for which we are directly
conducting clinical trials may cause us to incur additional operating expenses. The commencement and rate of completion of clinical
trials may be delayed by many factors, including, for example: inability to manufacture sufficient quantities of qualified materials
under cGMP, for use in clinical trials; slower than expected rates of patient recruitment; failure to recruit a sufficient number
of patients; modification of clinical trial protocols; changes in regulatory requirements for clinical trials; the lack of effectiveness
during clinical trials; the emergence of unforeseen safety issues; delays, suspension, or termination of the clinical trials due
to the institutional review board responsible for overseeing the study at a particular study site; and government or regulatory
delays or &ldquo;clinical holds&rdquo; requiring suspension or termination of the trials.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The results from early
clinical trials are not necessarily predictive of results obtained in later clinical trials. Accordingly, even if we obtain positive
results from early clinical trials, we may not achieve the same success in future clinical trials. Clinical trials may not demonstrate
statistically significant safety and effectiveness to obtain the requisite regulatory approvals for product candidates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our clinical trials
may be conducted in patients with CNS conditions, and in some cases, our products are expected to be used in combination with approved
therapies that themselves have significant adverse event profiles. During the course of treatment, these patients could suffer
adverse medical events or die for reasons that may or may not be related to our products. We cannot ensure that safety issues will
not arise with respect to our products in clinical development.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The failure of clinical
trials to demonstrate safety and effectiveness for the desired indications could harm the development of that product candidate
and other product candidates. This failure could cause us to abandon a product candidate and could delay development of other product
candidates. Any delay in, or termination of, our clinical trials would delay the filing of our NDAs with the FDA and, ultimately,
our ability to commercialize our product candidates and generate product revenues. Any change in, or termination of, our clinical
trials could materially harm our business, financial condition, and results of operation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We are subject to extensive and costly
government regulation.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Product candidates
employing our technology are subject to extensive and rigorous domestic government regulation including regulation by the FDA,
the Centers for Medicare and Medicaid Services, other divisions of the United States Department of Health and Human Services, the
United States Department of Justice, state and local governments, and their respective foreign equivalents. The FDA regulates the
research, development, preclinical and clinical testing, manufacture, safety, effectiveness, record-keeping, reporting, labeling,
storage, approval, advertising, promotion, sale, distribution, import, and export of biopharmaceutical products. The FDA regulates
small molecule chemical entities as drugs, subject to a New Drug Application, or NDA, under the Federal Food, Drug, and Cosmetic
Act. If products employing our technologies are marketed abroad, they will also be subject to extensive regulation by foreign governments,
whether or not they have obtained FDA approval for a given product and its uses. Such foreign regulation may be equally or more
demanding than corresponding United States regulation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Government regulation
substantially increases the cost and risk of researching, developing, manufacturing, and selling our products. The regulatory review
and approval process, which includes preclinical testing and clinical trials of each product candidate, is lengthy, expensive,
and uncertain. We or our collaborators must obtain and maintain regulatory authorization to conduct clinical trials. We or our
collaborators must obtain regulatory approval for each product we intend to market, and the manufacturing facilities used for the
products must be inspected and meet legal requirements. Securing regulatory approval requires the submission of extensive preclinical
and clinical data and other supporting information for each proposed therapeutic indication in order to establish the product's
safety and efficacy, and in the case of biologics also potency and purity, for each intended use. The development and approval
process takes many years, requires substantial resources, and may never lead to the approval of a product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Even if we are able
to obtain regulatory approval for a particular product, the approval may limit the indicated medical uses for the product, may
otherwise limit our ability to promote, sell, and distribute the product, may require that we conduct costly post-marketing surveillance,
and/or may require that we conduct ongoing post-marketing studies. Material changes to an approved product, such as, for example,
manufacturing changes or revised labeling, may require further regulatory review and approval. Once obtained, any approvals may
be withdrawn, including, for example, if there is a later discovery of previously unknown problems with the product, such as a
previously unknown safety issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we, our collaborators,
or our contract manufacturers fail to comply with applicable regulatory requirements at any stage during the regulatory process,
such noncompliance could result in, among other things delays in the approval of applications or supplements to approved applications;
refusal of a regulatory authority, including the FDA, to review pending market approval applications or supplements to approved
applications; warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions; total or partial
suspension of production; civil penalties; withdrawals of previously approved marketing applications or licenses; recommendations
by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We do not have, and may never obtain,
the regulatory approvals we need to market our product candidates.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Following completion
of clinical trials, the results are evaluated and, depending on the outcome, submitted to the FDA in the form of an NDA in order
to obtain FDA approval of the product and authorization to commence commercial marketing. In responding to an NDA, the FDA may
require additional testing or information, may require that the product labeling be modified, may impose post-approval study or
reporting requirements or other restrictions on product distribution, or may deny the application. The FDA has established performance
goals for review of NDAs - six months for priority applications and ten months for standard applications. However, the FDA is not
required to complete its review within these time periods. The timing of final FDA review and action varies greatly, but can take
years in some cases and may involve the input of an FDA advisory committee of outside experts. Product sales in the United States
may commence only when an NDA is approved.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To date, we have not
applied for or received the regulatory approvals required for the commercial sale of any of our products in the United States or
in any foreign jurisdiction. None of our product candidates has been determined to be safe and effective, and we have not submitted
an NDA to the FDA or an equivalent application to any foreign regulatory authorities for any of our product candidates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">It is possible that
none of our product candidates will be approved for marketing. Failure to obtain regulatory approvals, or delays in obtaining regulatory
approvals, may adversely affect the successful commercialization of any drugs or biologics that we or our partners develop, may
impose additional costs on us or our collaborators, may diminish any competitive advantages that we or our partners may attain,
and/or may adversely affect our receipt of revenues or royalties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Even if approved, our products will
be subject to extensive post-approval regulation.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Once a product is approved,
numerous post-approval requirements apply. Among other things, the holder of an approved NDA is subject to periodic and other FDA
monitoring and reporting obligations, including obligations to monitor and report adverse events and instances of the failure of
a product to meet the specifications in the NDA. Application holders must submit new or supplemental applications and obtain FDA
approval for certain changes to the approved product, product labeling, or manufacturing process. Application holders must also
submit advertising and other promotional material to the FDA and report on ongoing clinical trials.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Depending on the circumstances,
failure to meet these post-approval requirements can result in criminal prosecution, fines, injunctions, recall or seizure of products,
total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter
into supply contracts, including government contracts. In addition, even if we comply with FDA and other requirements, new information
regarding the safety or effectiveness of a product could lead the FDA to modify or withdraw product approval.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Even if we obtain regulatory approval
to market our product candidates, our product candidates may not be accepted by the market. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Even if the FDA approves
one or more of our product candidates, physicians and patients may not accept it or use it. Even if physicians and patients would
like to use our products, our products may not gain market acceptance among healthcare payors such as managed care formularies,
insurance companies or government programs such as Medicare or Medicaid. Acceptance and use of our products will depend upon a
number of factors including: perceptions by members of the health care community, including physicians, about the safety and effectiveness
of our drug or device product; cost-effectiveness of our product relative to competing products; availability of reimbursement
for our product from government or other healthcare payers; and effectiveness of marketing and distribution efforts by us and our
licensees and distributors, if any.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The degree of market
acceptance of any pharmaceutical product that we develop will depend on a number of factors, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.75in">&nbsp;</TD>
    <TD STYLE="width: 0.25in; font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">cost-effectiveness;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the safety and effectiveness of our products, including any significant potential side effects (including drowsiness and dry mouth), as compared to alternative products or treatment methods;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the timing of market entry as compared to competitive products;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">flat or declining use of off-label muscle-relaxant products for fibromyalgia prior to the launch of TNX-102 SL;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the rate of adoption of our products by doctors and nurses;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">product labeling or product insert required by the FDA for each of our products;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">reimbursement policies of government and third-party payors;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">effectiveness of our sales, marketing and distribution capabilities and the effectiveness of such capabilities of our collaborative partners, if any; and</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">unfavorable publicity concerning our products or any similar products.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our product candidates,
if successfully developed, will compete with a number of products manufactured and marketed by major pharmaceutical companies,
biotechnology companies and manufacturers of generic drugs. Our products may also compete with new products currently under development
by others. Physicians, patients, third-party payors and the medical community may not accept and utilize any of our product candidates.
If our products do not achieve market acceptance, we will not be able to generate significant revenues or become profitable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because we expect sales
of our current product candidates, if approved, to generate substantially all of our product revenues for the foreseeable future,
the failure of these products to find market acceptance would harm our business and could require us to seek additional financing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we fail to establish marketing,
sales and distribution capabilities, or fail to enter into arrangements with third parties, we will not be able to create a market
for our product candidates. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our strategy with our
lead product candidates is to control, directly or through contracted third parties, all or most aspects of the product development
process, including marketing, sales and distribution. Currently, we do not have any sales, marketing or distribution capabilities.
In order to generate sales of any product candidates that receive regulatory approval, we must either acquire or develop an internal
marketing and sales force with technical expertise and with supporting distribution capabilities or make arrangements with third
parties to perform these services for us. The acquisition or development of a sales and distribution infrastructure would require
substantial resources, which may divert the attention of our management and key personnel and defer our product development efforts.
To the extent that we enter into marketing and sales arrangements with other companies, our revenues will depend on the efforts
of others. These efforts may not be successful. If we fail to develop sales, marketing and distribution channels, or enter into
arrangements with third parties, we will experience delays in product sales and incur increased costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sales of pharmaceutical
products largely depend on the reimbursement of patients' medical expenses by government health care programs and private health
insurers. Without the financial support of the government or third-party payors, the market for our products will be limited. These
third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services.
Recent proposals to change the health care system in the United States have included measures that would limit or eliminate payments
for medical products and services or subject the pricing of medical treatment products to government control. Significant uncertainty
exists as to the reimbursement status of newly approved health care products. Third-party payors may not reimburse sales of our
products or enable our collaborators to sell them at profitable prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business strategy
might involve out-licensing product candidates to or collaborating with larger firms with experience in marketing and selling pharmaceutical
products. There can be no assurance that we will be able to successfully establish marketing, sales, or distribution relationships;
that such relationships, if established, will be successful; or that we will be successful in gaining market acceptance for our
products. To the extent that we enter into any marketing, sales, or distribution arrangements with third parties, our product revenues
will be lower than if we marketed and sold our products directly, and any revenues we receive will depend upon the efforts of such
third-parties. If we are unable to establish such third-party sales and marketing relationships, or choose not to do so, we will
have to establish and rely on our own in-house capabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We, as a company, have
no experience in marketing or selling pharmaceutical products and currently have no sales, marketing, or distribution infrastructure.
To market any of our products directly, we would need to develop a marketing, sales, and distribution force that both has technical
expertise and the ability to support a distribution capability. The establishment of a marketing, sales, and distribution capability
would significantly increase our costs, possibly requiring substantial additional capital. In addition, there is intense competition
for proficient sales and marketing personnel, and we may not be able to attract individuals who have the qualifications necessary
to market, sell, and distribute our products. There can be no assurance that we will be able to establish internal marketing, sales,
or distribution capabilities. If we are unable to, or choose not to establish these capabilities, or if the capabilities we establish
are not sufficient to meet our needs, we will be required to establish collaborative marketing, sales, or distribution relationships
with third parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>In the event that we are successful
in bringing any products to market, our revenues may be adversely affected if we fail to obtain acceptable prices or adequate reimbursement
for our products from third-party payors. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our ability to commercialize
pharmaceutical products successfully may depend in part on the availability of reimbursement for our products from:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.75in">&nbsp;</TD>
    <TD STYLE="width: 0.25in; font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">government and health administration authorities;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">private health insurers; and </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">other third party payors, including Medicare.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot predict the
availability of reimbursement for newly-approved health care products. Third-party payors, including Medicare, are challenging
the prices charged for medical products and services. Government and other third-party payors increasingly are limiting both coverage
and the level of reimbursement for new drugs. Third-party insurance coverage may not be available to patients for any of our products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The continuing efforts
of government and third-party payors to contain or reduce the costs of health care may limit our commercial opportunity. If government
and other third-party payors do not provide adequate coverage and reimbursement for any prescription product we bring to market,
doctors may not prescribe them or patients may ask to have their physicians prescribe competing drugs with more favorable reimbursement.
In some foreign markets, pricing and profitability of prescription pharmaceuticals are subject to government control. In the United
States, we expect that there will continue to be federal and state proposals for similar controls. In addition, we expect that
increasing emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products.
Cost control initiatives could decrease the price that we receive for any products in the future. Further, cost control initiatives
could impair our ability to commercialize our products and our ability to earn revenues from this commercialization.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We face the risk of product liability
claims and may not be able to obtain insurance.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business exposes
us to the risk of product liability claims that are inherent in the development of drugs. If the use of one or more of our or our
collaborators' drugs harms people, we may be subject to costly and damaging product liability claims brought against us by clinical
trial participants, consumers, health care providers, pharmaceutical companies or others selling our products. Our inability to
obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could
prevent or inhibit the commercialization of pharmaceutical products we develop, alone or with collaborators. We currently do not
carry clinical trial insurance or product liability insurance. We intend to obtain such insurance in the future. We cannot predict
all of the possible harms or side effects that may result and, therefore, the amount of insurance coverage we hold now or in the
future may not be adequate to cover all liabilities we might incur. We intend to expand our insurance coverage to include the sale
of commercial products if we obtain marketing approval for our drug candidates in development, but we may be unable to obtain commercially
reasonable product liability insurance for any products approved for marketing. If we are unable to obtain insurance at an acceptable
cost or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which may
materially and adversely affect our business and financial position. If we are sued for any injury allegedly caused by our or our
collaborators' products, our liability could exceed our total assets and our ability to pay the liability. A product liability
claim or series of claims brought against us would decrease our cash and could cause our stock price to fall.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We use hazardous chemicals in our
business. Potential claims relating to improper handling, storage or disposal of these chemicals could affect us and be time consuming
and costly. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our research and development
processes and/or those of our third party contractors may involve the controlled use of hazardous materials and chemicals. These
hazardous chemicals are reagents and solvents typically found in a chemistry laboratory. Our operations also produce hazardous
waste products. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous
materials. While we attempt to comply with all environmental laws and regulations, including those relating to the outsourcing
of the disposal of all hazardous chemicals and waste products, we cannot eliminate the risk of contamination from or discharge
of hazardous materials and any resultant injury. In the event of such an accident, we could be held liable for any resulting damages
and any liability could materially adversely affect our business, financial condition and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Compliance with environmental
laws and regulations may be expensive. Current or future environmental regulations may impair our research, development or production
efforts. We might have to pay civil damages in the event of an improper or unauthorized release of, or exposure of individuals
to, hazardous materials. We are not insured against these environmental risks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we enter into collaborations
with third parties, they might also work with hazardous materials in connection with our collaborations. We may agree to indemnify
our collaborators in some circumstances against damages and other liabilities arising out of development activities or products
produced in connection with these collaborations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the federal,
state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive
materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business,
financial condition and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we retain collaborative partners
and our partners do not satisfy their obligations, we will be unable to develop our partnered product candidates. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the event we enter
into any collaborative agreements, we may not have day-to-day control over the activities of our collaborative partners with respect
to any of these product candidates. Any collaborative partner may not fulfill its obligations under these agreements. If a collaborative
partner fails to fulfill its obligations under an agreement with us, we may be unable to assume the development of the products
covered by that agreement or enter into alternative arrangements with a third party. In addition, we may encounter delays in the
commercialization of the product candidate that is the subject of the agreement. Accordingly, our ability to receive any revenue
from the product candidates covered by these agreements will be dependent on the efforts of our collaborative partner. We could
also become involved in disputes with a collaborative partner, which could lead to delays in or termination of our development
and commercialization programs and time-consuming and expensive litigation or arbitration. In addition, any such dispute could
diminish our collaborators&rsquo; commitment to us and reduce the resources they devote to developing and commercializing our products.
Conflicts or disputes with our collaborators, and competition from them, could harm our relationships with our other collaborators,
restrict our ability to enter future collaboration agreements and delay the research, development or commercialization of our product
candidates. If any collaborative partner terminates or breaches its agreement, or otherwise fails to complete its obligations in
a timely manner, our chances of successfully developing or commercializing these product candidates would be materially and adversely
affected. We may not be able to enter into collaborative agreements with partners on terms favorable to us, or at all. Our inability
to enter into collaborative arrangements with collaborative partners, or our failure to maintain such arrangements, would limit
the number of product candidates that we could develop and ultimately, decrease our sources of any future revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>RISKS RELATED TO OUR STOCK </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>There has been a limited trading
market for our Common Stock and almost no market activity to date.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Currently, our Common
Stock is available for quotation on the OTCQB under the symbol &ldquo;TNXP.&rdquo; However, prior to February 2012, there was no
trading activity in our Common Stock and limited trading has occurred to date. As of December 31, 2012, trading occurred on only
82 out of 229 possible trading days, with an average of less than 3,200 shares per possible trading day and less than 8,900 shares
trades on each day when shares actually traded. It is anticipated that there will be a limited trading market for the Common Stock
on the OTCQB. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at
a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive
market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other
companies or technologies by using Common Stock as consideration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>You may have difficulty trading and
obtaining quotations for our Common Stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Common Stock may
not be actively traded, and the bid and asked prices for our Common Stock on the OTCQB may fluctuate widely. As a result, investors
may find it difficult to dispose of, or to obtain accurate quotations of the price of, our securities. This severely limits the
liquidity of the Common Stock, and would likely reduce the market price of our Common Stock and hamper our ability to raise additional
capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The market price for our Common Stock
may be volatile, and your investment in our Common Stock could decline in value. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The stock market in
general has experienced extreme price and volume fluctuations. The market prices of the securities of biotechnology and specialty
pharmaceutical companies, particularly companies like ours without product revenues and earnings, have been highly volatile and
may continue to be highly volatile in the future. This volatility has often been unrelated to the operating performance of particular
companies. The following factors, in addition to other risk factors described in this section, may have a significant impact on
the market price of our common stock:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">announcements of technological innovations or new products by us or our competitors;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">announcement of FDA approval or disapproval of our products or other product-related actions;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">developments involving our discovery efforts and clinical trials;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">developments or disputes concerning patents or proprietary rights, including announcements of infringement, interference or other litigation against us or our potential licensees;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">developments involving our efforts to commercialize our products, including developments impacting the timing of commercialization;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">announcements concerning our competitors, or the biotechnology, pharmaceutical or drug delivery industry in general;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">public concerns as to the safety or efficacy of our products or our competitors&rsquo; products;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">changes in government regulation of the pharmaceutical or medical industry;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">changes in the reimbursement policies of third party insurance companies or government agencies;&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">actual or anticipated fluctuations in our operating results;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">changes in financial estimates or recommendations by securities analysts;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">developments involving corporate collaborators, if any;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">changes in accounting principles; and </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">the loss of any of our key scientific or management personnel.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the past, securities
class action litigation has often been brought against companies that experience volatility in the market price of their securities.
Whether or not meritorious, litigation brought against us could result in substantial costs and a diversion of management&rsquo;s
attention and resources, which could adversely affect our business, operating results and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Investor relations activities, nominal
&ldquo;float&rdquo; and supply and demand factors may affect the price of our stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect to utilize
various techniques such as non-deal road shows and investor relations campaigns in order to create investor awareness for our company.&nbsp;&nbsp;These
campaigns may include personal, video and telephone conferences with investors and prospective investors in which our business
practices are described.&nbsp;&nbsp;We may provide compensation to investor relations firms and pay for newsletters, websites,
mailings and email campaigns that are produced by third-parties based upon publicly-available information concerning our company.&nbsp;&nbsp;We
will not be responsible for the content of analyst reports and other writings and communications by investor relations firms not
authored by us or from publicly available information.&nbsp;&nbsp;We do not intend to review or approve the content of such analysts&rsquo;
reports or other materials based upon analysts&rsquo; own research or methods.&nbsp;&nbsp;Investor relations firms should generally
disclose when they are compensated for their efforts, but whether such disclosure is made or complete is not under our control.&nbsp;&nbsp;
In addition, investors in our company may be willing, from time to time, to encourage investor awareness through similar activities.&nbsp;&nbsp;Investor
awareness activities may also be suspended or discontinued which may impact the trading market our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The SEC and FINRA enforce
various statutes and regulations intended to prevent manipulative or deceptive devices in connection with the purchase or sale
of any security and carefully scrutinize trading patterns and company news and other communications for false or misleading information,
particularly in cases where the hallmarks of &ldquo;pump and dump&rdquo; activities may exist, such as rapid share price increases
or decreases.&nbsp;&nbsp;We, and our shareholders may be subjected to enhanced regulatory scrutiny due to the small number of holders
who initially will own the registered shares of our common stock publicly available for resale, and the limited trading markets
in which such shares may be offered or sold which have often been associated with improper activities concerning penny-stocks,
such as the OTC Bulletin Board or the OTCQB Marketplace (Pink OTC) or pink sheets.&nbsp;&nbsp;Until such time as our restricted
shares are registered or available for resale under Rule 144, there will continue to be a small percentage of shares held by a
small number of investors, many of whom acquired such shares in privately negotiated purchase and sale transactions that will constitute
the entire available trading market.&nbsp;&nbsp;The Supreme Court has stated that manipulative action is a term of art connoting
intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities.&nbsp;&nbsp;Often
times, manipulation is associated by regulators with forces that upset the supply and demand factors that would normally determine
trading prices.&nbsp;&nbsp;Since a small percentage of the outstanding common stock of our company will initially be available
for trading, held by a small number of individuals or entities, the supply of our common stock for sale will be extremely limited
for an indeterminate amount of time, which could result in higher bids, asks or sales prices than would otherwise exist.&nbsp;&nbsp;Securities
regulators have often cited thinly-traded markets, small numbers of holders, and awareness campaigns as components of their claims
of price manipulation and other violations of law when combined with manipulative trading, such as wash sales, matched orders or
other manipulative trading timed to coincide with false or touting press releases.&nbsp;&nbsp;There can be no assurance that our
or third-parties&rsquo; activities, or the small number of potential sellers or small percentage of stock in the &ldquo;float,&rdquo;
or determinations by purchasers or holders as to when or under what circumstances or at what prices they may be willing to buy
or sell stock will not artificially impact (or would be claimed by regulators to have affected) the normal supply and demand factors
that determine the price of the stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We do not anticipate paying dividends
on our Common Stock. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have never declared
or paid cash dividends on our common stock and do not expect to do so in the foreseeable future. The declaration of dividends is
subject to the discretion of our board of directors and will depend on various factors, including our operating results, financial
condition, future prospects and any other factors deemed relevant by our board of directors. You should not rely on an investment
in our company if you require dividend income from your investment in our company. The success of your investment will likely depend
entirely upon any future appreciation of the market price of our common stock, which is uncertain and unpredictable. There is no
guarantee that our common stock will appreciate in value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We expect that our quarterly results
of operations will fluctuate, and this fluctuation could cause our stock price to decline. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our quarterly operating
results are likely to fluctuate in the future. These fluctuations could cause our stock price to decline. The nature of our business
involves variable factors, such as the timing of the research, development and regulatory pathways of our product candidates, which
could cause our operating results to fluctuate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to the possibility
of fluctuations in our revenues and expenses, we believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we or our existing shareholders
sell a substantial number of shares of our common stock in the public market, our stock price may decline. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we or our existing
shareholders sell a large number of shares of our common stock, or the public market perceives that we or our existing shareholders
might sell shares of common stock, particularly with respect to our affiliates, directors, executive officers or other insiders,
the market price of our common stock could decline significantly.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the future, we may
issue additional shares to our employees, directors or consultants, in connection with corporate alliances or acquisitions, or
to raise capital. Due to these factors, sales of a substantial number of shares of our common stock in the public market could
occur at any time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our officers, directors and principal
shareholders own a controlling interest in our voting stock and Investors will not have any voice in our management.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our officers, directors
and principal shareholders, in the aggregate, beneficially own or control the votes of approximately 46.5% of our outstanding Common
Stock. As a result, these stockholders, acting together, will have the ability to control substantially all matters submitted to
our stockholders for approval, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.75in">&nbsp;</TD>
    <TD STYLE="width: 0.25in; font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">election of our board of directors;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">removal of any of our directors;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">amendment of our certificate of incorporation or bylaws; and</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result of their
ownership and positions, our directors, executive officers and principal shareholders collectively are able to influence all matters
requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition,
sales of significant amounts of shares held by our directors, executive officers or principal shareholders, or the prospect of
these sales, could adversely affect the market price of our Common Stock. Management&rsquo;s stock ownership may discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price
or prevent our stockholders from realizing a premium over our stock price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our common stock is not currently
traded at high volume, and you may be unable to sell at or near ask prices or at all if you need to sell or liquidate a substantial
number of shares at one time.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our common stock is
currently traded, but with very low, if any, volume, based on quotations on the OTCQB, meaning that the number of persons interested
in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent. This situation
is attributable to a number of factors, including the fact that we are a small company which is still relatively unknown to stock
analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume,
and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven
company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable.
As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent,
as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market
for our common stock will develop or be sustained, or that trading levels will be sustained.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shareholders should
be aware that, according to Commission Release No. 34-29093, the market for &ldquo;penny stocks&rdquo; has suffered in recent years
from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers
that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales
and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers;
and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware
of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate
the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical
limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns
or practices could increase the future volatility of our share price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Efforts to comply with recently enacted
changes in securities laws and regulations will increase our costs and require additional management resources, and we still may
fail to comply.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As directed by Section
404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on their
internal controls over financial reporting in their annual reports on Form 10-K. In addition, in the event we are no longer a smaller
reporting company, the independent registered public accounting firm auditing our financial statements would be required to attest
to the effectiveness of our internal controls over financial reporting. Such attestation requirement by our independent registered
public accounting firm would not be applicable to us until the report for the year ended December 31, 2013 at the earliest, if
at all. If we are unable to conclude that we have effective internal controls over financial reporting or if our independent registered
public accounting firm is required to, but is unable to provide us with a report as to the effectiveness of our internal controls
over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in
a decrease in the value of our securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our common stock is subject to the
&ldquo;penny stock&rdquo; rules of the SEC and the trading market in our securities is limited, which makes transactions in our
stock cumbersome and may reduce the value of an investment in our stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Securities and
Exchange Commission (&ldquo;SEC&rdquo;) has adopted Rule 15g-9 which establishes the definition of a &ldquo;penny stock,&rdquo;
for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise
price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt,
the rules require:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.75in; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 0.25in; font-family: Symbol; text-align: justify; padding-left: -0.125in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">that a broker or dealer approve a person&rsquo;s account for transactions in penny stocks; and</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In order to approve a person&rsquo;s account
for transactions in penny stocks, the broker or dealer must:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.75in; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 0.25in; font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">obtain financial information and investment experience objectives of the person; and</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The broker or dealer
must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny
stock market, which, in highlight form:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.75in; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 0.25in; font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">sets forth the basis on which the broker or dealer made the suitability determination; and</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">that the broker or dealer received a signed, written agreement from the investor prior to the transaction.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Generally, brokers
may be less willing to execute transactions in securities subject to the &ldquo;penny stock&rdquo; rules. This may make it more
difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Disclosure also has
to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions
payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies
available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing
recent price information for the penny stock held in the account and information on the limited market in penny stocks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>FINRA sales practice requirements
may also limit a shareholder&rsquo;s ability to buy and sell our stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to the
&ldquo;penny stock&rdquo; rules described above, FINRA has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending
speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information
about the customer&rsquo;s financial status, tax status, investment objectives and other information. Under interpretations of
these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at
least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>USE OF PROCEEDS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We will not receive
any proceeds from the sale of common stock offered by the selling stockholders under this prospectus. However, we will receive
up to $5,342,500 in the aggregate from the selling stockholders if they exercise in full, on a cash basis, the Class A Warrants
to purchase 8,904,167 shares of common stock issued to the selling stockholders that are being offered by the selling stockholders
under this prospectus. All of the Class A Warrants entitle the holder to exercise their warrants on a cashless basis under certain
conditions. In the event that any selling stockholder exercises their Class A Warrants on a cashless basis, then we will not receive
any proceeds from the exercise of those warrants. We would use such proceeds from the exercise of the Class A Warrants for working
capital and other corporate purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The warrant holders
may exercise their Class A Warrants at any time until their expiration, as further described under &ldquo;Description of Capital
Stock.&rdquo; Because the warrant holders may exercise the Class A Warrants in their own discretion, if at all, we cannot plan
on specific uses of proceeds beyond application of proceeds to general corporate purposes.&nbsp;We have agreed to bear the expenses
(other than any underwriting discounts or commissions or agent&rsquo;s commissions) in connection with the registration of the
common stock being offered hereby by the selling stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our common stock is
currently traded on the OTCQB under the symbol &ldquo;TNXP.&rdquo; Prior to July 23, 2012, our common stock was quoted on the Over-the-Counter
Bulletin Board under the symbol &ldquo;TNXP.&rdquo; Prior to October 19, 2011, our common stock was quoted on the Over-the-Counter
Bulletin Board under the symbol &ldquo;TAEI.&rdquo; Prior to February 2012, no public trades occurred in our common stock. For
the periods indicated, the following table sets forth the high and low sale prices of our common stock as reported by NASDAQ.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.3in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fiscal Year 2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: justify; border-bottom: Black 1pt solid">High</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: justify; border-bottom: Black 1pt solid">Low</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 56%; text-align: justify">First Quarter</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 18%; text-align: right">2.06</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 18%; text-align: right">2.00</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">Second Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.83</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">Third Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.74</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">Fourth Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.82</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.25</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.3in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fiscal Year 2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: justify; border-bottom: Black 1pt solid">High</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: justify; border-bottom: Black 1pt solid">Low</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 56%; text-align: justify">First Quarter (1)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 18%; text-align: right">0.73</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 18%; text-align: right">0.44</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD STYLE="text-align: justify">As of January 22, 2013.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-transform: uppercase"><B>Holders</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of January 22, 2013,
we had approximately 199 holders of our common stock. The number of record holders was determined from the records of our transfer
agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers,
and registered clearing agencies. The transfer agent of our common stock is vStock Transfer, LLC, 77 Spruce Street, Suite 201,
Cedarhurst, NY 11516.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-transform: uppercase"><B>Dividends </B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have not declared
or paid any cash dividends on our common stock and we do not anticipate paying any cash dividends to stockholders in the foreseeable
future. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent
upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem
relevant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
OF </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Some of the information
in this Form S-1 contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements
by forward-looking words such as &ldquo;may,&rdquo; &ldquo;will,&rdquo; &ldquo;expect,&rdquo; &ldquo;anticipate,&rdquo; &ldquo;believe,&rdquo;
&ldquo;estimate&rdquo; and &ldquo;continue,&rdquo; or similar words. You should read statements that contain these words carefully
because they:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.5in; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 0.25in; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">discuss our future expectations;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">contain projections of our future results of operations or of our financial condition; and</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">state other &ldquo;forward-looking&rdquo; information.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe it is important
to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over
which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including those set forth under &ldquo;Risk Factors,&rdquo; &ldquo;Business&rdquo;
and elsewhere in this prospectus. See &ldquo;Risk Factors.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Business Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a specialty
pharmaceutical company focused on developing novel pharmaceutical products for challenging disorders of the CNS. We search for
potential therapeutic solutions among known pharmaceutical agents that lack regulatory approval for the indications we seek, but
may be approved for use in other indications. The ongoing evolution in the understanding of certain CNS disorders provides us with
opportunities to develop such agents as proprietary products for new indications. We typically seek to create new dose and formulation
options that are tailored to the therapeutic uses to which we apply these agents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are currently devoting
the majority of our efforts to the development of our lead product candidate, TNX-102 sublingual tablet, or TNX-102 SL. TNX-102
SL is a novel dose and formulation of CBP, the active pharmaceutical ingredient of two widely prescribed muscle relaxant products,
Flexeril and Amrix. TNX-102 SL is distinct from these products as it is being developed at a dose level significantly below the
lowest marketed doses of Flexeril and Amrix. TNX-102 SL is also distinct from these products with regard to its route of administration,
as it is designed to be placed under the tongue and disintegrated to provide sublingual absorption, whereas Flexeril and Amrix
are designed to be swallowed. TNX-102 SL is also intended for chronic use, whereas Flexeril and Amrix are marketed for two to three
weeks of use. We are currently developing TNX-102 SL for the treatment of FM under an IND and under three CTAs filed in Canada.
We are also developing TNX-102 SL for the treatment of PTSD for which we held a pre-IND meeting in October 2012. We expect that
any applications we submit for FDA approval of TNX-102 SL will be submitted under Section 505(b)(2) of the FDCA, which we believe
will allow for a shorter timeline of clinical development as compared to that needed to fulfill the requirements of Section 505(b)(1),
under which NCEs are generally reviewed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">TNX-102 SL is a small,
rapidly disintegrating tablet containing CBP for sublingual administration at bedtime. We designed TNX-102 SL to enable the efficient
delivery of CBP to the systemic circulation via sublingual transmucosal absorption and to avoid first-pass liver metabolism. We
also designed TNX-102 SL to provide CBP at doses lower than those currently available. We have conducted several clinical and pre-clinical
pharmacokinetic studies of TNX-102 SL which we believe support its development as a novel therapeutic product for FM and PTSD,
and which demonstrate a number of potentially advantageous characteristics as compared to current CBP-containing products, none
of which are approved for these indications. Based on our Phase 1 comparative study, we have observed that, as compared to oral
CBP tablets, TNX-102 SL results in faster systemic absorption and significantly higher plasma levels of CBP in the first hour following
administration. TNX-102 SL was generally well-tolerated, with no serious adverse events reported in this study. Some subjects experienced
transient numbness on the tongue after TNX-102 SL administration, and other side-effects reported were similar to those associated
with current CBP products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We also have a pipeline
of other product candidates, including TNX-201 and TNX-301. TNX-201 is based on isometheptene mucate and is under development as
a treatment for certain types of headaches. For competitive reasons, we do not disclose the identities of the active ingredients
or targeted indications in our pipeline until a U.S. patent has been allowed or issued. Consistent with our mission, these product
candidates are or likely will be reformulations of active ingredients that have been used in humans in other products and that
are designed for new CNS therapeutic indications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In other cases, the
products will be formulated to match predicate products closely enough to be considered generic copies or similarly enough to other
marketed products to rely (in part) on their regulatory review and approval, as well as available published data. The predicate
product may be approved by the FDA under an NDA or may have been reviewed for safety and effectiveness by the National Academy
of Sciences under the DESI program, in which case they would be considered by FDA to be &ldquo;unapproved products&rdquo;. For
DESI products, it is our intent to develop NDA versions to meet cGMP and the ICH requirements to seek approval under the 505(b)(2)
regulatory pathway.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because of our size
and being in the development stage, we do not currently devote a significant amount of time or resources towards our other pipeline
candidates. We anticipate that sometime in 2013 we will begin developing formulations for TNX-201 and possibly TNX-301, but do
not expect to start clinical trials until 2014 at the earliest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 7, 2011,
we executed and consummated the Share Exchange Agreement with Tonix Sub. Pursuant to the Share Exchange, each share of Tonix Sub&rsquo;s
common stock was exchanged for 0.9 shares of our common stock, and each share of Tonix Sub&rsquo;s Series A and B preferred stock
was exchanged for 4.8 shares of our common stock. Upon completion of the Share Exchange, the Tonix Sub shareholders, including
holders of 1,396,982 restricted shares, which were subject to accelerated vesting, received in exchange for all of their shares,
an aggregate of 22,666,667 shares of our common stock and our existing stockholders retained 4,000,000 shares of common stock.
The 22,666,667 shares issued to the Tonix Sub shareholders constituted approximately 85% of our 26,666,667 shares of common stock
issued and outstanding after the Share Exchange. Upon completion of the Share Exchange, Tonix Sub became our wholly-owned subsidiary.
For accounting purposes, the acquisition has been treated as a recapitalization of Tonix Sub, accompanied by the issuance of our
common stock for the outstanding common stock of Toxic Sub, which was recorded at a nominal value. The historical financial statements
are those of Tonix Sub. The accompanying financial statements give retroactive effect to the recapitalization as if it had occurred
on June 7, 2007 (inception date). Also, professional services expenses were allocated to research and development and general and
administrative expenses in the 2010 and cumulative from inception through December 31, 2011 statement of operations to be consistent
with the current period&rsquo;s presentation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Current Operating Trends</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our current research
and development efforts are focused on developing our lead product, TNX-102 SL, but we also expend some effort on our earlier pipeline
programs. Our research and development expenses consist of manufacturing work and the cost of drug ingredients used in such work,
fees paid to providers for conducting various clinical studies as well as for the analysis of the results of such studies, and
for other medical research addressing the potential efficacy of our drugs. We believe that significant investment in product development
is a competitive necessity, and we plan to continue these investments in order to be in a position to realize the potential of
our product candidates and proprietary technologies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We plan to start the
next phase of clinical development for TNX-102 SL over the next six months, subject to raising necessary funds. Clinical trials
can be very expensive. If these and additional necessary clinical trials are successful, we plan to prepare and submit applications
to the FDA for marketing approval for our drug candidates. This process entails significant costs. As a result of these and other
factors, we expect our research and development expenses to increase significantly over the next 12 to 24 months.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect that a larger
percentage of our research and development expenses in the future will be incurred in support of our current and future preclinical
and clinical development programs rather than technology development. These expenditures are subject to numerous uncertainties
relating to timing and cost to completion. We test compounds in numerous preclinical studies for safety, toxicology and efficacy.
At the appropriate time, subject to the approval of regulatory authorities, we expect to conduct early-stage clinical trials for
each drug candidate. We anticipate funding these trials ourselves, and possibly with the assistance of federal grants. As we obtain
results from trials, we may elect to discontinue or delay clinical trials for certain products in order to focus our resources
on more promising products. Completion of clinical trials may take several years, and the length of time generally varies substantially
according to the type, complexity, novelty and intended use of a product candidate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The commencement and
completion of clinical trials for our products may be delayed by many factors, including lack of efficacy during clinical trials,
unforeseen safety issues, slower than expected patient recruitment, or government delays. In addition, we may encounter regulatory
delays or rejections as a result of many factors, including results that do not support the intended safety or efficacy of our
product candidates, perceived defects in the design of clinical trials and changes in regulatory policy during the period of product
development. As a result of these risks and uncertainties, we are unable to accurately estimate the specific timing and costs of
our clinical development programs or the timing of material cash inflows, if any, from our product candidates. Our business, financial
condition and results of operations may be materially adversely affected by any delays in, or termination of, our clinical trials
or a determination by the FDA that the results of our trials are inadequate to justify regulatory approval, insofar as cash in-flows
from the relevant drug or program would be delayed or would not occur.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;&nbsp;<FONT STYLE="color: black">&nbsp;</FONT></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Results of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We anticipate that
our results of operations will fluctuate for the foreseeable future due to several factors, such as the 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Fiscal year Ended December 31, 2011
Compared to Fiscal year Ended December 31, 2010</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Revenues and
Cost of Goods Sold</U></I>. We had no revenues or cost of goods sold during the fiscal years ended December 31, 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Research and
Development Expenses</U>.</I> Research and development expenses for the fiscal year ended December 31, 2011 were $1,158,167, an
increase of $573,869, or 98.2%, from $584,298 for the fiscal year ended December 31, 2010. In 2011, we incurred $342,398 and $318,616
in clinical cost and activities, respectively, as compared to $0 in 2010 for both.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>General and Administrative
Expenses</U>.</I> General and administrative expenses for the fiscal year ended December 31, 2011 were $2,220,361, an increase
of $875,971, or 65%, from $1,344,390 incurred in the fiscal year ended December 31, 2010. This increase is primarily due to payroll
related expenses and professional services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Payroll related expenses
increased to $731,284 in the current year from $413,954 for the fiscal year ended December 31, 2010, an increase of $317,330, or
77%. Payroll related expenses include both cash and non-cash compensation associated with the vesting of restricted stock grants.
The increase in payroll related costs was a result of a full year of payments to our members of the core management team who joined
in June through August of 2010, along with the acceleration of vesting in conjunction with our reverse merger in 2011 of restricted
stock previously issued to our employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Professional services
for the fiscal year ended December 31, 2011 totaled $1,121,547, an increase of $440,642, or 65%, over the $680,905 recognized for
the fiscal year ended December 31, 2010. Of professional services, legal fees totaled $373,075 for the fiscal year ended December
31, 2011, an increase of $15,657, or 4.4%, from $357,418 incurred for the fiscal year ended December 31, 2010. Consulting fees
totaled $299,144 for the fiscal year ended December 31, 2011, an increase of $139,903 or 87.9%, from $159,241 for the fiscal year
ended December 31, 2010. The increase was primarily a result of $189,691 in regulatory costs in the fiscal year ended December
31, 2011 compared to $0 in 2010, offset by a reduction in public relations expenses of $45,513. Accounting fees incurred in fiscal
2011 amounted to $243,003, an increase of $145,400, or 149%, from $97,603 incurred in fiscal 2010. The increase included costs
associated with the audit of Tonix Sub&rsquo;s financial statements for the year ended December 31, 2010, review of our interim
financial statements and filings with the SEC related to our recent reverse merger, completed in October 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Travel, meals and entertainment
costs for fiscal 2011 were $69,268, an increase of $34,548, or 100%, from $34,720 incurred in fiscal 2010. Travel, meals and entertainment
costs include travel related to medical and life sciences conferences. Rent for fiscal 2011 totaled $128,228, an increase of $85,657,
or 201%, from $42,571 incurred in fiscal 2010, due primarily to the opening of new office space in New York. Depreciation expense
in fiscal 2011 totaled $9,300, an increase of $5,446, or 141%, over the expense of $3,854 incurred in fiscal 2010, as a result
of the purchase of new office computers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Interest Expense</U></I>.
Interest expense for the fiscal year ended December 31, 2011 totaled $91,585, an increase of $55,803, or 156%, from $35,782 incurred
during the fiscal year ended December 31, 2010. In 2011, our interest costs were comprised primarily of amortization of deferred
financing costs in conjunction with the issuance of our secured convertible debentures in October 2011. We incurred an aggregate
of $249,543 in deferred financing costs, of which we amortized $53,377 as interest expense for the fiscal year ended December 31,
2011. In addition, we incurred interest expense related to $500,000 of notes payable and our secured convertible debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Net Loss</U></I>.
As a result of the foregoing, net loss for the year ended December 31, 2011 was $3,470,113, compared to a net loss of $1,964,470
for the year ended December 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Three Months Ended September 30, 2012
Compared to Three Months September 30, 2011</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Revenues and
Cost of Goods Sold</U></I>. We had no revenues or cost of goods sold during the three month periods ended September 30, 2012 and
2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Research and
Development Expenses</U>.</I> Research and development expenses for the three months ended September 30, 2012 were $658,143, an
increase of $166,119, or 34%, from $492,024 for the three months ended September 30, 2011. The increase in clinical and non-clinical
cost and activities is primarily due to increased development work related to TNX-102 SL, including formulation development, manufacturing,
human pharmacokinetic studies, and market research.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>General and Administrative
Expenses</U>.</I> General and administrative expenses for the three months ended September 30, 2012 were $1,076,199, an increase
of $553,737, or 106%, from $522,462 incurred in the three months ended September 30, 2011. This increase is primarily due to an
increase in payroll-related expenses, along with increases in investor and public relations expense, travel, meals and entertainment
expense, and related-party consulting agreement expense, offset by decreases in accounting expense, rent, and other professional
fees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Payroll-related expenses
increased to $554,753 in the current period from $149,936 for the three months ended September 30, 2011, an increase of $404,817,
or 270%, primarily related to stock-based compensation and additional personnel. Payroll-related expenses include both cash and
non-cash compensation associated with restricted stock grants in 2011 of $13,768 and options granted in 2012 of $342,798.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Professional services
for the three months ended September 30, 2012 totaled $334,810, an increase of $59,377, or 22%, over the $275,433 incurred for
the three month period ended September 30, 2011. The increase was primarily a result of $98,101 in investor and public relations
in the three months ended September 30, 2012 compared to $24,675 in 2011. Accounting fees incurred in the three months ended September
30, 2012 amounted to $15,536, a decrease of $27,513, or 64%, from $43,049 incurred in the three months ended September 30, 2011.
The decrease in accounting fees was a result of our public reporting obligations incurred prior to our merger in 2011, as we were
still a private company at that time, although we were in the process of preparing to go public. Legal fees totaled $76,279 for
the three months ended September 30, 2012, a decrease of $23,998, or 24%, from $100,277 incurred for the three months ended September
30, 2011. The decrease in legal fees is due to legal expenses incurred when we were a private company preparing for our merger
in 2011, offset by expenses related to SEC filings. Other professional fees totaled $100,304 for the three months ended September
30, 2012, a decrease of $7,128 or 7%, from $107,432 for the three months ended September 30, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Travel, meals and entertainment
costs for three months ended September 30, 2012 were $19,375, an increase of $4,592, or 31%, from $14,783 incurred in the three
months ended September 30, 2011. Travel, meals and entertainment costs primarily include travel to contractors and consultants
engaged in research and development activities related to TNX-102 as well as travel related to investor relations activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Rent for three months
ended September 30, 2012 totaled $28,595, a decrease of $1,765, or 6%, from $30,360 incurred in the three months ended September
30, 2011. Depreciation expense in the three months ended September 30, 2012 totaled $4,076, an increase of $1,722, or 73%, over
the expense of $2,354 incurred in the three months ended September 30, 2011, as a result of the purchase of new office computers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Interest and
Other Financing Costs</U></I>. Interest income for the three months ended September 30, 2012 totaled $440, an increase of $432
from $8 income earned during the three months ended September 30, 2011. The increase was a result of having significantly more
cash on hand during the quarter ended September 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Net Loss</U></I>.
As a result of the foregoing, net loss for the three months ended September 30, 2012 was $1,732,027, compared to a net loss of
$1,014,478 for the three months ended September 30, 2011, an increase of $717,549, or 71%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Nine Months Ended September 30, 2012
Compared to Nine Months September 30, 2011</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Revenues and
Cost of Goods Sold</U></I>. We had no revenues or cost of goods sold during the nine month periods ended September 30, 2012 and
2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Research and
Development Expenses</U>.</I> Research and development expenses for the nine months ended September 30, 2012 were $1,883,559, an
increase of $1,249,063, or 197%, from $634,496 for the nine months ended September 30, 2011. The increase in clinical and non-clinical
cost and activities is primarily due to increased development work related to TNX-102, including formulation development, manufacturing,
human and animal pharmacokinetic studies, and market research.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>General and Administrative
Expenses</U>.</I> General and administrative expenses for the nine months ended September 30, 2012 were $2,862,085, an increase
of $1,612,585, or 129%, from $1,249,500 incurred in the nine months ended September 30, 2011. This increase is primarily due to
payroll-related expenses, professional services, travel, meals and entertainment expense, and marketing related expenses.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Payroll-related expenses
increased to $1,350,267 in the current period from $442,924 for the nine months ended September 30, 2011, an increase of $907,343,
or 205%. Payroll-related expenses include both cash and non-cash compensation associated with the restricted stock grants in 2011
of $139,063 and options granted in 2012 of $571,330. The increase in payroll-related costs was a result of headcount increases,
salary increases and bonuses to our core management team along with the increase in stock based compensation. Upon closing of the
private placement financing in January 2012, the salaries for our core management team were increased, and one-time bonuses were
paid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Professional services
for the nine months ended September 30, 2012 totaled $942,665, an increase of $367,323, or 64%, over the $575,342 incurred for
the nine month period ended September 30, 2011. The increase was primarily a result of $290,544 in investor and public relations
activities in the nine months ended September 30, 2012 compared to $60,878 in 2011, an increase of $229,666, or 377%. Legal fees
totaled $253,961 for the nine months ended September 30, 2012, an increase of $65,292, or 35%, from $188,669 incurred for the nine
months ended September 30, 2011. The increase related to filings with the SEC, as we were a private company during the nine months
ended September 30, 2011, as well as to the preparation and filing of patent applications. Accounting fees incurred in the nine
months ended September 30, 2012 amounted to $149,417, an increase of $41,319, or 38%, from $108,098 incurred in the nine months
ended September 30, 2011. The increase in accounting fees was a result of our public reporting obligations, which we did not have
in 2011 as we were still a private company at that time although we were in the process of preparing to go public. Other professional
fees totaled $204,155 for the nine months ended September 30, 2012, an increase of $40,232 or 25%, from $163,923 for the nine months
ended September 30, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Travel, meals and entertainment
costs for nine months ended September 30, 2012 were $84,507, an increase of $47,143, or 126%, from $37,364 incurred in the nine
months ended September 30, 2011. Travel, meals and entertainment costs include travel to contractors and consultants engaged in
research and development activities related to TNX-102 as well as travel related to investor relations activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Marketing related expenses
for the nine months ended September 30, 2012 were $212,401, an increase of $179,816, or 452%, from $32,585 incurred in the nine
months ended September 30, 2011. The increase in marketing is primarily due to $167,954 invested in market research in current
period compared to $1,890 during the same period, last year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Rent for nine months
ended September 30, 2012 totaled $88,138, a decrease of $9,730, or 10%, from $97,868 incurred in the nine months ended September
30, 2011. Depreciation expense in the nine months ended September 30, 2012 totaled $10,192, an increase of $3,246, or 47%, over
the expense of $6,946 incurred in the nine months ended September 30, 2011, as a result of the purchase of new office computers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other general expenses
for the nine months ended September 30, 2012 were $136,147, an increase of $99,314, or 277%, from $35,833 incurred in the nine
months ended September 30, 2011. Other general expenses are comprised of office operations, conventions and other administrative
expenses. The increase primarily were financial reporting expenses associated with a public entity of $31,883 and conventions of
$42,049 incurred in the current period as compared to $-0- and $9,404 during the same period, last year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Interest and
Other Financing Costs</U></I>. Interest income (expense) for the nine months ended September 30, 2012 totaled $(899,909), a decrease
of $(899,961) from $52 income earned during the nine months ended September 30, 2011. In 2012, our interest costs were comprised
primarily of amortization and write-off of $196,166 of deferred financing costs related to the issuance of our secured convertible
debentures in October 2011, allocated offering costs of $270,743 charged to interest as part of a financing and the fair value
of $426,153, net with prior period accrual, of common stock and warrants issued to convertible debentures holders in connection
with the conversion to a financing. In addition, we incurred interest expense related to our convertible debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Change in fair
value of warrant liability. </U></I>In connection with our January and March 2012 financing, we issued warrants that contained
certain reset provisions. As such, we were required to record the fair value as a liability and mark to market each reporting period.
In June 2012, upon the effectiveness of our registration statement, these reset provisions expired. Therefore we adjusted the fair
value of the warrants from their initial issuance in January and March 2012, charged operations for the increase in fair value
of $1,177,026 and reclassified the fair value of warrants to equity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I><U>Net Loss</U></I>.
As a result of the foregoing, net loss for the nine months ended September 30, 2012 was $6,820,705, compared to a net loss of $1,883,944
for the nine months ended September 30, 2011, an increase of $4,936,761, or 262%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Liquidity and Capital Resources</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of September 30,
2012, we had a working capital deficit of $758,068, comprised primarily of cash of $35,653 and prepaid expenses of $43,076, which
was offset by $697,383 of accounts payable and $136,303 of accrued expenses. For the nine months ended September 30, 2012, we used
$4,207,624 of cash in operating activities. Cash provided by financing activities totaled $4,237,894 from the sale of shares of
capital stock and warrants of $4,387,894, net with repayments of our convertible debentures of $150,000. In the comparable 2011
period, $612,000 was raised through the sale of shares of capital stock and $500,000 through issuance of convertible debentures.
At September 30, 2012, we had cash of $35,653 compared to $41,123 at December 31, 2011. Our cash is held in bank deposit accounts.
At September 30, 2012 and December 31, 2011, we had nil and $2,075,000 of secured convertible debentures outstanding, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cash used in operations
for the nine months ended September 30, 2012 and 2011 was $4,207,624 and $1,170,873, respectively, which represent cash outlays
for research and development and general and administrative expenses in such periods. Increase in cash outlays principally resulted
from manufacturing, pre-clinical, and clinical cost and activities, regulatory cost, payroll and rent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cash used in investing
activities for the nine months ended September 30, 2012 was $35,740 compared to cash provided by investing activities of $347 in
the nine months ended September 30, 2011. In the nine month periods ended September 30, 2012 and 2011, we purchased office furniture
and computer equipment of $35,673 and $2,764, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In their report dated
March 30, 2012, our independent registered public accounting firm stated at December 31, 2011, there is substantial doubt about
our ability to continue as a going concern. Our ability to continue as a going concern is an issue raised due to our net losses
and negative cash flows from operations since inception and our expectation that these conditions will continue for the foreseeable
future. In addition, we will require additional financing to fund future operations. Further, we do not have any commercial products
available for sale and have not generated revenues and there is no assurance that if approval of our products is received that
we will be able to generate cash flow to fund operations. In addition, there can be no assurance that our research and development
will be successfully completed or that any product will be approved or commercially viable. Our ability to continue as a going
concern is subject to our ability to obtain necessary funding from outside sources, including obtaining additional funding from
the sale of our securities, obtaining loans from various financial institutions or being awarded grants from government agencies,
where possible. Our continued net operating losses increase the difficulty in meeting such goals and there can be no assurances
that such methods will prove successful.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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. We expect that our general and administrative expenses will increase in the future as we
expand our business development, add infrastructure and incur additional costs related to being a public company, including incremental
audit fees, investor relations programs and increased professional services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 believe our existing cash will be sufficient to fund our operating
expenses and capital equipment requirements for the next six months. We anticipate we will need approximately $2,000,000 in addition
to our current cash to fund our operating expenses and capital equipment requirements for the next 12 months. We will have to raise
additional funds to continue our operations and, while we have been successful in doing so in the past, there can be no assurance
that we will be able to do so in the future. Our continuation as a going concern is dependent upon our ability to obtain necessary
additional funds to continue operations and the attainment of profitable operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We presently do not
have any available credit, bank financing or other external sources of liquidity. Due to our history and historical operating losses,
our operations have not been a source of liquidity. We will need to obtain additional capital in order to expand operations and
fund 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, stockholders 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>March 2012 Private Placement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Between January and
March, 2012, we consummated a private placement financing transaction (the &ldquo;March 2012 Financing&rdquo;) pursuant to which
we issued an aggregate of 264.7106 units (the &ldquo;March 2012 Units&rdquo;) to certain investors for aggregate cash proceeds
of $4,692,765 and the exchange of $1,925,000 in previously issued debentures that were converted into March 2012 Units.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each March 2012 Unit
had a purchase price of $25,000 per March 2012 Unit and consisted of twenty five thousand (25,000) shares of our Common Stock,
a Class A warrant to purchase twenty five thousand (25,000) shares of common stock (the &ldquo;March 2012 Class A Warrants&rdquo;),
and a Class B warrant to purchase up to twenty five thousand (25,000) shares of common stock (the &ldquo;March 2012 Class B Warrants&rdquo;
and together with the March 2012 Class A Warrants, the &ldquo;March 2012 Warrants&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The March 2012 Class
A Warrants have an exercise price of $1.25 per share of Common Stock and will be exercisable for a period of five years from the
date of issuance. The March 2012 Class B Warrants expired unexercised effective April 24, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
the March 2012 Financing, we paid Dawson James Securities, Inc., a FINRA registered broker-dealer (&ldquo;Dawson James&rdquo;)
a cash payment of $466,777, which represented an 8% commission and a 2% non-accountable expense allowance of the gross proceeds
delivered by investors in the March 2012 Financing. In addition, Dawson James earned warrants to purchase 466,777 shares of Common
Stock (the &ldquo;March 2012 Agent Warrants&rdquo;), which have an exercise price of $1.25 per share of common stock, will be exercisable
for a period of seven years, contain customary anti-dilution protection and are entitled to piggy-back registration rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>2012 Promissory Notes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Between October and
November 2012, we issued promissory notes in the amount of $320,000 (the &ldquo;Notes&rdquo;) in exchange for $320,000 borrowed
from six affiliated investors. The Notes bear no interest and were payable on demand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>2012 Bridge Financing</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 14, 2012,
we sold to accredited investors for aggregate cash proceeds of $390,000, convertible debentures (the &ldquo;Debentures&rdquo;)
in the principal face amount of $390,000 and the exchange of the Notes for Debentures in the principal face amount of $320,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Debentures mature
on the earlier of (i) November 14, 2013 or (ii) the date of closing of a private placement of equity, equity equivalent, convertible
debt or debt financing in which we receive gross proceeds, in one or more transactions, of at least $100,000 (a &ldquo;Subsequent
Financing&rdquo;). The Debentures bear interest at 8% per annum and are convertible at the holder&rsquo;s option into either (i)
a Subsequent Financing at a price equal to a 25% discount to the price of securities sold in the Subsequent Financing or (ii) shares
of our common stock at a conversion price per share equal to $1.00.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>December 2012 Private Placement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2012, we
consummated the December 2012 Financing, pursuant to which we issued an aggregate of 8,904,167 Units to the Purchasers for aggregate
cash proceeds of $2,615,000, at a price per Unit of $0.40, and the exchange of $710,000 in Debentures of the Company that were
converted into Units at a price of $0.30 per Unit. The December 2012 Financing satisfied the requirements for the Subsequent Financing
discussed above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each Unit consisted
of one share of Common Stock, a Class A Warrant to purchase one share of Common Stock and a Class B Warrant to purchase one share
of Common Stock. The Class A Warrants have an exercise price of $0.60 per share of Common Stock and will be exercisable for a period
of five years from the date of issuance. The Class A Warrants may be exercised on a cashless basis under certain circumstances.
The Class B Warrants have an exercise price of $0.40 per share of Common Stock and will be exercisable for a period of one year
from the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
the December 2012 Financing, we paid Kema Partners a cash payment of $70,000, which represented a 7% commission of the gross proceeds
delivered by Purchasers introduced by Kema Partners in the December 2012 Financing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Other</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In July 2011, we entered
into a contract with a contract research organization, or CRO, to investigate the feasibility of developing a new, proprietary
formulation of CBP at a cost of $58,080. In August 2011, we authorized the initiation of formulation work and manufacturing of
TNX-102 gelcap for clinical trials pursuant to a contract with Lipocine with respect to a research and development project for
reformulation work on our leading products for a fee of $235,000. In September 2011, we entered into a contract with a CRO, Pharmanet
Canada, for contract research work with respect to a pharmacokinetic study for TNX-102 gelcap. The full cost of the work to be
performed is $637,231. Payment is due in four installments based on the achievement of certain performance milestones. In October
2011, we entered into an agreement with another CRO to develop, and perform an exploratory non-clinical pharmacokinetic study on,
a new formulation of CBP for an approximate cost of $180,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2011, we
entered into an agreement with a public relations firm to provide news media placement and political intelligence from January
2012 through June 2012 for a total cost of $60,000, but subsequently amended the agreement to cover the period May 2012 through
October 2012. In April 2012, we entered into an agreement with a CMO to formulate and manufacture TNX-102 SL drug material for
clinical testing at a cost of $93,000. In May and June 2012, we entered into five contracts with a CMO to develop and manufacture
sublingual formulations of CBP and related compounds for an approximate total cost of $335,000. Payment is due in four installments
in four of these contracts, and is due in five installments in one contract. In May 2012, we entered into a contract with a CRO
to perform an exploratory pharmacokinetic study, which evaluated TNX-102 SL, at a cost of $283,000, with payment due in three installments.
In May 2012, we entered into an agreement with an investor relations firm to provide investor relations services, at a cost of
$50,000 to be paid in four equal monthly installments. In September 2012, we entered into a contract with a CRO to perform technology
transfer of manufacturing and formulation at a cost of $44,500, with payment due in two installments. In September 2012, we entered
into a contract with a CMO to perform analytical work on TNX-102 SL at an approximate cost of $95,000, with payment due in three
installments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Transactions with Related Parties</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Dr. Seth Lederman,
our Chief Executive Officer and Chairman of the Board, and Dr. Donald Landry, one of our directors, are the primary founders of
Tonix Sub. We have entered into various transactions with several companies under their control, including L&amp;L Technologies,
Plumbline, Targent Pharmaceuticals, LLC and Lederman &amp; Co. In 2010, we entered into a two-year consulting agreement with Lederman
&amp; Co. for clinical development, strategic, management and operational consulting services. Lederman &amp; Co. received $250,000
per annum for its services, until August 1, 2011, when it received $127,000 per annum until such time as we closed on the 2012
Financing. We first closed on the 2012 Financing in January 2012, and effective February 1, 2012, Lederman &amp; Co. receives $250,000
per annum for its services. The consulting agreement renews automatically for subsequent terms of one year at $250,000 per annum.
In January 2012, the related party companies received interest on the convertible notes in the aggregate amount of $6,183.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
the March 2012 Financing, related party convertible debenture holders received an aggregate of 84,150 shares of common stock and
10,000 warrants to purchase the Company's common stock at an exercise price of $1.00 for three years (see Note 10 on page F-28).
Upon exchange of debentures for units in the March 2012 Financing, related party debenture holders received an aggregate of 275,000
shares of the Company's common stock, 275,000 March 2012 Class A Warrants and 275,000 March 2012 Class B Warrants (see Note 10
pn page F-28).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Stock Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In February 2012, we
approved the 2012 Incentive Stock Options Plan (&ldquo;2012 Plan&rdquo;). The 2012 Plan provides for the issuance of options to
purchase up to 4,000,000 shares of our common stock to officers, directors, employees and consultants. Under the terms of the 2012
Plan, we may issue Incentive Stock Options, as defined by the Internal Revenue Code, and nonstatutory options. The Board of Directors
determines the exercise price, vesting and expiration period of the options granted under the 2012 Plan. However, the exercise
price of an Incentive Stock Option must be at least 100% of fair value of the common stock at the date of the grant (or 110% for
any stockholder that owns 10% or more of our common stock). The fair market value of the common stock determined based on quoted
market price or in absence of such quoted market price, by the Board of Directors in a good faith. Additionally, the vesting period
of the grants under the 2012 Plan should not be more than five years and expiration period not more than ten years. We reserved
4,000,000 shares of our common stock for future issuance under the terms of the 2012 Plan. In May 2012, we issued options to purchase
3,500,000 shares of common stock pursuant to the 2012 Plan, with such options vesting 1/3<SUP>rd</SUP> on May 9, 2013 and 1/36<SUP>th</SUP>
on the 9<SUP>th</SUP> of each month thereafter for 24 months, having an exercise price of $1.50 and expiring 10 years from date
of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Lease Commitments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In September 2010,
we entered into a five-year lease for office space in New York City, with monthly payments escalating from approximately $10,000
in the first year to approximately $11,000 in the fifth year. The Company received a rent credit of $9,420 in each of the months
of November 2010, December 2010 and January 2011. We issued a letter of credit in the amount of approximately $60,000 for the benefit
of the landlord, which is collateralized by a money market account. Our future minimum lease payments under the operating lease
are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Year&nbsp;Ending&nbsp;December&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 84%; text-align: left">2013</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">127,889</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">131,513</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">2015</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">100,719</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">360,121</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Critical Accounting Policies and Estimates</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 of America. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe the following
critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Research and Development</I>.
Tonix outsources its research and development efforts and expenses 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Stock Based Compensation</I>.
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. Restricted stock payments to nonemployees are recognized as an expense
over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is
reached or the date performance is completed. In addition, for awards that vest immediately and are nonforfeitable, the measurement
date is the date the award is issued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Income Taxes</I>.
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit
carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting
amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income
tax assets if it is not more likely than not that these deferred income tax assets will be realized. The Company recognizes a tax
benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination
by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial
statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Recent Accounting Pronouncements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There were various
updates recently issued, most of which represented technical corrections to the accounting literature or application to specific
industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations
or cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Corporate Structure</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We were incorporated
on November 16, 2007 under the laws of the State of Nevada as Tamandare Explorations Inc. From inception through October 2011,
we were involved in the acquisition, exploration and development of natural resource properties in the State of Nevada. On October
7, 2011 (&ldquo;Closing Date&rdquo; and the closing of the share exchange transaction, the &ldquo;Closing&rdquo;), we executed
and consummated a share exchange agreement by and among Tonix Sub and the stockholders of 100% of the equity securities of Tonix
Sub, including, the holders of 5,207,500 shares of common stock, 1,500,000 shares of Series A Preferred Stock and 2,275,527 shares
of Series B Preferred Stock (the &ldquo;Tonix Shareholders&rdquo;), on the one hand, and us and David Moss (&ldquo;Moss&rdquo;),
our then sole officer and director and majority shareholder, on the other hand (the &ldquo;Share Exchange Agreement&rdquo; and
the transaction, the &ldquo;Share Exchange&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the Share Exchange,
the Tonix Shareholders exchanged their shares of Tonix Sub for newly issued shares of our common stock (&ldquo;Common Stock&rdquo;).
As a result, upon completion of the Share Exchange, Tonix Sub became our wholly-owned subsidiary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Upon completion of
the Share Exchange, the Tonix Shareholders received an aggregate of 22,666,667 shares of our Common Stock. Moss returned 1,500,000
shares of Common Stock to us, which were retired, and our existing stockholders retained 4,000,000 shares of Common Stock. The
22,666,667 shares issued to the Tonix Shareholders constituted approximately 85% of our 26,666,667 issued and outstanding shares
of Common Stock post-Closing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result of the
Share Exchange, we acquired 100% of the capital stock of Tonix Sub and consequently, control of the business and operations of
Tonix Sub and Krele. From and after the Closing Date of the Share Exchange, our primary operations consist of the business and
operations of Tonix Sub and Krele.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 11, 2011,
we changed our name to Tonix Pharmaceuticals Holding Corp. to reflect our new business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Corporate Background</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 1996, Seth Lederman,
MD, and Donald Landry, MD, PhD, formed L&amp;L to develop medications for CNS conditions. Dr. Lederman is our Chairman and Chief
Executive Officer and Dr. Landry is a Director. L&amp;L was a founder of Janus Pharmaceuticals, Inc., which later became Vela Vela,
which developed various therapeutics, including a VLD version of CBP under an agreement with L&amp;L. Vela decided to focus its
resources on other programs and transferred the rights in VLD CBP and certain other technologies to L&amp;L in March 2006.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Tonix Sub formed in
June 2007 as Krele Pharmaceuticals, Inc. by L&amp;L and Plumbline. Dr. Lederman is managing partner of Plumbline. Plumbline possessed
rights to certain technology for the treatment of alcohol dependence and abuse. In connection with founding Tonix Sub, L&amp;L
and Plumbline entered into an intellectual property transfer and assignment agreement with Tonix Sub for the purpose of assigning
patents and transferring intellectual property and know-how in exchange for shares of common stock of Tonix Sub. As a result of
economic conditions related to the financial crisis of 2007 and 2008, Tonix Sub was not successful in raising money to fund its
programs until 2009. As a result, Tonix Sub was unable to advance the development programs and had little activity except for prosecuting
and maintaining patents and maintaining contracts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2009, Tonix Sub
contracted with the Toronto Psychiatric Research Foundation to analyze the sleep data from the Moldofsky Study, who were treated
with bedtime VLD CBP or placebo. The Moldofsky Study was conducted in Canada by the Toronto Psychiatric Research Foundation, and
Tonix Sub obtained the data from this study from L&amp;L. In addition, in 2009, Tonix Sub contracted with Caliper to analyze the
interactions of CBP with certain receptors. In June 2010, Tonix Sub entered into consulting agreements with L&amp;L and Lederman
&amp; Co and also acquired certain rights to develop isometheptene mucate as a treatment for certain types of headaches from Lederman
&amp; Co., which we are developing as TNX-201. Dr. Lederman is managing partner of Lederman &amp; Co. Between June 2010 and October
2011, Tonix Sub was active in recruiting new officers and directors and initiating preclinical and clinical development of novel
CBP formulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Lederman &amp; Co predominantly
provides us with clinical development expertise. L&amp;L predominantly provided us with scientific development expertise until
the termination of the consulting agreement in June 2012. Relative to traditional pharmaceutical development companies, we can
be considered a virtual company, since we contract with third-party vendors to provide many functions that are core to traditional
pharmaceutical companies. For example, we have contracted with PharmaNet Canada to develop methods for analyzing CBP in the blood
and to conduct human clinical studies to evaluate the performance of our formulation technology. Lederman &amp; Co is responsible
for overseeing the scientific and technical aspects of PharmaNet&rsquo;s contract work product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In July 2010, Tonix
Sub changed its name to Tonix Pharmaceuticals, Inc. In August 2010, Tonix Sub formed Krele.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Business Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a specialty
pharmaceutical company focused on developing novel pharmaceutical products for challenging disorders of the CNS. We search for
potential therapeutic solutions among known pharmaceutical agents that lack regulatory approval for the indications we seek, but
may be approved for use in other indications. The ongoing evolution in the understanding of certain CNS disorders provides us with
opportunities to develop such agents as proprietary products for new indications. We typically seek to create new dose and formulation
options that are tailored to the therapeutic uses to which we apply these agents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Many CNS drugs have
been identified by physicians who observe unexpected improvements in their patients&rsquo; CNS conditions despite being prescribed
for a different purpose. One of our goals is to establish formal clinical study programs to determine if such anecdotal observations
are, in fact, reflections of a compound&rsquo;s ability to treat a particular CNS condition. While some new applications can use
the commercially-available form of a given drug, in other cases, reformulating the active ingredient may improve the active ingredient&rsquo;s
safety or effectiveness in treating the condition. If we demonstrate success in our formal development programs, we will seek marketing
approval from the FDA.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&#9;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are currently devoting
the majority of our efforts to the development of our lead product candidate, TNX-102 SL. TNX-102 SL is a novel dose and formulation
of CBP, the active pharmaceutical ingredient of two widely prescribed muscle relaxant products, Flexeril and Amrix. TNX-102 SL
is distinct from these products as it is being developed at a dose level significantly below the lowest marketed doses of Flexeril
and Amrix. TNX-102 SL is also distinct from these products with regard to its route of administration, as it is designed to be
placed under the tongue and disintegrated to provide sublingual absorption, whereas Flexeril and Amrix are designed to be swallowed.
TNX-102 SL is also intended for chronic use, whereas Flexeril and Amrix are marketed for two to three weeks of use. We are currently
developing TNX-102 SL for the treatment of FM under an IND and under three CTAs filed in Canada. We are also developing TNX-102
SL for the treatment of PTSD for which we held a pre-IND meeting in October 2012. We expect that any applications we submit for
FDA approval of TNX-102 SL will be submitted under Section 505(b)(2) of FDCA, which we believe will allow for a shorter timeline
of clinical development as compared to that needed to fulfill the requirements of Section 505(b)(1), under which NCEs are generally
reviewed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">TNX-102 SL is a small,
rapidly disintegrating tablet containing CBP for sublingual administration at bedtime. We designed TNX-102 SL to enable the efficient
delivery of CBP to the systemic circulation via sublingual transmucosal absorption and to avoid first-pass liver metabolism. We
also designed TNX-102 SL to provide CBP at doses lower than those currently available. We have conducted several clinical and pre-clinical
pharmacokinetic studies of TNX-102 SL which we believe support its development as a novel therapeutic product for FM and PTSD,
and which demonstrate a number of potentially advantageous characteristics as compared to current CBP-containing products, none
of which are approved for these indications. Based on our Phase 1 comparative study, we have observed that, as compared to oral
CBP tablets, TNX-102 SL results in faster systemic absorption and significantly higher plasma levels of CBP in the first hour following
administration. TNX-102 SL was generally well-tolerated, with no serious adverse events reported in this study. Some subjects experienced
transient numbness on the tongue after TNX-102 SL administration, and other side-effects reported were similar to those associated
with current CBP products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based on these promising
results, we are advancing TNX-102 SL for the management of FM. We believe that TNX-102 SL could be approved by the FDA for the
treatment of FM following two adequate, well-controlled safety and efficacy studies and, if required, a long-term safety exposure
study that, together, would confirm the safety and efficacy of TNX-102 SL in a sufficient number of FM patients to satisfy the
approval requirements under Section 505(b)(2). New drug products based on novel active ingredients, approved under Section 505(b)(1),
need significantly more clinical studies, e.g. drug-drug interaction, special population pharmacokinetic, and long-term safety
exposure studies, than will be required for TNX-102 SL. Under the IND, we plan to initiate a potential pivotal efficacy trial in
the first half of 2013 that will evaluate this candidate in FM. A Type B Pre-Phase 3 meeting has been scheduled with the FDA in
February 2013, at which we plan to discuss the design of the clinical program, including the acceptability of the pivotal study
design and the proposed registration plan, to support the approval of TNX-102 SL for the management of FM.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are also advancing
TNX-102 SL for the management of PTSD. We held a pre-IND meeting with the FDA in October 2012, and we plan to file an IND for this
indication in the first half of 2013. We then plan to conduct a clinical proof-of-concept trial of TNX-102 SL in PTSD in the second
half of 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">CBP is the active pharmaceutical
ingredient in our lead product candidate, TNX-102 SL. We are utilizing drug delivery technology to produce new formulations. In
addition to CBP, TNX-102 SL contains excipients, which are well-characterized, are listed in the IIG, and are approved for pharmaceutical
use. As a result, we anticipate seeking FDA marketing approval of TNX-102 SL through a 505(b)(2) NDA. As one of three types of
new drug applications, the 505(b)(2) NDA allows drug companies to obtain FDA approval of new drug products without having to conduct
the full complement of safety and efficacy trials, which is often the most time-consuming and expensive part of the drug development
process. As the 505(b)(2) NDA permits the drug manufacturer to rely on the agency&rsquo;s findings for a previously-approved drug,
published literature, or both, it permits the FDA to make some safety and effectiveness determinations through the review of materials
in the public domain or in already approved NDAs of products containing CBP. The 505(b)(2) regulatory pathway would spare us some
of the burden of generating all of this data for ourselves and may allow TNX-102 SL to progress through a shorter development pathway
than is typical for pharmaceutical products based on novel active ingredients. We have not filed an NDA for TNX-102 SL for any
indications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to TNX-102
SL, we have developed other innovative formulations of CBP, including TNX-102 gelcap. We have developed TNX-102 gelcap under an
agreement with Lipocine, a contract formulation developer and small-scale manufacturer. Although we had met with the FDA to discuss
the TNX-102 gelcap development program in August 2011 and we have generated clinical data that support the further development
of TNX-102 gelcap, we currently do not plan to advance this candidate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We also have a pipeline
of other product candidates, including TNX-201 and TNX-301. TNX-201 is based on isometheptene mucate and is under development as
a treatment for certain types of headaches. For competitive reasons, we do not disclose the identities of the active ingredients
or targeted indications in our pipeline until a U.S. patent has been allowed or issued. Consistent with our mission, these product
candidates are or likely will be reformulations of active ingredients that have been used in humans in other products and that
are designed for new CNS therapeutic indications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In other cases, the
products will be formulated to match predicate products closely enough to be considered generic copies or similarly enough to other
marketed products to rely (in part) on their regulatory review and approval, as well as available published data. The predicate
product may be approved by the FDA under an NDA or may have been reviewed for safety and effectiveness by the National Academy
of Sciences under the DESI program, in which case they would be considered by FDA to be &ldquo;unapproved products&rdquo;. For
DESI products, it is our intent to develop NDA versions to meet cGMP and the ICH requirements to seek approval under the 505(b)(2)
regulatory pathway.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because of our size
and being in the development stage, we do not currently devote a significant amount of time or resources towards our other pipeline
candidates. We anticipate that sometime in 2013 we will begin developing formulations for TNX-201 and possibly TNX-301, but do
not expect to start clinical trials until 2014 at the earliest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The process of taking
a new drug formulation from concept through testing to approval for a new indication by the FDA is a time-consuming, costly and
a high-risk process. Once a drug formulation has been tested in laboratories, we need to conduct clinical trials of the product
candidate to test its uptake into the blood stream, elimination, effectiveness and safety. Neither laboratory nor animal studies
predict the properties of drugs in humans, so designing new formulations can result in a large number of unexpected outcomes. The
Phase 1 studies are performed by administering new drug formulations to a limited number of healthy human volunteers and are designed
to test the initial concept of the drug formulation and to determine the correct dosage to be tested subsequently on patients affected
with the target disorder. The initial Phase 1 studies can take up to a year to complete, however, since we reformulate versions
of approved drugs for new uses, we may need to devote less time to Phase I studies since our testing is informed by significant
prior human research that we believe allows us to reduce the possible safety-related outcomes. The next step in the process is
to conduct a proof-of-concept efficacy study to identify the effective dose(s). A small Phase 2a efficacy study in the representative
patient population will be done either using a pilot formulation or the formulation selected for further development. A larger
study in which the selected formulation has been optimized for the target indication can be referred to as a first pivotal study,
a Phase 2b study or a Phase 3 study. If the results of this study are positive and are accepted by the FDA as fulfilling the requirements
of a registrational study, then it may be considered to be one of the two pivotal studies typically required for drug approval.
The first pivotal study for a condition like FM typically takes a year to complete and then two to three months to interpret the
data, but we believe we will be able to conduct our first pivotal study of TNX-102 SL in less time due to the nature of the trial
design. If the first pivotal study suggests the drug is safe and effective, then a second pivotal Phase 3 study is conducted. The
second pivotal study in FM typically takes 18 months to complete if no additional long-term safety exposure data are necessary
for an NDA filing. After the second pivotal study is completed, and if the results are deemed a success, we would submit an NDA
to the FDA seeking approval of the new drug product. We believe it would take approximately six months to prepare and file the
NDA and another 14 months for FDA approval. The drug could be marketed shortly after FDA approval. Therefore, it typically takes
more than five years to bring a new formulation of a drug to market for a new indication, and any delays in the process, such as
lack of capital necessary to run clinical trials, unexpected results, adverse effects, or difficulty in recruiting willing subjects
for trials, would result in additional time before a drug could be approved for marketing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In August 2010, we
formed Krele to commercialize products that are generic versions of predicate NDA products. We anticipate that when our branded
products lose patent protection, Krele may market authorized generic versions of them. Krele also may develop or acquire generic
products approved under ANDAs and we may market branded versions (branded generics) of such products. Krele has been issued a state
license in New York.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our Strategy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our objective is to
develop and commercialize our product candidates to treat CNS conditions, including FM and PTSD. The principal components of our
strategy to achieve this objective are to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 4%; font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 84%; text-align: justify"><FONT STYLE="font-size: 10pt">pursue development and regulatory approval pathways by reformulating versions of approved drugs for new uses and by using the Section 505(b)(2) regulatory pathway for NDA approval;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">adopt a multi-pronged patent strategy to protect our products, including patents which protect methods of use for the active ingredients in our products, the formulation technology employed in our products, and the performance characteristics of our products in the human body;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">provide clear value propositions to third-party payers, such as managed care companies or government programs like Medicare, to merit reimbursement for our product candidates; and</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">enter into collaborations with other pharmaceutical companies with respect to, among others, our FM and PTSD product candidates and other products that will benefit from development or marketing resources beyond those in our Company.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Pursue development
and regulatory approval pathways</I>. We believe our lead product candidates may be approvable under pathways that are potentially
shorter than those typically available for drug products based on novel active ingredients (Section 505(b)(1)). By focusing on
developing new formulations of approved drugs for new uses, we believe that we will be able to use the Section 505(b)(2) regulatory
pathway for NDA approval. This pathway can reduce the time and expense required for our development programs by allowing our use
of previously-generated safety and efficacy information regarding the active pharmaceutical ingredients in our lead product candidates
to support the filing and approval of our NDA application. Doing so may help reduce the size and scope of our preclinical and clinical
trials. The FDA has strict requirements on the marketing of drugs, and FDA approves each drug for specific uses which are called
the label indications. The use of a drug product for the treatment of a condition other than one of its approved label indications
is called off-label use. The development of an existing FDA-approved drug for the treatment of a condition other than one of its
approved label indications is considered a &ldquo;new use&rdquo;. For companies involved in the ethical development and marketing
of prescription drugs in the US, FDA approval of a new use or new label indication is the only legal basis of marketing claims
for that use or indication. Off-label use is not recognized by the FDA or FDA-regulated companies as a new use.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Adopt a multi-pronged
patent strategy.</I> We are pursuing a multi-pronged patent strategy by seeking intellectual property protection on several aspects
of our products. Aspects we seek to protect include, among others, methods of use for certain known active pharmaceutical ingredients,
formulation technologies incorporated into our products, and performance characteristics of our products in the human body. With
respect to methods of use patents, we believe the therapeutic uses we target are new uses for these active ingredients and we have
been issued patents directed to certain aspects of our new uses. For example, the invention of bedtime VLD CBP as a treatment for
FM was novel and unexpected when our patents were filed in 2000. We are seeking additional patents to cover other new uses. For
example, we filed a patent application seeking to protect the use of CBP in PTSD. With respect to formulation patents, we believe
our products will be protected by patents that describe inventions of technology for making new formulations, which may include
novel routes of delivery for the active ingredients. With respect to patents related to the performance characteristics of our
products in the human body, we believe our products will be protected by patents that describe novel pharmacokinetic properties
of the active ingredient, as well as of its active metabolites, at certain times after administration. For example, we filed a
patent application seeking to protect novel pharmacokinetic properties of CBP as enabled by TNX-102 SL.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Provide clear value
propositions to third-party payors to merit reimbursement for our product candidates</I>. We are designing our clinical development
programs to demonstrate compelling competitive advantages to patients and prescribers and also to demonstrate value propositions
to third-party payors. We believe TNX-102 SL might help in the management of FM by reducing pain and other symptoms, such as fatigue.
In addition, we believe that bedtime treatment with TNX-102 SL will have fewer day time side-effects than off-label bedtime treatment
with immediate release CBP. For FM, we believe an FDA-approved product would capture some of the off-label use of generic CBP.
Because FDA approvals are based on objective data, we believe that third-party payors will provide reimbursement for an FDA approved
product, even at a premium price relative to other drugs that are used off-label, such as immediate-release CBP, tizanidine, baclofen,
carisoprodol or metaxalone. For example, third-party payors reimburse the use of Lyrica&reg; and Cymbalta&reg; for FM despite the
availability of off-label generic versions of drugs with similar mechanisms of action, for example, Neurontin&reg; (gabapentin)
and generic anti-depressants, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Enter into collaborations
to maximize the value of our technology</I>. We believe certain of our drug development candidates, including TNX-102 SL, can be
developed and marketed more effectively by companies that already have significant drug development and marketing capabilities.
We will seek to enter into collaborations with pharmaceutical or biotechnology companies for the commercialization of these product
candidates at the times we believe most effective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our Lead Product Candidates</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our lead product candidate
is TNX-102 SL, for the treatment of FM and PTSD. TNX-102 SL consists of CBP in a mixture of inactive ingredients that are called
&ldquo;excipients&rdquo;, which we believe will improve the absorption rate of CBP in ways that will optimize the product for bedtime
treatment. The excipients used in TNX-102 SL are approved by the FDA for pharmaceutical uses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Cyclobenzaprine</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">CBP was first synthesized
in 1961 by Merck, and the 10 mg Flexeril immediate-release dose form was FDA approved in 1977 for the relief of muscle spasm associated
with acute, painful musculoskeletal conditions as an adjunct to rest and physical therapy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although a number of
clinical studies have addressed the potential use and benefit of CBP in treating symptoms of FM, to our knowledge these studies
have not motivated a sponsor to pursue FDA approval.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based on CBP&rsquo;s
safety and efficacy for treating muscle spasm, in the 1990s, Merck conducted studies to support an application to market a 5 mg
Flexeril tablet (low dose) for the over-the-counter, or OTC, market, whereby patients can purchase medicine without a physician&rsquo;s
prescription. Although Merck&rsquo;s studies re-affirmed the safety and demonstrated efficacy of 5 mg Flexeril in several large
trials, the OTC division of the FDA rejected the application for use without a prescription, apparently, we believe, because muscle
spasm was deemed a condition that required a physician to diagnose and supervise treatment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Merck divested the
Flexeril franchise to Alza Pharmaceuticals, or Alza. Alza subsequently was acquired by Johnson and Johnson and Flexeril is part
of their McNeil Specialty Pharmaceuticals division. Based largely on the Merck studies, McNeil won approval of Flexeril 5 mg tablets
as a prescription medicine to treat muscle spasm. McNeil promoted Flexeril 5 mg tablets for the three year period of market exclusivity
based on The Drug Price Competition and Patent Term Restoration Act of 1984, generally referred to as the Hatch-Waxman Act. Following
this exclusivity period, several generics entered the market and took market share from Flexeril. McNeil continues to manufacture
Flexeril, but we believe McNeil no longer actively promotes it.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Despite the approved
uses of CBP in treating muscle spasm, we believe current marketed formulations of CBP are limited for treating FM by unpredictable
absorption. As described in the Flexeril package insert, the amount of CBP absorbed into the bloodstream varies between 33-55%
of the dose ingested. The variability in absorption may be due to several factors, including effects of the stomach pH (acidity
or base) on the dissolution of the tablets, as well as the context of either an empty stomach or a recent meal. Food in the stomach
and small intestine from a recent meal contributes to variability in absorbing other drugs. The uncertainties in absorption rates
make it challenging for a physician contemplating a bedtime treatment for FM to ensure the intended therapeutic effect is achieved
without risking side effects like next-day drowsiness, which could result if the patient has too much CBP remaining in the bloodstream
the next day.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If a product could
deliver a predictable absorption rate of CBP, it would mean patients would be less likely to receive too little drug to receive
a therapeutic effect. Conversely, patients would be less likely to be over-dosed, which might lead to potential side effects, including
next-day drowsiness. An optimal VLD CBP product could have faster absorption, faster clearance and more predictable effects than
the immediate release tablet format. We have tested a number of technologies to optimize the properties of VLD CBP as a bedtime
therapy for FM and PTSD. Our lead product, TNX-102 SL is a novel sublingual tablet form of VLD CBP that we have tested in pre-clinical
and clinical studies. We intend to enter TNX-102 SL into a potential pivotal clinical trial program in FM in the first half of
2013, and into a Phase 2 trial in PTSD in the second half of 2013. We believe the unique properties of TNX-102 SL, as demonstrated
by the results of our studies, support its development in both FM and PTSD. We have developed other innovative formulations of
CBP, including TNX-102 gelcap. Although we had met with the FDA to discuss the TNX-102 gelcap development program in August 2011
and we have generated clinical data that support the further development of TNX-102 gelcap, we currently do not plan to advance
this candidate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>TNX-102 SL in Fibromyalgia Syndrome</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">TNX-102 SL, our most
advanced product candidate, is a rapidly disintegrating tablet containing VLD CBP that is designed to be placed under the tongue
at bedtime. The development of TNX-102 SL is supported by the results of the Moldofsky study, which evaluated oral administration
of CBP at doses below the lowest marketed dose in the evening, as well as by preclinical and comparative clinical pharmacokinetic
studies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the Moldofsky study,
which was a randomized, double-blind, placebo-controlled, Phase 2a trial, it was demonstrated that VLD CBP in a capsule swallowed
between dinner and bedtime resulted in significant decreases in next-day pain and other core FM symptoms, as well as in a significant
improvement in sleep quality. We believe that CBP exerts its benefit in FM via its ability to improve the restorative quality of
sleep, which has been shown to be frequently impaired in patients with FM or PTSD. Current CBP products are believed to be widely
used off-label by FM patients.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">FM is diagnosed by
groups of symptoms that have been defined by committees of the American College of Rheumatology, or ACR, and a committee of experts
from the organization Outcome Measures in Rheumatology. In 2007, Pfizer&rsquo;s Lyrica (pregabalin) became the first medicine approved
by the FDA for the management of FM. In 2008, Eli Lilly&rsquo;s Cymbalta (duloxetine) became the second medicine approved by the
FDA for the management of FM. In 2009, Savella&reg; (milnacipran) was the third medicine approved by the FDA for the management
of FM. Savella is marketed by Forest Laboratories.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Product Development Plan</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Phase 2a Data of VLD Cyclobenzaprine
in FM Patients</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our motivation to focus
our efforts on developing TNX-102 SL for FM stems from the results of the Moldofsky study, the related rights to which we acquired
from L&amp;L. Specifically, this study was a randomized, double-blind, placebo-controlled, dose-escalating eight week trial conducted
at two study centers. The study subjects met ACR criteria for FM.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Patients received VLD
CBP immediate-release 1 mg capsules or corresponding placebo capsules to ingest after dinner and before bedtime. Initially, patients
took one capsule each evening, but over the course of the study, they were allowed to increase the number of tablets taken in increments
of one capsule per week. The maximum number of capsules allowed was four per evening, which would be a total dose of 4 mg immediate-release
CBP.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Patients treated with
VLD CBP demonstrated significant improvements in pain, fatigue and tenderness at week 8 relative to baseline, whereas placebo-treated
patients did not improve (Figure 1). Although this study excluded patients who met formal criteria for major depressive disorder
or any anxiety disorder, there is a high degree of co-existing symptoms of depression and anxiety associated with FM. VLD CBP treatment
resulted in significant reductions in total Hospital Anxiety and Depression Scale, or HAD, which measures symptoms of anxiety and
depression, and the HAD depression subscale which measures depressive symptoms (Figure 1).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><img src="tchart.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This study showed treatment
with VLD CBP:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 11%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 4%; font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 85%; text-align: justify"><FONT STYLE="font-size: 10pt">provided benefit in core symptoms of FM, including pain and fatigue;</FONT></TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; width: 11%">&nbsp;</TD>
    <TD STYLE="font-family: Symbol; text-align: justify; width: 4%"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify; width: 85%"><FONT STYLE="font-size: 10pt">improved mood, by demonstrating a significant decrease in HAD scores; and</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">was well tolerated, with no serious adverse events, or SAEs, or discontinuations due to adverse events, or AEs.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This study also showed
that VLD CBP taken between dinner and bedtime resulted in a significant improvement in sleep quality. We believe that CBP exerts
its benefit in FM via its ability to improve the restorative quality of sleep, which has been shown to be frequently impaired in
patients with FM.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This research was published
in the <I>Journal of Rheumatology</I>, in an article entitled &ldquo;Effects of Bedtime Very Low Dose (VLD) Cyclobenzaprine (CBP)
on Symptoms and Sleep Physiology in Patients with Fibromyalgia Syndrome (FM): A Double-blind, Randomized, Placebo-controlled Study.&rdquo;
The citation is: Moldofsky H, Harris H, Kwong T, Archambault WT and Lederman S. <FONT STYLE="text-underline-style: none; color: windowtext"><I>J
Rheum</I></FONT> 2011 Dec;38(12):2653-63.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Pharmacokinetic and Bioequivalence Studies</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have conducted two
preclinical and two clinical studies of our sublingual formulations of CBP, which have evaluated the pharmacokinetics of these
formulations as well as their bioequivalence to oral CBP.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our preclinical animal
studies demonstrated that our sublingual formulations provide faster delivery and more efficient systemic absorption of CBP as
compared to current oral forms of the drug.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our first clinical
study of sublingual CBP evaluated a solution formulation in which certain key ingredients of TNX-102 SL were delivered under the
tongue in a small volume of water. This single-dose study was conducted in Canada. The trial enrolled 23 healthy volunteers, and
subjects received one of: a sublingual solution containing 2.4 mg of CBP and sublingual absorption-enabling ingredients of TNX-102
SL (Arm 1), a sublingual solution that was designed to simulate crushed immediate-release CBP tablets, i.e., without the sublingual
absorption-enabling ingredients (2.4 mg) (Arm 2), an immediate-release oral CBP tablet (5 mg) (Arm 3), or intravenous CBP (2.4
mg) (Arm 4). The study measured circulating blood levels of CBP at pre-defined time-points over six days after receiving study
medication. Patients receiving sublingual formulations were instructed to spit and rinse 90 seconds following administration. The
results demonstrated that the solution formulation of TNX-102 SL (Arm 1) delivered CBP to the systemic circulation more efficiently
than the sublingual solution of a simulated crushed tablet (Arm 2) and faster than the ingested tablet (Arm 3). In the study, all
of the CBP formulations were well-tolerated, and there were no unexpected adverse events.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our second clinical
study of sublingual CBP evaluated TNX-102 SL, the tablet formulation we expect to advance into further development. This study
was conducted in Canada under the U.S. IND. This study enrolled 24 healthy volunteers and evaluated a single dose of one 2.4 mg
tablet or two tablets (4.8 mg) of TNX-102 SL or the currently-marketed 5 mg CBP tablet. In comparison to oral administration of
the 5 mg CBP tablet, both sublingual doses of TNX-102 SL demonstrated faster systemic absorption. After administration of TNX-102
SL, blood levels of CBP were significantly higher at 20, 30, 45 and 60 minutes relative to administration of the 5 mg CBP tablet.
In the study, TNX-102 SL was generally well tolerated. There were no unexpected adverse events, with the exception of a mild, temporary
numbness at the tongue experienced by less than one-third of the subjects that received TNX-102 SL tablets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Prospective Phase 2b Study</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect to advance
the clinical development of TNX-102 SL for the management of FM by conducting a Phase 2b study. In this multicenter, randomized,
double-blind, placebo-controlled clinical trial, FM patients will be administered either TNX-102 SL or placebo at bedtime nightly
for 12 weeks. We expect to enroll 100-200 patients into this study. We expect that our proposed Phase 2b study, if successful and
accepted by the FDA, will be one of the two pivotal studies required to support the NDA approval.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect the primary
efficacy measure in this study will be the change in pain severity at week 12 with TNX-102 SL as compared to placebo, as assessed
by the Numeric Rating Scale, or NRS. This endpoint is similar to that utilized by drug products currently approved for use in FM.
We will also collect information on other outcome measures, including NRS scores at other timepoints, the Fibromyalgia Impact Questionnaire,
and the Patient Global Impression of Change. We will seek FDA concurrence on the study design at the February 2013 Pre-Phase 3
meeting, and expect to engage a CRO to conduct and manage this study under our direction. We expect the study will begin enrollment
in the first half of 2013 and will be completed in the first quarter of 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Prospective Multi-dose Pharmacokinetic Study</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Since CBP will be used
chronically in TNX-102 SL, we will study TNX-102 SL in comparison to immediate-release CBP in multiple-day dosing (once daily).
Subjects will receive TNX-102 SL or immediate-release CBP for four or more consecutive days. Peak and trough blood levels of CBP
will be measured. The results of this study will provide information regarding blood levels of CBP resulting from use of the marketed
immediate-release tablet and our sublingual tablet when taken in a multiple day regimen. We expect the data from this study to
serve as a &lsquo;bridge&rsquo;, in that they will allow us to use the immediate-release CBP tablet as the reference product in
our submission of a Section 505(b)(2) NDA for TNX-102 SL.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Prospective Study Comparing Side-effects
of TNX-102 SL with Immediate-Release Cyclobenzaprine</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We plan to conduct
a small study designed to compare the bedtime use of TNX-102 SL and immediate-release CBP on next morning drowsiness. The goal
of this study is to determine the potential benefit of TNX-102 SL compared with immediate-release CBP on next morning drowsiness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Prospective Phase 3 Study</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If our Phase 2b study
of TNX-102 SL is successful, then we expect to conduct a Phase 3 confirmatory study in support of product registration. At that
time, we plan to conduct a randomized, double-blind, placebo-controlled Phase 3 study in which patients with FM will receive TNX-102
SL or placebo at bedtime nightly for 12 weeks. It is likely that the primary efficacy measure in this study will be the change
in pain severity with TNX-102 SL as compared to placebo at week 12, assessed by the NRS, similar to the primary efficacy measure
of the Phase 2b study. Secondary outcome measures will be carefully considered to best support desired label claims and to optimize
the marketing message for product differentiation. We expect approximately 300 FM patients will be enrolled in this trial.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Safety Exposure Study</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To study the safety
of our product in chronic use, we expect to conduct an open label study in which approximately 300 FM subjects would receive TNX-102
SL for up to one year. Together with our other studies, we believe this safety exposure study will be sufficient to meet ICH long-term
safety exposure requirements, which require us to provide data for at least 300 subjects treated with TNX-102 SL for six months
and at least 100 subjects treated for one year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Regulatory Strategy</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The FDA approvals of
Lyrica, Cymbalta and Savella establish a regulatory approval standard for the management of FM. However, given the heterogeneity
of patients with this disease, it may not prove to be the only pathway or approval requirement. We hope to register TNX-102 SL
with the FDA through the provisions of Section 505(b)(2). This regulatory pathway may help to accelerate product development and
reduce overall business risk. The 505(b)(2)-based product development plan for TNX-102 SL is designed to leverage the safety data
that have been generated by other manufacturers for CBP-containing products and accepted by the FDA in support of their product
registrations, in addition to the safety data we generate. TNX-102 SL contains significantly less active CBP than other marketed
products. We believe that the safety data package from these products and the CBP prescriptions utilization database analyzed by
IMS Health Incorporated will provide adequate safety margin to support TNX-102 SL development. A Type B Pre-Phase 3 meeting<B>
</B>with the FDA is scheduled for February 2013, at which we plan to discuss the design of our anticipated Phase 2b and Phase 3
trials for TNX-102 SL so as to receive regulatory acceptance of our proposed NDA plan for a differentiated product for the management
of FM.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If NDA approval of
TNX-102 SL is granted, in addition to the three-year marketing exclusivity granted by law, we expect this product to be protected
by patents that extend through at least 2021, during which time it should not be subject to generic substitution. We plan to continue
to support the TNX-102 SL program with new patent applications as we obtain data from the clinical evaluation of our new formulation
in healthy human subjects and FM patients. For example, we have recently filed patent applications on TNX-102 SL which, if issued,
would be expected to provide protection from generic substitution until 2033.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>TNX-102 SL in Post-Traumatic Stress
Disorder</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are also developing
TNX-102 SL for the management of PTSD, a psychiatric disorder that begins in the aftermath of traumatic experiences. A Type B pre-IND
meeting was held with the FDA in October 2012, at which our clinical program for PTSD was discussed. We have not yet conducted
any clinical trials on PTSD patients.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Parallels Between FM and PTSD</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A number of parallels
have been noted between FM and PTSD. In addition, symptom overlaps may exist between patients diagnosed with FM or PTSD. In a survey
of males with PTSD or major depression (Amital, Fostick et al, Posttraumatic stress disorder, tenderness, and fibromyalgia syndrome:
are they different entities? J. Psychosom Res 2006. 61(5):663-9.2006), 49% of PTSD patients met the ACR criteria for FM compared
to 5% of major depression patients. Conversely, in a different survey of FM patients (Cohen, Neumann et al., Prevalence of post-traumatic
stress disorder in fibromyalgia patients: overlapping syndromes or post-traumatic fibromyalgia syndrome? Semin Arthritis Rheum
2002. 32(1):38-50), 57% of the sample had symptoms associated with PTSD.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&#9;A core feature of PTSD is sleep
disturbance, including insomnia and nightmares. Sleep disturbances are believed to exacerbate daytime symptoms of PTSD, including
irritability, poor concentration, and diminished interest in significant activities. We believe the sleep disturbances of PTSD
bear similarity to those associated with FM.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Emerging Market Opportunity</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The selective serotonin
reuptake inhibitors Paxil&reg; (paroxetine) and Zoloft&reg; (sertraline) are FDA approved for PTSD, but are not satisfactory treatments
for many patients. Other drugs that show promise for the treatment of PTSD, but are not FDA approved, include antidepressants such
as nefazodone, mirtazapine and trazodone; the antihistamine cyproheptadine; certain atypical antipsychotics such as olanzapine
and risperidone; and an adrenergic alpha-1 receptor blocker, prazosin. Prazosin may decrease nightmares and insomnia and has been
associated with improvements in daytime PTSD symptoms, depression, and quality of life.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our rationale for studying
the effects of CBP in PTSD derives from the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 5%; font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 85%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">our clinical studies that very
low dose CBP improves FM symptoms, a disorder having significant overlap with PTSD;&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">our clinical studies that very
low dose CBP can improve sleep quality, which is impaired in PTSD; and&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">in studies conducted by Caliper, CBP interacts with a receptor on brain cells called the serotonin type 2a receptor. Based on numerous peer-reviewed scientific publications, we have identified a number of compounds that bind this receptor that have been shown to have effects in treating PTSD. Therefore, it is our belief that CBP, because it binds to the serotonin type 2a receptor, will have a therapeutic effect in treating PTSD like other compounds that bind to it.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As very little information
was available on the biochemical effects of CBP and its primary metabolite, norcyclobenzaprine, or nCBP, in the central nervous
system, we have engaged several CROs to better understand the interactions of these agents with certain receptors in the brain.
CROs we have engaged in this effort include Caliper, Cerep, Millipore, and DiscoveRx. Results from a series of binding and functional
studies show that both of these molecules are potent antagonists of the serotonin type 2a and the histamine H1 receptors, which
known to have effects on sleep and sleep maintenance. The results also show that CBP and nCBP antagonize the adrenergic alpha 1A
and 1B receptors, which may have effects on autonomic dysfunction. The results of some of these studies were presented at a poster
session during the 2012 American College of Rheumatology Annual Meeting (Daugherty et al, &ldquo;Cyclobenzaprine (CBP) and its
Major Metabolite Norcyclobenzaprine (nCBP) are Potent Antagonists of Human Serotonin Receptor 2a (5-HT2a), Histamine Receptor H1
and Alpha-Adrenergic Receptors: Mechanistic and Safety Implications for Treating Fibromyalgia Syndrome by Improving Sleep Quality&rdquo;,
Abstract #960).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Product Development Path</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We anticipate that
the dose of TNX-102 SL sufficient to treat PTSD symptoms may be higher than that sufficient to treat FM. We plan to utilize the
data obtained from our pharmacokinetic studies of TNX-102 SL to inform the design of efficacy trials in PTSD.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based on the recommendations
and guidance received at the October 2012 pre-IND meeting with the FDA, we plan to file an IND application for TNX-102 SL in the
PTSD indication in the first half of 2013, and to conduct a Phase 2 trial in the second half of 2013. We expect to be able to use
TNX-102 SL tablets manufactured for the FM studies in the initial PTSD clinical trials.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Prospective Proof-of-Concept Phase 2
Study</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We plan to use the
IND to support a small clinical study to ascertain the potential efficacy of TNX-102 SL in this disorder. This randomized, double-blind,
placebo-controlled, crossover study will enroll approximately 15 subjects with PTSD. TNX-102 SL and placebo will be administered
once daily at bedtime. The primary efficacy measure will be the change in the Clinician-Administered PTSD Scale from baseline to
week six. Secondary outcome variables may include the PTSD Dream Rating Scale, PTSD Checklist, CGI-I, Pittsburgh Sleep Quality
Index and the Beck Depression Inventory. In addition, polysomnograms will be obtained at baseline and at specified times during
the trial.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Prospective Phase 3 Studies</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If our Phase 2 trial
of TNX-102 SL in PTSD is successful, we intend to conduct two multicenter, double-blind, placebo-controlled, Phase 3 studies designed
to evaluate the efficacy, safety, and tolerability of TNX-102 SL in patients with PTSD. We expect both of these Phase 3 studies
to be of crossover design. We plan to conduct one 24-week study (TNX-102 SL and placebo treatment for 12 weeks) and one six-month
study (TNX-102 SL and placebo treatment for 3 months). We expect the results of the Phase 2 trial to determine dosing in these
Phase 3 trials, but like the Phase 2 trial, TNX-102 SL may be dosed flexibly. The primary endpoints for both Phase 3 studies are
anticipated to be similar to those proposed to be feature in the Phase 2 study, and as with the Phase 2 study, in addition to standardized
measures of PTSD symptomatology and severity, polysomnograms will be obtained.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Regulatory Strategy</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The approvals by the
FDA of Paxil (paroxetine) and Zoloft (sertraline) for treating PTSD establish a regulatory approval pathway for symptom reduction
in PTSD. We believe our clinical development program of TNX-102 SL and the chronic safety data generated from the TNX-102 SL FM
NDA program will result in a differentiated product for the treatment of PTSD. We believe that our planned clinical trials in PTSD,
if successful, will provide sufficient evidence of clinical efficacy and safety to support a Section 505(b)(2) NDA.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Drug Delivery Technology</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>TNX-102 SL</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">TNX-102 SL is a small
tablet that rapidly disintegrates in saliva and transmucosally delivers CBP into the systemic circulation. TNX-102 SL contains
sublingual absorption-enabling ingredients that promote a local oral environment that facilitates oromucosal absorption of CBP.
We own all rights to TNX-102 SL in all geographies, and we bear no obligations to third-parties for any future development or commercialization.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>TNX-102 Gelcap</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In June 2007, we entered
into a Feasibility and Option Agreement with Lipocine, which was amended in October 2010 (the &ldquo;Feasibility Agreement&rdquo;).
Pursuant to the Feasibility Agreement, we identified and obtained an exclusive worldwide option on technology from Lipocine that
employs mixtures of different types of lipids to envelop CBP molecules in the small intestine and facilitate absorption into the
bloodstream. We believe this approach has potential for more consistent absorption and decreased variability in blood levels.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Feasibility Agreement
provided for two stages of work, stated as Stage I and Stage II. The Stage I work involved developing methods and testing compatibility
between Lipocine&rsquo;s technology and our drug formulation. The Stage II work involved supporting us in our efforts to conduct
a clinical trial study, based on the Stage I work, and is expected to conclude upon the completion of a final report on the results
of the clinical study (the &ldquo;Final Report&rdquo;). Upon completion of the Final Report, we have the right, within 30 days
after the Final Report, to exercise an exclusive worldwide license to the Lipocine technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Feasibility
Agreement, Lipocine completed the Stage I work, which involved studying a number of combinations of lipids for their ability to
form micelles that solubilize the free base of CBP and which might serve as inactive ingredients in a gelatin capsule formulation.
We selected a candidate formulation, TNX-102 gelcap, based on properties that included the dispersion of the active ingredient
in simulated gastric or small-intestinal fluids and the stability of the formulation over time prior to testing. Lipocine was also
engaged to manufacture gelatin capsules of TNX-102 gelcap for use in a pharmacokinetic trial.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In August 2011, we
provided notice to Lipocine that we intended to move forward with the Stage II work. The clinical phase of the Stage II trial was
completed during the fourth quarter of 2011. Some of the data has been collected and some data is still awaiting the development
and validation of assays. We are working to analyze the data and write the Final Report, which is anticipated to be completed in
2013. After completion of the Final Report, we will have 30 days to decide whether to exercise the option to license Lipocine&rsquo;s
US patent 6,294,192 &ldquo;Triglyceride-free compositions and methods for improved delivery of hydrophobic therapeutic agents&rdquo;
and US Patent 6,451,339 &ldquo;Compositions and methods for improved delivery of hydrophobic agents&rdquo;. These patents expire
on September 24, 2021 and September 16, 2022, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we elect to exercise
the option, we will execute a license agreement with Lipocine. If we exercise the option to license these patents, we will be obligated
to pay Lipocine low single-digit percentage royalties based on net sales or mid-teen sublicense fees based on the consideration
that we receive from a licensee. The maximum amount of milestone payments we could be required to pay to Lipocine pursuant to the
Feasibility Agreement is $3,000,000. We currently do not plan to exercise the option with Lipocine.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Market Dynamics</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe the U.S.
market for products that treat CNS conditions has several characteristics that make it an attractive market for pharmaceuticals,
including that the customer base is driven by physicians who are involved in long-term care of patients with chronic disorders.
Patients with CNS disorders sometimes carry disease burdens that require long-term treatment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe the market
for FDA-approved FM treatments is underserved and that there is a constant need for new treatment options, since many prescription
drugs provide relief only to some of the affected patients, only to some of some patients&rsquo; symptoms, or provide relief only
for limited periods of time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2007, Lyrica (pregabalin)
became the first medicine approved by the FDA for the management of FM. Lyrica previously had been approved and marketed to treat
pain in other conditions as well as epilepsy. In 2008, Cymbalta (duloxetine) became the second medicine approved by the FDA for
the management of FM. Cymbalta previously had been approved and marketed to treat depression. FM shares a number of symptoms with
depression, and a number of FM patients are believed to experience depression as a co-existing condition. Savella (milnacipran)
was the third medicine approved by the FDA for the management of FM. Savella&rsquo;s active ingredient, milnacipran, is approved
in Europe to treat depression.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As many products used
for the treatment of FM are approved and marketed for other conditions, sales of these products related specifically to FM can
only be estimated. According to Decision Resources, U.S. sales of prescription drugs specifically for the treatment of FM totaled
$1.4 billion in 2011. This figure includes sales of Cymbalta, Lyrica, and Savella of $595 million, $504 million, and $110 million,
respectively. Despite the availability of FDA approved products, we believe the current treatment options for FM continue to leave
many patients dissatisfied.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Prior to 2007, the
landscape of prescription drugs used to treat FM was characterized by off-label use of generically-available therapies. Drugs that
had been prescribed as the primary treatments for FM were approved for other indications, with analgesics, antidepressants, and
muscle relaxants among the categories receiving the greatest use by the FM population. Despite the significant FM-related sales
growth of the three products approved for FM following their approvals for this indication, according to Adivo Associates, the
unit volume of medications prescribed to specifically treat FM has been nearly flat since 2007, implying that the sales growth
of the approved products was mainly driven by patients switching from off-label, generic medications to on-label, branded medications.
In particular, these market dynamics are consistent with the interpretation that Lyrica&rsquo;s growth came at the expense of off-label
analgesics and Cymbalta&rsquo;s and Savella&rsquo;s growth came at the expense of off-label anti-depressants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Despite the wide use
of muscle relaxants by FM patients, this category lacks a product approved for FM. Demand continues to be satisfied by off-label
medicines such as CBP, tizanidine, baclofen, carisoprodol and metaxalone. These muscle relaxants have generic and branded versions.
According to Adivo Associates, 20 million daily doses of the Flexeril brand and its associated immediate-release CBP generic products
were prescribed off-label for FM in 2011 and accounted for approximately 48% of the daily doses of muscle relaxants prescribed
for FM that year. These figures indicate that muscle relaxants in general, and CBP in particular, have been widely adopted in FM
despite the lack of an approval for this disorder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Challenges in the Market for CNS Therapies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Developers of pharmaceutical
treatments for syndromes and disorders that affect the CNS face special challenges. In many cases, the causes and exacerbating
factors of CNS conditions remain unknown. Frequently, key symptoms are known only by patient reports and cannot be objectively
validated or measured. Symptoms like pain, fatigue, disturbed sleep or altered mood are characteristics of more than one condition.
Often, physicians may not agree that a particular patient is affected by one or another condition or by more than one co-existing
conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">CNS conditions are
typically defined by committees of expert professionals who set criteria based on the presence of several symptoms or groups of
symptoms. Sometimes groups of subjective symptoms are insufficient to describe CNS disorders and further refinement of diagnostic
categories can be achieved by patient demographics, such as gender, age or concurrent medical processes, such as menopause or adolescence.
Many CNS conditions, including syndromes and disorders, have not yet been characterized by laboratory tests, such as blood tests
or x-ray imaging. However, laboratory tests are often important to exclude other conditions, such as inflammatory or infectious
processes. Consequently, a CNS condition is sometimes called a diagnosis of exclusion because inflammation and infection should
typically be ruled out by laboratory tests before applying the criteria of groups of symptoms to diagnose it.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Once a CNS condition
is diagnosed, physicians may select from among treatment options based on a patient&rsquo;s symptoms and history. Some medications
improve or relieve only one or another symptom in a condition. Consequently, physicians may prescribe several different medications
concurrently to treat individual symptoms or groups of symptoms. A desirable quality for CNS medications is the ability to relieve
more than one symptom of a CNS condition. Another desirable quality for CNS medications is safety, particularly if a medicine is
safe enough to be used with other medicines concurrently or at different times of the day.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Opportunity for New Treatments of FM</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe the market
for the treatment of FM is underserved, which we believe fuels a need for new therapeutic options. Due to the market acceptance
of FM treatments (such as Lyrica, Cymbalta and Savella), we believe there will be a growing interest in alternative drug treatment
options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that if
TNX-102 SL won FDA approval, it would be an appealing option because it has an entirely different mechanism of action from the
currently approved products and we expect TNX-102 SL will be recommended for use at bedtime. Lyrica is recommended for twice or
three-times daily dosing. Cymbalta was found effective at once-daily dosing and is generally restricted to daytime use and not
recommended for bedtime use. Cymbalta and Savella act on the CNS in ways that are believed to interfere with sleep, while data
support the view that CBP, the active ingredient in TNX-102 SL, improves sleep quality.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Competition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our industry is highly
competitive and subject to rapid and significant technological change. Our potential competitors include large pharmaceutical and
biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research
institutions. We believe that key competitive factors that will affect the development and commercial success of our product candidates
are efficacy, safety, tolerability, reliability, price and reimbursement level. Many of our potential competitors, including many
of the organizations named below, have substantially greater financial, technical and human resources than we do and significantly
greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products
and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining FDA
approval for drugs and achieving widespread market acceptance. Our competitors&rsquo; drugs may be more effective, or more effectively
marketed and sold, than any drug we may commercialize and may render our product candidates obsolete or non-competitive before
we can recover the expenses of developing and commercializing any of our product candidates. We anticipate that we will face intense
and increasing competition as new drugs enter the market and advanced technologies become available. Further, the development of
new treatment methods for the conditions we are targeting could render our drugs non-competitive or obsolete.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The markets for medicines
to treat FM, PTSD and other CNS conditions are well developed and populated with established drugs marketed by large and small
pharmaceutical, biotechnology and generic drug companies. Pfizer (Lyrica), Eli Lilly (Cymbalta) and Forest Laboratories/Cyprus
Biosciences (Savella) market FDA approved drugs for FM. Pfizer (Zoloft) and GlaxoSmithKline (Paxil) market FDA approved drugs for
PTSD.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of January 2013,
we are aware of several companies pursuing treatments for FM, including Chelsea Therapeutics, Johnson and Johnson, Meda, Pfizer,
Synthetic Biologics, Teva, and Theravance. Clinical trials in the U.S. are registered with the FDA and reported on the website
www.clinicaltrials.gov.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A number of companies
are specifically engaged in developing drugs for PTSD, including AstraZeneca, UCB, GlaxoSmithKline, Ortho-McNeil Janssen Scientific
Affairs, and Pfizer. Medications that may be used for the treatment of PTSD include anti-depressants such as: nefazodone and trazodone;
the antihistamine cyproheptadine and certain atypical antipsychotics such as olanzapine and risperidone. Several of these products
are supported by companies such as AstraZeneca, GlaxoSmithKline and Pfizer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Intellectual Property</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Proprietary protection
for our product candidates, technology and processes are important to our business and we seek patent protection in the U.S. and
internationally when we deem appropriate. We also rely on trade secrets, know-how and continuing technological advances to protect
various aspects of our core technology. We require our employees, consultants and scientific collaborators to execute confidentiality
and invention assignment agreements with us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We own numerous patents
and have patent applications pending in the United States and abroad. In addition, we have one trademark application pending.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our commercial success
will depend in part on obtaining and maintaining patent protection and trade secret protection of our current and future product
candidates and the methods used to manufacture them, as well as successfully defending these patents against third-party challenges.
Our ability to stop third parties from making, using, selling, offering to sell or importing our products depends on the extent
to which we have rights under valid and enforceable patents or trade secrets that cover these activities. We cannot assure you
that our pending patent applications will result in issued patents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Approved Patents</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our current patents
owned are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%; border-bottom: black 1pt solid; font-weight: bold; text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 10pt"><B>Number</B></FONT></TD>
    <TD STYLE="width: 2%; text-align: left; vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="width: 47%; border-bottom: black 1pt solid; font-weight: bold; text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="width: 2%; text-align: left; vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="width: 20%; border-bottom: black 1pt solid; font-weight: bold; text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 10pt"><B>Jurisdiction</B></FONT></TD>
    <TD STYLE="width: 2%; text-align: left; vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="width: 15%; border-bottom: black 1pt solid; font-weight: bold; text-align: left; vertical-align: bottom"><FONT STYLE="font-size: 10pt"><B>Expiration</B></FONT><BR>
<FONT STYLE="font-size: 10pt"><B>Date</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">6,541,523</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Methods For Treating Or Preventing Fibromyalgia Using Very Low Doses Of Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">August 11, 2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">6,395,788</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Methods And Compositions For Treating Or Preventing Sleep Disturbances And Associated Illnesses Using Very Low Doses Of Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">August 11, 2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">6,358,944</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Methods And Compositions For Treating Generalized Anxiety Disorder&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">August 11, 2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">EP 1202722</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Uses of Compositions for Treating or Preventing Sleep Disturbances Using Very&nbsp; Low Doses of Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">European Patent Office, Belgium, France, Ireland, Luxembourg, Monaco, Portugal, Switzerland and United Kingdom</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">August 11, 2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">AT 299369</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Uses of Compositions for Treating or Preventing Sleep Disturbances Using Very&nbsp; Low Doses of Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">Austria</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">August 11, 2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">DE 60021266</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Uses of Compositions for Treating or Preventing Sleep Disturbances Using Very&nbsp; Low Doses of Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">Germany</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">August 11, 2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">NZ 516749</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Uses of Compositions for Treating or Preventing Sleep Disturbances Using Very&nbsp; Low Doses of Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">New Zealand</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">August 11, 2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">ES 2245944</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Uses of Compositions for Treating or Preventing Sleep Disturbances Using Very&nbsp; Low Doses of Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">Spain</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">August 11, 2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">HK 1047691</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Uses of Compositions for Treating or Preventing Sleep Disturbances Using Very&nbsp; Low Doses of Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">Hong Kong</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">August 11, 2020</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">8,093,300</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Compositions and Methods for Increasing Compliance with Therapies using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism&rdquo; </FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">May 25, 2023</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">AU 2002354017</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Compositions and Methods for Increasing Compliance with Therapies using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">Australia</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">November 4, 2022</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">CA 2463987</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Compositions and Methods for Increasing Compliance with Therapies using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">Canada</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">November 4, 2022</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">EP 1441708</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Compositions and Methods for Increasing Compliance with Therapies using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">European Patent Office, Austria, Belgium,
        Switzerland, Denmark, Luxembourg, Monaco, Germany, France, Portugal and</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">United Kingdom</P></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">November 4, 2022</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">NZ 532583</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Compositions and Methods for Increasing Compliance with Therapies using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">New Zealand</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">November 4, 2022</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Patent Applications</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our current patent
applications that are pending are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 18%; border-bottom: Black 1pt solid; font-weight: bold; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Number</B></FONT></TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt; font-weight: bold; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 63%; padding-bottom: 1pt; font-weight: bold; text-align: justify; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B>&nbsp;Name</B></FONT></TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt; font-weight: bold; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 15%; padding-bottom: 1pt; font-weight: bold; text-align: justify; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B>&nbsp;Jurisdiction</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">61/660,593</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Compositions and Methods for Transmucosal Absorption&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">61/667,774</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Compositions and Methods for Transmucosal Absorption&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">61/725,402</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Compositions and Methods for Transmucosal Absorption&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">61/281,661</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Methods and Compositions for Treating Symptoms Associated with Post-Traumatic Stress Disorder Using Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">12/948,828</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Methods And Compositions For Treating Symptoms Associated With Post-Traumatic Stress Disorder Using Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">10831895.7</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Methods And Compositions For Treating Symptoms Associated With Post-Traumatic Stress Disorder Using Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">European Patent Office</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">61/449,838</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Methods and Compositions for Treating Depression Using Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">13/157,270</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Method for Improving Fatigue Using Low Dose Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">PCT/US 10/02979</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Methods And Compositions For Treating Symptoms Associated With Post-Traumatic Stress Disorder Using Cyclobenzaprine&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">PCT</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">PCT/US 11/01529</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Method for Treating Cocaine Addiction&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">PCT</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">12/151,200</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Method For Treating Neurodegenerative Dysfunction&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">CA 2723688</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Method For Treating Neurodegenerative Dysfunction&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">Canada</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">EP 2299822</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">&ldquo;Method For Treating Neurodegenerative Dysfunction&rdquo;</FONT></TD>
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top"><FONT STYLE="font-size: 10pt">European Patent Office</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Trademark Application</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have one trademark
application that is pending as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 18%; border-bottom: Black 1pt solid; font-weight: bold; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Number</B></FONT></TD>
    <TD STYLE="width: 2%; font-weight: bold; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 63%; border-bottom: Black 1pt solid; font-weight: bold; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="width: 2%; font-weight: bold; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 15%; border-bottom: black 1pt solid; font-weight: bold; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Jurisdiction</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">85088881</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Tonix Pharmaceuticals</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">U.S.A.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Research and Development</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have one employee
dedicated to research and development. We anticipate that our research and development expenditures will increase several fold
as we advance TNX-102 SL into late-stage clinical development and advance other candidates in our pipeline. We need to raise additional
capital to fund our development plans and there is no certainty that we will be successful in continuing to attract new investments.
Our research and development operations are located in New York, NY. We have used, and expect to continue to use, third parties
to conduct our preclinical and clinical studies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Manufacturing</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have contracted
with third parties for the manufacture of TNX-102 SL for investigational purposes, including preclinical and clinical testing,
as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="width: 40%; font-weight: bold; text-decoration: underline"><FONT STYLE="font-size: 10pt"><B><U>CMO</U></B></FONT></TD>
    <TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 49%; font-weight: bold; text-decoration: underline"><FONT STYLE="font-size: 10pt"><B><U>Purpose</U></B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Lipocine Inc.</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">TNX-102 gelcap used in our completed pharmacokinetic study on this candidate</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">KABS Laboratories, Inc. (Quebec, Canada)</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">TNX-102 intravenous and sublingual solutions</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Laboratorio Farmacologico Milanese S.r.l. (Milan, Italy)</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">TNX-102 SL tablets used in our completed pharmacokinetic studies</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Pharmatek Laboratories</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">TNX-102 SL tablets to be used in our planned Phase 2b study</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All of our compounds
are small molecules, generally constructed using industry standard processes and use readily accessible raw materials.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Government Regulation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The FDA and other federal,
state, local and foreign regulatory agencies impose substantial requirements upon the clinical development, approval, labeling,
manufacture, marketing and distribution of drug products. These agencies regulate, among other things, research and development
activities and the testing, approval, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, advertising
and promotion of our product candidates. The regulatory approval process is generally lengthy and expensive, with no guarantee
of a positive result. Moreover, failure to comply with applicable FDA or other requirements may result in civil or criminal penalties,
recall or seizure of products, injunctive relief including partial or total suspension of production, or withdrawal of a product
from the market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The FDA regulates,
among other things, the research, manufacture, promotion and distribution of drugs in the United States under the FDCA and other
statutes and implementing regulations. The process required by the FDA before prescription drug product candidates may be marketed
in the United States generally involves the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 3%; font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 87%; text-align: justify"><FONT STYLE="font-size: 10pt">completion of extensive nonclinical laboratory tests, animal studies and formulation studies, all performed in accordance with the FDA&rsquo;s Good Laboratory Practice regulations;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol; text-align: justify"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">submission to the FDA of an IND, which must become effective before human clinical trials may begin;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">for some products, performance of adequate and well-controlled human clinical trials in accordance with the FDA&rsquo;s regulations, including Good Clinical Practices, to establish the safety and efficacy of the product candidate for each proposed indication;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">submission to the FDA of an NDA;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">satisfactory completion of an FDA preapproval inspection of the manufacturing facilities at which the product is produced to assess compliance with current Good Manufacturing Practice, or cGMP, regulations; and</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">FDA review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The testing and approval
process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product
candidates will be granted on a timely basis, if at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Nonclinical tests include
laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animals and
other animal studies. The results of nonclinical tests, together with manufacturing information and analytical data, are submitted
as part of an IND to the FDA. Some nonclinical testing may continue even after an IND is submitted. The IND also includes one or
more protocols for the initial clinical trial or trials and an investigator&rsquo;s brochure. An IND automatically becomes effective
30&nbsp;days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions relating to
the proposed clinical trials as outlined in the IND and places the clinical trial on a clinical hold. In such cases, the IND sponsor
and the FDA must resolve any outstanding concerns or questions before any clinical trials can begin. Clinical trial holds also
may be imposed at any time before or during studies due to safety concerns or non-compliance with regulatory requirements. An independent
institutional review board, or IRB, at each of the clinical centers proposing to conduct the clinical trial must review and approve
the plan for any clinical trial before it commences at that center. An IRB considers, among other things, whether the risks to
individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves
the consent form signed by the trial participants and must monitor the study until completed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Clinical Trials</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Clinical trials involve
the administration of the product candidate to human subjects under the supervision of qualified medical investigators according
to approved protocols that detail the objectives of the study, dosing procedures, subject selection and exclusion criteria, and
the parameters to be used to monitor participant safety. Each protocol is submitted to the FDA as part of the IND.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Human clinical trials
are typically conducted in three sequential phases, but the phases may overlap, or be combined.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 3%; font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 87%; text-align: justify"><FONT STYLE="font-size: 10pt">Phase 1 clinical trials typically involve the initial introduction of the product candidate into healthy human volunteers. In Phase 1 clinical trials, the product candidate is typically tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Phase 2 clinical trials are generally conducted in a limited patient population to gather evidence about the efficacy of the product candidate for specific, targeted indications; to determine dosage tolerance and optimal dosage; and to identify possible adverse effects and safety risks. Phase 2 clinical trials, in particular Phase 2b trials, can be undertaken to evaluate clinical efficacy and to test for safety in an expanded patient population at geographically dispersed clinical trial sites.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Phase 3 clinical trials are undertaken to evaluate clinical efficacy and to test for safety in an expanded patient population at geographically dispersed clinical trial sites. The size of Phase 3 clinical trials depends upon clinical and statistical considerations for the product candidate and disease, but sometimes can include several thousand patients. Phase 3 clinical trials are intended to establish the overall risk-benefit ratio of the product candidate and provide an adequate basis for product labeling.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Clinical testing must
satisfy extensive FDA regulations. Reports detailing the results of the clinical trials must be submitted at least annually to
the FDA and safety reports must be submitted for serious and unexpected adverse events. Success in early stage clinical trials
does not assure success in later stage clinical trials. The FDA, an IRB or we may suspend a clinical trial at any time on various
grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>New Drug Applications</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Assuming successful
completion of the required clinical trials, the results of product development, nonclinical studies and clinical trials are submitted
to the FDA as part of an NDA. An NDA also must contain extensive manufacturing information, as well as proposed labeling for the
finished product. An NDA applicant must develop information about the chemistry and physical characteristics of the drug and finalize
a process for manufacturing the product in accordance with cGMP. The manufacturing process must be capable of consistently producing
quality product within specifications approved by the FDA. The manufacturer must develop methods for testing the quality, purity
and potency of the final product. In addition, appropriate packaging must be selected and tested and stability studies must be
conducted to demonstrate that the product does not undergo unacceptable deterioration over its shelf life. Prior to approval, the
FDA will conduct an inspection of the manufacturing facilities to assess compliance with cGMP.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The FDA reviews all
NDAs submitted before it accepts them for filing. The FDA may request additional information rather than accept an NDA for filing.
In this event, the NDA must be resubmitted with the additional information and is subject to review before the FDA accepts it for
filing. After an application is filed, the FDA may refer the NDA to an advisory committee for review, evaluation and recommendation
as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory
committee, but it considers them carefully when making decisions. The FDA may deny approval of an NDA if the applicable regulatory
criteria are not satisfied. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently
than we interpret the same data. The FDA may issue a complete response letter, which may require additional clinical or other data
or impose other conditions that must be met in order to secure final approval of the NDA. If a product receives regulatory approval,
the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited,
which could restrict the commercial value of the product. In addition, the FDA may require us to conduct Phase 4 testing which
involves clinical trials designed to further assess a drug&rsquo;s safety and effectiveness after NDA approval, and may require
surveillance programs to monitor the safety of approved products which have been commercialized. Once issued, the FDA may withdraw
product approval if ongoing regulatory requirements are not met or if safety or efficacy questions are raised after the product
reaches the market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Section&nbsp;505(b)(2) NDAs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There are two types
of NDAs: the Section 505(b)(1) NDA, or full NDA, and the Section&nbsp;505(b)(2) NDA. When possible, we intend to file Section&nbsp;505(b)(2)
NDAs that might, if accepted by the FDA, save time and expense in the development and testing of our product candidates. A full
NDA is submitted under Section&nbsp;505(b)(1) of the FDCA, and must contain full reports of investigations conducted by the applicant
to demonstrate the safety and effectiveness of the drug. A Section&nbsp;505(b)(2) NDA may be submitted for a drug for which one
or more of the investigations relied upon by the applicant was not conducted by or for the applicant and for which the applicant
has no right of reference from the person by or for whom the investigations were conducted. A Section&nbsp;505(b)(2) NDA may be
submitted based in whole or in part on published literature or on the FDA&rsquo;s finding of safety and efficacy of one or more
previously approved drugs, which are known as reference drugs. Thus, the filing of a Section&nbsp;505(b)(2) NDA may result in approval
of a drug based on fewer clinical or nonclinical studies than would be required under a full NDA. The number and size of studies
that need to be conducted by the sponsor depends on the amount and quality of data pertaining to the reference drug that are publicly
available, and on the similarity of and differences between the applicant&rsquo;s drug and the reference drug. In some cases, extensive,
time-consuming, and costly clinical and nonclinical studies may still be required for approval of a Section&nbsp;505(b)(2) NDA.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because we are developing
new formulations of previously approved chemical entities, such as CBP, our drug approval strategy is to submit Section&nbsp;505(b)(2)
NDAs to the FDA. The FDA may not agree that our product candidates are approvable as Section&nbsp;505(b)(2) NDAs. If the FDA determines
that Section&nbsp;505(b)(2) NDAs are not appropriate and that full NDAs are required for our product candidates, the time and financial
resources required to obtain FDA approval for our product candidates could substantially and materially increase, and our products
might be less likely to be approved. If the FDA requires full NDAs for our product candidates, or requires more extensive testing
and development for some other reason, our ability to compete with alternative products that arrive on the market more quickly
than our product candidates would be adversely impacted. If CBP-containing products are withdrawn from the market by the FDA for
any reason, we may not be able to reference such products to support our anticipated TNX-102 SL 505(b)(2) NDA, and we may be required
to follow the requirements of Section 505(b)(1).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based on our intent
to file under Section 505(b)(2) with respect to our lead product candidate, we believe it is unlikely the development process for
this product candidate will follow the ordinary course of Phase 1, Phase 2 and Phase 3 studies. Our human pharmacokinetic studies
of reformulated CBP dosage forms represented the first use of TNX-102 SL and TNX-102 gelcap, or collectively, TNX-102, in humans
and could therefore be described as &ldquo;Phase 1.&rdquo; However, because these studies compared TNX-102 to existing approved
formulations of CBP and specified the comparable ability to deliver effective levels of CBP to the bloodstream of FM patients,
these studies provide a reference to the therapeutic effects previously observed in our dose-ranging clinical study of immediate-release
CBP capsules in FM patients. For these reasons, rather than always identifying clinical trials by Phase, we find it more illustrative
to describe in a narrative form the purpose of the studies and the nature and potential significance of the results. Because our
double-blind, randomized, placebo-controlled, dose-ranging study on bedtime CBP was performed in Canada, we did not meet with the
FDA&rsquo;s Center for Drug Evaluation and Research to discuss our approach and plans until August 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Patent Protections</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An applicant submitting
a Section&nbsp;505(b)(2) NDA must certify to the FDA with respect to the patent status of the reference drug upon which the applicant
relies in support of approval of its drug. With respect to every patent listed in the FDA&rsquo;s Orange Book, which is the FDA&rsquo;s
list of approved drug products, as claiming the reference drug or an approved method of use of the reference drug, the Section&nbsp;505(b)(2)
applicant must certify that: (1)&nbsp;there is no patent information listed by the FDA for the reference drug; (2)&nbsp;the listed
patent has expired; (3)&nbsp;the listed patent has not expired, but will expire on a particular date; (4)&nbsp;the listed patent
is invalid, unenforceable, or will not be infringed by the manufacture, use, or sale of the product in the Section&nbsp;505(b)(2)
NDA; or (5)&nbsp;if the patent is a use patent, that the applicant does not seek approval for a use claimed by the patent. If the
applicant files a certification to the effect of clause (1), (2)&nbsp;or (5), FDA approval of the Section&nbsp;505(b)(2) NDA may
be made effective immediately upon successful FDA review of the application, in the absence of marketing exclusivity delays, which
are discussed below. If the applicant files a certification to the effect of clause (3), the Section&nbsp;505(b)(2) NDA approval
may not be made effective until the expiration of the relevant patent and the expiration of any marketing exclusivity delays.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the Section&nbsp;505(b)(2)
NDA applicant provides a certification to the effect of clause (4), referred to as a paragraph IV certification, the applicant
also must send notice of the certification to the patent owner and the holder of the NDA for the reference drug. The filing of
a patent infringement lawsuit within 45&nbsp;days of the receipt of the notification may prevent the FDA from approving the Section&nbsp;505(b)(2)
NDA for 30&nbsp;months from the date of the receipt of the notification unless the court determines that a longer or shorter period
is appropriate because either party to the action failed to reasonably cooperate in expediting the action. However, the FDA may
approve the Section&nbsp;505(b)(2) NDA before the 30&nbsp;months have expired if a court decides that the patent is invalid, unenforceable,
or not infringed, or if a court enters a settlement order or consent decree stating the patent is invalid or not infringed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Notwithstanding the
approval of many products by the FDA pursuant to Section&nbsp;505(b)(2), over the last few years certain brand-name pharmaceutical
companies and others have objected to the FDA&rsquo;s interpretation of Section&nbsp;505(b)(2). If the FDA&rsquo;s interpretation
of Section&nbsp;505(b)(2) is successfully challenged in court, the FDA may be required to change its interpretation of Section&nbsp;505(b)(2)
which could delay or even prevent the FDA from approving any Section&nbsp;505(b)(2) NDA that we submit. The pharmaceutical industry
is highly competitive, and it is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA
seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions
can significantly delay, or even prevent, the approval of the new product. Moreover, even if the FDA ultimately denies such a petition,
the FDA may substantially delay approval while it considers and responds to the petition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Marketing Exclusivity</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Market exclusivity
provisions under the FDCA can delay the submission or the approval of Section&nbsp;505(b)(2) NDAs, thereby delaying a Section&nbsp;505(b)(2)
product from entering the market. The FDCA provides five-year marketing exclusivity to the first applicant to gain approval of
an NDA for a new chemical entity, or NCE, meaning that the FDA has not previously approved any other drug containing the same active
moiety. This exclusivity prohibits the submission of a Section&nbsp;505(b)(2) NDA for any drug product containing the active ingredient
during the five-year exclusivity period. However, submission of a Section&nbsp;505(b)(2) NDA that certifies that a listed patent
is invalid, unenforceable, or will not be infringed, as discussed above, is permitted after four years, but if a patent infringement
lawsuit is brought within 45&nbsp;days after such certification, FDA approval of the Section&nbsp;505(b)(2) NDA may automatically
be stayed until 7 1/2&nbsp;years after the NCE approval date. The FDCA also provides three years of marketing exclusivity for the
approval of new and supplemental NDAs for product changes, including, among other things, new indications, dosage forms, routes
of administration or strengths of an existing drug, or for a new use, if new clinical investigations, other than bioavailability
studies, that were conducted or sponsored by the applicant are deemed by FDA to be essential to the approval of the application.
Five-year and three-year exclusivity will not delay the submission or approval of another full NDA; however, as discussed above,
an applicant submitting a full NDA under Section&nbsp;505(b)(1) would be required to conduct or obtain a right of reference to
all of the preclinical and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other types of exclusivity
in the United States include orphan drug exclusivity and pediatric exclusivity. The FDA may grant orphan drug designation to a
drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals
in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that
the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered
from sales in the United States for that drug. Seven-year orphan drug exclusivity is available to a product that has orphan drug
designation and that receives the first FDA approval for the indication for which the drug has such designation. Orphan drug exclusivity
prevents approval of another application for the same drug for the same orphan indication, for a period of seven years, regardless
of whether the application is a full NDA or a Section&nbsp;505(b)(2) NDA, except in limited circumstances, such as a showing of
clinical superiority to the product with orphan exclusivity. Pediatric exclusivity, if granted, provides an additional six months
to an existing exclusivity or statutory delay in approval resulting from a patent certification. This six-month exclusivity, which
runs from the end of other exclusivity protection or patent delay, may be granted based on the voluntary completion of a pediatric
study in accordance with an FDA-issued &ldquo;Written Request&rdquo; for such a study.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Section&nbsp;505(b)(2)
NDAs are similar to full NDAs filed under Section&nbsp;505(b)(1) in that they are entitled to any of these forms of exclusivity
if they meet the qualifying criteria. They also are entitled to the patent protections described above, based on patents that are
listed in the FDA&rsquo;s Orange Book in the same manner as patents claiming drugs and uses approved for NDAs submitted as full
NDAs. <I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Other Regulatory Requirements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Maintaining substantial
compliance with appropriate federal, state and local statutes and regulations requires the expenditure of substantial time and
financial resources. Drug manufacturers are required to register their establishments with the FDA and certain state agencies,
and after approval, the FDA and these state agencies conduct periodic unannounced inspections to ensure continued compliance with
ongoing regulatory requirements, including cGMPs. In addition, after approval, some types of changes to the approved product, such
as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval.
The FDA may require post-approval testing and surveillance programs to monitor safety and the effectiveness of approved products
that have been commercialized. Any drug products manufactured or distributed by us pursuant to FDA approvals are subject to continuing
regulation by the FDA, including:&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 3%; font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 87%; text-align: justify"><FONT STYLE="font-size: 10pt">record-keeping requirements;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">reporting of adverse experiences with the drug;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">providing the FDA with updated safety and efficacy information;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">reporting on advertisements and promotional labeling;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">drug sampling and distribution requirements; and</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">complying with electronic record and signature requirements.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the FDA
strictly regulates labeling, advertising, promotion and other types of information on products that are placed on the market. There
are numerous regulations and policies that govern various means for disseminating information to health-care professionals as well
as consumers, including to industry sponsored scientific and educational activities, information provided to the media and information
provided over the Internet. Drugs may be promoted only for the approved indications and in accordance with the provisions of the
approved label.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The FDA has very broad
enforcement authority and the failure to comply with applicable regulatory requirements can result in administrative or judicial
sanctions being imposed on us or on the manufacturers and distributors of our approved products, including warning letters, refusals
of government contracts, clinical holds, civil penalties, injunctions, restitution and disgorgement of profits, recall or seizure
of products, total or partial suspension of production or distribution, withdrawal of approvals, refusal to approve pending applications,
and criminal prosecution resulting in fines and incarceration. The FDA and other agencies actively enforce the laws and regulations
prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject
to significant liability. In addition, even after regulatory approval is obtained, later discovery of previously unknown problems
with a product may result in restrictions on the product or even complete withdrawal of the product from the market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Food and Drug Administration Amendments
Act of 2007</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In September 2007,
the Food and Drug Administration Amendments Act of 2007, or FDAAA, became law. This legislation grants significant new powers to
the FDA, many of which are aimed at improving drug safety and assuring the safety of drug products after approval. In particular,
the new law authorizes the FDA to, among other things, require post-approval studies and clinical trials, mandate changes to drug
labeling to reflect new safety information, and require risk evaluation and mitigation strategies for certain drugs, including
certain currently approved drugs. In addition, the new law significantly expands the federal government&rsquo;s clinical trial
registry and results databank and creates new restrictions on the advertising and promotion of drug products. Under the FDAAA,
companies that violate these and other provisions of the new law are subject to substantial civil monetary penalties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The FDA has not yet
implemented many of the provisions of the FDAAA, so we cannot predict the impact of the new legislation on the pharmaceutical industry
or our business. However, the requirements and changes imposed by the FDAAA may make it more difficult, and more costly, to obtain
and maintain approval for new pharmaceutical products, or to produce, market and distribute existing products. In addition, the
FDA&rsquo;s regulations, policies and guidance are often revised or reinterpreted by the agency or the courts in ways that may
significantly affect our business and our products. It is impossible to predict whether additional legislative changes will be
enacted, or FDA regulations, guidance or interpretations changed, or what the impact of such changes, if any, may be.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Employees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31,
2012, we had two full-time employees, Leland Gershell, our Chief Financial Officer, and Bruce Daugherty, our Senior Director of
Drug Development and Controller, as well as one part-time senior director of research.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, we rely
on consultants instead of employees for critical activities, including Seth Lederman who serves as our Chief Executive Officer
and as President of Tonix Sub pursuant to a consulting agreement with Lederman &amp; Co. None of our employees are represented
by a labor union, and we believe that our relations with our employees are good.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF PROPERTIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We maintain our principal
office at 509 Madison Avenue, Suite 306, New York, New York 10022.&nbsp;&nbsp;Our telephone number at that office is (212) 980-9155
and our fax number is (212) 923-5700. Our current office space consists of approximately 2,355 square feet. The lease expires in
September 2015. The base rent is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="border-bottom: Black 1pt solid">Lease Period</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Amount Per Annum</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 65%; text-align: justify">October 1, 2010 &ndash; September 30, 2011</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 30%; text-align: right">120,105.00</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">October 1, 2011 &ndash; September 30, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">123.496.20</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">October 1, 2012 &ndash; September 30, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">126,989.14</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">October 1, 2013 &ndash; September 30, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">130,586.86</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">October 1, 2014 &ndash; September 30, 2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">134,292.52</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that our
existing facilities are suitable and adequate to meet our current business requirements. We maintain websites at www.tonixpharma.com
and www.krele.com and the information contained on those websites is not deemed to be a part of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL PROCEEDINGS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From time to time,
we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm
our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in
the aggregate, a material adverse effect on our business, financial condition or operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The names of our executive
officers and directors and their age, title, and biography&nbsp;as of&nbsp;December 31, 2012&nbsp;are set forth below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 35%; border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="width: 2%; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 12%; border-bottom: black 1pt solid; padding-left: 5.4pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt"><B>Age</B></FONT></TD>
    <TD STYLE="width: 3%; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 48%; border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 10pt"><B>Title</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Seth Lederman</FONT></TD>
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">55</FONT></TD>
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">President, CEO and Chairman of the Board of Directors</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Leland Gershell</FONT></TD>
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">40</FONT></TD>
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Chief Financial Officer and Treasurer</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Bruce Daugherty</FONT></TD>
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">55</FONT></TD>
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Senior Director of Drug Development, Controller and Secretary</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Stuart Davidson</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">55</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Patrick Grace</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">56</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Director</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Donald W. Landry</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">58</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Director</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Ernest Mario</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">74</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Director</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Charles E. Mather IV</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">52</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Director</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">John Rhodes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">56</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Director</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Samuel Saks</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">58</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Director</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Directors are elected
annually and hold office until the next annual meeting of the stockholders of the Company and until their successors are elected.
Officers are elected annually and serve at the discretion of the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Seth Lederman,
MD</I></B> became our President, Chief Executive Officer, Chairman of the Board and a Director in October 2011. Dr. Lederman founded
Tonix Sub in June of 2007 and has acted as its Chairman of the Board of Directors since inception and as President since June 2010.
Dr. Lederman has been the Chairman of Krele since its inception in August 2010. Since 1996, Dr. Lederman has been an Associate
Professor at Columbia University. As an Assistant Professor at Columbia, Dr. Lederman discovered and characterized the CD40-ligand
and invented therapeutic candidates to treat autoimmune diseases and transplant rejection. Dr. Lederman has been a Manager of L&amp;L
Technologies LLC since 1996. In addition, Dr. Lederman has been the Managing Member of Seth Lederman Co, LLC since January 2007
and the Managing Member of Lederman &amp; Co, LLC since 2002, both of which are biopharmaceutical consulting and investing companies.
Dr. Lederman has also been the Managing Member of Targent Pharmaceuticals since 2000, and Managing Member of Plumbline LLC since
2002. Targent Pharmaceuticals, LLC was a founder of Targent Pharmaceuticals Inc. on which Board of Directors Dr. Lederman served
from inception in 2001 until the sale of its assets to Spectrum Pharmaceuticals Inc. in 2006. Between January 2007 and November
2008, Dr. Lederman was a Managing Partner of Konanda Pharma Partners, LLC, a Director of Konanda Pharma Fund I, LP, and a Managing
Partner of Konanda General Partner, LLC, which were related private growth equity fund entities. As well, between January 2007
and November 2008, Dr. Lederman was Chairman of Validus Pharmaceuticals, Inc. and Fontus Pharmaceuticals, Inc., which were portfolio
companies of the Konanda private growth equity fund. Since December 2011, Dr. Lederman has served as CEO and Chairman of Leder
Laboratories Inc. and Starling Pharmaceuticals Inc, which are biopharmaceutical development companies. Between 2006 and 2011, Dr.
Lederman was a director of Research Corporation, a New York-based non-profit Dr. Lederman received his BA degree in Chemistry from
Princeton University in 1979 and his MD from Columbia University in 1983. Dr. Lederman has been a New York State licensed physician
since 1985. Dr.&nbsp;Lederman&rsquo;s significant experience with our patent portfolio and his experience as an entrepreneur, seed
capital investor, fund manager, and director of start-up biopharmaceutical companies were instrumental in his selection as a member
of the board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Leland Gershell,
MD PhD</I></B> became our Chief Financial Officer on April 1, 2012 and our Treasurer in November 2012. From May 2011 to December
2011, Dr. Gershell was Managing Director and Senior Analyst at Madison Williams and Company, where he was responsible for equity
research coverage of specialty pharmaceutical and biotechnology companies. From April 2010 to October 2010, Dr. Gershell was Senior
Analyst at Favus Institutional Research, where he was responsible for issuing research reports on a variety of healthcare companies
to institutional investors. From October 2008 to October 2009, Dr. Gershell was Senior Analyst at Apothecary Capital, a healthcare
investment firm. From November 2004 to September 2008, Dr. Gershell was an equity research analyst at Cowen and Company, most recently
as Vice President, where he was responsible for the equity research coverage of small and middle capitalization biotechnology companies.
Dr. Gershell earned his M.D. and Ph.D. in Organic Chemistry from Columbia University and his B.A. magna cum laude in Chemistry
and Asian Studies from Dartmouth College. Dr. Gershell is an inventor on Columbia&rsquo;s patents for SAHA/vorinostat, which is
marketed by Merck as Zolinza&reg; and is the first histone deacetylase (HDAC) inhibitor to receive FDA approval.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Bruce Daugherty,
PhD</I></B> became our Senior Director of Drug Development and Controller on April 1, 2012 and our Secretary in November 2012.
Since January 2009, Dr. Daugherty has worked as a consultant to academia and biotechnology companies in drug discovery/development
and licensing through his consulting company, LeClair Pharma Consulting, LLC. Dr. Daugherty was a consultant to our company between
November 2011 and March 2012. In 2009, Dr. Daugherty was employed at Assumption College in Mendham, New Jersey, where he was a
lecturer in Biology for freshman students. From 1987 to 2008, Dr. Daugherty was employed at Merck &amp; Co., where he was a scientist
in drug discovery and development. Dr. Daugherty earned his MBA from Emory University&rsquo;s Goizueta Business School, his PhD
in Molecular Genetics and Microbiology from UMDNJ-Robert Wood Johnson Medical School, his MS in Zoology from Rutgers University
and his BA in Biology from Washington University in St. Louis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Stuart Davidson</I></B>
became a Director in October 2011. Between July 2010 and October 2011, Mr. Davidson served as a director of Tonix Sub. Since 2011,
Mr. Davidson has been a Managing Director of Sonen Capital. Since 1994, Mr. Davidson has been a Managing Partner of Labrador Ventures.
Prior to Labrador, Mr. Davidson founded and served as CEO of Combion, Inc., which was acquired by Incyte. He also served as President
of Alkermes, Inc., a biotechnology company focused on drug delivery. Mr. Davidson received his Bachelor&rsquo;s Degree from Harvard
College in 1978 and his MBA from Harvard Business School in 1984. Mr.&nbsp;Davidson&rsquo;s prior experience as a venture capital
investor, entrepreneur, and biotechnology industry executive experience leading pharmaceutical companies was instrumental in his
selection as a member of our board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Patrick Grace</I></B>
became a Director in October 2011. Between June 2007 and October 2011, Mr. Grace served as a director of Tonix Sub. Mr.&nbsp;Grace
was the co-founder of and has&nbsp;served as the Managing Partner of Apollo&nbsp;Philanthropy Partners, L.L.C. since October&nbsp;2008.
He has also been President of&nbsp;MLP&nbsp;Capital, Inc., New York, New York, an&nbsp;investment holding company, since&nbsp;1996.
Mr.&nbsp;Grace served in various senior management&nbsp;roles with W. R. Grace &amp;&nbsp;Co. from 1977-1995, and was last President&nbsp;and
CEO of Grace&nbsp;Logistics Services, Inc. From January&nbsp;2002 to August&nbsp;2002, Mr. Grace was also President and Chief Executive
Officer of Kingdom Group, LLC (&ldquo;Kingdom&rdquo;), New York, New York (a provider of turnkey compressed natural gas fueling
systems), which filed for bankruptcy January&nbsp;2002, and he was Executive Vice President of Kingdom from August&nbsp;1999 to
December&nbsp;2000. Since 1996, he&nbsp;has been a director of Chemed Corporation.&nbsp;Mr. Grace&nbsp;was a liberal arts major
at the University of&nbsp;Notre&nbsp;Dame and earned a MBA in finance&nbsp;from Columbia University. Mr. Grace&rsquo;s&nbsp;extensive
executive experience, along with&nbsp;his membership on the board of&nbsp;directors of&nbsp;a public company was instrumental in
his&nbsp;selection as a member of&nbsp;our board of&nbsp;directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Donald W. Landry,
MD, PhD</I></B> became a Director in October 2011. Between June 2007 and October 2011, Dr. Landry served as a director of Tonix
Sub. Dr. Landry has been a member of the faculty of Columbia University since 1986, and has served as the Samuel Bard Professor
of Medicine, Chair of the Department of Medicine and Physician-in-Chief at New York Presbyterian Hospital/Columbia University since
2008. Dr. Landry was a co-founder and has been a member of L&amp;L Technologies, LLC since 1996. Dr. Landry received his BS degree
in Chemistry from Lafayette College in 1975, his PhD in Organic Chemistry from Harvard University in 1979 and his M.D. from Columbia
University in 1983. Dr. Landry has been a New York State licensed physician since 1985. In 2008, Dr. Landry was awarded the Presidential
Citizens Medal, the second-highest award that the President can confer upon a civilian. Dr.&nbsp;Landry&rsquo;s significant medical
and scientific background was instrumental in his selection as a member of the board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Ernest Mario,
PhD </I></B>became a Director in October 2011. Between September 2010 and October 2011, Dr. Mario served as a director of Tonix
Sub. Dr. Mario is a former Deputy Chairman and Chief Executive of Glaxo Holdings plc and a former Chairman and Chief Executive
Officer of ALZA Corporation. Since August 2007, Dr.&nbsp;Mario has served as the Chief Executive Officer and Chairman of Capnia,
Inc., a privately held specialty pharmaceutical company in Palo Alto, CA.&nbsp; From 2003 to 2007, he was Chairman and Chief Executive
of Reliant Pharmaceuticals, Inc.&nbsp; Dr. Mario is currently a Director of Boston Scientific Corp. (since 2001), Celgene Corp.
(since 2007), Maxygen Inc. (since 2001), VIVUS Inc. (since 2012) and XenoPort Inc. (since 2012).&nbsp;&nbsp; He is Chairman of
the American Foundation for Pharmaceutical Education and serves as an advisor to The Ernest Mario School of Pharmacy at Rutgers
University. In 2007, Dr.&nbsp;Mario was awarded the Remington Medal by the American Pharmacists&rsquo; Association, pharmacy&rsquo;s
highest honor. Dr.&nbsp;Mario received a PhD and an MS in physical sciences from the University of Rhode Island and a BS in pharmacy
from Rutgers University. Dr.&nbsp;Mario brings to his service as a director his significant executive leadership experience, including
his experience leading several pharmaceutical companies, as well as his membership on public company boards and foundations. He
also has extensive experience in financial and operations management, risk oversight, and quality and business strategy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Charles E. Mather
IV</I></B> became a Director in October 2011. Between April and October 2011, Mr. Mather served as a director of Tonix Sub. Mr.
Mather has been the Head of Private and Alternative Capital and Co-Head of ECM at Janney Montgomery Scott since December 2009.
Between October 2008 and December 2009, Mr. Mather served as an independent consultant to various securities firms. Between May
2007 and September 2008, Mr. Mather was the head of the Structured Equity Group at Jefferies Group Inc. Prior to that, Mr. Mather
held various senior investment banking positions at Cowen and Company, including as Co-Head of the Private Equity Group. Mr. Mather
received a BA in History from Brown University and an MBA in Finance from The Wharton School, University of Pennsylvania. Mr.&nbsp;Mather&rsquo;s
extensive experience as an investment banker was instrumental in his selection as a member of our board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>John Rhodes</I></B>
became a Director in October 2011. Mr. Rhodes has served as director of the Center for Market Innovation at Natural Resources Defence
Council since January 2012. Between October 2010 and October 2011, Mr. Rhodes served as a director of Tonix Sub. Mr. Rhodes has
been a director of Dewey Electronics Company, a manufacturer of electronic and electromechanical systems for the military and commercial
markets, since 2005. Between April 2007 and June 2010, Mr. Rhodes was a Senior Advisor to Good Energies, Inc., a renewable energy
company. Mr. Rhodes is a former Vice President of Booz Allen Hamilton, Inc. Mr. Rhodes is a graduate of Princeton University and
the Yale School of Management. Mr.&nbsp;Rhodes&rsquo; extensive business and consulting experience, along with his membership on
the board of directors of a public company was instrumental in his selection as a member of our board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Samuel Saks,
MD</I></B> became a Director in May 2012. Between 2003 and April 2009, Dr. Saks was the chief executive officer and a director
of Jazz Pharmaceuticals, Inc., a publicly-held biopharmaceutical company, which he co-founded in 2003. From April 2011 until February
2012, Dr. Saks served as interim Chief Medical Officer of Threshold Pharmaceuticals, a publicly-held biopharmaceutical company.
From 2001 until 2003, Dr. Saks was company group chairman of ALZA Corporation and a member of the Johnson &amp; Johnson Pharmaceuticals
Operating Committee. From 1992 until 2001, Dr. Saks held various positions at ALZA, including Chief Medical Officer and Group Vice
President, where he was responsible for clinical, regulatory and commercial activities. Previously, Dr. Saks held clinical research
and development management positions with Schering-Plough, Xoma and Genentech. Dr. Saks formerly served as a scientific advisor
to ArQule Pharmaceuticals, CMEA Ventures and ProQuest Investments. Dr. Saks is currently a Director of Auspex Pharmaceuticals,
Inc. (since 2009), Depomed (since 2012), Bullet Biotechnology, Inc. (since 2012) and Velocity Pharmaceutical Development LLC (since
2011).&nbsp; From September 2005 until October 2010, Dr. Saks served on the board of directors of Trubion Pharmaceuticals, a publicly-held
biopharmaceutical company. Between September 2007 and July 2009, Dr. Saks served on the board of directors of Cougar Biotechnology,
a publicly-held biopharmaceutical company. Dr. Saks has also served on the board of directors of Corixa, Coulter and Ribozyme.
Dr.&nbsp;Saks is board certified in oncology and received a B.S. and an M.D. from the University of Illinois. Mr.&nbsp;Saks&rsquo;
extensive <FONT STYLE="color: black; background-color: white">scientific and medical expertise and experience in formulating partnering
and business development strategies, including those involving larger pharmaceutical companies,</FONT> was instrumental in his
selection as a member of our board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Family Relationships</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;Board Independence</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are not required
to have any independent members of the Board of Directors. The board of directors has determined that (i) Seth Lederman, has a
relationship which, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director and is not an &ldquo;independent director&rdquo; as defined in the Marketplace Rules of
The NASDAQ Stock Market and (ii) Stuart Davidson, Patrick Grace, Donald Landry, Ernest Mario, Charles Mather, John Rhodes and Samuel
Saks are each an independent director as defined in the Marketplace Rules of The NASDAQ Stock Market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Meetings and Committees of the Board
of Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the fiscal year
ended December 31, 2012, our board of directors held five meetings and approved certain actions by unanimous written consent. We
expect our directors to attend all board and committee meetings and to spend the time needed and meet as frequently as necessary
to properly discharge their responsibilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Audit Committee</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Audit Committee
consists of Patrick Grace, Charles Mather and John Rhodes, with Mr. Grace elected as Chairman of the Committee. Our Board of Directors
has determined that each of Messrs. Grace, Mather and Rhodes are &ldquo;independent&rdquo; as that term is defined under applicable
SEC rules and under the current listing standards of the NASDAQ Stock Market. Mr. Grace is our audit committee financial expert.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Audit Committee&rsquo;s
responsibilities include: (i) reviewing the independence, qualifications, services, fees, and performance of the independent auditors,
(ii) appointing, replacing and discharging the independent auditor, (iii) pre-approving the professional services provided by the
independent auditor, (iv) reviewing the scope of the annual audit and reports and recommendations submitted by the independent
auditor, and (v) reviewing our financial reporting and accounting policies, including any significant changes, with management
and the independent auditor. The Audit Committee has&nbsp;reviewed and discussed with management the Company&rsquo;s audited financial
statements for the year ended December&nbsp;31, 2011.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Compensation Committee</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Compensation Committee
consists of Stuart Davidson, Ernest Mario and Samuel Saks, with Mr. Davidson elected as Chairman of the Committee. Our Board of
Directors has determined that all of the members are &ldquo;independent&rdquo; under the current listing standards of the NASDAQ
Stock Market. Our Board of Directors has adopted a written charter setting forth the authority and responsibilities of the Compensation
Committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&#9;<FONT STYLE="font-size: 10pt">Our
Compensation Committee has responsibility for assisting the Board of Directors in, among other things, evaluating and making recommendations
regarding the compensation of our executive officers and directors, assuring that the executive officers are compensated effectively
in a manner consistent with our stated compensation strategy, producing an annual report on executive compensation in accordance
with the rules and regulations promulgated by the SEC, periodically evaluating the terms and administration of our incentive plans
and benefit programs and monitoring of compliance with the legal prohibition on loans to our directors and executive officers.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Governance and Nominating Committee</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Governance and
Nominating Committee consists of Donald Landry, Charles Mather and John Rhodes, with Mr. Rhodes elected as Chairman of the Committee.
The Board of Directors has determined that all of the members are &ldquo;independent&rdquo; under the current listing standards
of the NASDAQ Stock Market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Governance and
Nominating Committee has responsibility for assisting the Board in, among other things, effecting the organization, membership
and function of the Board and its committees. The Governance and Nominating Committee shall identify and evaluate the qualifications
of all candidates for nomination for election as directors. In addition, the Governance and Nominating Committee is responsible
for developing, recommending and evaluating corporate governance standards and a code of business conduct and ethics.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Involvement in Certain Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Directors and Executive
Officers have not been involved in any of the following events during the past ten years:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 5%; text-align: justify"><FONT STYLE="font-size: 10pt">1.</FONT></TD>
    <TD STYLE="width: 85%; text-align: justify"><FONT STYLE="font-size: 10pt">any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">2.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">3.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">4.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">being found by a court of competent jurisdiction in a civil action, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">5.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">being subject of, or a party to, any federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">6.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
provides certain summary information concerning compensation awarded to, earned by or paid to our Chief Executive Officer, the
two highest paid executive officers and up to two other highest paid individuals whose total annual salary and bonus exceeded $100,000
for fiscal years 2012 and 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Name &amp; Principal<BR>
    Position</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Year</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Salary<BR>
    ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Bonus<BR> ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Stock<BR> Awards<BR>
    ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Option<BR>
    Awards<BR> ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Non-Equity<BR>
    Incentive Plan<BR> Compensation<BR>
    ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Change in<BR>
    Pension<BR> Value and<BR> Non-<BR> Qualified<BR>
    Deferred<BR> Compensation<BR> Earnings ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">All Other<BR>
    Compensation<BR> ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Total ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; width: 26%"><FONT STYLE="font-size: 8pt">Seth Lederman (1)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 4%; text-align: right"><FONT STYLE="font-size: 8pt">2012</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 8pt">822,715</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">277,167</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">(2)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">1,099,882</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Chief Executive Officer</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">300,750</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">(2)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">300,750</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Leland Gershell (3)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2012</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">138,542</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">587,654</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">726,196</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Chief Financial Officer</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Bruce Daugherty (4)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2012</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">110,833</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">470,123</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">580,956</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Senior Director of Drug Development</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Benjamin Selzer (5)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2012</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">192,708</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">192,708</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Chief Operating Officer</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">David J. Moss (6)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Chief Executive Officer</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Rhonda Rosen (7)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">160,104</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">160,104</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Chief Financial Officer</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">140,463</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">140,463</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Susan Oliver (8)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">113,249</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">113,249</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">Secretary</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-size: 10pt">(1)</FONT></TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font-size: 10pt">Dr. Lederman became our President and Chief Executive Officer on October 7, 2011. His compensation reflects payments made to him either through Tonix or Tonix Sub.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">(2)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Represents $48,000 and $96,000 of consulting fees paid to L&amp;L Technologies, $229,167 and $198,750 of consulting fees paid to Lederman &amp; Co. and $0 and $6,000 of director fees paid for the years ended December 31, 2012 and 2011, respectively.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">(3)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Dr. Gershell became our Chief Financial Officer on April 1, 2012 and our Treasurer in November 2012.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">(4)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Dr. Daugherty became our Senior Director of Drug Development and Controller on April 1, 2012 and our Secretary in November 2012</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">(5)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Mr. Selzer became our Chief Operating Officer in October 2011 and our interim Chief Financial Officer, Secretary and Treasurer in February 2012. Mr. Selzer resigned as our interim Chief Financial Officer on April 1, 2012. Mr. Selzer was terminated effective October 26, 2012.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">(6)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Mr. Moss become our Chief Executive Officer on November 22, 2010 and resigned effective October 7, 2011.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">(7)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Ms. Rosen become our Chief Financial Officer on October 7, 2011. Her compensation reflects payments made to her either through Tonix or Tonix Sub. Ms. Rosen was terminated effective February 16, 2012.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">(8)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Ms. Oliver was terminated effective October 20, 2011.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Option/SAR Grants in Fiscal Year Ended December 31, 2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT>&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Grant<BR> Date</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">All Other Option Awards:<BR> Number of Securities<BR> Underlying Options (#)</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Exercise or Base Price <BR> of Option Awards<BR> ($/Share)</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Grant Date Fair Value<BR> of Stock and Option<BR> Awards ($)</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; width: 21%">Seth Lederman</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 20%; text-align: center">5/9/2012</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 16%; text-align: right">700,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 16%; text-align: right">1.50</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 16%; text-align: right">822,715</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Leland Gershell</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">5/9/2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">500,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.50</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">587,654</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Bruce Daugherty</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">5/9/2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">400,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.50</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">470,123</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Outstanding Equity Awards at Fiscal Year-End Table</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth information for the named executive officers regarding the number of shares subject to both exercisable and unexercisable
stock options, as well as the exercise prices and expiration dates thereof, as of December 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="border-bottom: Black 1pt solid">Name</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Number of<BR> Securities<BR> underlying<BR> Unexercised<BR> Options (#)<BR> Exercisable</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Number of<BR> Securities<BR> underlying<BR> Unexercised<BR> Options (#)<BR> Unexercisable</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Option<BR> Exercise<BR> Price<BR> ($/Sh)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Option Expiration Date</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; width: 21%">Seth Lederman</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 16%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 16%; text-align: right">700,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 16%; text-align: right">1.50</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 21%; text-align: right">5/9/2022</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Leland Gershell</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">500,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.50</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5/9/2022</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Bruce Daugherty</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">400,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.50</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5/9/2022</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Equity Compensation Plan Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Plan&nbsp;category</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number&nbsp;of<BR> securities&nbsp;to<BR> be&nbsp;issued<BR> upon<BR> exercise&nbsp;of<BR> outstanding<BR> options<BR> (a)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted-<BR> average<BR> exercise<BR> price&nbsp;of<BR> outstanding<BR> options<BR> (b)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Securities<BR> remaining<BR> available&nbsp;for<BR> future<BR> issuance<BR> under&nbsp;equity<BR> compensation<BR> plans<BR> (excluding<BR> securities<BR> reflected&nbsp;in<BR> column&nbsp;(a))<BR> (c)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; text-align: left">Equity compensation plans approved by security holders</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">3,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1.50</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">1,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Equity compensation plans not approved by security holders</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 2.5pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,000,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1.50</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,000,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employment Contracts and Termination of Employment and Change-In-Control
Arrangements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Employment Agreement with Leland Gershell</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Effective April 1,
2012, we entered into an employment agreement (the &ldquo;Gershell Agreement&rdquo;) with Dr. Gershell to serve as Chief Financial
Officer. The base salary under the Gershell Agreement is $175,000 per annum, which shall increase to $325,000 per annum upon our
consummation of an equity sale of securities in excess of $20 million (the &ldquo;Gershell Threshold&rdquo;). The Gershell Agreement
provides for at-will employment and can be terminated at any time by either party, provided, however, that if we terminate Dr.
Gershell for any reason other than cause (as defined in the Gershell Agreement), then Dr. Gershell shall be entitled to six weeks
of severance, which severance payment shall increase to six months if such termination occurs after the Gershell Threshold. In
addition, Dr. Gershell is entitled to participate in any and all benefit plans, from time to time, in effect for our employees,
along with vacation, sick and holiday pay in accordance with its policies established and in effect from time to time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Employment Agreement with Bruce Daugherty</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Effective April 1,
2012, we entered into an employment agreement (the &ldquo;Daugherty Agreement&rdquo;) with Dr. Daugherty to serve as Senior Director
of Drug Development. The base salary under the Daugherty Agreement is $140,000 per annum, which shall increase to $220,000 per
annum upon our consummation of an equity sale of securities in excess of $20 million (the &ldquo;Daugherty Threshold&rdquo;). The
Daugherty Agreement provides for at-will employment and can be terminated at any time by either party, provided, however, that
if we terminate Dr. Daugherty for any reason other than cause (as defined in the Daugherty Agreement), then Dr. Daugherty shall
be entitled to six weeks of severance, which severance payment shall increase to six months if such termination occurs after the
Daugherty Threshold. In addition, Dr. Daugherty is entitled to participate in any and all benefit plans, from time to time, in
effect for our employees, along with vacation, sick and holiday pay in accordance with its policies established and in effect from
time to time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth summary information concerning the total compensation paid to our non-employee directors in 2012 for services to our
company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fees&nbsp;Earned<BR> or&nbsp;Paid&nbsp;in<BR> Cash&nbsp;($)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Option<BR> Awards&nbsp;($)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total&nbsp;($)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; text-align: left">Stuart&nbsp;Davidson</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">235,062</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">235,062</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Patrick Grace</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">235,062</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">235,062</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Donald Landry</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">235,062</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">235,062</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Ernest Mario</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">235,062</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">235,062</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Charles Mather IV</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">235,062</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">235,062</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">John Rhodes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">235,062</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">235,062</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Samuel Saks</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">235,062</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">235,062</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total:</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,645,434</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,645,434</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other than as disclosed
below, since January 1, 2011, there have been no transactions, or proposed transactions, which have materially affected or will
materially affect us in which any director, executive officer or beneficial holder of more than 5% of the outstanding common, or
any of their respective relatives, spouses, associates or affiliates, has had or will have any direct or material indirect interest.
We have no policy regarding entering into transactions with affiliated parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 4, 2010, Tonix
Sub entered into a consulting agreement with Lederman &amp; Co., LLC, of which our Chairman, CEO and President Seth Lederman is
the Managing Member. Pursuant to this agreement, Lederman &amp; Co. shall provide clinical development, strategic, management and
operational consulting services. In exchange for its services, Tonix Sub shall pay Lederman &amp; Co. compensation of $250,000
per annum and issued to Lederman &amp; Co. 261,784 shares of its common stock, 20% of which vested on the date of the agreement
and the remainder vesting in equal amounts on each of the first, second, third and fourth anniversaries of the date of the agreement.
On August 1, 2011, the cash compensation was reduced to $127,000 per annum. On February 1, 2012, the cash compensation was increased
to $250,000 per annum. Immediately prior to the Share Exchange, the unvested shares of common stock vested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 4, 2010, Tonix
Sub entered into a technology transfer and assignment agreement with Lederman &amp; Co., LLC. Pursuant to this agreement, Lederman
&amp; Co. transferred intellectual property rights related to isometheptene mucate to Tonix Sub. In exchange for the assignment
of the intellectual property rights, Tonix Sub issued to Lederman &amp; Co. 1,308,921 shares of its common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 4, 2010 Tonix
Sub entered into a consulting agreement with L&amp;L Technologies, LLC, of which our Chairman, CEO and President Seth Lederman
is the Manager. Pursuant to this agreement, L&amp;L Technologies shall provide scientific and medical consulting services. In exchange
for its services, Tonix Sub shall pay L&amp;L Technologies compensation of $96,000 per annum, or such greater amount as the Board
may designate from time to time, and issued to L&amp;L Technologies 1,026,194 shares of its common stock, 25% of which vested on
the date of the agreement and the remainder vesting in equal amounts on each of the first, second and third anniversaries of the
date of the agreement. Immediately prior to the Share Exchange, the unvested shares of common stock vested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth certain information regarding beneficial ownership of our common stock as of January 22, 2013:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 3%"><FONT STYLE="font-size: 10pt">&bull;</FONT></TD>
    <TD STYLE="width: 92%"><FONT STYLE="font-size: 10pt">by each person who is known by us to beneficially own more than 5% of our common stock;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">&bull;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">by each of our officers and directors; and</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">&bull;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">by all of our officers and directors as a group.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Unless otherwise indicated
in the footnotes to the following table, each person named in the table has sole voting and investment power and that person&rsquo;s
address is c/o Tonix Pharmaceuticals Holding Corp., 509 Madison Avenue, Suite 306, New York New York 10022.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">NAME OF OWNER</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">TITLE OF</FONT><BR>
<FONT STYLE="font-size: 10pt">CLASS</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">NUMBER OF</FONT><BR>
<FONT STYLE="font-size: 10pt">SHARES OWNED (1)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">PERCENTAGE OF</FONT><BR>
<FONT STYLE="font-size: 10pt">COMMON STOCK (2)</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 42%"><FONT STYLE="font-size: 10pt">Seth Lederman</FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 16%; padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 16%; text-align: right"><FONT STYLE="font-size: 10pt">9,508,949</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">(3)&nbsp;</FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 16%; text-align: right"><FONT STYLE="font-size: 10pt">35.06</FONT></TD>
    <TD STYLE="width: 2%"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Leland Gershell</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">162,500</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">(4)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Bruce Daugherty</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">500,001</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">(5)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Stuart Davidson</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1,838,289</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">(6)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3.90</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Patrick Grace</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">130,906</FONT></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Donald Landry</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1,933,532</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">(7)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">6.83</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Ernest Mario</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1,663,746</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">(8)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3.39</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Charles Mather IV</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">260,569</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">(9)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">John Rhodes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1,651,936</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">(10)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">2.63</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Samuel Saks</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">500,001</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">(11)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 10pt">Officers and Directors as a Group (10 persons)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">16,115,488</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">(12)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">42.74</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 10pt">Lederman &amp; Co., LLC (13)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5,963,565</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">(14)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">17.35</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 10pt">Eli Lederman (15)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,352,810</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">(16)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6.85</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 10pt">Technology Partners Fund VIII, LP (17)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Common Stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,924,857</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">(18)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5.61</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* Denotes less than 1%</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(1) Beneficial Ownership is determined
in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of
common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days
of January 22, 2013 are deemed outstanding for computing the percentage of the person holding such option or warrant but are not
deemed outstanding for computing the percentage of any other person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(2) Percentage based upon <FONT STYLE="color: black">43,182,599
</FONT>shares of common stock issued and outstanding as of January 22, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(3) Includes 3,692,558 shares of common
stock and 2,090,000 shares of common stock underlying warrants owned by Lederman &amp; Co., LLC, 649,138 shares of common stock
and 486,666 shares of common stock underlying warrants owned by L&amp;L Technologies, LLC, 1,179,424 shares of common stock and
165,000 shares of common stock underlying warrants owned by Targent Pharmaceuticals, LLC, 83,333 shares of common stock and 166,666
shares of common stock underlying warrants owned by Leder Laboratories, Inc. and 83,333 shares of common stock and 166,666 shares
of common stock underlying warrants owned by Starling Pharmaceuticals, Inc. Seth Lederman, as the Managing Member of Lederman &amp;
Co., LLC and Targent Pharmaceuticals, LLC, the Manager of L&amp;L Technologies, Inc. and the Chairman of Leder Laboratories, Inc.
and Starling Pharmaceuticals, Inc., has investment and voting control over the shares held by these entities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(4) Includes 100,000 shares of common stock
underlying warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(5) Includes 333,334 shares of common stock
underlying warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(6) Includes 1,324,049 shares of common
stock and 383,334 shares of common stock underlying warrants owned by Lysander, LLC and 130,906 shares owned by Oystercatcher Trust.
Stuart Davidson, as the Member of Lysander, LLC and Trustee of Oystercatcher Trust, has investment and voting control over the
shares held by these entities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(7) Includes 649,138 shares of common stock
and 486,666 shares of common stock underlying warrants owned by L&amp;L Technologies, LLC. Donald Landry, as a Member of L&amp;L
Technologies, LLC, has investment and voting control over the shares held by this entity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(8) Includes 383,334 shares of common stock
underlying warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(9) Includes 110,000 shares of common stock
underlying warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(10) Includes 550,000 shares of common
stock underlying warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(11) Includes 333,334 shares of common
stock underlying warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(12) Includes 3,692,558 shares of common
stock and 2,090,000 shares of common stock underlying warrants owned by Lederman &amp; Co., LLC, 649,138 shares of common stock
and 486,666 shares of common stock underlying warrants owned by L&amp;L Technologies, LLC, 1,179,424 shares of common stock and
165,000 shares of common stock underlying warrants owned by Targent Pharmaceuticals, LLC, 83,333 shares of common stock and 166,666
shares of common stock underlying warrants owned by Leder Laboratories, Inc., 83,333 shares of common stock and 166,666 shares
of common stock underlying warrants owned by Starling Pharmaceuticals, Inc., 1,324,049 shares of common stock and 383,334 shares
of common stock underlying warrants owned by Lysander, LLC, 130,906 shares owned by Oystercatcher Trust and 1,835,002 shares of
common stock underlying warrants owned directly by the executive officers and directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(13) Seth Lederman, our President and Chief
Executive Officer, has investment and voting control over the shares held by this entity. The mailing address for this entity is
245 E. 93 <SUP>rd</SUP> St. 14E, New York, New York 10128.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(14) Includes 2,090,000 shares of common
stock underlying warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(15) The mailing address for this beneficial
owner is Malt House Cottage, Hurley, Berkshire, SL6 5LT, United Kingdom.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(16) Includes 300,000 shares of common
stock underlying warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(17) The mailing address for this beneficial
owner is 100 Shoreline Highway, Suite 282-B, Mill Valley, California 94941. Sheila Mutter and Roger Quy are the managing members
of TP Management VIII, LLC, the general partner of Technology Partners Fund VIII, LP and have voting and investment power over
the securities owned by it.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(16) Includes 2,015,266 shares of common
stock underlying warrants and represents the maximum beneficial ownership percentage pursuant to exercise limitations contained
within warrants owned by this beneficial owner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF SECURITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are authorized to
issue up to 150,000,000 shares of our common stock, par value $0.001 per share. As of January 22, 2013, there were <FONT STYLE="color: black">43,182,599
</FONT>shares of our common stock issued and outstanding. The outstanding shares of our common stock are validly issued, fully
paid and nonassessable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Holders of our common
stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of our common stock do not
have cumulative voting rights. Therefore, holders of a majority of the shares of our common stock voting for the election of directors
can elect all of the directors. Holders of our common stock representing a majority of the voting power of our capital stock issued,
outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of stockholders.
A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such
as liquidation, merger or an amendment to our articles of incorporation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Holders of our common
stock are entitled to share in all dividends that our Board of Directors, in its discretion, declares from legally available funds.
In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in
all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over
our common stock. Our common stock has no pre-emptive, subscription or conversion rights and there are no redemption provisions
applicable to our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are authorized to
issue up to 5,000,000 shares of preferred stock, par value $.001 per share, none of which are currently outstanding. The shares
of preferred stock may be issued in series, and shall have such voting powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the resolution or resolutions providing for the issuance of such stock adopted from time to
time by the board of directors. The board of directors is expressly vested with the authority to determine and fix in the resolution
or resolutions providing for the issuances of preferred stock the voting powers, designations, preferences and rights, and the
qualifications, limitations or restrictions thereof, of each such series to the full extent now or hereafter permitted by the laws
of the State of Nevada.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Options</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of January 22, 2013,
there are an aggregate of 3,000,000 options to purchase shares of our common stock issued and outstanding. All of the options are
exercisable at $1.50 per share, expire on May 9, 2022 and vest 1/3<SUP>rd</SUP> on May 9, 2013 and 1/36<SUP>th</SUP> on the 9<SUP>th</SUP>
of each month thereafter for 24 months</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="color: black">In
connection with the 2011 Financing, we issued Conversion Warrants to purchase 275,000 shares of Common Stock. In addition, we issued
2011 Agent Warrants to the placement agents to purchase </FONT>an aggregate of 30,750 shares of Common Stock. <FONT STYLE="color: black">The
Conversion Warrants have a three year term and $1.00 exercise price. The 2011 Agent Warrants have a $1.00 exercise price and 15,000
have a two year term and the remaining 15,750 have a three year term. The Conversion Warrants may be exercised on a cashless basis.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="color: black">In
connection with the March 2012 Financing, we issued March 2012 Class A Warrants to purchase 6,617,765 shares of Common Stock. In
addition, we issued 2012 Agent Warrants to the placement agent to purchase </FONT>466,777 shares of Common Stock. <FONT STYLE="color: black">The
March 2012 Class A Warrants have a five year term and $1.25 exercise price. The 2012 Agent Warrants have a seven year term and
$1.25 exercise price. The March 2012 Class A Warrants and 2012 Agent Warrants may be exercised on a cashless basis and contain
customary anti-dilution protection.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="color: black">In
connection with the December 2012 Financing, we issued Class A Warrants to purchase 8,904,167 shares of Common Stock and Class
B Warrants to purchase 8,904,167 shares of Common Stock. The Class A Warrants have a five year term and $0.60 exercise price and
the Class B Warrants have a one year term and $0.40 exercise price. The Class A Warrants may be exercised on a cashless basis </FONT>under
certain conditions<FONT STYLE="color: black">.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Convertible Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Chapter 78 of the Nevada
Revised Statutes (&ldquo;NRS&rdquo;) provides that a corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys&rsquo;
fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action,
suit or proceeding if he is not liable pursuant to NRS Section 78.138 or acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. NRS Chapter 78 further provides that a corporation similarly may indemnify
any such person serving in any such capacity who was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses
(including attorneys&rsquo; fees) actually and reasonably incurred in connection with the defense or settlement of such action
or suit if he is not liable pursuant to NRS Section 78.138 or acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent
that the court or other court of competent jurisdiction in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court or other court of competent jurisdiction shall deem proper.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our bylaws provide
that we may indemnify our officers, directors, employees, agents and any other persons to the maximum extent permitted by the NRS.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PLAN OF DISTRIBUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are registering
the shares of common stock previously issued and the shares of common stock issuable upon exercise of the warrants to permit the
resale of these shares of common stock by the holders of the common stock and warrants from time to time after the date of this
prospectus.&nbsp;&nbsp;We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common
stock.&nbsp;&nbsp;We will bear all fees and expenses incident to our obligation to register the shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The selling stockholders
may sell all or a portion of the shares of common stock held by them and offered hereby from time to time directly or through one
or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers,
the selling stockholders will be responsible for underwriting discounts or commissions or agent&rsquo;s commissions. The shares
of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at
varying prices determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve
crosses or block transactions, pursuant to one or more of the following methods:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 3%; font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="width: 87%; text-align: justify"><FONT STYLE="font-size: 10pt">on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">in the over-the-counter market;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">in transactions otherwise than on these exchanges or systems or in the over-the-counter market;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">through the writing or settlement of options, whether such options are listed on an options exchange or otherwise;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">purchases by a broker-dealer as principal and resale by the broker-dealer for its account;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">an exchange distribution in accordance with the rules of the applicable exchange;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">privately negotiated transactions;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">a combination of any such methods of sale; or</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="font-family: Symbol"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">any other method permitted pursuant to applicable law.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling stockholders may also sell shares
under Rule 144 under the Securities Act of 1933, as amended (the &ldquo;<U>Securities Act</U>&rdquo;), if available, rather than
under this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the selling
stockholders may transfer the shares of common stock by other means not described in this prospectus. If the selling stockholders
effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders
or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal
(which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of
common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock short
and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection
with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may
sell such shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The selling stockholders
may pledge or grant a security interest in some or all of the warrants or shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock
from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors
in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of
common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent required
by the Securities Act and the rules and regulations thereunder, the selling stockholders and any broker-dealer participating in
the distribution of the shares of common stock may be deemed to be &ldquo;underwriters&rdquo; within the meaning of the Securities
Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus
supplement, if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered
and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other
terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or re-allowed
or paid to broker-dealers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the securities
laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied with.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There can be no assurance
that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement,
of which this prospectus forms a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The selling stockholders
and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation
M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders
and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged
in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock.
All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage
in market-making activities with respect to the shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We will pay all expenses
of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be approximately
$106,336 in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with
state securities or &ldquo;blue sky&rdquo; laws; provided, however, a selling stockholder will pay all underwriting discounts and
selling commissions, if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the
Securities Act in accordance with the registration rights agreements or the selling stockholders will be entitled to contribution.
We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act that
may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance
with the related registration rights agreements or we may be entitled to contribution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Once sold under the
registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands
of persons other than our affiliates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SELLING STOCKHOLDERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This prospectus relates
to the offering by the selling stockholders identified in the table below of up to 17,808,334 shares of common stock, par value
$0.001 per share.&nbsp;All of the shares of common stock offered by this prospectus are being sold by the selling stockholders.
These shares consist of (i) 8,904,167 shares of common stock issued to investors in our December 2012 Financing and (ii) 8,904,167
shares of common stock issuable upon exercise of warrants to purchase 8,904,167 shares issued to investors in our December 2012
Financing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below has
been prepared based upon the information furnished to us by the selling stockholders.&nbsp;The selling stockholders identified
below may have sold, transferred or otherwise disposed of some or all of their shares since the date on which the information in
the following table is presented in transactions exempt from, or not subject to, the registration requirements of the Securities
Act.&nbsp;Information concerning the selling stockholders may change from time to time and, if necessary, we will amend or supplement
this prospectus accordingly.&nbsp;We cannot provide an estimate as to the number of shares of common stock that will be held by
the selling stockholders upon termination of the offering covered by this prospectus because the selling stockholders may offer
some or all of their shares of common stock under this prospectus. The selling stockholders may also sell, transfer or otherwise
dispose of all or a portion of their shares in transactions exempt from the registration requirements of the Securities Act or
pursuant to another effective registration statement covering those shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth, based on information provided to us by the selling stockholders or known to us, the name of each selling stockholder,
the nature of any position, office or other material relationship, if any, which the selling stockholder has had, within the past
three years, with us or with any of our predecessors or affiliates, and the number of shares of our common stock beneficially owned
by the stockholder before this offering.&nbsp;The number of shares owned are those beneficially owned, as determined under the
rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose.&nbsp;Under these
rules, beneficial ownership includes any shares of common stock as to which a person has sole or shared voting power or investment
power and any shares of common stock which the person has the right to acquire within 60 days through the exercise of any option,
warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation
of a trust, discretionary account or similar arrangement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have assumed all
shares of common stock reflected on the table will be sold from time to time in the offering covered by this prospectus.&nbsp;Because
the selling stockholders may offer all or any portions of the shares of common stock listed in the table below, no estimate can
be given as to the amount of those shares of common stock covered by this prospectus that will be held by the selling stockholders
upon the termination of the offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Selling Stockholder</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares of<BR>
    Common<BR> Stock Owned<BR> Before this<BR> Offering</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares of<BR>
    Common Stock<BR> Underlying<BR> Warrants Owned<BR> Before this<BR> Offering (1)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Percentage of<BR>
    Common Stock<BR> Beneficially<BR> Owned Before<BR> this Offering (2)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares of<BR>
    Common<BR> Stock Being<BR> Offered in<BR> this Offering<BR> (3)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares of<BR>
    Common<BR> Stock<BR> Beneficially<BR> Owned<BR> After this<BR> Offering (4)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Percentage of<BR>
    Common Stock <BR> Beneficially<BR> Owned After this<BR> Offering (2)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 22%; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Bruce Daugherty (5)</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">166,667</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">333,334</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; color: black; text-align: right"><FONT STYLE="font-size: 8pt">1.15</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">333,334</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">166,667</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="width: 1%; color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Lysander, LLC (6)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,324,049</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">383,334</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">3.92</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">333,334</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,374,049</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">2.63</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">L&amp;L Technologies, LLC (7)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">649,138</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">486,666</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">2.60</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">466,666</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">669,138</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">1.28</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Lederman &amp; Co., LLC (8)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,692,558</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,090,000</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">12.77</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,000,000</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,782,558</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">7.11</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Leder Laboratories, Inc. (9)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">83,333</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">166,666</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">166,666</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">83,333</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Starling Pharmaceuticals, Inc. (10)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">83,333</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">166,666</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">166,666</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">83,333</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Charles E. Mather IV (11)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">150,569</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">110,000</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">100,000</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">160,569</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">John Rhodes (12)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,101,936</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">550,000</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">3.78</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">500,000</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,151,936</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">2.20</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Ernest Mario (13)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,280,412</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">383,334</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">3.82</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">333,334</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,330,412</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">2.54</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Marcia Fox</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">62,500</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">62,500</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Eli Lederman (14)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,427,810</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">300,000</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">6.27</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,477,810</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">4.74</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Samuel Saks (15)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">166,667</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">333,334</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">1.15</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">333,334</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">166,667</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Selling Stockholder</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares of<BR>
    Common<BR> Stock Owned<BR> Before this<BR> Offering</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares of<BR>
    Common Stock<BR> Underlying<BR> Warrants Owned<BR> Before this<BR> Offering (1)</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Percentage of<BR>
    Common Stock<BR> Beneficially<BR> Owned Before<BR> this Offering (2)</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares of<BR>
    Common<BR> Stock Being<BR> Offered in<BR> this Offering<BR> (3)</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares of<BR>
    Common<BR> Stock<BR> Beneficially<BR> Owned<BR> After this<BR> Offering (4)</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Percentage of<BR>
    Common Stock <BR> Beneficially<BR> Owned After this<BR> Offering (2)</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 22%; text-align: left"><FONT STYLE="font-size: 8pt">Theodore A. McGraw, Jr.</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; color: black; text-align: right"><FONT STYLE="font-size: 8pt">1.37</FONT></TD><TD STYLE="width: 1%; color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="width: 1%; color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Charles Lowery</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">500,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">1.72</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">500,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">David Lummis</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">500,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">1.72</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">500,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Matthew Harad</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">62,500</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">62,500</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Ju Innovation Partners I, L.P. (16)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Peabody Capital Partners, LP (17)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">500,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,000,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">3.40</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,000,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">500,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Gates P. Torrey</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Leland &amp; Lauren Gershell, JTWROS (18)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">62,500</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">100,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">75,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">87,500</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Jupiter Financial Services, LLC (19)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,540,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,080,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt; color: black">4.99%
                                                                                              (25)</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,080,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,540,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">2.87</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">The Fontinalis Trust (20)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">The 1901 Trust (21)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Bluestein Capital Opportunities Fund, L.P. (22)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Richard M. Furlaud, Jr.</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">250,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">125,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Technology Partners Fund VIII, LP (23)</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">2,500,000</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">5,000,000</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt; color: black">9.99%
                                                                                              (25)</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">5,000,000</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">2,500,000</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">4.58</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">The 2012 Quinine Fund (24)</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">335,000</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">670,000</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">2.29</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">%</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">670,000</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">335,000</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">*</FONT></TD><TD STYLE="color: black"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="color: black; font-weight: bold"><FONT STYLE="font-size: 8pt">TOTALS:</FONT></TD><TD STYLE="color: black; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">17,782,150</FONT></TD><TD STYLE="color: black; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">18,153,334</FONT></TD><TD STYLE="color: black; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">17,808,334</FONT></TD><TD STYLE="color: black; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="color: black; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="color: black; font-weight: bold; text-align: right"><FONT STYLE="font-size: 8pt">18,127,150</FONT></TD><TD STYLE="color: black; font-weight: bold; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%; text-align: justify"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD STYLE="width: 95%; text-align: justify"><FONT STYLE="font-size: 10pt">Represents less than 1%.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(1)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Represents shares of our common stock remaining issuable under warrants issued in connection with the 2011 Financing, the 2012 Financing and/or the December 2012 Financing. All warrants are immediately exercisable, subject to exercise limitations contains therein relating to beneficial ownership percentages.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(2)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Applicable percentage ownership before the offering is based on <FONT STYLE="color: black">43,182,599</FONT> shares of common stock outstanding as of December 31, 2012. Applicable percentage ownership after the offering is based on 52,086,766 shares of common stock, which includes the 8,904,167 shares of common stock issuable upon exercise of the Class A Warrants to purchase common stock registered pursuant to this prospectus.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(3)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Assumes that (i) all of the shares of common stock to be registered on the registration statement of which this prospectus is a part, including all shares of common stock underlying warrants held by the selling stockholders, are sold in the offering and (ii) that no other shares of common stock are acquired or sold by the selling stockholder prior to the completion of the offering. However, subject to the restrictions of transfer agreed to by the selling stockholders (see &ldquo;Plan of Distribution&rdquo; in this prospectus), the selling stockholders may sell all, some or none of the shares offered pursuant to this prospectus and may sell other shares of our common stock that they may own pursuant to another registration statement under the Securities Act or sell some or all of their shares pursuant to an exemption from the registration provisions of the Securities Act, including under Rule 144.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(4)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">50% of such total shares represent shares of common stock issuable upon exercise of the Class A Warrants.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(5)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Bruce Daugherty is an executive officer of the Company.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(6)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Stuart Davidson, a member of our board of directors, is a member of Lysander LLC and has voting and investment power over the securities owned by it.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(7)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Seth Lederman, our chairman and chief executive officer, is the manager of L&amp;L Technologies, LLC and has voting and investment power over the securities owned by it.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(8)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Seth Lederman, our chairman and chief executive officer, is the managing member of Lederman &amp; Co, LLC and has voting and investment power over the securities owned by it.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(9)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Seth Lederman, our chairman and chief executive officer, is the chairman of Leder Laboratories, Inc. and has voting and investment power over the securities owned by it.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%; text-align: justify"><FONT STYLE="font-size: 10pt">(10)</FONT></TD>
    <TD STYLE="width: 95%; text-align: justify"><FONT STYLE="font-size: 10pt">Seth Lederman, our chairman and chief executive officer, is the chairman of Starling Pharmaceuticals, Inc. and has voting and investment power over the securities owned by it.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(11)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Charles Mather IV is a member of our board of directors.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(12)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">John Rhodes is a member of our board of directors.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(13)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Ernest Mario is a member of our board of directors.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(14)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Eli Lederman is the brother of Seth Lederman, our chairman and chief executive officer. Seth Lederman disclaims beneficial ownership of the securities held by Eli Lederman.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(15)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Samuel Saks is a member of our board of directors.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(16)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">William Ju is the member of William David Ju, L.L.C., the general partner of Ju Innovation Partners I, L.P. and has voting and investment power over the securities owned by it.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(17)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">James A. Torrey is the general partner of Peabody Capital Partners, LP and has voting and investment power over the securities owned by it.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(18)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Leland Gershell is an executive officer of the Company.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(19)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">David T. Altshuler is the member of Jupiter Financial Services, LLC and has voting and investment power over the securities owned by it. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(20)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">William C. Ford, Jr. is the trustee of The Fontinalis Trust and has voting and investment power over the securities owned by it.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(21)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Elena A. Ford is the trustee of The 1901 Trust and has voting and investment power over the securities owned by it.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(22)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Robert H. Bluestein and Jeffrey N. Bluestein are the president and senior managing director, respectively, of R. J. Bluestein &amp; Company, the general partner of Bluestein Capital Opportunities Fund, L.P. and have voting and investment power over the securities owned by it.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(23)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Sheila Mutter and Roger Quy are the managing members of TP Management VIII, LLC, the general partner of Technology Partners Fund VIII, LP and have voting and investment power over the securities owned by it. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(24)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Hill C. Snellings is the trustee of The 2012 Quinine Fund and has voting and investment power over the securities owned by it.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(25)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Represents maximum beneficial ownership percentage pursuant to exercise limitations contained within the warrants.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>December 2012 Private Placement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2012, we
consummated the December 2012 Financing, pursuant to which we issued an aggregate of 8,904,167 Units to the Purchasers for aggregate
cash proceeds of $2,615,000, at a price per Unit of $0.40, and the exchange of $710,000 in Debentures of the Company that were
converted into Units at a price of $0.30 per Unit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each Unit consisted
of one share of Common Stock, a Class A Warrant to purchase one share of Common Stock and a Class B Warrant to purchase one share
of Common Stock. The Class A Warrants have an exercise price of $0.60 per share of Common Stock and will be exercisable for a period
of five years from the date of issuance. The Class A Warrants may be exercised on a cashless basis under certain circumstances.
The Class B Warrants have an exercise price of $0.40 per share of Common Stock and will be exercisable for a period of one year
from the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
the December 2012 Financing, we granted each Purchaser registration rights.&nbsp;&nbsp;We are obligated to use our best efforts
to cause a registration statement registering for resale the Common Stock included in the Units and the Common Stock underlying
the Class A Warrants to be filed no later than 60 days from the date of the last closing of the December 2012 Financing and must
be declared effective no later than 120 days from the date of the last closing of the December 2012 Financing.&nbsp;&nbsp;Moreover,
we will maintain the effectiveness of the registration statement from its effective date unless all securities registered under
the registration statement have been sold or are otherwise able to be sold pursuant to Rule 144 of the Securities Act of 1933,
as amended (the &ldquo;Securities Act&rdquo;).&nbsp;&nbsp;If we fail to comply with the registration statement filing or effective
date requirements, we are required to pay the investors a fee equal to 1.0% of the Purchaser&rsquo;s investment, for each 30-day
period of delay, subject to a maximum payment of 10% to each Purchaser.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The shares included
in the Units and shares underlying the Class A Warrants are registered pursuant to this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sichenzia Ross Friedman
Ference LLP, New York, New York will issue an opinion with respect to the validity of the shares of common stock being offered
hereby.&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXPERTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">EisnerAmper LLP, an
independent registered public accounting firm, has audited, as set forth in its report thereon appearing elsewhere herein, our
financial statements at December 31, 2011 and 2010 and for the years then ended that appear in the prospectus. The financial statements
referred to above are included in this prospectus in reliance upon the independent registered public accounting firm&rsquo;s report
given on their authority as experts in accounting and auditing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>AVAILABLE INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have filed a registration
statement on Form S-1 under the Securities Act of 1933, as amended, relating to the shares of common stock being offered by this
prospectus, and reference is made to such registration statement. This prospectus constitutes the prospectus of Tonix Pharmaceuticals
Holding Corp., filed as part of the registration statement, and it does not contain all information in the registration statement,
as certain portions have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are subject to the
informational requirements of the Securities Exchange Act of 1934 which requires us to file reports, proxy statements and other
information with the Securities and Exchange Commission. Such reports, proxy statements and other information may be inspected
at public reference facilities of the SEC at 100 F Street, N.E., Washington D.C. 20549. Copies of such material can be obtained
from the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. Because we file
documents electronically with the SEC, you may also obtain this information by visiting the SEC's Internet website at http://www.sec.gov.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INDEX TO FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">INDEX TO FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="width: 88%"><FONT STYLE="font-size: 10pt">For the Years Ended December 31, 2011 and 2010</FONT></TD>
    <TD NOWRAP STYLE="width: 12%; text-align: center; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.25in"><FONT STYLE="font-size: 10pt">Report of Independent Registered Public Accounting Firm</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt">F-1</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 0.25in"><FONT STYLE="font-size: 10pt">Consolidated balance sheets as of December 31, 2011 and 2010</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt">F-2</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.25in"><FONT STYLE="font-size: 10pt">Consolidated statements of operations for the years ended December 31, 2011 and 2010 and for the period from June 7, 2007 (date of inception) through December 31, 2011</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt">F-3</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 0.25in"><FONT STYLE="font-size: 10pt">Consolidated statements of stockholders&rsquo; deficiency for the years ended December 31, 2011, 2010, 2009, 2008 and for the period from June 7, 2007 (date of inception) through December 31, 2007</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt">F-4</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.25in"><FONT STYLE="font-size: 10pt">Consolidated statements of cash flows for the years ended December 31, 2011 and 2010 and for the period from June 7, 2007 (date of inception) through December 31, 2011</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt">F-5</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 0.25in"><FONT STYLE="font-size: 10pt">Notes to consolidated financial statements</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt">F-6 to F-16</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">For the Three and Nine Months Ended September 30, 2012 and 2011</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 0.25in"><FONT STYLE="font-size: 10pt">Condensed consolidated balance sheets as of September 30, 2012 (unaudited) and December 31, 2011</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt">F-17</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.25in"><FONT STYLE="font-size: 10pt">Condensed consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011 and for the period from June 7, 2007 (date of inception) through September 30, 2012 (unaudited)</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt">F-18</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 0.25in"><FONT STYLE="font-size: 10pt">Condensed consolidated statement of stockholders&rsquo; deficiency for the nine months ended March 31, 2012 (unaudited)</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt">F-19</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.25in"><FONT STYLE="font-size: 10pt">Condensed consolidated statements of cash flows for the nine months ended September 30, 2012 and 2011 and for the period from June 7, 2007 (date of inception) through September 30, 2012 (unaudited)</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt">F-20</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 0.25in"><FONT STYLE="font-size: 10pt">Notes to condensed consolidated financial statements (unaudited)</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; vertical-align: bottom"><FONT STYLE="font-size: 10pt">F-21 to F-29</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"></P>



<P STYLE="margin: 0"></P>
<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Board of Directors and Stockholders</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Tonix Pharmaceuticals Holding Corp.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying consolidated
balance sheets of Tonix Pharmaceuticals Holding Corp. (a development stage company) (the &ldquo;Company&rdquo;) as of December
31, 2011 and 2010, the related consolidated statements of operations and cash flows for the years then ended and for the period
from June 7, 2007 (inception) through December 31, 2011 and the consolidated statements of stockholders&rsquo; deficiency for each
of the four years in the period ended December 31, 2011 and for the period from June 7, 2007 (inception) through December 31, 2007.
These financial statements are the responsibility of the Company&rsquo;s management. Our responsibility is to express an opinion
on these financial statements based on our audits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not
engaged to perform an audit of the Company&rsquo;s internal control over financial reporting. Our audits include consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company&rsquo;s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In our opinion, the financial statements
referred to above present fairly, in all material respects, the consolidated financial position of Tonix Pharmaceuticals Holding
Corp. as of December 31, 2011 and 2010, the consolidated results of its operations and its cash flows for the years ended December
31, 2011 and 2010 and for the period from June 7, 2007 (inception) through December 31, 2011 and consolidated changes in stockholders&rsquo;
deficiency for each of the four years in the period ended December 31, 2011 and for the period June 7, 2007 through December 31,
2007, in conformity with accounting principles generally accepted in the United States of America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the
Company has incurred recurring net losses and negative cash flows from operations, has both working capital and stockholders' deficiencies
at December 31, 2011 and requires additional financing to fund future operations. These events and conditions, among others referred
to in Note 2, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning
these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 40%; border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">/s/EisnerAmper LLP</FONT></TD>
    <TD STYLE="width: 60%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">EisnerAmper LLP</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">New York, New York</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">March 30, 2012</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.8pt; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING
CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.8pt; text-align: center"><B>(Formerly known as Tamandare
Explorations Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.8pt; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.8pt; text-align: center"><B>CONSOLIDATED BALANCE SHEETS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.8pt; text-align: center"><B>DECEMBER 31, 2011 AND 2010</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.8pt; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Current assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%">Cash</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">41,123</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">65,359</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Prepaid expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">102,430</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">23,313</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Total current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">143,553</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">88,672</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Furniture and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25,550</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32,086</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Deferred financing costs, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">196,166</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Restricted cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60,177</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60,087</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Security deposit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,156</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">425,446</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">184,001</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">LIABILITIES AND STOCKHOLDERS' DEFICIENCY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Current liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">695,198</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">317,745</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,229</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,533</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accrued interest, including $5,006 to related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">38,306</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Liability to placement agent</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31,543</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Convertible Debentures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">150,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Total current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">925,276</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">340,278</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Convertible Debentures, including $265,000 to related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,925,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Deferred rent payable</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">29,083</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">19,174</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Total liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,879,359</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">359,452</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Commitments (Note 6)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Stockholders' deficiency:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Common stock, $0.001 par value; 75,000,000 shares authorized, 27,066,667 and 18,034,483 shares issued and outstanding as of December 31, 2011 and 2010, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,067</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,035</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Additional paid in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,913,700</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,731,081</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Deficit accumulated during development stage</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(6,394,680</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,924,567</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Total stockholders' deficiency</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,453,913</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(175,451</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">425,446</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">184,001</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See notes to consolidated financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.8pt; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING
CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.8pt; text-align: center"><B>(Formerly known as Tamandare
Explorations Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.8pt; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.8pt; text-align: center"><B>CONSOLIDATED STATEMENTS OF
OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.8pt; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">From June 7, 2007</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="9" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">(date of inception)</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">Year ended December 31,</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Through</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">December 31, 2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Costs and expenses:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 55%; text-align: left">Research and development</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,158,167</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">584,298</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,951,954</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">General and administrative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,220,361</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,344,390</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,255,247</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,378,528</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,928,688</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,207,201</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Operating loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,378,528</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,928,688</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,207,201</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Gain on extinguishment of debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,908</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Interest expense, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(91,585</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(35,782</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(195,387</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net loss</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,470,113</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,964,470</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(6,394,680</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net loss per common share, basic and&nbsp; diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.16</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.18</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Weighted average common shares outstanding, basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">21,425,632</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,175,096</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See notes to consolidated financial statements&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>


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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIENCY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Deficit</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Accumulated</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Additional</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">During</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Common stock</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Paid in</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Development</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Amount</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Capital</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Stage</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Total</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 50%; text-align: left"><FONT STYLE="font-size: 8pt">Shares issued to founders for intellectual property
    in June 2007 ($0.15 per share)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">589,014</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">589</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">87,161</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">87,750</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Shares issued to bankers for services in June 2007 ($0.15 per share)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">65,446</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">66</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">9,684</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">9,750</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Compensation related to restricted share awards issued to directors
    in November 2007</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">24,187</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">24,187</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Net loss</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(537,001</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(537,001</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt"><FONT STYLE="font-size: 8pt">Balance at December 31, 2007</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">654,460</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">655</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">121,032</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(537,001</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(415,314</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Compensation related to cancelled restricted share awards in December
    2008</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">72,563</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">72,563</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Net loss</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(202,262</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(202,262</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt"><FONT STYLE="font-size: 8pt">Balance at December 31, 2008</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">654,460</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">655</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">193,595</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(739,263</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(545,013</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Conversion of senior convertible notes into capital stock in June
    2009 ($0.03 per share)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">7,200,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">7,200</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">192,800</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">200,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">Shares issued to directors in July 2009 ($0.15 per share)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">31,414</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">31</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">4,649</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">4,680</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Capital contribution in June 2009</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">23,725</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">23,725</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Net loss</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(220,834</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(220,834</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt"><FONT STYLE="font-size: 8pt">Balance at December 31, 2009</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">7,885,875</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">7,886</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">414,769</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(960,097</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(537,442</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Conversion of demand notes into capital stock in July 2010 ($0.23
    per share)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,094,547</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,095</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">477,905</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">480,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Conversion of accrued interest on demand notes into capital stock
    in July 2010 ($0.23 per share)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">301,430</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">301</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">68,777</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">69,078</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">Issuance of capital stock in August to December 2010 ($0.23 per share)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">5,856,005</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">5,856</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,336,145</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,342,001</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Shares issued to founders for intellectual property in June 2010
    ($0.23 per share)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,308,921</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,309</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">294,191</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">295,500</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Issuance of restricted shares to directors, employees and consultants
    in June to November 2010 ($0.24 per share)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">587,705</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">588</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">139,294</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">139,882</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Net loss</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(1,964,470</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(1,964,470</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt"><FONT STYLE="font-size: 8pt">Balance at December 31, 2010</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">18,034,483</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">18,035</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,731,081</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(2,924,567</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(175,451</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Vesting and issuance of capital stock in January to September 2011
    ($0.23 per share)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,670,548</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,670</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">609,330</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">612,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Vesting and issuance of restricted shares to directors, employees
    and consultants in February to April&nbsp; 2011 and vesting of restricted shares pursuant to Share Exchange in October 2011</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,961,636</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,962</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">433,689</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">435,651</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Common stock issued in connection with the share exchange transaction
    in October 2011</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">4,000,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">4,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(4,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Common stock issued in October 2011 in exchange for services rendered
    ($0.36 per share)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">400,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">400</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">143,600</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">144,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Net loss</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(3,470,113</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(3,470,113</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Balance at December 31, 2011</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">27,066,667</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">27,067</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">3,913,700</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(6,394,680</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(2,453,913</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See notes to consolidated financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">From June 7, 2007</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="9" NOWRAP STYLE="font-weight: bold">&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">(date of inception)</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">Year ended December 31,</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Through</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">December 31, 2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">CASH FLOWS FROM OPERATING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 55%; text-align: left">Net loss</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(3,470,113</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(1,964,470</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(6,394,680</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Adjustments to reconcile net loss to net cash used in operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,300</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,854</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,312</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Amortization of deferred financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">53,377</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">53,377</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Common stock issued in exchange for intellectual property</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">295,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">383,250</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Stock based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">435,651</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">139,882</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">686,713</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Gain on extinguishment of debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,908</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Prepaid expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(79,117</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(19,315</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(102,430</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">377,453</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">294,132</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">695,198</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accrued interest</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">38,306</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32,691</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">38,306</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,304</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(34,789</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">110,940</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Deferred rent payable</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,909</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">19,174</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">29,083</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 8.65pt">Net cash used in operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,637,538</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,233,341</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,490,839</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">CASH FLOWS FROM INVESTING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Purchase of furniture and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,764</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(34,279</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(42,862</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Repayment of security deposit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,156</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Payment of restricted cash</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(90</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(60,087</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(60,177</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Net cash provided by (used in) investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">302</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(94,366</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(103,039</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">CASH FLOWS FROM FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Proceeds from demand notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">480,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Proceeds from notes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">500,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">700,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Proceeds from Convertible Debentures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,501,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,501,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Proceeds from the sale of capital stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">612,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,342,001</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,954,001</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Net cash provided by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,613,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,392,001</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,635,001</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net (decrease) increase in cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(24,236</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">64,294</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">41,123</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Cash, beginning of the period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">65,359</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,065</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Cash, end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">41,123</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">65,359</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">41,123</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Non cash investing and financing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Senior convertible notes exchanged for preferred shares</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">200,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">200,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Capital contribution of accrued interest on convertible notes</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">23,725</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Demand notes together with accrued interest converted into capital stock</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">549,078</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">549,078</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Common stock issued for deferred financing costs</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">144,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">144,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See notes to consolidated financial statements&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DECEMBER 31, 2011 AND 2010&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 1 &ndash;BUSINESS AND RECAPITALIZATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Tonix Pharmaceuticals Holding Corp. through
its wholly owned subsidiary Tonix Pharmaceuticals, Inc. is attempting to develop safer and more effective versions of widely prescribed
central nervous system (&quot;CNS&quot;) drugs. While some new applications can use the commercially available form of the drug,
in other cases reformulating the active ingredient improves its safety or effectiveness in treating the CNS condition. When formal
development programs have proven successful in clinical tests, Tonix Pharmaceuticals, Inc. intends to seek marketing approval from
the Food and Drug Administration (&quot;FDA&quot;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 16, 2010, Tonix Pharmaceuticals,
Inc. formed Krele LLC (&quot;Krele&quot;) in the state of Delaware. Krele is a limited liability corporation whose sole member
is Tonix Pharmaceuticals Inc. Krele was established to commercialize products that are generic versions of predicate new drug application
products or versions of drug efficacy study implementation products. The Company expects that its relationship to Krele will be
similar to that of several other pharmaceutical companies and their subsidiaries that market generic versions of the parent's branded
products at different periods in their product life-cycle.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 7, 2011, Tonix Pharmaceuticals,
Inc. (formerly Krele Pharmaceuticals, Inc. incorporated on June 7, 2007 in the State of Delaware) and a publicly traded non-operating
shell company Tamandare Explorations Inc. (&ldquo;Tamandare&rdquo;), incorporated under the laws of the State of Nevada, along
with certain other parties executed and consummated a share exchange agreement (the &ldquo;Share Exchange&rdquo;). Pursuant to
the Share Exchange, each share of Tonix Pharmaceuticals Inc.&rsquo;s common stock was exchanged for 0.9 shares of Tamandare&rsquo;s
common stock and each share of Tonix Pharmaceuticals, Inc.&rsquo;s Series A and B preferred stock was exchanged for 4.8 shares
of Tamandare&rsquo;s common stock. Upon completion of the Share Exchange, the Tonix Pharmaceuticals, Inc. shareholders, including
holders of restricted shares, which were subject to accelerated vesting, received in exchange for all of their shares, an aggregate
of 22,666,667 shares of Tamandare&rsquo;s common stock and Tamandare&rsquo;s existing stockholders retained 4,000,000 shares of
common stock. The 22,666,667 shares issued to the Tonix Pharmaceuticals, Inc. shareholders constituted approximately 85% of Tamandare&rsquo;s
26,666,667 issued and outstanding shares of common stock after the Share Exchange. Upon completion of the Share Exchange, Tonix
Pharmaceuticals, Inc. became Tamandare&rsquo;s wholly-owned subsidiary and in October 2011 Tamandare was renamed Tonix Pharmaceuticals
Holding Corp. As the owners and management of Tonix Pharmaceuticals, Inc. obtained voting and operating control of Tamandare after
the Share Exchange and Tamandare was non-operating, had no assets or liabilities and did not meet the definition of a business,
the transaction has been accounted for as a recapitalization of Tonix Pharmaceuticals, Inc., accompanied by the issuance of its
common stock for outstanding common stock of Tamandare, which was recorded at a nominal value. The accompanying financial statements
and related notes give retroactive effect to the recapitalization as if it had occurred on June 7, 2007 (inception date) and accordingly
all share and per share amounts have been adjusted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Basis of presentation:</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The consolidated financial statements include
the accounts of Tonix Pharmaceuticals Holding Corp. and&nbsp;its wholly owned subsidiaries, Tonix Pharmaceuticals, Inc. and Krele
LLC (hereafter referred to as the &ldquo;Company&rdquo; or &ldquo;Tonix&rdquo;). All significant intercompany balances and transactions
have been eliminated in consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As the Company is devoting substantially
all of its efforts to establishing a new business, and while planned principal operations have commenced, there has been no revenue
generated from sales, license fees or royalties, the Company is considered a development stage enterprise. Accordingly, the Company's
consolidated financial statements are presented in accordance with authoritative accounting guidance related to a development stage
enterprise. Financial position, results of operations and cash flows of a development stage enterprise are presented in conformity
with generally accepted accounting principles that apply to established operating enterprises.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a development stage enterprise, the
Company's primary efforts are devoted to conducting research and development for the treatment of CNS diseases. The Company has
experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the
foreseeable future. In addition, the Company has both working capital and stockholders' deficiencies at December&nbsp;31, 2011
and requires additional financing to fund future operations. Although, in the first quarter of 2012, the Company raised approximately
$4,700,000 (see Note 11), it&rsquo;s expected that cash used in operations will increase significantly over the next several years.
The Company intends to raise additional capital to complete the development and commercialization of its current product candidates
through equity or debt financing; however the Company does not have any commitments or definitive or binding arrangements for such
funds. There can be no assurance that such funds, if available at all, can be obtained on terms reasonable to the Company. If the
Company is unsuccessful in raising additional capital it will need to reduce costs and operations substantially. Further, the Company
does not have any commercial products available for sale and has not generated revenues and there is no assurance that if approval
of their products is received that the Company will be able to generate cash flow to fund operations. In addition, there can be
no assurance that the Company's research and development will be successfully completed or that any product will be approved or
commercially viable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DECEMBER 31, 2011 AND 2010&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The above factors raise substantial doubt
as to the Company's ability to continue as a going concern. The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern and do not include any adjustments that may result from the outcome
of this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Use of estimates</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The preparation of financial statements
in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant estimates include the useful life of fixed assets and assumptions used in the fair value of stock-based
compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Research and Development costs</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company outsources its research and
development efforts and expenses 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 in 2007 and 2010 as research and development costs, as it related to particular research and development
projects and had no alternative future uses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Reclassifications</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying 2010 financial statements
together with cumulative amounts from inception have been reclassified to allocate professional services expenses to research and
development and general and administrative expenses to be consistent with current year presentation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Furniture and equipment</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Furniture and equipment are stated at cost,
less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset's estimated useful life,
which is three years for computer assets and five years for furniture and all other equipment. Expenditures for maintenance and
repairs are expensed as incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Income taxes</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Deferred income tax assets and liabilities
are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences
between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted
tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than
not that these deferred income tax assets will be realized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognizes a tax benefit from
an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a
position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
As of December&nbsp;31, 2011 and 2010, the Company has not recorded any unrecognized tax benefits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DECEMBER 31, 2011 AND 2010&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Stock-based compensation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All stock-based payments to employees and
to nonemployee directors for their services as directors, including grants of restricted stock and stock options, are measured
at fair value on the grant date and recognized in the consolidated statements of operations as compensation or other expense over
the relevant vesting period. Stock-based payments to nonemployees are recognized as an expense over the period of performance.
Such payments are measured at fair value at the earlier of the date a performance commitment is reached or the date performance
is completed. In addition, for awards that vest immediately and are non forfeitable the measurement date is the date the award
is issued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Per share data:</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Basic and diluted net loss per common share
is calculated by dividing net loss, by the weighted average number of outstanding shares of common stock, adjusted to give effect
to the exchange ratio in the Share Exchange in October 2011 (see Note 1), which was accounted for as recapitalization of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In October 2011, upon completion of the
share exchange referred to above, the Company issued Convertible Debentures in the amount of $2,075,000 which as of December 31,
2011 were convertible into approximately 3,985,000 common shares. In computing diluted net loss per share, no effect has been given
to such shares as their effect would be antidilutive. See Notes 5 and 10 for subsequent issuance of securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 3 &ndash; FURNITURE AND EQUIPMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Furniture and equipment as of December
31, 2011 and 2010 is summarized as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Office furniture and equipment</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">42,862</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">40,098</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less:&nbsp; accumulated depreciation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(17,312</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,012</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">25,550</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">32,086</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Depreciation expense for the years ended December 31, 2011 and
2010 was $9,300 and $3,854, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 4 - RESTRICTED CASH</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Restricted cash at December 31, 2011 and
2010 collateralizes a letter of credit in the amount of approximately $60,000 issued in connection with the lease of office space
in New York City (see Note 6).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 5 - CONVERTIBLE DEBENTURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 7, 2011, concurrently with the
Share Exchange, the Company issued secured Convertible Debentures (&ldquo;Convertible Debentures&rdquo;) in the amount of $1,625,000
of which $1,125,000 were sold to certain investors for aggregate cash proceeds of $1,065,000, net of selling commissions to a placement
agent of $40,000 and $20,000 of legal fees, and $500,000 were exchanged for 8% Notes Payable (&ldquo;Notes Payable&rdquo;) issued
on September 9, 2011. In addition, 400,000 shares of common stock with the fair market value of $144,000 were issued to a second
placement agent. On November 16, the Company issued Convertible Debentures in the amount of $450,000 for aggregate cash proceeds
of $436,000, net of selling commissions to a third placement agent of $14,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Convertible Debentures mature on the
earlier of (i) one year from the date of issuance or (ii) the date of closing of a private placement of equity, equity equivalent,
convertible debt or debt financing in which the Company receives gross proceeds, in one or more transactions, of at least $3,425,000
(a &ldquo;Subsequent Financing&rdquo;). The Convertible Debentures bear interest at 8% per annum and are convertible at the holder&rsquo;s
option into a Subsequent Financing. In the event that a Subsequent Financing has not occurred within 12 months from the date of
issuance of the Convertible Debentures, the holder has the option to convert into a number of shares of the Company's common stock
equal to 1% of the Company's shares of common stock on a fully diluted basis for every $125,000 of Convertible Debentures (the
&ldquo;Conversion Shares&rdquo;) or an aggregate of approximately 3,985,000 shares based on the outstanding shares of the Company
common stock as of December 31, 2011. A Subsequent Financing comprised of Units consisting of common stock and warrants took place
on January 20, 2012 and $1,925,000 of debentures were exchanged for Units (see Note 10). The remaining $150,000 of debentures were
repaid. As a result of the exchange, $1,925,000 principal amount of debentures are classified as a non-current liability in the
accompanying balance sheet at December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DECEMBER 31, 2011 AND 2010&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Upon conversion or repayment of the Convertible
Debenture, the holder is entitled to receive, at the holder&rsquo;s option, either (i) a warrant (the &ldquo;Warrant&rdquo;), which
has a three year term and is exercisable at the offering price in a Subsequent Financing, to purchase such number of shares of
the Company's common stock equal to the principal amount of the Convertible Debenture divided by the offering price in a Subsequent
Financing, (the &ldquo;Warrant Shares&rdquo;) or (ii) shares of the Company's common stock equal to 33% of the principal amount
of the Debenture divided by the offering price in a Subsequent Financing (the &ldquo;Incentive Shares&rdquo;). The value of the
Warrant Shares or Incentive Shares will be measured and number of such shares determined upon occurrence of any Subsequent Financing.
The Conversion Shares, Warrant Shares and Incentive Shares are entitled to piggyback registration rights. Upon the Subsequent Financing
on January 20, 2012, the holders $1,925,000 principal amount of Convertible Debentures elected to receive 250,000 Warrants exercisable
at $1 per share and 536,250 Incentive Shares, and holders of the remaining $150,000 principal amount of Convertible Debentures,
which were redeemed, received 25,000 Warrants exercisable at $1 per share and 57,750 Incentive Shares. The value of the Warrants
and Incentive Shares will be charged to operations in the first quarter of 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition to selling commissions paid
to the placement agents on the sale of certain Convertible Debentures, the placement agents received warrants which expire in October
2013 and November 2013, respectively, and are exercisable at the offering price in a Subsequent Financing to purchase shares of
the Company's common stock equal to 3% and 9%, respectively, of the gross proceeds delivered by purchasers introduced by such placement
agents divided by the purchase price per share in the Subsequent Financing. In the event that the Subsequent Financing has not
occurred within 12 months from the date of issuance of the Convertible Debentures, the placement agents will receive, in lieu of
the warrants, shares of common stock equal to 3% and 9%, respectively, of the number of shares of the Company's common stock such
purchasers are entitled to receive upon conversion of their Convertible Debentures or an aggregate of approximately 88,000 shares
based on the outstanding shares of the Company's common stock as of December 31, 2011. The Company recognized a liability to placement
agents to issue shares of its common stock based on their fair value of approximately $32,000 as of December 31, 2011. Upon the
Subsequent Financing on January 20, 2012, the placement agents become entitled to receive 30,750 warrants exercisable at $1.00
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following expenses in connection with
the issuance of Convertible Debenture are recorded as deferred financing costs: fair value of 400,000 shares of the Company&rsquo;s
common stock issued to the placement agent valued at $144,000, cash payments to the placement agents of $54,000, legal expenses
of $20,000 and fair value of the liability to placement agent to issue the Company&rsquo;s shares of common stock in the amount
of $32,000. The deferred financing costs are being amortized using the effective interest method over the twelve month term of
the Convertible Debentures. During the year ended December 31, 2011, amortization of deferred financing costs amounted to approximately
$53,000 and charged to interest expenses in the statement of operations. The unamortized balance will be charged to operations
in connection with the extinguishment of the debentures resulting from their exchange for the Units and repayment in 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to a Pledge and Security Agreement
and Subsidiary Guaranty, the Company granted the Debenture holders a first priority lien on all its assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 6 - COMMITMENTS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Operating leases</U>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 28, 2010, the Company entered
into a five-year lease for office space in New York City, with monthly payments escalating from approximately $10,000 in first
year to approximately $11,000 in fifth year. The Company received a rent credit of $9,420 in each of the months of November 2010,
December 2010 and January 2011. The Company has posted a letter of credit in the amount of approximately $60,000 for the benefit
of the landlord which is collateralized by a money market account (see Note 4 - Restricted Cash).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DECEMBER 31, 2011 AND 2010&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Future minimum lease payments under the operating lease are
as follows:&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Year Ending December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 85%; text-align: left">2012</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">124,370</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">127,889</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">131,513</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">2015</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">100,719</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">484,491</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Rent expense charged to operations, which
differs from rent paid due to the rent credits and to increasing amounts of base rent, is calculated by allocating total rental
payments on a straight-line basis over the term of the lease. During the years ended December 31, 2011 and 2010, rent expense was
$128,228 and $42,570, respectively and as of December 31, 2011 and 2010 deferred rent payable was $29,083 and $19,174, respectively.
The Company utilized office space in New York City provided by founders without remuneration until October 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Consulting agreements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June 2010, the Company entered into
a two-year consulting agreement with L&amp;L Technologies, an entity controlled by a member of the Company&rsquo;s Board of Directors,
for scientific and medical consulting services. In consideration for such services, L&amp;L Technologies will receive $96,000 per
annum and 1,026,194 shares of restricted common stock which were granted at the inception of the agreement. The consulting agreement
renews automatically for subsequent terms of one year at $96,000 per annum. The restricted shares vest as follows: 25% on the grant
date (June 4, 2010) and 25% on each of the first and second annual anniversaries of the grant date and, if the consulting agreement
is renewed, 25% on the third anniversary of the grant date. Vesting of the unvested 513,097 restricted shares accelerated on October
7, 2011, the date of the Share Exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June 2010, the Company entered into
a two-year consulting agreement with Lederman &amp; Co., an entity controlled by a member of the Company&rsquo;s Board of Directors,
for clinical development, strategic, management and operational consulting services. In consideration for such services, Lederman
&amp; Co. will receive $250,000 per annum and 261,784 shares of restricted common stock which were granted at the inception of
the agreement. The consulting agreement renews automatically for subsequent terms of one year at $250,000 per annum. The restricted
shares vest as follows: 20% on the grant date (June 4, 2010) and 20% on each of the first and second anniversaries of the grant
date and, if the consulting agreement is renewed, 20% on each of the third and fourth anniversaries of the grant date. Vesting
of the unvested 157,087 restricted shares accelerated on October 7, 2011, the date of the Share Exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June 2010, the Company entered into
an agreement with Burns McClellan, Inc. to provide media and investor relations services, including preparation of investor presentations
and press releases, media outreach and training and investor targeting and introductions, for a fee of $20,000 per month, plus
expenses. The agreement was terminated in January 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In October 2010, the Company entered into
an agreement with Frost &amp; Sullivan to prepare an assessment of the U.S. fibromyalgia market, including current market size
and historical and projected growth rates, as well as a formal presentation supporting their findings for a fee of $109,400, all
of which was recognized in 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In July 2011, the Company entered into
an agreement with Catalent Pharma Solutions, LLC to investigate, for $58,080, the feasibility of developing the active pharmaceutical
ingredient (&ldquo;API&rdquo;) used in TNX-102, one of the Company&rsquo;s product candidates, for use in a new, proprietary formulation</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In August 2011, the Company entered into
an agreement with Porter, LeVay &amp; Rose, Inc. to provide media and investor relations services, including preparation of investor
presentations and press releases, media outreach and training and investor targeting and introductions, for a fee of $12,000 per
month, plus expenses.&nbsp;&nbsp;Also in August 2011, the Company entered into an agreement with JFC Technologies, LLC (&ldquo;JFC&rdquo;)
for product development work for an initial fee of $75,000, of which $35,000 was paid upon signing. In September 2011, JFC was
acquired by Cyalume Specialty Products, Inc. (&ldquo;Cyalume&rdquo;) and the Company&rsquo;s agreement was transferred to Cyalume.&nbsp;&nbsp;Additionally,
in August 2011 the Company authorized the initiation of stage 2 work pursuant to a contract with Lipocine Inc. with respect to
a research and development project for reformulation work on TNX-102 for a fee of $235,000, which work started in the third quarter
of 2011.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DECEMBER 31, 2011 AND 2010&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In September 2011, the Company entered
into two contracts with Pharmanet Canada for contract research work with respect to the development of methods to measure the active
ingredient of TNX-102 in blood and urine. The full cost of the work to be performed is approximately $90,000.&nbsp;&nbsp;Payment
is due in three installments based on the achievement of certain performance milestones. Also, in September 2011, the Company entered
into a contract with Pharmanet Canada for contract research work with respect to the pharmacokinetic study for TNX-102. The full
cost of the work to be performed is $637,231.&nbsp;&nbsp;Payment is due in four installments based on the achievement of certain
performance milestones.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In October 2011, the Company entered into
an agreement with Applied Pharma Research to develop, and perform an exploratory pharmacokinetic study on a new formulation of
the API used in TNX-102 for an approximate cost of $180,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Employment agreements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2010, the Company entered into employment
agreements with the Chief Operating Officer and the Vice President of Marketing which expire in August 2012 and June 2012, respectively.
Under the terms of the employment agreements, the Chief Operating Officer and the Vice President of Marketing shall receive annual
base compensation of $250,000 and $150,000, respectively, which shall be adjusted to $320,000 and $200,000, respectively, or such
other rate as the Board may designate from time to time, upon completion of an initial public offering with net proceeds of at
least $15,000,000. The agreements will be automatically renewed for additional one-year periods (the &quot;Renewal Terms&quot;)
unless either party notifies the other in writing of its intention not to renew within 90&nbsp;days prior to the expiration of
the Initial Term or any Renewal Terms. Upon termination without cause, as defined in the agreements, the executives will continue
to receive compensation for up to nine months if termination is in connection with or following an initial public offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February 2011, the Company entered into
an employment agreement with the Chief Business Officer which expires in February 2013. Under the terms of the employment agreement,
the Chief Business Officer shall receive annual base compensation of $150,000 which shall increase, with a retroactive adjustment,
upon the completion of an underwritten public offering, as defined, or certain other events. The employment agreement will be automatically
renewed for additional renewal terms unless either party notifies the other in writing of its intention not to renew within 90
days prior to the expiration of the initial term or any renewal terms. Upon termination without cause, as defined in the employment
agreement, the Chief Business Officer will continue to receive compensation for six months, or nine months if termination is in
connection with or following certain events.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In April 2011, the Company terminated existing
employment agreements with the three executive employees referred to in the first two paragraphs above and entered into new employment
agreements which stipulate such employees will receive minimum wage salary ($7.25 per hour) for a 40 hour week until the Company
receives new capital of at least $500,000 through the sale of equity securities. The expiration dates of the new agreements remain
the same as the terminated agreements. In addition, the Chief Business Officer assumed the title of Chief Operating Officer and
the Chief Operating Officer assumed the title of Chief Financial Officer and Chief Administrative Officer and the Vice President
of Marketing assumed the title of Vice President of Strategy. Upon receipt of $500,000 or more in new capital, the employees will
receive a lump sum payment in the amount of $50,000 each for the Chief Operating Officer and Chief Financial Officer and $30,000
for the Vice President of Strategy. Further, base salaries for all three employees will be increased with a retroactive adjustment
upon the completion of an underwritten offering, as defined, or certain other events. All other terms remain the same.&nbsp;&nbsp;In
October 2011, the position of Vice President of Strategy was eliminated and the employment agreement was terminated. In conjunction
with this event, the Company paid $37,500 in December 2011 in exchange for the release from future obligations. In February 2012,
the Company terminated its employment agreement with its Chief Financial Officer and in accordance with the agreement paid such
officer approximately $88,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In July 2011, the Company entered into
agreements with the executive employees to defer payment of the lump sum amounts referred to above until the closing of a private
placement of securities, as defined.&nbsp;&nbsp;In addition, salaries of the Chief Financial Officer and Chief Operating Officer
were adjusted to $175,000 per annum effective August 2011. The salary of the Chief Operating Officer shall increase to $250,000
per annum on the first anniversary of the Share Exchange provided that the Company has raised at least $500,000 in additional equity
securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DECEMBER 31, 2011 AND 2010&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-variant: small-caps"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-variant: small-caps"><B>NOTE 7 - INCOME TAXES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There is no provision for federal or state
income taxes for the years ended December&nbsp;31, 2011 and 2010 since the Company has established a valuation allowance equal
to the total deferred tax asset related to losses incurred during such periods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Deferred tax assets and liabilities and
related valuation allowance as of December&nbsp;31, 2011 and 2010 are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">December 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Deferred tax assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; text-align: left">Organization costs</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">733</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">2,494</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Research and development credit carryforward</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,188</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,188</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net operating loss carryforwards</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,329,829</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,107,688</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">132,482</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">121,091</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Total deferred tax assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,469,232</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,237,461</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Deferred tax liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Restricted stock compensation(1)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(148,871</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net deferred tax assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,469,232</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,088,590</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Valuation allowance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,469,232</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,088,590</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Net deferred tax assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%"><FONT STYLE="font-size: 10pt">(1)&nbsp;&nbsp;</FONT></TD>
    <TD STYLE="width: 97%"><FONT STYLE="font-size: 10pt">Relates to restricted stock grants for which Internal Revenue Code (&quot;IRC&quot;) Section 83(b) elections were filed in 2010, resulting in tax deductions in excess of related compensation expense for financial reporting purposes in 2010.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Based on the Company's historical losses
and its expectation of continuation of losses for the foreseeable future, the Company has determined that it is not more likely
than not that the deferred tax assets will be realized and, accordingly, has provided a valuation allowance. The increase in the
valuation allowance for the years ended December 31, 2011 and 2010 was $1,380,642 and $783,696, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At December&nbsp;31, 2011, the Company
has available unused net operating loss carryforwards of approximately $5.8 million that expire from 2027 to 2031 for federal tax
purposes and the same amount for New Jersey state tax purposes, which expire from 2014 to 2018. The Company also has approximately
$3 million of net operating loss carryforwards for New York state purposes expiring in 2031. These net operating loss carryforwards
may be subject to annual limitations in their use in accordance with IRC Section 382. Accordingly, the extent to which the net
operating loss carryforwards can be used to offset future taxable income may be limited. At December 31, 2011, the Company has
a research and development credit carryforward of $6,188 for federal tax purposes that expires in 2027.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company's federal and state tax returns
remain open and subject to examination by the tax authorities for the tax years 2008 and 2007, respectively through 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A reconciliation of the effect of applying
the federal statutory rate and the effective income tax rate used to calculate the Company's income tax provision is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DECEMBER 31, 2011 AND 2010&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">Year Ended<BR> December&nbsp;31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Statutory federal income tax</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">(34.0</TD><TD STYLE="width: 1%; text-align: left">)%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">(34.0</TD><TD STYLE="width: 1%; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">State income tax, net of federal tax effect</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5.9</TD><TD STYLE="text-align: left">)%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5.9</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Permanent difference</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Increase in valuation allowance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">39.9</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">34.9</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Income tax provision</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 8 &ndash; STOCK PLAN</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June and August 2010, respectively,
the board of directors and stockholders of Tonix Pharmaceuticals, Inc. approved, and in December 2010 and February 2011, the board
of directors amended, the terms and provisions of the 2010 Stock Plan (&quot;Plan&quot;) whereby the Company reserved 4,564,641
shares of its Common Stock for issuance pursuant to the Plan. The Plan allowed for grants of options to purchase shares of Common
Stock and awards of restricted Common Stock to employees, officers, directors, consultants and advisors of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2010, the Company granted shares of
restricted Common Stock under the Plan to employees (&quot;Employee Granted Shares&quot;) as follows: 196,359 shares to the Chief
Operating Officer, 109,088 shares to the Vice President of Clinical Development, 130,906 shares to the Vice President of Marketing
and 196,359 shares to the Chief Medical Officer. Employee Granted Shares vest: 20% on the grant date and 20% on each of the first,
second, third and fourth anniversaries of the grant date. Upon termination of the Chief Medical Officer's employment with Tonix,
157,087 unvested shares held by him were forfeited and he retained 39,272 shares of fully vested Common Stock. Upon termination
of the Vice President of Clinical Development's employment with Tonix, 87,270 unvested shares held by him were forfeited and he
retained 21,818 shares of fully vested Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2010, the Company granted 1,288,112
shares of restricted Common Stock under the Plan to consultants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2010, the Company granted 556,786 shares
of restricted Common Stock under the Plan to directors and also granted 52,362 shares of restricted Common Stock under the Plan
to members of the Scientific Advisory Board which vest: 25% on the grant date and 25% on each of the first, second and third anniversaries
of the grant date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February 2011, the Company granted shares
of restricted Common Stock to employees as follows: 196,359 shares to the Chief Business Officer and 130,906 shares to the incoming
President of Krele. The shares vest: 20% on the grant date and 20% on each of the first, second, third and fourth anniversaries
of the grant date. In August 2011, upon resignation of the President of Krele, 104,725 unvested shares were forfeited.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In March and April 2011, the Company granted
19,636 and 21,818 shares of restricted Common Stock, respectively, to newly appointed members of the Scientific Advisory Board
and the Board of Directors which vest: 25% on the grant date and 25% on each of the first, second and third anniversaries of the
grant date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DECEMBER 31, 2011 AND 2010&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Following is a summary of the status of
the Company's nonvested restricted stock as of December 31, 2011 and the changes during the years 2010 and 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Weighted</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Number of</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Average</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Restricted</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Grant-Date</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Nonvested Restricted Stock</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fair Value</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Nonvested at January 1, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%">Granted</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">2,529,971</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">0.23</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Vested</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(587,767</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.23</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Forfeited</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(244,357</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.23</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Nonvested at December 31, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,697,847</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.23</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">368,718</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.23</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Vested prior to Share Exchange</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(564,858</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.23</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Vested pursuant to Share Exchange</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,396,982</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.23</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Forfeited</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(104,725</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.23</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Nonvested at December 31, 2011</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Restricted stock is not considered to be issued until the stock
vests.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognized share-based compensation
expense of $139,063 prior to Share Exchange and remaining expense of $296,588 was recognized on October 7, 2011, the date of Share
Exchange, upon which all nonvested restricted shares vested and the Plan ceased to exist. Stock based compensation expense for
the year ended December 31, 2010 was $139,882.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 9 - RELATED PARTY TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Dr. Seth Lederman and Dr. Donald Landry
are primary founders of the Company and serve on the board of directors. They have entered into various transactions with the Company
through several companies under their control, including L&amp;L Technologies and Lederman &amp; Co as described in Note 6.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="color: black">D</FONT>uring
2007, the Company issued senior convertible promissory notes (the &quot;Senior Convertible Notes&quot;) pursuant to the Note Purchase
Agreements among the Company and National Holdings Corporation, Lederman &amp; Co., LLC, Eli Lederman PhD and Dr. Seth Lederman,
all but one of whom are direct or indirect stockholders of the Company (collectively referred to herein as the &quot;Noteholders&quot;),
in the amount of $50,000 per Senior Convertible Note, or $200,000 in the aggregate. The Senior Convertible Notes bore interest
at the rate of 8% per annum and were payable together with the interest accrued thereon on the two year anniversary of the Senior
Convertible Notes. The outstanding principal and interest accrued thereon were to be automatically converted into fully paid shares
of capital stock upon the closing of a Qualified Financing of capital stock or securities convertible into preferred stock which
resulted in gross proceeds of at least $2,000,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June 2009, although a Qualified Financing
had not occurred, the Noteholders agreed to exchange the Senior Convertible Notes for shares of capital stock of the Company at
the rate of one share of capital per $0.13 of the outstanding principal balance of such notes. The accrued interest on the notes
in the amount of $31,633 was forgiven. The excess of the carrying value of the notes including accrued interest over the fair value
of the capital stock for which they were exchanged amounted to $31,633 of which $23,725, representing the excess related to the
Noteholders who are direct or indirect stockholders, has been accounted for as a capital contribution and credited to additional
paid-in capital and the remaining $7,908 was recorded as a gain on extinguishment of debt. Interest expense relating to the Senior
Convertible Notes for the year ended December&nbsp;31, 2009 was $8,044.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2007, Lederman &amp; Co. loaned the
Company $10,000. On December&nbsp;19, 2008, the Company issued to Lederman &amp; Co. a demand note in the amount of $280,000, which
included new cash proceeds of $270,000 as well as the amount loaned in 2007, with interest accruing on the total demand note balance
commencing December 19, 2008. On December 7, 2009, the Company borrowed an additional $150,000 from Lederman &amp; Co. and issued
a demand note. The principal balance of the demand notes outstanding as of December&nbsp;31, 2009 was $430,000 with accrued interest
owed at December&nbsp;31, 2009 of $36,387. On March 5, 2010, the Company issued to Dr. Donald Landry a demand note in the amount
of $50,000. The demand notes accrue interest at the rate of 12% per annum.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DECEMBER 31, 2011 AND 2010&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 30, 2010, the demand notes and
all interest accrued thereon were converted into shares of capital stock. Demand notes held by Lederman &amp; Co. totaling $430,000
and accrued interest thereon of $66,629 were converted into 2,166,444 shares of capital stock, at a conversion price of $0.23 per
share of capital stock. The demand note held by Donald Landry totaling $50,000 and accrued interest thereon of $2,449 was converted
into 228,835 shares of capital stock, at a conversion price of $0.23 per share of capital stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 9, 2011, the Company sold
$500,000 principal amount of 8% convertible notes (the &ldquo;Notes&rdquo;) to members of the board of directors and their related
parties. The Notes were due one year from the date of issuance, and were exchangeable for a future financing (the &ldquo;New Financing&rdquo;)
at the option of the holders. Interest is payable on either the maturity date or on the date the Notes are exchanged into the New
Financing, or such accrued interest can be converted into the New Financing. On October 7, 2011, the Notes were exchanged into
debentures issued by the Company concurrently with the Share Exchange (see Note 5).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Interest expense on the demand notes for
the years ended December 31, 2010 and 2009 was $32,691 and $35,267, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 10 - SUBSEQUENT EVENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company amended and restated its Bylaws
and Articles of Incorporation on February&nbsp;16, 2012 and among other changes, increased the number of authorized shares of common
stock, $0.001 par value to 150,000,000. Additionally, the Company is now authorized to issue 5,000,000 shares of preferred stock,
$0.001 par value with such designations, references and participating, optional or other special rights and qualifications, limitations
or restrictions thereof as shall be determined by the Company&rsquo;s Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 12, 2012 the Company&rsquo;s
Board of Directors approved the 2012 Incentive Stock Options Plan (the &ldquo;Plan&rdquo;). The Plan provides for the issuance
of options to purchase up to 4,000,000 shares of the Company&rsquo;s common stock to officers, directors, employees and consultants
of the Company. Under the terms of the Plan the Company may issue Incentive Stock Options as defined by the Internal Revenue Code
to employees of the Company only and nonstatutory options. The Board of Directors of the Company determines the exercise price,
vesting and expiration period of the grants under the Plan. However, the exercise price of an Incentive Stock Option should not
be less than 110% of fair value of the common stock at the date of the grant for a 10% or more stockholder and 100% of fair value
for a grantee who is not 10% stockholder. 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 vesting period of the grants under the
Plan should not be more than five years and expiration period not more than ten years. The Company reserved 4,000,000 shares of
its common stock for future issuance under the terms of the Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Subsequent financing</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 20, 2012, the Company issued
an aggregate of 172.118 units (&ldquo;Units&rdquo;) to certain investors (the &ldquo;Purchasers&rdquo;) for aggregate cash proceeds
of $2,377,950 and $1,925,000 in previously issued Convertible Debentures of the Company that were exchanged for Units (the &ldquo;Financing&rdquo;).
On March 1, 2012, the Company issued an aggregate of 92.5926 units to certain investors for aggregate cash proceeds of $2,314,815.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each Unit had a purchase price of $25,000
per Unit and consisted of twenty five thousand (25,000) shares of the Company&rsquo;s common stock, a Class A Warrant to purchase
twenty five thousand (25,000) shares of Common Stock (the &ldquo;Class A Warrants&rdquo;), and a Class B Warrant to purchase up
to twenty five thousand (25,000) shares of Common Stock (the &ldquo;Class B Warrants&rdquo; and together with the Class A Warrants,
the &ldquo;Warrants&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Class A Warrants have an exercise price
of $1.25 per share of common stock and will be exercisable for a period of five years from the date of issuance. The Class B Warrants
are exercisable automatically on their expiration date by cashless exercise or expire without exercise. In the event that the average
of the Company&rsquo;s daily volume weighted average price is below $0.75 during the 10 trading days after the Announcement Date
(as hereinafter defined) (the &ldquo;Measuring Period&rdquo;), then the holder will be entitled to receive additional shares of
the Company&rsquo;s Common Stock upon the exercise of the Class B Warrants on the expiration date, which is the 12<SUP>th</SUP>
trading day after the Announcement Date. In the event that the Company&rsquo;s average daily volume weighted average price is at
or above $0.75 during the Measuring Period, the Class B Warrants will expire unexercised. The Announcement Date is the earlier
of (1) the date on which the Company announces via press release the results of the pharmacokinetic study of its TNX-102 drug formulation;
or (2) June 1, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DECEMBER 31, 2011 AND 2010&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Financing, the Company
paid a placement agent (the &ldquo;Agent&rdquo;) an aggregate cash payment of $466,777, which represented an 8% commission and
a 2% non-accountable expense allowance of the gross proceeds delivered by Purchasers in the Financing. In addition, the Agent earned
warrants to purchase shares of Common Stock equal to 10% of the gross proceeds delivered by Purchasers in the Financing (the &ldquo;Agent
Warrants&rdquo;), which have an exercise price of $1.25 per share of common stock, exercisable for a period of seven years, contain
customary anti-dilution protection and are entitled to piggy-back registration rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Warrants, no Purchaser
may exercise such Purchaser&rsquo;s Warrant if such exercise would result in the Purchaser beneficially owning in excess of 4.99%
of the Company&rsquo;s then issued and outstanding common stock. A Purchaser may, however, increase or decrease this limitation
(but in no event exceed 9.99% of the number of shares of Common Stock issued and outstanding) by providing the Company with 61
days&rsquo; notice that such holder wishes to increase or decrease this limitation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Financing, the Company
entered into a Registration Rights Agreements with Purchasers.&nbsp;&nbsp;The Company is required to file a registration statement
registering for resale the common stock included in the Units and the common stock underlying the Warrants and the Agent Warrants
to be filed no later than 60 days from the date of termination of the Financing on March 1, 2012 and must be declared effective
no later than 120 days from the date of termination of the Financing (June 29, 2012).&nbsp;&nbsp;The Company is required to maintain
the effectiveness of the registration statement from its effective date unless all securities registered under the registration
statement have been sold or are otherwise able to be sold.&nbsp;&nbsp;If the Company fails to comply with the registration statement
filing or effective date requirements, the Company is required to pay the investors a fee equal to 1.0% of the Purchaser&rsquo;s
investment, for each 30-day period of delay, subject to a maximum payment of 10% to each Purchaser.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company determined the offering price
for the purpose of calculation of number of Warrants or Incentive Share to be issued to Convertible Debenture holders and warrants
to be issued the placement agents of Convertible Debentures to be $1.00 (see Note 5).&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONDENSED CONSOLIDATED BALANCE SHEETS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT>&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">September 30,</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">December 31,</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">(unaudited)</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Current assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%">Cash</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">35,653</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">41,123</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Prepaid expenses and other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">43,076</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">102,430</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Total current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">78,729</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">143,553</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Furniture and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">51,031</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25,550</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Deferred financing costs, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">196,166</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Restricted cash</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">60,244</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">60,177</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Total assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">190,004</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">425,446</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Current liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accounts payable, including $20,778 and $27,483 to related parties as of September 30, 2012 and December 31, 2011, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">697,383</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">695,198</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">136,303</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,229</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accrued interest, including $3,111 and $5,006 to related parties as of September 30, 2012 and December 31, 2011, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,111</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">38,306</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Liability to placement agent</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31,543</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Convertible debentures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">150,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Total current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">836,797</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">925,276</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Convertible debentures, including $265,000 to related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,925,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Deferred rent payable</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">27,543</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">29,083</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Total liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">864,340</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,879,359</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Commitments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Stockholders' (deficiency):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Preferred stock, $0.001 par value; 5,000,000 and -0- authorized as of September 30, 2012 and December 31, 2011, respectively; none issued or outstanding</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Common stock, $0.001 par value; 150,000,000 and 75,000,000 authorized as of September 30, 2012 and December 31, 2011, respectively; 34,278,432 and 27,066,667 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">34,278</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,067</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Additional paid in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,506,771</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,913,700</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Deficit accumulated during development stage</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(13,215,385</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(6,394,680</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Total stockholders' (deficiency)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(674,336</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,453,913</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Total liabilities and stockholders' (deficiency)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">190,004</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">425,446</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See the accompanying notes to condensed
consolidated financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">From June 7, 2007</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="17" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">(date of inception)</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">Three months ended September 30,</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">Nine months ended September 30,</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">through</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, 2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">COSTS AND EXPENSES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 35%; text-align: left">Research and development</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">658,143</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">492,024</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,883,559</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">634,496</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">3,835,513</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">General and administrative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,076,199</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">522,462</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,862,086</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,249,500</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,117,333</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,734,342</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,014,486</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,745,645</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,883,996</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,952,846</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Operating Loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,734,342</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,014,486</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,745,645</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,883,996</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(10,952,846</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Gain on extinguishment of debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,908</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Other income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,875</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,875</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,875</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Change in fair value of warrants liability</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,177,026</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,177,026</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Interest and other financing costs, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">440</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(899,909</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">52</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,095,296</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">NET LOSS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,732,027</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,014,478</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(6,820,705</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,883,944</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(13,215,385</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net loss per common share, basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.05</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.05</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.20</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.10</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Weighted average common shares outstanding, basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">34,278,432</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">20,667,466</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">33,405,648</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">19,687,742</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See the accompanying notes to condensed
consolidated financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
(DEFICIENCY)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the Nine Months Ended September 30,
2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
&nbsp; &nbsp; &nbsp;</FONT>&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Deficit</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Accumulated</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Additional</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">During</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Preferred stock</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Common stock</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Paid in</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 8pt">Development</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Amount</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Amount</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Capital</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Stage</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Total</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 30%"><FONT STYLE="font-size: 8pt">&nbsp;Balance at December 31, 2011</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">27,066,667</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">27,067</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">3,913,700</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">(6,394,680</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 8pt">(2,453,913</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Common stock issued in January 2012 to holders of convertible debentures
    ($0.62 per share)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">594,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">594</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">367,686</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">368,280</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Issuance of common stock in January and March 2012 ( $0.62 per share)
    net of transaction expenses</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">6,617,765</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">6,617</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,625,694</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,632,311</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Warrants issued in January 2012 to holders of convertible debentures</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">83,289</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">83,289</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Warrants issued to placement agent in January 2012</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">6,126</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">6,126</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Warrants reclassified to equity upon expiry of reset provisions</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,938,946</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">3,938,946</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Stock based compensation</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">571,330</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">571,330</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Net loss</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(6,820,705</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(6,820,705</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;Balance at September 30, 2012</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">34,278,432</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">34,278</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">12,506,771</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(13,215,385</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(674,336</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See the accompanying notes to condensed
consolidated financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp; &nbsp; &nbsp; &nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">From June 7, 2007</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="9" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">(date of inception)</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center">Nine months ended September 30,</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">through</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, 2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">CASH FLOWS FROM OPERATING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 55%; text-align: left">Net loss</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(6,820,705</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(1,883,944</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(13,215,385</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Adjustments to reconcile net loss to net cash used in operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,192</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,946</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,504</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Amortization and write down of deferred financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">196,166</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">249,543</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Non cash interest, consisting of common stock and warrants issued in connection with convertible debentures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">426,152</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">426,152</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Non-cash financing costs related to January and March 2012 financing</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">81,337</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">81,337</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Stock based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">571,330</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">139,064</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,258,043</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Loss in change in fair value of warrant liability</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,177,026</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,177,026</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Common stock issued in exchange for intellectual property</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">383,250</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Gain on extinguishment of debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,908</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Prepaid expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">59,354</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,539</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(43,076</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,185</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">539,571</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">697,383</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Accrued interest</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(35,195</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,111</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">126,074</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,472</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">237,014</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Deferred rent payable</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,540</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,423</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">27,543</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;Net cash used in operating activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,207,624</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,170,873</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(8,698,463</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">CASH FLOWS FROM INVESTING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Purchase of furniture and fixtures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(35,673</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,764</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(78,535</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Proceeds from security deposit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,156</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Payment of restricted cash and interest earned on restricted cash</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(67</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(45</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(60,244</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;Net cash (used in) provided by investing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(35,740</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">347</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(138,779</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">CASH FLOWS FROM FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Proceeds from demand notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">480,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Proceeds from other notes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">700,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Proceeds, net of expenses of $24,000 from Convertible Debentures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">500,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,501,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Repayment of Convertible Debentures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(150,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(150,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Proceeds, net of expenses of $304,870, from sale of units consisting of common stock and warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,387,894</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,387,894</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Proceeds from the sale of capital stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">612,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,954,001</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;Net cash provided by financing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,237,894</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,112,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,872,895</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Net (decrease) increase in cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,470</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(58,526</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">35,653</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Cash, beginning of the period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">41,123</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">65,359</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Cash, end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">35,653</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,833</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">35,653</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Supplemental disclosures of cash flow information:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Interest paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">35,195</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Non cash investing and financing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Senior convertible notes exchanged for preferred shares</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">200,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Capital contribution of accrued interest</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">23,725</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Demand notes together with accrued interest converted into capital stock</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">549,078</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Common stock issued for deferred financing costs</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">144,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Exchange of Notes Payable for Convertible Debenture</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">500,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Warrants Liability reclassified to Stockholders' Equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,938,946</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,938,946</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Exchange of Convertible Debenture for Units consisting of common stock and warrants</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,925,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,925,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See the accompanying notes to condensed
consolidated financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 1 &ndash; BUSINESS AND RECAPITALIZATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Tonix Pharmaceuticals Holding Corp. (the
&quot;Company&quot;), through its wholly owned subsidiary Tonix Pharmaceuticals, Inc., or Tonix Sub, is attempting to develop safer
and more effective versions of widely prescribed central nervous system (&quot;CNS&quot;) drugs. While some new applications can
use the commercially available form of the drug, in other cases, reformulating the active ingredient improves its safety or effectiveness
in treating the CNS condition. When formal development programs have proven successful in clinical tests, Tonix Sub intends to
seek marketing approval from the Food and Drug Administration (&quot;FDA&quot;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 16, 2010, Tonix Sub formed Krele
LLC (&quot;Krele&quot;) in the state of Delaware. Krele is a limited liability corporation whose sole member is Tonix Sub. Krele
was established to commercialize products that are generic versions of predicate new drug application products or versions of drug
efficacy study implementation products. The Company expects that its relationship to Krele will be similar to that of several other
pharmaceutical companies and their subsidiaries that market generic versions of the parent's branded products at different periods
in their product life-cycle.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 7, 2011, Tonix Sub (formerly
Krele Pharmaceuticals, Inc. incorporated on June 7, 2007 in the State of Delaware) and a publicly traded non-operating shell company
Tamandare Explorations Inc. (&ldquo;Tamandare&rdquo;), incorporated under the laws of the State of Nevada, along with certain other
parties executed and consummated a share exchange agreement (the &ldquo;Share Exchange&rdquo;). Pursuant to the Share Exchange,
each share of Tonix Sub&rsquo;s common stock was exchanged for 0.9 shares of Tamandare&rsquo;s common stock and each share of Tonix
Sub&rsquo;s Series A and B preferred stock was exchanged for 4.8 shares of Tamandare&rsquo;s common stock. Upon completion of the
Share Exchange, the Tonix Sub shareholders, including holders of restricted shares, which were subject to accelerated vesting,
received in exchange for all of their shares, an aggregate of 22,666,667 shares of Tamandare&rsquo;s common stock and Tamandare&rsquo;s
existing stockholders retained 4,000,000 shares of common stock. The 22,666,667 shares issued to the Tonix Sub shareholders constituted
approximately 85% of Tamandare&rsquo;s 26,666,667 issued and outstanding shares of common stock after the Share Exchange. Upon
completion of the Share Exchange, Tonix Sub became Tamandare&rsquo;s wholly-owned subsidiary and in October 2011 Tamandare was
renamed Tonix Pharmaceuticals Holding Corp. As the owners and management of Tonix Sub obtained voting and operating control of
Tamandare after the Share Exchange and Tamandare was non-operating, had no assets or liabilities and did not meet the definition
of a business, the transaction has been accounted for as a recapitalization of Tonix Sub, accompanied by the issuance of its common
stock for outstanding common stock of Tamandare, which was recorded at a nominal value. The accompanying financial statements and
related notes give retroactive effect to the recapitalization as if it had occurred on June 7, 2007 (inception date) and accordingly
all share and per share amounts have been adjusted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 2 &ndash; SIGNIFICANT ACCOUNTING
POLICIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Interim Financial Statements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The unaudited condensed consolidated interim
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States (&ldquo;GAAP&rdquo;) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have
been included.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The condensed consolidated balance sheet
as of December 31, 2011 contained herein have been derived from audited financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Operating results for the three and nine
months ended September 30, 2012 are not necessarily indicative of results that may be expected for the year ending December 31,
2012. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and notes thereto for the year ended December 31, 2011 included in the Company&rsquo;s Annual Report on Form 10-K, filed with the
Securities and Exchange Commission (&ldquo;SEC&rdquo;) on March 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Basis of presentation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a development stage enterprise, the
Company's primary efforts are devoted to conducting research and development for the treatment of CNS diseases. The Company has
experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the
foreseeable future. In addition, the Company has working capital and stockholders' deficiencies as of September 30, 2012, The Company
requires additional financing, for which there are no existing commitments to fund its working capital deficiency and future operations
and no assurances can be given that the Company will be able to obtain sufficient financing on terms acceptable to it, if at all.
Further, the Company does not have any commercial products available for sale and there is no assurance that if approval of their
products is received that the Company will be able to generate cash flow to fund operations. In addition, there can be no assurance
that the Company's research and development will be successfully completed or that any product will be approved or commercially
viable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The above factors raise substantial doubt
as to the Company's ability to continue as a going concern. The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern and do not include any adjustments that may result from the outcome
of this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the nine months ended September
30, 2012, the Company issued common stock and warrants and obtained net cash proceeds in the aggregate of $4,387,894. In addition,
$1,925,000 in previously issued notes were exchanged for common stock and warrants (see Note 6). The Company expects that cash
used in operations will increase significantly over the next several years and it is the Company's intent to raise additional capital
to complete the development and commercialization of its current product candidates through equity or debt financing. There can
be no assurance that such funds, if available at all, can be obtained on terms reasonable to the Company. If the Company is unsuccessful
in raising additional capital it will need to reduce costs and may be required to reduce or cease operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Use of estimates</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The preparation of financial statements
in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities and expenses and disclosures of contingent assets and liabilities at the
date of the financial statements. Actual results could differ from those estimates. Significant estimates include the useful life
of fixed assets and assumptions used in the fair value of stock-based compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Research and development costs</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company outsources its research and
development efforts and expenses related costs as incurred, including the cost of manufacturing products 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 in 2007 and 2010 as research and development costs, as it related to particular research and development
projects and had no alternative future uses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Income taxes</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Income tax provisions or benefits for interim
periods are computed based on the Company&rsquo;s estimated annual effective tax rate. Based on the Company's historical losses
and its expectation of continuation of losses for the foreseeable future, the Company has determined that it is more likely than
not that deferred tax assets will not be realized and, accordingly, has provided a full valuation allowance. As the Company anticipates
or anticipated that its net deferred tax assets at December 31, 2012 and 2011 would be fully offset by a valuation allowance, there
is no federal or state income tax benefit for the periods ended September 30, 2012 and 2011 related to losses incurred during such
periods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 45.35pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Per share data</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Basic and diluted net loss per common share
is calculated by dividing net loss, by the weighted average number of outstanding shares of common stock, adjusted to give effect
to the exchange ratio in the Share Exchange in October 2011 (see Note 1), which was accounted for as a recapitalization of the
Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the nine months ended September
30, 2012, upon the completion of the January and March financing (see Note 6), the Company issued warrants to purchase an aggregate
7,390,292 shares of the Company's common stock. In addition, in May 2012, the Company issued to employees options to acquire an
aggregate of 3,500,000 shares of the Company's common stock (see Note 8). In computing diluted net loss per share, no effect has
been given to such options and warrants as their effect would be anti-dilutive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 3 &ndash; FURNITURE AND EQUIPMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Furniture and equipment as of September
30, 2012 and December 31, 2011 is summarized as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, <BR> 2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">December&nbsp;31,<BR> 2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Office furniture and equipment</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">78,535</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">42,862</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less:&nbsp; accumulated depreciation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(27,504</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(17,312</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">51,031</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">25,550</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Depreciation expense for the three and
nine months ended September 30, 2012 was $4,076 and $10,192, respectively; and $2,354 and $6,946 for the three and nine months
ended September 30, 2011, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 4 &ndash; RESTRICTED CASH</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Restricted cash at September 30, 2012 and
December 31, 2011 collateralizes a letter of credit in the amount of approximately $60,000 issued in connection with the lease
of office space in New York City.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 5 &ndash; CONVERTIBLE DEBENTURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 7, 2011, concurrently with the
Share Exchange, the Company issued secured Convertible Debentures (&ldquo;Convertible Debentures&rdquo;) in the amount of $1,625,000
of which $1,125,000 were sold to certain investors for aggregate cash proceeds of $1,065,000, net of selling commissions to a placement
agent of $40,000 and $20,000 of legal fees, and $500,000 were exchanged for 8% Notes Payable (&ldquo;Notes Payable&rdquo;) issued
on September 9, 2011. In addition, 400,000 shares of common stock with the fair market value of $144,000 were issued to a second
placement agent. On November 16, the Company issued Convertible Debentures in the amount of $450,000 for aggregate cash proceeds
of $436,000, net of selling commissions to a third placement agent of $14,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Convertible Debentures mature on the
earlier of (i) one year from the date of issuance or (ii) the date of closing of a private placement of equity, equity equivalent,
convertible debt or debt financing in which the Company receives gross proceeds, in one or more transactions, of at least $3,425,000
(a &ldquo;Subsequent Financing&rdquo;), which took place on January 20, 2012 (&ldquo;January 2012 Financing&rdquo;) (see Note 6).
The Convertible Debentures bear interest at 8% per annum and were convertible at the holder&rsquo;s option into a Subsequent Financing.
In the event that a Subsequent Financing has not occurred within 12 months from the date of issuance of the Convertible Debentures,
the holder had the option to convert into a number of shares of the Company's common stock equal to 1% of the Company's shares
of common stock on a fully diluted basis for every $125,000 of Convertible Debentures (the &ldquo;Conversion Shares&rdquo;) or
an aggregate of approximately 3,985,000 shares based on the outstanding shares of the Company common stock as of December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Upon the January 2012 Financing, $1,925,000
of debentures were exchanged for Units and the remaining $150,000 of debentures were repaid. As a result of the exchange, $1,925,000
principal amount of debentures are classified as a non-current liability in the accompanying balance sheet at December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Upon conversion or repayment of the Convertible
Debenture, the holder was entitled to receive, at the holder&rsquo;s option, either (i) a warrant (the &ldquo;Debenture Warrant&rdquo;),
which has a three year term and is exercisable at the offering price in a Subsequent Financing, to purchase such number of shares
of the Company's common stock equal to the principal amount of the Convertible Debenture divided by the offering price in a Subsequent
Financing, (the &ldquo;Warrant Shares&rdquo;) or (ii) shares of the Company's common stock equal to 33% of the principal amount
of the Convertible Debenture divided by the offering price in a Subsequent Financing (the &ldquo;Incentive Shares&rdquo;). The
Conversion Shares, Warrant Shares and Incentive Shares are entitled to piggyback registration rights. Upon the January 2012 Financing,
the holders of the Convertible Debenture elected to receive 275,000 Debenture Warrants exercisable at $1 per share with fair value
of $83,289 and 594,000 Incentive Shares valued at $368,280. The value of the Debenture Warrants and Incentive Shares was charged
to operations as interest expense in the first quarter of 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition to selling commissions paid
to the placement agents on the sale of certain Convertible Debentures, the placement agents received warrants that expire in January
2014 and 2015 (&ldquo;Agents Warrants&rdquo;), respectively, and are exercisable at the offering price in a Subsequent Financing
to purchase shares of the Company's common stock equal to 3% and 9%, respectively, of the gross proceeds delivered by purchasers
introduced by such placement agents divided by the purchase price per share in the Subsequent Financing. In the event that the
Subsequent Financing has not occurred within 12 months from the date of issuance of the Convertible Debentures, the placement agents
were entitled to receive, in lieu of the warrants, shares of common stock equal to 3% and 9%, respectively, of the number of shares
of the Company's common stock such purchasers were entitled to receive upon conversion of their Convertible Debentures or an aggregate
of approximately 88,000 shares based on the outstanding shares of the Company's common stock as of December 31, 2011. The Company
recognized a liability to placement agents to issue shares of its common stock based on their fair value of approximately $32,000
as of December 31, 2011. Upon the January 2012 Financing, the placement agents become entitled to receive 30,750 warrants exercisable
at $1.00 per share with a fair value $6,126, which was charged to operations as interest expense in the first quarter of 2012.
Additionally the liability to placement agent of $32,000 was credited to interest expense in the first quarter of 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The fair value of the Debenture and Agents
Warrants was determined using the Black Scholes option pricing model with the following assumptions: fair value of the Company&rsquo;s
common stock $0.62 per share determined based on January and March 2012 proceeds; dividends yield 0%; expected terms 2 to 3 years;
risk free interest rate: 0.91%; and expected volatility: 73 to 94%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following expenses in connection with
the issuance of Convertible Debenture were recorded as deferred financing costs: fair value of 400,000 shares of the Company&rsquo;s
common stock issued to the placement agent valued at $144,000, cash payments to the placement agents of $54,000, legal expenses
of $20,000 and fair value of the liability to placement agent to issue the Company&rsquo;s shares of common stock in the amount
of $32,000. The deferred financing costs were amortized using the effective interest method over the twelve month term of the Convertible
Debentures. During the year ended December 31, 2011, amortization of deferred financing costs amounted to approximately $53,000
and charged to interest expense in the statement of operations and remaining balance was charged to operations in connection with
the extinguishment of the debentures resulting from their exchange and repayment in 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to a Pledge and Security Agreement
and Subsidiary Guaranty, the Company granted the Debenture holders a first priority lien on all its assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 45.35pt">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 6 &ndash; JANUARY AND MARCH 2012
FINANCING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 20, 2012, the Company issued
an aggregate of 172.118 units (&ldquo;Units&rdquo;) to certain investors (the &ldquo;Purchasers&rdquo;) for aggregate cash proceeds
of $2,377,950 and $1,925,000 in previously issued Convertible Debentures of the Company that were exchanged for Units (&ldquo;January
2012 Financing&rdquo;). On March 1, 2012, the Company issued an aggregate of 92.5926 units to certain investors for aggregate cash
proceeds of $2,314,815 (&ldquo;March 2012 Financing&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each Unit had a purchase price of $25,000
per Unit and consisted of twenty five thousand (25,000) shares of the Company&rsquo;s common stock, a Class A Warrant to purchase
twenty five thousand (25,000) shares of Common Stock (the &ldquo;Class A Warrants&rdquo;), and a Class B Warrant to purchase up
to twenty five thousand (25,000) shares of Common Stock (the &ldquo;Class B Warrants&rdquo; and together with the Class A Warrants,
the &ldquo;Warrants&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Class A Warrants have an exercise price
of $1.25 per share of common stock and will be exercisable for a period of five years from the date of issuance. The warrants had
certain anti-dilutive provisions that were set to expire the earlier of i) one year or ii) upon effectiveness of a registration
of all shares covered by Class A Warrants, which took place on June 6, 2012. The Company determined the fair value of the Class
A Warrants and the Agent Warrants, described below, to be $2,549,684 and $212,235 on the issuance dates and initially classified
them as a liability due to transactions which cause an adjustment to the conversion rate (reset provisions) contained in the warrant
agreements. On June 6, 2012, upon the Company's registration statement being declared effective by the Securities and Exchange
Commission, the reset provisions expired and the Company reclassified $3,938,946, the fair value of the Class A Warrants and Agent
Warrants as of that date to equity. The increase of $1,177,026 in fair value of warrants liability was included in results of operations
for the nine months ended September 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following assumptions were used in
the Binomial Lattice model to determine fair value of the Class A Warrants and the Agent Warrants:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Issuance date</FONT><BR>
<FONT STYLE="font-size: 10pt">January 20 and</FONT><BR>
<FONT STYLE="font-size: 10pt">March 1, 2012</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Expiration date</FONT><BR>
<FONT STYLE="font-size: 10pt">June 6, 2012</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 64%"><FONT STYLE="font-size: 10pt">Price of the Company&rsquo;s common stock</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 15%; text-align: right"><FONT STYLE="font-size: 10pt">0.62</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 15%; text-align: right"><FONT STYLE="font-size: 10pt">0.85</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Dividend yield</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 10pt">Expected terms</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5 &ndash; 7 years</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4.6 - 6.7 years</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Risk free interest rate</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0.89 - 1.47</FONT></TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0.73 - 1.11</FONT></TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 10pt">Expected volatility</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">96.68 - 96.69</FONT></TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">95.73</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Expected price at which holders are likely to exercise their warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1.25</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1.25</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Class B Warrants were exercisable automatically
on their expiration date by cashless exercise or expire without exercise. In the event that the average of the Company&rsquo;s
daily volume weighted average price was below $0.75 during the 10 trading days after the Announcement Date (as hereinafter defined)
(the &ldquo;Measuring Period&rdquo;), then the holder was entitled to receive additional shares of the Company&rsquo;s Common Stock
upon the exercise of the Class B Warrants on the expiration date, which is the 12<SUP>th</SUP> trading day after the Announcement
Date. In the event that the Company&rsquo;s average daily volume weighted average price was at or above $0.75 during the Measuring
Period, the Class B Warrants were to expire unexercised. The Announcement Date was the earlier of (1) the date on which the Company
announces via press release the results of the pharmacokinetic study of its TNX-102 drug formulation; or (2) June 1, 2012. On April
5, 2012 the Company issued a press release announcing the results of the pharmacokinetic study of its TNX-102 drug formulation,
which is defined as an Announcement Date for the purpose of the Class B Warrants. Based on the Company&rsquo;s average daily volume
weighted average price, which was $1.73 per share, during the Measuring Period, the Class B Warrants expired unexercised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the January and March
2012 Financing, the Company paid a placement agent (the &ldquo;Agent&rdquo;) an aggregate cash payment of $466,777, which represented
an 8% commission and a 2% non-accountable expense allowance of the gross proceeds delivered by Purchasers in the January and March
2012 Financing. In addition, the Agent earned an aggregate of 466,777 warrants to purchase shares of common stock equal to 10%
of the gross proceeds delivered by Purchasers in the January and March 2012 Financing (the &ldquo;Agent Warrants&rdquo;), which
have an exercise price of $1.25 per share of common stock, exercisable for a period of seven years, contained anti-dilution protection
and are entitled to piggy-back registration rights. Total expenses related to the financing, including cash and the fair value
of warrants given to the Agent, amounted to $706,511, of which $435,713 was charged to additional paid-in capital and $270,798,
deemed initially allocable to the warrant liability, was charged to current and other financing costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the financings, the
Company entered into a Registration Rights Agreement with Purchasers.&nbsp;&nbsp;The Company is required to file a registration
statement registering for resale the common stock included in the Units and the common stock underlying the Class A Warrants and
the Agent Warrants to be filed no later than 60 days from the date of termination of the financings on March 1, 2012 and must be
declared effective no later than 120 days from the date of termination of the Financing (June 29, 2012).&nbsp; On April 26, 2012,
the Company filed the registration statement, which was declared effective on June 6, 2012.&nbsp;The Company is required to maintain
the effectiveness of the registration statement from its effective date unless all securities registered under the registration
statement have been sold or are otherwise able to be sold.&nbsp;&nbsp;If the Company failed to comply with the registration statement
filing or effective date requirements, the Company was required to pay the investors a fee equal to 1.0% of the Purchaser&rsquo;s
investment, for each 30-day period of delay, subject to a maximum payment of 10% to each Purchaser.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 7 &ndash; STOCKHOLDERS' EQUITY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 2, 2012, the Company filed amended
and restated Articles of Incorporation. Among other changes, the Company increased the number of authorized shares of common stock,
$0.001 par value to 150,000,000. Additionally, the Company is now authorized to issue 5,000,000 shares of preferred stock, $0.001
par value with such designations, preferences and participating, optional or other special rights and qualifications, limitations
or restrictions thereof as shall be determined by the Company&rsquo;s Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 8 &ndash; SHARE BASED COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>2010 Stock Plan</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June and August 2010, respectively,
the Board of Directors and stockholders of Tonix Sub. approved, and in December 2010 and February 2011, the Board of Directors
amended, the terms and provisions of the 2010 Stock Plan (the &quot;2010 Plan&quot;) whereby the Company reserved 4,564,641 shares
of its Common Stock for issuance pursuant to the 2010 Plan. The 2010 Plan allowed for grants of options to purchase shares of Common
Stock and awards of restricted Common Stock to employees, officers, directors, consultants and advisors of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February 2011, the Company granted shares
of restricted Common Stock to employees as follows: 196,359 shares to the Chief Business Officer and 130,906 shares to the incoming
President of Krele. The shares vest: 20% on the grant date and 20% on each of the first, second, third and fourth anniversaries
of the grant date. In August 2011, upon resignation of the President of Krele, 104,725 unvested shares were forfeited.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In March and April 2011, the Company granted
19,636 and 21,818 shares of restricted Common Stock, respectively, to newly appointed members of the Scientific Advisory Board
and the Board of Directors which vest: 25% on the grant date and 25% on each of the first, second and third anniversaries of the
grant date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognized share-based compensation
expense of $139,063 prior to Share Exchange and remaining expense of $296,588 was recognized on October 7, 2011, the date of Share
Exchange, upon which all non vested restricted shares vested and the 2010 Plan ceased to exist.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>2012 Incentive Stock Option Plan</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 12, 2012, the Company&rsquo;s
Board of Directors approved the 2012 Incentive Stock Option Plan (the &ldquo;2012 Plan&rdquo;). The 2012 Plan provides for the
issuance of options to purchase up to 4,000,000 shares of the Company&rsquo;s common stock to officers, directors, employees and
consultants of the Company. Under the terms of the 2012 Plan, the Company may issue Incentive Stock Options as defined by the Internal
Revenue Code to employees of the Company only and nonstatutory options. The Board of Directors of the Company determines the exercise
price, vesting and expiration period of the grants under the 2012 Plan. However, the exercise price of an Incentive Stock Option
should not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more stockholder and 100%
of fair value for a grantee who is not 10% stockholder. 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 vesting period of the
grants under the 2012 Plan should not be more than five years and expiration period not more than ten years. The Company reserved
4,000,000 shares of its common stock for future issuance under the terms of the 2012 Plan. On May 9, 2012, 3,500,000 options had
been granted under the 2012 Plan (all of which are outstanding at September 30, 2012) with an exercise price of $1.50, a 10 year
life and fair value of $1.175. The options vest 1/3rd on May 9, 2013 and 1/36th on the 9th of each month thereafter for 24 months.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company measures the fair value of
stock options on the date of grant, based on a Binomial option pricing model using certain assumptions discussed in the following
paragraph, and the closing market price of the Company's common stock on the date of the grant. Stock options granted vest over
a three year period and expire ten years from the date of grant. Share-based compensation expense related to awards is amortized
over the applicable vesting periods using the straight-line method. Share-based compensation expense of $571,330 was recognized
for the nine month period ended September 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The assumptions used in the valuation of
stock options granted during the nine months ended September 30, 2012 were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="font: 10pt Times New Roman, Times, Serif; width: 80%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 75%"><FONT STYLE="font-size: 10pt">Risk-free interest rate</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 22%; text-align: right"><FONT STYLE="font-size: 10pt">1.87</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Expected term of option</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6.5 years</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 10pt">Expected stock price volatility</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">95.89</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Expected dividend yield</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0.0</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The risk-free rate of return is based on
the yield of Daily U.S. Treasury Yield Curve Rates with terms equal to the expected life of the options as of the grant date.&nbsp;&nbsp;The
expected term of options determined using the simplified method and the expected stock price volatility is based on comparable
companies&rsquo; historical stock price volatility since the Company does not have sufficient historical exercise data because
its equity shares have been publicly traded for only a limited period of time.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of September 30, 2012, the Company had
approximately $3,542,246 of total unrecognized compensation cost related to non-vested awards granted under the Company&rsquo;s
2012 Plan, which the Company expects to recognize over approximately a three-year period.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 9 &ndash; STOCK WARRANTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table summarizes information
with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable, at September 30, 2012:&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Exercise</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Number</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Expiration</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Price</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Outstanding</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Date</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 12%; text-align: right"><FONT STYLE="font-size: 10pt">1.00</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: right"><FONT STYLE="font-size: 10pt">305,750</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 70%; text-align: center"><FONT STYLE="font-size: 10pt">January 2014 to January 2015</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1.25</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">7,084,542</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">January 2017 to March 2019</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">7,390,292</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: center">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 20, 2012, the Company issued
an aggregate of 275,000 and 30,750 warrants to purchase the Company's common stock at an exercise price of $1.00 per share expiring
five and seven years from the date of issuance to convertible debenture holders and debenture placement agents, respectively (see
Note 5).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the January 2012 and
March 2012 Financing, the Company issued to investors an aggregate of 4,302,950 and 2,314,815 warrants, respectively, to purchase
the Company's common stock at an exercise price of $1.25 per share expiring five years from the date of issuance. In addition,
the Company issued an aggregate of 235,295 and 231,482 warrants to purchase the Company's common stock at an exercise price of
$1.25 per share expiring seven years from the date of issuance to placement agents. These warrants contained certain anti-dilutive
provisions and are covered under a registration rights agreement (see Note 6).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 10 &ndash; RELATED PARTY TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Dr. Seth Lederman, our Chief Executive
Officer and Chairman of the Board, and Dr. Donald Landry, one of our directors, are the primary founders of Tonix Sub. We have
entered into various transactions with several companies under their control, including L&amp;L Technologies, Plumbline, Targent
Pharmaceuticals, LLC and Lederman &amp; Co. Lederman &amp; Co. received $250,000 per annum for its services, until August 1, 2011,
when it received $127,000 per annum until such time as we closed on the 2012 Financing. We first closed on the 2012 Financing in
January 2012, and effective February 1, 2012, Lederman &amp; Co. receives $250,000 per annum for its services. The consulting agreement
renews automatically for subsequent terms of one year at $250,000 per annum. Total expenses paid under these agreements were $107,333
and $246,083 during the three and nine months ended September 30, 2012, respectively; and $44,281 and $239,000 during the three
and nine months ended September 30, 2011, respectively. In January 2012, the related party companies received interest on the convertible
notes in the aggregate amount of $6,183.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the January 2012 Financing,
related party convertible debenture holders received an aggregate of 84,150 shares of common stock and 10,000 warrants to purchase
the Company's common stock at an exercise price of $1.00 for three years (see Note 5). Upon exchange of debentures for units in
the January 2012 Financing, related party debenture holders received an aggregate of 275,000 shares of the Company's common stock,
275,000 Class A Warrants and 275,000 Class B Warrants (see Note 6).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 11 &ndash; COMMITMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Employment agreements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Effective April 1, 2012, the Company entered
into an employment agreement with Leland Gershell (the &ldquo;Gershell Agreement&rdquo;) to serve as Chief Financial Officer.&nbsp;&nbsp;The
base salary under the Gershell Agreement is $175,000 per annum, which shall increase to $325,000 per annum upon the Company consummating
an equity sale of securities in excess of $20 million (the &ldquo;Gershell Threshold&rdquo;). The Gershell Agreement provides for
at-will employment and can be terminated at any time by either party, provided, however, that if the Company terminates Dr. Gershell
for any reason other than cause (as defined in the Gershell Agreement), then Dr. Gershell shall be entitled to six weeks of severance,
which severance payment shall increase to six months if such termination occurs after the Gershell Threshold. In addition, Dr.
Gershell is entitled to participate in any and all benefit plans, from time to time, in effect for the Company&rsquo;s employees,
along with vacation, sick and holiday pay in accordance with its policies established and in effect from time to time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Effective April 2, 2012, the Company entered
into an employment agreement (the &ldquo;Selzer Agreement&rdquo;) with Benjamin Selzer to serve as Chief Operating Officer.&nbsp;&nbsp;The
Selzer Agreement replaces and terminates the employment agreement Mr. Selzer had previously entered into with Tonix Sub. The base
salary under the Selzer Agreement is $175,000 per annum, which shall increase to $250,000 per annum effective October 7, 2012,
and shall increase to $320,000 per annum upon the Company consummating an underwritten public offering of equity securities in
excess of $10 million net to the Company (the &ldquo;Selzer Threshold&rdquo;). In the event that the Selzer Threshold occurs subsequent
to October 7, 2012, Mr. Selzer shall be entitled to retroactive adjustment of the base salary to the $320,000 per annum rate, not
to exceed an aggregate adjustment of $170,000. The Selzer Agreement has an initial term of two years, and renews thereafter for
additional one year terms unless either party provides 90 days written notice prior to the termination of a term not to extend
the Selzer Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 12 &ndash; SUBSEQUENT EVENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Effective October 5, 2012, the Company
entered into an amendment to its employment agreement (the &ldquo;Selzer Amendment&rdquo;) with Benjamin Selzer, which amended
the employment agreement entered into with Mr. Selzer on April 2, 2012 (the &ldquo;Selzer Agreement&rdquo;) to serve as Chief Operating
Officer.&nbsp;&nbsp;Pursuant to the Selzer Amendment, the base salary under the Selzer Agreement remains $175,000 per annum through
March 31, 2013, at which time it shall increase to $250,000 per annum, and shall increase to $320,000 per annum upon the Company
consummating an underwritten public offering of equity securities in excess of $10 million net to the Company (the &ldquo;Selzer
Threshold&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Selzer Agreement, the base
salary was to increase to $250,000 effective October 7, 2012. In addition, pursuant to the Selzer Amendment, a retroactive adjustment
of the base salary to the $320,000 per annum rate, not to exceed an aggregate adjustment of $170,000, that Mr. Selzer would have
been entitled to upon the Selzer Threshold occurring after October 7, 2012 was eliminated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 26, 2012, the Company elected
to voluntarily terminate Benjamin Selzer as Chief Operating Officer, Secretary and Treasurer, effective immediately. In conjunction
with the termination, 500,000 unvested options previously issued to Mr. Selzer were cancelled.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Between October and November 2012, the
Company issued promissory notes in the amount of $320,000 (the &ldquo;Notes&rdquo;) in exchange for $320,000 borrowed from six
affiliated investors. The Notes bear no interest and were payable on demand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 14, 2012, the Company sold
to accredited investors for aggregate cash proceeds of $390,000, convertible debentures (the &ldquo;Debentures&rdquo;) in the principal
face amount of $390,000 and the exchange of the Notes for Debentures in the principal face amount of $320,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Debentures mature on the earlier of
(i) November 14, 2013 or (ii) the date of closing of a private placement of equity, equity equivalent, convertible debt or debt
financing in which we receive gross proceeds, in one or more transactions, of at least $100,000 (a &ldquo;Subsequent Financing&rdquo;).
The Debentures bear interest at 8% per annum and are convertible at the holder&rsquo;s option into either (i) a Subsequent Financing
at a price equal to a 25% discount to the price of securities sold in the Subsequent Financing or (ii) shares of the Company&rsquo;s
common stock at a conversion price per share equal to $1.00.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Formerly known as Tamandare Explorations
Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(a development stage company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In December 2012, the Company issued an
aggregate of 8,904,167 units (&ldquo;Units&rdquo;) to certain accredited investors (the &ldquo;Purchasers&rdquo;) for aggregate
cash proceeds of $2,615,000, at a price per Unit of $0.40, and the exchange of $710,000 in previously issued convertible debentures
(the &ldquo;Prior Debentures&rdquo;) of the Company that were converted into Units at a price of $0.30 per Unit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each Unit consisted of one share of the
Company&rsquo;s common stock, $0.001 par value (the &ldquo;Common Stock&rdquo;), a Class A Warrant to purchase one share of Common
Stock (the &ldquo;Class A Warrants&rdquo;), and a Class B Warrant to purchase one share of Common Stock (the &ldquo;Class B Warrants&rdquo;
and together with the Class A Warrants, the &ldquo;Warrants&rdquo;).The Class A Warrants have an exercise price of $0.60 per share
of Common Stock and will be exercisable for a period of five years from the date of issuance. The Class A Warrants may be exercised
on a cashless basis under certain circumstances. The Class B Warrants have an exercise price of $0.40 per share of Common Stock
and will be exercisable for a period of one year from the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 0pt; margin-bottom: 0pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Tonix Pharmaceuticals Holding Corp.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="tlogo.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Up to 17,808,334 shares of</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Common Stock, par value $0.001 per share</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>__________________ , 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 0pt; margin-bottom: 0pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Dealer Prospectus Delivery Obligation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Until [*], 2013, all dealers that effect
transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with information different from that which is set forth
in this prospectus. We are offering to sell shares of our common stock and seeking offers to buy shares of our common stock only
in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the
date of this prospectus, regardless of the time of delivery of this prospectus or any sale of these securities. Our business, financial
condition, results of operation and prospects may have changed after the date of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PART II</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INFORMATION NOT REQUIRED IN PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth the estimated costs and expenses to be incurred in connection with the issuance and distribution of the securities registered
under this Registration Statement. All amounts are estimates except the Securities and Exchange Commission registration fee. The
total expenses for this offering, borne solely by the registrant, are estimated to be approximately $106,336, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 85%; text-align: left">SEC registration fee </TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,336</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Legal fees and expenses </TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">60,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Accounting fees and expenses </TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Miscellaneous expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: 0.25in">Total</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">106,336</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our bylaws, as amended,
provide to the fullest extent permitted by Nevada law, our directors or officers shall not be personally liable to us or our shareholders
for damages for breach of such director's or officer's fiduciary duty. The effect of this provision of our bylaws, as amended,
is to eliminate our right and our shareholders (through shareholders' derivative suits on behalf of our company) to recover damages
against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from
negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification
provisions in our bylaws, as amended, are necessary to attract and retain qualified persons as directors and officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the past three
years, the registrant has sold the following securities which were not registered under the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 7, 2011,
we issued 22,666,667 shares of our common stock to the shareholders of Tonix Sub in exchange for 100% of the issued and outstanding
shares of common stock of Tonix Sub. The shares were issued to accredited investors pursuant to Rule 506 of Regulation D or non-U.S.
Persons pursuant to Rule 903 of Regulation S of the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 7, 2011,
we issued 400,000 shares of our common stock to a placement agent in connection with an amendment to a placement agent agreement.
The shares were issued to an accredited investor pursuant to Rule 506 of Regulation D or Section 4(2) of the Securities Act of
1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Between October and
November 2011, we sold to certain investors (the &ldquo;Purchasers&rdquo;) for aggregate cash proceeds of $1,575,000, secured convertible
debentures (the &ldquo;Debentures&rdquo;) in the principal face amount of $1,575,000 and the exchange of $500,000 in previously
issued notes of Tonix Sub that were converted into Debentures in the principal face amount of $500,000 (the &ldquo;2011 Financing&rdquo;).
The Debentures were sold to accredited investors pursuant to Rule 506 of Regulation D or non-U.S. Persons pursuant to Rule 903
of Regulation S of the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Debentures mature
on the earlier of (i) one year from the date of issuance or (ii) the date of closing of a private placement of equity, equity equivalent,
convertible debt or debt financing in which we receive gross proceeds, in one or more transactions, of at least $3,425,000 (a &ldquo;Subsequent
Financing&rdquo;). The Debentures bear interest at 8% per annum and are convertible at the holder&rsquo;s option into a Subsequent
Financing. In the event that a Subsequent Financing has not occurred within 12 months from the date of issuance of the Debenture,
the holder has the option to convert the Debenture into a number of shares of our common stock equal to 1% of our shares of common
stock on a fully diluted basis for every $125,000 of Debentures (the &ldquo;Conversion Shares&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, upon conversion
or repayment of the Debenture, the holder is entitled to receive, at the holder&rsquo;s option, either (i) a warrant (the &ldquo;Warrant&rdquo;)
to purchase such number of shares of common stock equal to the principal amount of the Debenture divided by the offering price
in a Subsequent Financing (the &ldquo;Warrant Shares&rdquo;) or (ii) shares of our common stock equal to 33% of the principal amount
of the Debenture divided by the offering price in a Subsequent Financing (the &ldquo;Incentive Shares&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
the 2011 Financing, placement agents earned warrants to purchase shares of our common stock equal to 3% or 9% of the gross proceeds
delivered by Purchasers introduced by such placement agents in the 2011 Financing divided by the purchase price per share in the
Subsequent Financing (collectively, the &ldquo;2011 Agent Warrants&rdquo;). In the event that the Subsequent Financing has not
occurred within 12 months from the date of issuance of the Debentures, the placement agents will receive, in lieu of the 2011 Agent
Warrants, shares of common stock equal to 3% or 9% of the number of shares of our common stock such Purchasers introduced by such
placement agent in the 2011 Financing are entitled to receive upon conversion of their Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Between January and
March, 2012, we consummated the 2012 Financing pursuant to which we issued an aggregate of 264.7106 Units to certain investors
for aggregate cash proceeds of $4,692,765 and the exchange of $1,925,000 in previously issued debentures that were converted into
Units.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each Unit had a purchase
price of $25,000 per Unit and consisted of twenty five thousand (25,000) shares of our Common Stock, 25,000 Class A Warrants and
25,000 Class B Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Class A Warrants
have an exercise price of $1.25 per share of Common Stock and will be exercisable for a period of five years from the date of issuance.
The Class B Warrants were not exercisable by the Purchasers and would be exercised automatically on their expiration date by cashless
exercise or expire without exercise. Effective April 24, 2012, the Class B Warrants expired unexercised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
the Financing, we issued Dawson James 466,777 2012 Agent Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Between October and
November 2012, we issued promissory notes in the amount of $320,000 (the &ldquo;Notes&rdquo;) in exchange for $320,000 borrowed
from six affiliated investors. The Notes bear no interest and were payable on demand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 14, 2012,
we sold to accredited investors for aggregate cash proceeds of $390,000, convertible debentures (the &ldquo;Debentures&rdquo;)
in the principal face amount of $390,000 and the exchange of the Notes for Debentures in the principal face amount of $320,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Debentures mature
on the earlier of (i) November 14, 2013 or (ii) the date of closing of a private placement of equity, equity equivalent, convertible
debt or debt financing in which we receive gross proceeds, in one or more transactions, of at least $100,000 (a &ldquo;Subsequent
Financing&rdquo;). The Debentures bear interest at 8% per annum and are convertible at the holder&rsquo;s option into either (i)
a Subsequent Financing at a price equal to a 25% discount to the price of securities sold in the Subsequent Financing or (ii) shares
of our common stock at a conversion price per share equal to $1.00.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2012, the
Company issued an aggregate of 8,904,167 units (&ldquo;Units&rdquo;) to certain accredited investors (the &ldquo;Purchasers&rdquo;)
for aggregate cash proceeds of $2,615,000, at a price per Unit of $0.40, and the exchange of $710,000 in previously issued convertible
debentures (the &ldquo;Prior Debentures&rdquo;) of the Company that were converted into Units at a price of $0.30 per Unit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each Unit consisted
of one share of the Company&rsquo;s common stock, $0.001 par value (the &ldquo;Common Stock&rdquo;), a Class A Warrant to purchase
one share of Common Stock (the &ldquo;Class A Warrants&rdquo;), and a Class B Warrant to purchase one share of Common Stock (the
&ldquo;Class B Warrants&rdquo; and together with the Class A Warrants, the &ldquo;Warrants&rdquo;).The Class A Warrants have an
exercise price of $0.60 per share of Common Stock and will be exercisable for a period of five years from the date of issuance.
The Class A Warrants may be exercised on a cashless basis under certain circumstances. The Class B Warrants have an exercise price
of $0.40 per share of Common Stock and will be exercisable for a period of one year from the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following exhibits
are included as part of this Form S-1. References to &ldquo;the Company&rdquo; in this Exhibit List mean Tonix Pharmaceuticals
Holding Corp., a Nevada corporation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%; text-align: justify"><FONT STYLE="font-size: 10pt">2.01</FONT></TD>
    <TD STYLE="width: 88%; text-align: justify"><FONT STYLE="font-size: 10pt">Share Exchange Agreement, dated as of October 7, 2011 by and among Tamandare Explorations Inc., David J. Moss, Tonix Pharmaceuticals, Inc. and the shareholders of Tonix Pharmaceuticals, Inc. filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">3.01</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Articles of Incorporation, filed as an exhibit to the Registration Statement on Form S-1, filed with the Securities and Exchange Commission (the &ldquo;Commission&rdquo;) on April 9, 2008 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">3.02</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Articles of Merger between Tamandare Explorations Inc. and Tonix Pharmaceuticals Holding Corp., effective October 11, 2011, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 17, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">3.03</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Amended and Restated Bylaws, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on February 23, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">5.01</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt; color: black">Opinion of Sichenzia Ross Friedman Ference LLP.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.01</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Feasibility and Option Agreement, dated as of June 20, 2007, by and between Krele Pharmaceuticals, Inc. (now, Tonix Pharmaceuticals, Inc.) and Lipocine, Inc., filed as an exhibit to the amended Current Report on Form 8-K/A, filed with the Commission on April 3, 2012 and incorporated herein by reference. &dagger;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.02</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Consulting Agreement, dated as of June 4, 2010, by and between Krele Pharmaceuticals, Inc. (now, Tonix Pharmaceuticals, Inc.) and Lederman &amp; Co., LLC, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.03</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Technology Transfer and Assignment Agreement, dated as of June 4, 2010, by and between Krele Pharmaceuticals, Inc. (now, Tonix Pharmaceuticals, Inc.) and Lederman &amp; Co., LLC, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.04</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Lease Agreement, dated as of September 28, 2010, by and between 509 Madison Avenue Associates, L.P. and Tonix Pharmaceuticals, Inc., filed as an exhibit to the amended Current Report on Form 8-K/A, filed with the Commission on February 3, 2012 and incorporated herein by reference.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%; text-align: justify"><FONT STYLE="font-size: 10pt">10.05</FONT></TD>
    <TD STYLE="width: 88%; text-align: justify"><FONT STYLE="font-size: 10pt">Amendment to Feasibility and Option Agreement, dated as of October 4, 2010, by and between Tonix Pharmaceuticals, Inc. and Lipocine, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference. &dagger;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.06</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Engagement Agreement, dated as of October 6, 2010, by and between Tonix Pharmaceuticals, Inc. and Frost and Sullivan, filed as an exhibit to the amended Current Report on Form 8-K/A, filed with the Commission on April 3, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.07</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Amendment to Consulting Agreement, dated as of December 9, 2010, by and between Tonix Pharmaceuticals, Inc. and Lederman &amp; Co., LLC, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.08</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Employment Agreement, dated as of April 1, 2011, by and between Tonix Pharmaceuticals, Inc. and Rhonda Rosen, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.09</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Employment Agreement, dated as of April 1, 2011, by and between Tonix Pharmaceuticals, Inc. and Benjamin A. Selzer, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 88%; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.10</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Employment Agreement, dated as of April 1, 2011, by and between Tonix Pharmaceuticals, Inc. and Susan Oliver (now, Susan Kerridge), filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.11</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">API Supply and Development Agreement, dated as of April 7, 2011, by and between Tonix Pharmaceuticals, Inc. and JFC Technologies, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.12</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Consulting Agreement, dated as of June 2, 2011, by and between Tonix Pharmaceuticals, Inc. and Pharmanet Canada, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.13</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Amendment to Employment Agreement, dated as of July 27, 2011, by and between Tonix Pharmaceuticals, Inc. and Rhonda Rosen, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.14</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Amendment to Employment Agreement, dated as of July 27, 2011, by and between Tonix Pharmaceuticals, Inc. and Benjamin A. Selzer, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.15</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Amendment to Employment Agreement, dated as of July 27, 2011, by and between Tonix Pharmaceuticals, Inc. and Susan Oliver (now, Susan Kerridge), filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.16</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Financial Public Relations Agreement, dated as of August 1, 2011, by and between Tonix Pharmaceuticals, Inc. and Porter, LeVay &amp; Rose, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.17</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of 8% Secured Convertible Debenture, issued October 7, 2011, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.18</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Subscription Agreement, dated October 7, 2011, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
</TABLE>
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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%; text-align: justify"><FONT STYLE="font-size: 10pt">10.19</FONT></TD>
    <TD STYLE="width: 88%; text-align: justify"><FONT STYLE="font-size: 10pt">Form of Pledge and Security Agreement, dated as of October 7, 2011, by and among Tamandare Explorations Inc., Tonix Pharmaceuticals, Inc., Krele LLC and the investors, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.20</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Subsidiary Guaranty, dated as of October 7, 2011, by and among Tonix Pharmaceuticals, Inc., Krele LLC and Sandor Capital Master Fund L.P., on behalf of the investors, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.21</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Subscription Agreement, dated January 20, 2012, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on January 23, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.22</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Class A Warrant, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on January 23, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.23</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Class B Warrant, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on January 23, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.24</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Registration Rights Agreement, dated January 20, 2012, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on January 23, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.25</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Amendment to Consulting Agreement, dated as of March 30, 2012 but effective as of July 27, 2011, by and between Tonix Pharmaceuticals, Inc. and Lederman &amp; Co., LLC, filed as an exhibit to the Annual Report on Form 10-K filed with the Commission on March 30, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.26</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Employment Agreement, between Tonix Pharmaceuticals Holding Corp. and Leland Gershell, dated April 1, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on April 5, 2012 and incorporated herein by reference. </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.27</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Employment Agreement, between Tonix Pharmaceuticals Holding Corp. and Benjamin Selzer, dated April 2, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on April 5, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.28</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Amendment to Employment Agreement, between Tonix Pharmaceuticals Holding Corp. and Benjamin Selzer, dated October 5, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on October 10, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.29</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Subscription Agreement, dated November 13, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on November 14, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.30</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Convertible Debenture, dated November 13, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on November 14, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.31</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Subscription Agreement, dated December 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 5, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.32</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Class A Warrant, dated December 4, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 5, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.33</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Class B Warrant, dated December 4, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 5, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.34</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Registration Rights Agreement, dated December 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 5, 2012 and incorporated herein by reference.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%; text-align: justify"><FONT STYLE="font-size: 10pt">10.35</FONT></TD>
    <TD STYLE="width: 88%; text-align: justify"><FONT STYLE="font-size: 10pt">Form of Class A Warrant, dated December 21, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 27, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.36</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Class B Warrant, dated December 21, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 27, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">10.37</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Form of Amendment No. 1 to the Purchase Agreement, Registration Rights Agreement and Escrow Agreement, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 27, 2012 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">21.01</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">List of Subsidiaries, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">23.01</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Consent of EisnerAmper LLP</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">24.01</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Power of Attorney</FONT> <FONT STYLE="font-size: 10pt; color: black">(included on signature page to the registration statement).</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">99.01</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Frost &amp; Sullivan Fibromyalgia Market Study, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">99.02</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Lipocine Cyclobenzaprine Study Results, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&dagger;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Confidential
treatment granted for certain confidential portions of this exhibit pursuant to Rule 24b-2 under the Exchange Act. In accordance
with Rule 24b-2, these confidential portions have been omitted from this exhibit and filed separately with the Commission.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>ITEM 17. UNDERTAKINGS. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The undersigned registrant hereby undertakes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the &ldquo;Securities Act&rdquo;);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering
price set forth in the &quot;Calculation of Registration Fee&quot; table in the effective registration statement, and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
determining liability of the undersigned registrant under the Securities Act to any purchaser in the initial distribution of the
securities, the undersigned undertakes that in a primary offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such purchaser:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed <FONT STYLE="color: black">pursuant
to<FONT STYLE="text-underline-style: none"> Rule 424</FONT></FONT>;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to
by the undersigned registrant;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">(iv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the event that a
claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each prospectus filed
pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying
on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such date of first use.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 23pt">Pursuant to the requirements
of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on this 25th
day of January, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold"><FONT STYLE="font-size: 10pt"><B>TONIX PHARMACEUTICALS HOLDING CORP.</B> &nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 45%">&nbsp;</TD>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 51%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Date:&nbsp;&nbsp;January 25, 2013</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">By:</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-style: normal; font-weight: normal"><FONT STYLE="font-size: 10pt">/s/ SETH
LEDERMAN</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Seth Lederman</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Chief Executive Officer (Principal Executive</FONT><BR>
<FONT STYLE="font-size: 10pt">Officer)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Date:&nbsp;&nbsp;January 25, 2013</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">By: <I>&nbsp;</I></FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">/s/ LELAND GERSHELL</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Leland Gershell</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Chief Financial Officer (Principal Accounting</FONT><BR>
<FONT STYLE="font-size: 10pt">Officer)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="vertical-align: top; width: 30%; border-bottom: windowtext 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Signature</FONT></TD>
    <TD STYLE="width: 5%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 40%; border-bottom: windowtext 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Title</FONT></TD>
    <TD STYLE="width: 5%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 20%; border-bottom: windowtext 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">Date</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-bottom: windowtext 1pt solid; font-style: italic; text-align: justify"><FONT STYLE="font-size: 10pt"><I>/s/ SETH LEDERMAN</I></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Chief Executive Officer (Principal Executive</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">January 25, 2013</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Seth Lederman</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Officer)&nbsp;and Director</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-bottom: windowtext 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;<I>/s/ LELAND GERSHELL</I></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Chief Financial Officer (Principal Financial</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">January 25, 2013</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Leland Gershell</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Officer and Principal Accounting Officer)</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-bottom: windowtext 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;<I>/s/ STUART DAVIDSON</I></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">January 25, 2013</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Stuart Davidson</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-bottom: windowtext 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;<I>/s/ PATRICK GRACE</I></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">January 25, 2013</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Patrick Grace</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-bottom: windowtext 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;<I>/s/ DONALD W. LANDRY</I></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">January 25, 2013</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Donald W. Landry</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-bottom: windowtext 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;<I>/s/ ERNEST MARIO</I></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">January 25, 2013</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Ernest Mario</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-bottom: windowtext 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;<I>/s/ CHARLES MATHER IV</I></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">January 25, 2013</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Charles Mather IV</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-bottom: windowtext 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;<I>/s/ JOHN RHODES</I></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">January 25, 2013</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">John Rhodes</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; border-bottom: windowtext 1pt solid; font-style: italic"><FONT STYLE="font-size: 10pt"><I>/s/ SAMUEL SAKS</I></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">January 25, 2013</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Samuel Saks</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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[{"type": "S-1", "sequence": "1", "filename": "v332967_s1.htm", "secsgml_size_bytes": 1293346}]
{"company-data": {"conformed-name": "Tonix Pharmaceuticals Holding Corp.", "cik": "0001430306", "assigned-sic": "1000", "irs-number": "261434750", "state-of-incorporation": "NV", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-186223", "film-number": "13549407"}, "business-address": {"street1": "509 MADISON AVE. - SUITE 306", "city": "NEW YORK", "state": "NY", "zip": "10022", "phone": "1-800-849-7894"}, "mail-address": {"street1": "509 MADISON AVE. - SUITE 306", "city": "NEW YORK", "state": "NY", "zip": "10022"}, "former-company": {"former-conformed-name": "TAMANDARE EXPLORATIONS INC.", "date-changed": "20080320"}}
As filed with the Securities and Exchange
Commission on January 25, 2013
Registration No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TONIX PHARMACEUTICALS HOLDING CORP.
(Name of registrant in its charter)
Nevada
1000
26-1434750
(State or other Jurisdiction
of Incorporation or
Organization)
(Primary Standard Industrial
Classification Code
Number)
(I.R.S. Employer
Identification No.)
509 Madison Avenue, Suite 306
New York, New York
(212) 980-9155
(Address and telephone number of principal
executive offices and principal place of business)
Seth Lederman, Chief Executive Officer
Tonix Pharmaceuticals Holding Corp.
509 Madison Avenue, Suite 306
New York, New York
(212) 980-9155
(Name, address and telephone number
of agent for service)
Copies to:
Marc J. Ross, Esq.
James M. Turner, Esq.
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32nd Flr.
New York, New York 10006
(212) 930-9700
(212) 930-9725 (fax)
APPROXIMATE DATE OF PROPOSED SALE TO
THE PUBLIC:
From time to time after this Registration
Statement becomes effective.
If any securities
being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box:
x
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.
£
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
£
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
£
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.  See definitions
of "large accelerated filer," "accelerated filed," and "smaller reporting company" in Rule
12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x
(Do not check if a smaller reporting company)
CALCULATION OF REGISTRATION FEE
Title of Each Class Of
Securities To Be Registered
Amount To
Be
Registered
(1)
Proposed
Maximum
Offering Price
Per Security
(2)
Proposed
Maximum
Aggregate
Offering Price
Amount Of
Registration
Fee
Common Stock, $.001 par value
8,904,167
$
0.50
$
4,452,083.50
$
607.26
Common Stock, $.001 par value issuable upon exercise of warrants exercisable at $0.60 per share
8,904,167
$
0.60
$
5,342,500.20
$
728.72
Total
17,808,334
$
9,794,583.70
$
1,335.98
(1)
Includes shares of our common stock, par value $0.001 per share,
which may be offered pursuant to this registration statement, which shares are issuable upon exercise of warrants held by the selling
stockholders. In addition to the shares set forth in the table, the amount to be registered includes an indeterminate number of
shares issuable upon exercise of the warrants, as such number may be adjusted as a result of stock splits, stock dividends and
similar transactions in accordance with Rule 416. The number of shares of common stock registered hereunder represents a good faith
estimate by us of the number of shares of common stock issuable upon exercise of the warrants. For purposes of estimating the number
of shares of common stock to be included in this registration statement, we calculated a good faith estimate of the number of shares
of our common stock that we believe will be issuable upon exercise of the warrants to account for market fluctuations, and antidilution
and price protection adjustments, respectively. Should the conversion ratio result in our having insufficient shares, we will not
rely upon Rule 416, but will file a new registration statement to cover the resale of such additional shares should that become
necessary. In addition, should a decrease in the exercise price as a result of an issuance or sale of shares below the then current
market price, result in our having insufficient shares, we will not rely upon Rule 416, but will file a new registration statement
to cover the resale of such additional shares should that become necessary.
(2)
Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c)
and Rule 457(g) under the Securities Act of 1933, using the average of the high and low price as reported on the OTCQB on January
24, 2013, which was $0.50 per share.
Pursuant to Rule 429 promulgated under
the Securities Act of 1933, the enclosed prospectus constitutes a combined prospectus also relating to an aggregate of up to 14,543,807
shares of our common stock that were previously registered for sale in a Registration Statement on Form S-1, Registration No. 333-180964.
As such, this prospectus also constitutes post-effective amendment No. 1 to the Registration Statement on Form S-1, Registration
No. 333-180964, which shall hereafter become effective concurrently with the effectiveness of this Registration Statement on Form
S-1 in accordance with Section 8(c) of the Securities Act of 1933.
The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
The information in this
prospectus is not complete and may be changed. The selling stockholders may not sell these securities under this prospectus
until the registration statement of which it is a part and filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
SUBJECT TO COMPLETION,
DATED JANUARY 25, 2013
PROSPECTUS
Up to 17,808,334 Shares of Common Stock
This prospectus relates
to the offering by the selling stockholders of Tonix Pharmaceuticals Holding Corp. of up to 17,808,334 shares of common stock,
par value $0.001 per share. All of the shares of common stock offered by this prospectus are being sold by the selling stockholders.
These shares consist of (i) 8,904,167 shares of common stock issued to investors in our December 2012 Financing and (ii) 8,904,167
shares of common stock issuable upon exercise of warrants to purchase 8,904,167 shares issued to investors in our December 2012
Financing.
The selling stockholders
have advised us that they will sell the shares of common stock from time to time in the open market, on the OTCQB, in privately
negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at prices related
to the prevailing market prices or at negotiated prices.
The selling stockholders
may sell the common shares to or through underwriters, brokers or dealers or directly to purchasers. Underwriters, brokers or dealers
may receive discounts, commissions or concessions from the selling stockholders, purchasers in connection with sales of the common
shares, or both. Additional information relating to the distribution of the common shares by the selling stockholders can be found
in this prospectus under the heading "Plan of Distribution." If underwriters or dealers are involved in the sale of
any securities offered by this prospectus, their names, and any applicable purchase price, fee, commission or discount arrangement
between or among them, will be set forth, or will be calculable from the information set forth, in a supplement to this prospectus.
We will pay the expenses of registering these shares.
We will not receive
any proceeds from the sale of common stock by the selling stockholders. We will receive proceeds from the selling stockholders
from any exercise of their warrants on a cash basis.
We are a reporting
company pursuant to Section 12(g) of the Securities Exchange Act of 1934, or the Exchange Act, and our common stock is traded on
the OTCQB under the symbol "TNXP". On January 22, 2013, the closing price of our common stock was $0.55 per share.
Investing in our
common stock involves a high degree of risk. Before making any investment in our common stock, you should read and carefully
consider the risks described in this prospectus under "
Risk Factors
" beginning on page 8 of this prospectus.
You should rely
only on the information contained in this prospectus or any prospectus supplement or amendment thereto. We have not authorized
anyone to provide you with different information.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This prospectus is dated
, 2013
TABLE OF CONTENTS
Page
Special Note Regarding Forward-Looking Statements
1
About this Prospectus
1
Prospectus Summary
2
Risk Factors
8
Use of Proceeds
27
Market For Common Stock and Related Stockholder Matters
28
Management's Discussion and Analysis of Financial Condition and Results of Operations
29
Business
40
Description of Property
61
Legal Proceedings
61
Management
62
Executive Compensation
67
Certain Relationships and Related Transactions
70
Security Ownership of Certain Beneficial Owners and Management
71
Description of Securities
73
Indemnification for Securities Act Liabilities
75
Plan of Distribution
76
Selling Stockholders
78
Legal Matters
81
Experts
81
Additional Information
81
Index to Financial Statements
82
You should rely
only on the information contained in this prospectus. We have not, and the underwriter has not, authorized anyone to provide you
with information that is different. If anyone provides you with different or inconsistent information, you should not rely on it.
We are offering to sell, and are seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time
of delivery of this prospectus or of any sale of the common stock. Our business, financial conditions, results of operations and
prospects may have changed since that date.
i
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains
"forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities
Act, and Section 21E of the Securities Exchange Act of 1934, or Exchange Act. Forward-looking statements reflect the current
view about future events. When used in this prospectus, the words "anticipate," "believe," "estimate,"
"expect," "future," "intend," "plan," or the negative of these terms and similar
expressions, as they relate to us or our management, identify forward-looking statements. Such statements, include, but are not
limited to, statements contained in this prospectus relating to our business strategy, our future operating results and liquidity
and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business,
the economy and other future conditions. Because forward–looking statements relate to the future, they are subject to inherent
uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from
those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance
of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factors that
could cause actual results to differ materially from those in the forward-looking statements include, without limitation, a continued
decline in general economic conditions nationally and internationally; decreased demand for our products and services; market acceptance
of our products and services; our ability to protect our intellectual property rights; the impact of any infringement actions or
other litigation brought against us; competition from other providers and products; our ability to develop and commercialize new
and improved products and services; our ability to raise capital to fund continuing operations; changes in government regulation;
our ability to complete customer transactions and capital raising transactions; and other factors (including the risks contained
in the section of this prospectus entitled "Risk Factors") relating to our industry, our operations and results of
operations and any businesses that may be acquired by us. Should one or more of these risks or uncertainties materialize, or should
the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated,
expected, intended or planned.
Factors or events that
could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We
cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including
the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements
to actual results.
ABOUT THIS PROSPECTUS
You should rely only
on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell and seeking offers to buy shares of our common stock,
including shares they acquire upon exercise of their warrants, only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery
of this prospectus or of any sale of our common stock. The prospectus will be updated and updated prospectuses made available for
delivery to the extent required by the federal securities laws.
No person is authorized
in connection with this prospectus to give any information or to make any representations about us, the selling stockholders, the
securities or any matter discussed in this prospectus, other than the information and representations contained in this prospectus.
If any other information or representation is given or made, such information or representation may not be relied upon as having
been authorized by us or any selling stockholder. This prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy the securities in any circumstances under which the offer or solicitation is unlawful. Neither the delivery of this
prospectus nor any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there
has been no change in our affairs since the date of this prospectus. The prospectus will be updated and updated prospectuses made
available for delivery to the extent required by the federal securities laws.
1
PROSPECTUS SUMMARY
This summary highlights information
contained throughout this prospectus and is qualified in its entirety to the more detailed information and financial statements
included elsewhere in this prospectus. This summary does not contain all of the information that should be considered before investing
in our common stock. Investors should read the entire prospectus carefully, including the more detailed information regarding
our business, the risks of purchasing our common stock discussed in this prospectus under "Risk Factors" beginning
on page 8 of this prospectus and our financial statements and the accompanying notes beginning on page F-1 of this prospectus.
Unless otherwise indicated or unless the
context requires otherwise, this prospectus includes the accounts of Tonix Pharmaceuticals Holding Corp. ("Tonix")
and its wholly-owned subsidiaries, as follows, collectively referred to as "we", "us" or the "Company":
Tonix Pharmaceuticals, Inc., a Delaware corporation ("Tonix Sub") and Krele LLC, a Delaware limited liability company
("Krele"). Tonix Sub is a wholly-owned subsidiary of Tonix and Krele is a wholly-owned subsidiary of Tonix Sub.
Our Company
Corporate Structure
We were incorporated
on November 16, 2007 under the laws of the State of Nevada as Tamandare Explorations Inc. From inception through October 2011,
we were involved in the acquisition, exploration and development of natural resource properties in the State of Nevada. On October
7, 2011 ("Closing Date" and the closing of the share exchange transaction, the "Closing"), we executed
and consummated a share exchange agreement by and among Tonix Sub and the stockholders of 100% of the equity securities of Tonix
Sub, including, the holders of 5,207,500 shares of common stock, 1,500,000 shares of Series A Preferred Stock and 2,275,527 shares
of Series B Preferred Stock (the "Tonix Shareholders"), on the one hand, and us and David Moss ("Moss"),
our then sole officer and director and majority shareholder, on the other hand (the "Share Exchange Agreement" and
the transaction, the "Share Exchange").
In the Share Exchange,
the Tonix Shareholders exchanged their shares of Tonix Sub for newly issued shares of our common stock ("Common Stock").
As a result, upon completion of the Share Exchange, Tonix Sub became our wholly-owned subsidiary.
Upon completion of
the Share Exchange, the Tonix Shareholders received an aggregate of 22,666,667 shares of our Common Stock. Moss returned 1,500,000
shares of Common Stock to us, which were retired, and our existing stockholders retained 4,000,000 shares of Common Stock. The
22,666,667 shares issued to the Tonix Shareholders constituted approximately 85% of our 26,666,667 issued and outstanding shares
of Common Stock post-Closing.
As a result of the
Share Exchange, we acquired 100% of the capital stock of Tonix Sub and consequently, control of the business and operations of
Tonix Sub and Krele. From and after the Closing Date of the Share Exchange, our primary operations consist of the business and
operations of Tonix Sub and Krele.
On October 11, 2011,
we changed our name to Tonix Pharmaceuticals Holding Corp. to reflect our new business.
Corporate Background
In 1996, Seth Lederman,
MD, and Donald Landry, MD, PhD, formed L&L Technologies, LLC, ("L&L"), to develop medications for central nervous
system ("CNS") conditions. Dr. Lederman is our Chairman and Chief Executive Officer and Dr. Landry is a Director. L&L
was a founder of Janus Pharmaceuticals, Inc., later renamed Vela Pharmaceuticals, Inc., ("Vela"), which developed various
therapeutics, including a very low dose, or VLD, version of cyclobenzaprine, or CBP, under an agreement with L&L. Vela decided
to focus its resources on other programs and transferred the rights in VLD CBP and certain other technologies to L&L in March
2006.
2
Tonix Sub formed in
June 2007 as Krele Pharmaceuticals, Inc. by L&L and Krele Pharmaceuticals, LLC (now known as Plumbline LLC) ("Plumbline").
Dr. Lederman is managing partner of Plumbline. Plumbline possessed rights to certain technology for the treatment of alcohol dependence
and abuse. In connection with founding Tonix Sub, L&L and Plumbline entered into an intellectual property transfer and assignment
agreement with Tonix Sub for the purpose of assigning patents and transferring intellectual property and know-how in exchange for
shares of common stock of Tonix Sub. As a result of economic conditions related to the financial crisis of 2007 and 2008, Tonix
Sub was not successful in raising money to fund its programs until 2009. As a result, Tonix Sub was unable to advance the development
programs and had little activity except for prosecuting and maintaining patents and maintaining contracts.
In 2009, Tonix Sub
contracted with the Toronto Psychiatric Research Foundation to analyze the sleep data from the 2001 Phase 2a study of 36 patients
with fibromyalgia syndrome, or FM (the "Moldofsky Study"), who were treated with bedtime VLD CBP or placebo. The Moldofsky
Study was conducted in Canada by the Toronto Psychiatric Research Foundation, and Tonix Sub obtained the data from this study from
L&L. In addition, in 2009, Tonix Sub contracted with Caliper Life Sciences (formerly, NovaScreen Bioscience Corp.) ("Caliper")
to analyze the interactions of CBP with certain receptors. In June 2010, Tonix Sub entered into consulting agreements with L&L
and Lederman & Co, LLC ("Lederman & Co") and also acquired certain rights to develop isometheptene mucate as
a treatment for certain types of headaches from Lederman & Co., which we are developing as TNX-201. Dr. Lederman is managing
partner of Lederman & Co. Between June 2010 and October 2011, Tonix Sub was active in recruiting new officers and directors
and initiating preclinical and clinical development of novel CBP formulations.
Lederman & Co predominantly
provides us with clinical development expertise. L&L predominantly provided us with scientific development expertise until
the termination of the consulting agreement in June 2012. Relative to traditional pharmaceutical development companies, we can
be considered a virtual company, since we contract with third-party vendors to provide many functions that are core to traditional
pharmaceutical companies. For example, we have contracted with PharmaNet Canada, Inc., or PharmaNet Canada, to develop methods
for analyzing CBP in the blood and to conduct human clinical studies to evaluate the performance of our formulation technology.
Lederman & Co is responsible for overseeing the scientific and technical aspects of PharmaNet's contract work product.
In July 2010, Tonix
Sub changed its name to Tonix Pharmaceuticals, Inc. In August 2010, Tonix Sub formed Krele.
Business Overview
We are a specialty
pharmaceutical company focused on developing novel pharmaceutical products for challenging disorders of the CNS. We search for
potential therapeutic solutions among known pharmaceutical agents that lack regulatory approval for the indications we seek, but
may be approved for use in other indications. The ongoing evolution in the understanding of certain CNS disorders provides us with
opportunities to develop such agents as proprietary products for new indications. We typically seek to create new dose and formulation
options that are tailored to the therapeutic uses to which we apply these agents.
Many CNS drugs have
been identified by physicians who observe unexpected improvements in their patients' CNS conditions despite being prescribed
for a different purpose. One of our goals is to establish formal clinical study programs to determine if such anecdotal observations
are, in fact, reflections of a compound's ability to treat a particular CNS condition. While some new applications can use
the commercially-available form of a given drug, in other cases, reformulating the active ingredient may improve the active ingredient's
safety or effectiveness in treating the condition. If we demonstrate success in our formal development programs, we will seek marketing
approval from the U.S. Food and Drug Administration, or FDA.
3
We are currently devoting
the majority of our efforts to the development of our lead product candidate, TNX-102 sublingual tablet, or TNX-102 SL. TNX-102
SL is a novel dose and formulation of CBP, the active pharmaceutical ingredient of two widely prescribed muscle relaxant products,
Flexeril® and Amrix®. TNX-102 SL is distinct from these products as it is being developed at a dose level significantly
below the lowest marketed doses of Flexeril and Amrix. TNX-102 SL is also distinct from these products with regard to its route
of administration, as it is designed to be placed under the tongue and disintegrated to provide sublingual absorption, whereas
Flexeril and Amrix are designed to be swallowed. TNX-102 SL is also intended for chronic use, whereas Flexeril and Amrix are marketed
for two to three weeks of use. We are currently developing TNX-102 SL for the treatment of FM under a U.S. Investigational New
Drug application, or IND, and under three Clinical Trial Applications, or CTAs, filed in Canada. We are also developing TNX-102
SL for the treatment of post-traumatic stress disorder, or PTSD, for which we held a pre-IND meeting in October 2012. We expect
that any applications we submit for FDA approval of TNX-102 SL will be submitted under Section 505(b)(2) of the Federal Food, Drug,
and Cosmetic Act, or FDCA, which we believe will allow for a shorter timeline of clinical development as compared to that needed
to fulfill the requirements of Section 505(b)(1), under which new chemical entities, or NCEs, are generally reviewed.
TNX-102 SL is a small,
rapidly disintegrating tablet containing CBP for sublingual administration at bedtime. We designed TNX-102 SL to enable the efficient
delivery of CBP to the systemic circulation via sublingual transmucosal absorption and to avoid first-pass liver metabolism. We
also designed TNX-102 SL to provide CBP at doses lower than those currently available. We have conducted several clinical and pre-clinical
pharmacokinetic studies of TNX-102 SL which we believe support its development as a novel therapeutic product for FM and PTSD,
and which demonstrate a number of potentially advantageous characteristics as compared to current CBP-containing products, none
of which are approved for these indications. Based on our Phase 1 comparative study, we have observed that, as compared to oral
CBP tablets, TNX-102 SL results in faster systemic absorption and significantly higher plasma levels of CBP in the first hour following
administration. TNX-102 SL was generally well-tolerated, with no serious adverse events reported in this study. Some subjects experienced
transient numbness on the tongue after TNX-102 SL administration, and other side-effects reported were similar to those associated
with current CBP products.
Based on these promising
results, we are advancing TNX-102 SL for the management of FM. We believe that TNX-102 SL could be approved by the FDA for the
treatment of FM following two adequate, well-controlled safety and efficacy studies and, if required, a long-term safety exposure
study that, together, would confirm the safety and efficacy of TNX-102 SL in a sufficient number of FM patients to satisfy the
approval requirements under Section 505(b)(2). New drug products based on novel active ingredients, approved under Section 505(b)(1),
need significantly more clinical studies, e.g. drug-drug interaction, special population pharmacokinetic, and long-term safety
exposure studies, than will be required for TNX-102 SL. Under the IND, we plan to initiate a potential pivotal efficacy trial in
the first half of 2013 that will evaluate this candidate in FM. A Type B Pre-Phase 3 meeting has been scheduled with the FDA in
February 2013, at which we plan to discuss the design of the clinical program, including the acceptability of the pivotal study
design and the proposed registration plan, to support the approval of TNX-102 SL for the management of FM.
We are also advancing
TNX-102 SL for the management of PTSD. We held a pre-IND meeting with the FDA in October 2012, and we plan to file an IND for this
indication in the first half of 2013. We then plan to conduct a clinical proof-of-concept trial of TNX-102 SL in PTSD in the second
half of 2013.
CBP is the active pharmaceutical
ingredient in our lead product candidate, TNX-102 SL. We are utilizing drug delivery technology to produce new formulations. In
addition to CBP, TNX-102 SL contains inactive ingredients, called excipients, which are well-characterized, are listed in the FDA
Inactive Ingredients Guide (IIG), and are approved for pharmaceutical use. As a result, we anticipate seeking FDA marketing approval
of TNX-102 SL through the NDA process under Section 505(b)(2) of the FDCA, which we also refer to as a 505(b)(2) NDA. As one of
three types of new drug applications, the 505(b)(2) NDA allows drug companies to obtain FDA approval of new drug products without
having to conduct the full complement of safety and efficacy trials, which is often the most time-consuming and expensive part
of the drug development process. As the 505(b)(2) NDA permits the drug manufacturer to rely on the agency's findings for
a previously-approved drug, published literature, or both, it permits the FDA to make some safety and effectiveness determinations
through the review of materials in the public domain or in already approved NDAs of products containing CBP. The 505(b)(2) regulatory
pathway would spare us some of the burden of generating all of this data for ourselves and may allow TNX-102 SL to progress through
a shorter development pathway than is typical for pharmaceutical products based on novel active ingredients. We have not filed
an NDA for TNX-102 SL for any indications.
4
In addition to TNX-102
SL, we have developed other innovative formulations of CBP, including TNX-102 promicellar gelatin capsule, or TNX-102 gelcap. We
have developed TNX-102 gelcap under an agreement with Lipocine, Inc. ("Lipocine"), a contract formulation developer
and small-scale manufacturer. Although we had met with the FDA to discuss the TNX-102 gelcap development program in August 2011
and we have generated clinical data that support the further development of TNX-102 gelcap, we currently do not plan to advance
this candidate.
We also have a pipeline
of other product candidates, including TNX-201 and TNX-301. TNX-201 is based on isometheptene mucate and is under development as
a treatment for certain types of headaches. For competitive reasons, we do not disclose the identities of the active ingredients
or targeted indications in our pipeline until a U.S. patent has been allowed or issued. Consistent with our mission, these product
candidates are or likely will be reformulations of active ingredients that have been used in humans in other products and that
are designed for new CNS therapeutic indications.
In other cases, the
products will be formulated to match earlier, or predicate, products closely enough to be considered generic copies or similarly
enough to other marketed products to rely (in part) on their regulatory review and approval, as well as available published data.
The predicate product may be approved by the FDA under an NDA or may have been reviewed for safety and effectiveness by the National
Academy of Sciences under the Drug Efficacy Study Implementation, or DESI, program, in which case they would be considered by FDA
to be "unapproved products". For DESI products, it is our intent to develop NDA versions to meet the current Good Manufacturing
Practice, or cGMP, and the International Conference on Harmonization, or ICH, requirements to seek approval under the 505(b)(2)
regulatory pathway.
Because of our size
and being in the development stage, we do not currently devote a significant amount of time or resources towards our other pipeline
candidates. We anticipate that sometime in 2013 we will begin developing formulations for TNX-201 and possibly TNX-301, but do
not expect to start clinical trials until 2014 at the earliest.
The process of taking
a new drug formulation from concept through testing to approval for a new indication by the FDA is a time-consuming, costly and
a high-risk process. Once a drug formulation has been tested in laboratories, we need to conduct clinical trials of the product
candidate to test its uptake into the blood stream, elimination, effectiveness and safety. Neither laboratory nor animal studies
predict the properties of drugs in humans, so designing new formulations can result in a large number of unexpected outcomes. The
first set of clinical trials, which are sometimes referred to as Phase 1 studies, are performed by administering new drug formulations
to a limited number of healthy human volunteers and are designed to test the initial concept of the drug formulation and to determine
the correct dosage to be tested subsequently on patients affected with the target disorder. The initial Phase 1 studies can take
up to a year to complete, however, since we reformulate versions of approved drugs for new uses, we may need to devote less time
to Phase I studies since our testing is informed by significant prior human research that we believe allows us to reduce the possible
safety-related outcomes. The next step in the process is to conduct a proof-of-concept efficacy study to identify the effective
dose(s). A small Phase 2a efficacy study in the representative patient population will be done either using a pilot formulation
or the formulation selected for further development. A larger study in which the selected formulation has been optimized for the
target population can be referred to as a Phase 2b study. If the results of this study are positive and are accepted by the FDA
as fulfilling the requirements of a registrational study, then it may be considered to be one of the two pivotal, or Phase 3, studies
typically required for drug approval. The first pivotal study for a condition like FM typically takes a year to complete and then
two to three months to interpret the data, but we believe we will be able to conduct our first potential pivotal study of TNX-102
SL in less time due to the nature of the trial design. If the first potential pivotal study suggests the drug is safe and effective,
then a second pivotal study, sometimes referred to as a confirmatory study, is conducted. The second pivotal study in FM typically
takes 18 months to complete if no additional long-term safety exposure data are necessary for an NDA filing. After the second pivotal
study is completed, and if the results are deemed a success, we would submit an NDA to the FDA seeking approval of the new drug
product. We believe it would take approximately six months to prepare and file the NDA and another 14 months for FDA approval.
The drug could be marketed shortly after FDA approval. Therefore, it typically takes more than five years to bring a new formulation
of a drug to market for a new indication, and any delays in the process, such as lack of capital necessary to run clinical trials,
unexpected results, adverse effects, or difficulty in recruiting willing subjects for trials, would result in additional time before
a drug could be approved for marketing.
5
In August 2010, we
formed Krele to commercialize products that are generic versions of predicate NDA products. We anticipate that when our branded
products lose patent protection, Krele may market authorized generic versions of them. Krele also may develop or acquire generic
products approved under FDA abbreviated new drug applciations, or ANDAs, and we may market branded versions (branded generics)
of such products. Krele has been issued a state license in New York.
The Offering
Common stock offered by the selling stockholders
Up to 17,808,334 shares of common stock, including the
        following:
-	     8,904,167
        shares of common stock, and
-	     up
        to 8,904,167 shares of common stock issuable upon the exercise of class A common stock purchase warrants at an exercise price of
        $0.60 per share (includes a good faith estimate of the shares underlying warrants to account for antidilution protection adjustments).
Common stock to be outstanding after the offering
Up to 52,086,766 shares.
Use of proceeds
We will not receive any proceeds from the sale of the common stock. However, we will receive the exercise price of any common stock we sell to the selling stockholder upon exercise of the Class A Warrants. The Class A Warrants entitle the holder to exercise their warrants on a cashless basis under certain conditions. In the event that any selling stockholder exercises their Class A Warrants on a cashless basis, then we will not receive any proceeds from the exercise of those warrants. We expect to use the proceeds received from the exercise of the Class A Warrants, if any, for general working capital purposes.
OTCQB symbol
TNXP
The above information
regarding common stock to be outstanding after the offering is based on
43,182,599
shares of
common stock outstanding as of January 22, 2013 and includes the 8,904,167 shares of common stock that are issuable upon the exercise
of warrants that are registered pursuant to the registration statement that this prospectus is part of but does not include any
shares of common stock issuable upon exercise of other outstanding warrants or options.
The following is a
summary of the transactions relating to the securities being registered hereunder.
December 2012 Private Placement
In December 2012, we
issued an aggregate of 8,904,167 units ("Units") to certain accredited investors (the "Purchasers") for
aggregate cash proceeds of $2,615,000, at a price per Unit of $0.40, and the exchange of $710,000 in previously issued convertible
debentures (the "Prior Debentures") of the Company that were converted into Units at a price of $0.30 per Unit (the
"December 2012 Financing").
Each Unit consisted
of one share of our common stock, $0.001 par value (the "Common Stock"), a Class A Warrant to purchase one share of
Common Stock (the "Class A Warrants"), and a Class B Warrant to purchase one share of Common Stock (the "Class
B Warrants" and together with the Class A Warrants, the "Warrants").The Class A Warrants have an exercise price
of $0.60 per share of Common Stock and will be exercisable for a period of five years from the date of issuance. The Class A Warrants
may be exercised on a cashless basis under certain circumstances. The Class B Warrants have an exercise price of $0.40 per share
of Common Stock and will be exercisable for a period of one year from the date of issuance.
6
In connection with
the December 2012 Financing, we granted each Purchaser registration rights.  We are obligated to use our best efforts
to cause a registration statement registering for resale the Common Stock included in the Units and the Common Stock underlying
the Class A Warrants to be filed no later than 60 days from the date of the last closing of the December 2012 Financing and must
be declared effective no later than 120 days from the date of the last closing of the December 2012 Financing.  Moreover,
we will maintain the effectiveness of the registration statement from its effective date unless all securities registered under
the registration statement have been sold or are otherwise able to be sold pursuant to Rule 144 of the Securities Act of 1933,
as amended (the "Securities Act").  If we fail to comply with the registration statement filing or effective
date requirements, we are required to pay the investors a fee equal to 1.0% of the Purchaser's investment, for each 30-day
period of delay, subject to a maximum payment of 10% to each Purchaser.
In connection with
the December 2012 Financing, we paid Kema Partners LLC, a FINRA registered broker-dealer ("Kema Partners") a cash payment
of $70,000, which represented a 7% commission of the gross proceeds delivered by Purchasers introduced by Kema Partners in the
December 2012 Financing.
The shares included
in the Units and shares underlying the Class A Warrants are registered pursuant to this prospectus.
Plan of Distribution
This offering is not
being underwritten. The selling stockholders will sell their shares of our common stock at prevailing market prices or privately
negotiated prices. The selling stockholders themselves directly, or through their agents, or through their brokers or dealers,
may sell their shares from time to time, in (i) privately negotiated transactions, (ii) in one or more transactions,
including block transactions in accordance with the applicable rules of the OTCQB or (iii) otherwise in accordance with the
section of this prospectus entitled "Plan of Distribution." To the extent required, the specific shares to be
sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agent,
broker or dealer and any applicable commission or discounts with respect to a particular offer will be described in an accompanying
prospectus supplement. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144
may be sold under Rule 144 rather than pursuant to this prospectus.
For additional information
on the methods of sale, you should refer to the section of this prospectus entitled "Plan of Distribution," beginning
on page 76.
7
RISK FACTORS
This investment has
a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other
information in this prospectus. If any of the following risks actually occur, our business, operating results and financial condition
could be harmed and the value of our stock could go down. This means you could lose all or a part of your investment.
RISKS RELATED TO OUR BUSINESS
We have a history of operating losses
and expect to incur losses for the foreseeable future. We may never generate revenues or, if we are able to generate revenues,
achieve profitability.
We are focused on product
development, and we have not generated any revenues to date. We have incurred losses in each year of our operations, and we expect
to continue to incur operating losses for the foreseeable future. These operating losses have adversely affected and are likely
to continue to adversely affect our working capital, total assets and shareholders' equity.
The Company and its
prospects should be examined in light of the risks and difficulties frequently encountered by new and early stage companies in
new and rapidly evolving markets. These risks include, among other things, the speed at which we can scale up operations, our complete
dependence upon development of products that currently have no market acceptance, our ability to establish and expand our brand
name, our ability to expand our operations to meet the commercial demand of our clients, our development of and reliance on strategic
and customer relationships and our ability to minimize fraud and other security risks.
The process of developing
our products requires significant clinical, development and laboratory testing and clinical trials. In addition, commercialization
of our product candidates will require that we obtain necessary regulatory approvals and establish sales, marketing and manufacturing
capabilities, either through internal hiring or through contractual relationships with others. We expect to incur substantial losses
for the foreseeable future as a result of anticipated increases in our research and development costs, including costs associated
with conducting preclinical testing and clinical trials, and regulatory compliance activities.
Our ability to generate
revenues and achieve profitability will depend on numerous factors, including success in:
·
developing and testing product candidates;
·
receiving regulatory approvals;
·
commercializing our products; and
·
establishing a favorable competitive position.
Many of these factors
will depend on circumstances beyond our control. We cannot assure you that we will ever have a product approved by the FDA, that
we will bring any product to market or, if we are successful in doing so, that we will ever become profitable.
We expect to incur
substantial additional operating expenses over the next several years as our research, development, pre-clinical testing, and clinical
trial activities increase. The amount of future losses and when, if ever, we will achieve profitability are uncertain. We have
no products that have generated any commercial revenue, do not expect to generate revenues from the commercial sale of products
in the near future, and might never generate revenues from the sale of products. Our ability to generate revenue and achieve profitability
will depend on, among other things, successful completion of the development of our product candidates; obtaining necessary regulatory
approvals from the FDA; establishing manufacturing, sales, and marketing arrangements with third parties; and raising sufficient
funds to finance our activities. We might not succeed at any of these undertakings. If we are unsuccessful at some or all of these
undertakings, our business, prospects, and results of operations may be materially adversely affected.
8
We received a report from our independent
registered public accounting firm with an explanatory paragraph for the year ended December 31, 2011 with respect to our ability
to continue as a going concern.  The existence of such a report may adversely affect our stock price and our ability
to raise capital.  There is no assurance that we will not receive a similar report for our year ended December 31, 2012.
In their report dated
March 30, 2012, our independent registered public accounting firm expressed substantial doubt about our ability to continue as
a going concern as we have incurred losses since inception of development stage, have a negative cash flow from operations and
have working capital and stockholders' deficiencies and require additional financing to fund future operations. Our ability
to continue as a going concern is subject to our ability to obtain necessary funding from outside sources, including obtaining
additional funding from the sale of our securities, obtaining loans and grants from various financial institutions where possible.
Our continued net operating losses increase the difficulty in meeting such goals and there can be no assurances that such methods
will prove successful.
We have no approved products on the
market and therefore do not expect to generate any revenues from product sales in the foreseeable future, if at all.
To date, we have no
approved product on the market and have generated no product revenues. We have funded our operations primarily from sales of our
securities. We have not received, and do not expect to receive for at least the next several years, if at all, any revenues from
the commercialization of our product candidates. To obtain revenues from sales of our product candidates, we must succeed, either
alone or with third parties, in developing, obtaining regulatory approval for, manufacturing and marketing drugs with commercial
potential. We may never succeed in these activities, and we may not generate sufficient revenues to continue our business operations
or achieve profitability.
We are largely dependent on the success
of our lead product candidate, TNX-102 SL, and we cannot be certain that this product candidate will receive regulatory approval
or be successfully commercialized.
We currently have no
products for sale, and we cannot guarantee that we will ever have any drug products approved for sale. We and our product candidates
are subject to extensive regulation by the FDA and comparable regulatory authorities in other countries governing, among other
things, research, testing, clinical trials, manufacturing, labeling, promotion, selling, adverse event reporting and recordkeeping.
We are not permitted to market any of our product candidates in the United States until we receive approval of an NDA for a product
candidate from the FDA or the equivalent approval from a foreign regulatory authority. Obtaining FDA approval is a lengthy, expensive
and uncertain process. We currently have one lead product candidate, TNX-102 SL for the treatment of FM, and the success of our
business currently depends on its successful development, approval and commercialization. Any projected sales or future revenue
predictions are predicated upon FDA approval and market acceptance of TNX-102 SL. If projected sales do not materialize for any
reason, it would have a material adverse effect on our business and our ability to continue operations.
TNX-102 SL has not
completed the clinical development process; therefore, we have not yet submitted an NDA or foreign equivalent or received marketing
approval for this product candidate anywhere in the world. The clinical development program for TNX-102 SL may not lead to commercial
products for a number of reasons, including if we fail to obtain necessary approvals from the FDA or foreign regulatory authorities
because our clinical trials fail to demonstrate to their satisfaction that this product candidate is safe and effective or the
clinical program may be put on hold due to unexpected safety issues with marketed CBP products. We may also fail to obtain the
necessary approvals if we have inadequate financial or other resources to advance our product candidates through the clinical trial
process. Any failure or delay in completing clinical trials or obtaining regulatory approval for TNX-102 SL in a timely manner
would have a material adverse impact on our business and our stock price.
We need additional capital. If additional
capital is not available or is available at unattractive terms, we may be forced to delay, reduce the scope of or eliminate our
research and development programs, reduce our commercialization efforts or curtail our operations.
In order to develop
and bring our product candidates to market, we must commit substantial resources to costly and time-consuming research, preclinical
and clinical trials and marketing activities. We anticipate that our existing cash and cash equivalents will enable us to maintain
our current operations for at least the next six months, and we anticipate that we will require additional capital to complete
the planned pivotal trial of TNX-102 SL in FM. We anticipate using our cash and cash equivalents to fund further research and development
with respect to our lead product candidates. We may, however, need to raise additional funding sooner if our business or operations
change in a manner that consumes available resources more rapidly than we anticipate. Our requirements for additional capital will
depend on many factors, including:
9
·
successful commercialization of our product candidates;
·
the time and costs involved in obtaining regulatory approval for our product candidates;
·
costs associated with protecting our intellectual property rights;
·
development of marketing and sales capabilities;
·
payments received under future collaborative agreements, if any; and
·
market acceptance of our products.
To the extent we raise
additional capital through the sale of equity securities, the issuance of those securities could result in dilution to our shareholders.
In addition, if we obtain debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal
and interest on such indebtedness, thus limiting funds available for our business activities. If adequate funds are not available,
we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization
efforts or curtail our operations. In addition, we may be required to obtain funds through arrangements with collaborative partners
or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek
to develop or commercialize ourselves or license rights to technologies, product candidates or products on terms that are less
favorable to us than might otherwise be available.
We will require substantial
additional funds to support our research and development activities, and the anticipated costs of preclinical studies and clinical
trials, regulatory approvals and eventual commercialization. Such additional sources of financing may not be available on favorable
terms, if at all. If we do not succeed in raising additional funds on acceptable terms, we may be unable to initiate clinical trials
or obtain approval of any product candidates from the FDA and other regulatory authorities. In addition, we could be forced to
discontinue product development, forego sales and marketing efforts and forego attractive business opportunities. Any additional
sources of financing will likely involve the issuance of our equity securities, which will have a dilutive effect on our stockholders.
There is no assurance
that we will be successful in raising the additional funds needed to fund our business plan. If we are not able to raise sufficient
capital in the near future, our continued operations will be in jeopardy and we may be forced to cease operations and sell or otherwise
transfer all or substantially all of our remaining assets.
We face intense competition in the
markets targeted by our lead product candidates. Many of our competitors have substantially greater resources than we do, and we
expect that all of our product candidates under development will face intense competition from existing or future drugs.
We expect that all
of our product candidates under development, if approved, will face intense competition from existing and future drugs marketed
by large companies. These competitors may successfully market products that compete with our products, successfully identify drug
candidates or develop products earlier than we do, or develop products that are more effective, have fewer side effects or cost
less than our products.
Additionally, if a
competitor receives FDA approval before we do for a drug that is similar to one of our product candidates, FDA approval for our
product candidate may be precluded or delayed due to periods of non-patent exclusivity and/or the listing with the FDA by the competitor
of patents covering its newly-approved drug product. Periods of non-patent exclusivity for new versions of existing drugs such
as our current product candidates can extend up to three and one-half years. See "Business—Government Regulation."
These competitive factors
could require us to conduct substantial new research and development activities to establish new product targets, which would be
costly and time consuming. These activities would adversely affect our ability to commercialize products and achieve revenue and
profits.
10
Competition and technological change
may make our product candidates and technologies less attractive or obsolete.
We compete with established
pharmaceutical and biotechnology companies that are pursuing other forms of treatment for the same indications we are pursuing
and that have greater financial and other resources. Other companies may succeed in developing products earlier than us, obtaining
FDA approval for products more rapidly, or developing products that are more effective than our product candidates. Research and
development by others may render our technology or product candidates obsolete or noncompetitive, or result in treatments or cures
superior to any therapy we develop. We face competition from companies that internally develop competing technology or acquire
competing technology from universities and other research institutions. As these companies develop their technologies, they may
develop competitive positions that may prevent, make futile, or limit our product commercialization efforts, which would result
in a decrease in the revenue we would be able to derive from the sale of any products.
There can be no assurance
that any of our product candidates will be accepted by the marketplace as readily as these or other competing treatments. Furthermore,
if our competitors' products are approved before ours, it could be more difficult for us to obtain approval from the FDA. Even
if our products are successfully developed and approved for use by all governing regulatory bodies, there can be no assurance that
physicians and patients will accept our product(s) as a treatment of choice.
Furthermore, the pharmaceutical
research industry is diverse, complex, and rapidly changing. By its nature, the business risks associated therewith are numerous
and significant. The effects of competition, intellectual property disputes, market acceptance, and FDA regulations preclude us
from forecasting revenues or income with certainty or even confidence.
If we fail to protect our intellectual
property rights, our ability to pursue the development of our technologies and products would be negatively affected.
Our success will depend
in part on our ability to obtain patents and maintain adequate protection of our technologies and products. If we do not adequately
protect our intellectual property, competitors may be able to use our technologies to produce and market drugs in direct competition
with us and erode our competitive advantage. Some foreign countries lack rules and methods for defending intellectual property
rights and do not protect proprietary rights to the same extent as the United States. Many companies have had difficulty protecting
their proprietary rights in these foreign countries. We may not be able to prevent misappropriation of our proprietary rights.
We have received, and
are currently seeking, patent protection for numerous compounds and methods of treating diseases. However, the patent process is
subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting our products
by obtaining and defending patents. These risks and uncertainties include the following: patents that may be issued or licensed
may be challenged, invalidated, or circumvented, or otherwise may not provide any competitive advantage; our competitors, many
of which have substantially greater resources than us and many of which have made significant investments in competing technologies,
may seek, or may already have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell
our potential products either in the United States or in international markets; there may be significant pressure on the United
States government and other international governmental bodies to limit the scope of patent protection both inside and outside the
United States for treatments that prove successful as a matter of public policy regarding worldwide health concerns; countries
other than the United States may have less restrictive patent laws than those upheld by United States courts, allowing foreign
competitors the ability to exploit these laws to create, develop, and market competing products.
Moreover, any patents
issued to us may not provide us with meaningful protection, or others may challenge, circumvent or narrow our patents. Third parties
may also independently develop products similar to our products, duplicate our unpatented products or design around any patents
on products we develop. Additionally, extensive time is required for development, testing and regulatory review of a potential
product. While extensions of patent term due to regulatory delays may be available, it is possible that, before any of our product
candidates can be commercialized, any related patent, even with an extension, may expire or remain in force for only a short period
following commercialization, thereby reducing any advantages of the patent.
11
In addition, the United
States Patent and Trademark Office (the "PTO") and patent offices in other jurisdictions have often required that patent
applications concerning pharmaceutical and/or biotechnology-related inventions be limited or narrowed substantially to cover only
the specific innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges.
Thus, even if we or our licensors are able to obtain patents, the patents may be substantially narrower than anticipated.
Our success depends
on our patents, patent applications that may be licensed exclusively to us and other patents to which we may obtain assignment
or licenses. We may not be aware, however, of all patents, published applications or published literature that may affect our business
either by blocking our ability to commercialize our product candidates, by preventing the patentability of our product candidates
to us or our licensors, or by covering the same or similar technologies that may invalidate our patents, limit the scope of our
future patent claims or adversely affect our ability to market our product candidates.
In addition to patents,
we rely on a combination of trade secrets, confidentiality, nondisclosure and other contractual provisions, and security measures
to protect our confidential and proprietary information. These measures may not adequately protect our trade secrets or other proprietary
information. If they do not adequately protect our rights, third parties could use our technology, and we could lose any competitive
advantage we may have. In addition, others may independently develop similar proprietary information or techniques or otherwise
gain access to our trade secrets, which could impair any competitive advantage we may have.
Patent protection and
other intellectual property protection is crucial to the success of our business and prospects, and there is a substantial risk
that such protections will prove inadequate.
We may be involved in lawsuits to
protect or enforce our patents, which could be expensive and time consuming.
The pharmaceutical
industry has been characterized by extensive litigation regarding patents and other intellectual property rights, and companies
have employed intellectual property litigation to gain a competitive advantage. We may become subject to infringement claims or
litigation arising out of patents and pending applications of our competitors, or additional interference proceedings declared
by the PTO to determine the priority of inventions. The defense and prosecution of intellectual property suits, PTO proceedings,
and related legal and administrative proceedings are costly and time-consuming to pursue, and their outcome is uncertain. Litigation
may be necessary to enforce our issued patents, to protect our trade secrets and know-how, or to determine the enforceability,
scope, and validity of the proprietary rights of others. An adverse determination in litigation or interference proceedings to
which we may become a party could subject us to significant liabilities, require us to obtain licenses from third parties, or restrict
or prevent us from selling our products in certain markets. Although patent and intellectual property disputes might be settled
through licensing or similar arrangements, the costs associated with such arrangements may be substantial and could include our
paying large fixed payments and ongoing royalties. Furthermore, the necessary licenses may not be available on satisfactory terms
or at all.
Competitors may infringe
our patents, and we may file infringement claims to counter infringement or unauthorized use. This can be expensive, particularly
for a company of our size, and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of
ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds
that our patents do not cover its technology. An adverse determination of any litigation or defense proceedings could put one or
more of our patents at risk of being invalidated or interpreted narrowly.
Also, a third party
may assert that our patents are invalid and/or unenforceable. There are no unresolved communications, allegations, complaints or
threats of litigation related to the possibility that our patents are invalid or unenforceable. Any litigation or claims against
us, whether or not merited, may result in substantial costs, place a significant strain on our financial resources, divert the
attention of management and harm our reputation. An adverse decision in litigation could result in inadequate protection for our
product candidates and/or reduce the value of any license agreements we have with third parties.
12
Interference proceedings
brought before the U.S. Patent and Trademark Office may be necessary to determine priority of invention with respect to our patents
or patent applications. During an interference proceeding, it may be determined that we do not have priority of invention for one
or more aspects in our patents or patent applications and could result in the invalidation in part or whole of a patent or could
put a patent application at risk of not issuing. Even if successful, an interference proceeding may result in substantial costs
and distraction to our management.
Furthermore, because
of the substantial amount of discovery required in connection with intellectual property litigation or interference proceedings,
there is a risk that some of our confidential information could be compromised by disclosure. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments. If investors perceive these results
to be negative, the price of our common stock could be adversely affected.
If we infringe the rights of third
parties we could be prevented from selling products, forced to pay damages, and defend against litigation.
If our products, methods,
processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and we may
have to: obtain licenses, which may not be available on commercially reasonable terms, if at all; abandon an infringing product
candidate; redesign our products or processes to avoid infringement; stop using the subject matter claimed in the patents held
by others; pay damages; and/or defend litigation or administrative proceedings which may be costly whether we win or lose, and
which could result in a substantial diversion of our financial and management resources.
If preclinical testing or clinical
trials for our product candidates are unsuccessful or delayed, we will be unable to meet our anticipated development and commercialization
timelines.
We rely and expect
to continue to rely on third parties, including clinical research organizations and outside consultants, to conduct, supervise
or monitor some or all aspects of preclinical testing or clinical trials involving our product candidates. We have less control
over the timing and other aspects of these preclinical testing or clinical trials than if we performed the monitoring and supervision
entirely on our own. Third parties may not perform their responsibilities for our preclinical testing or clinical trials on our
anticipated schedule or, for clinical trials, consistent with a clinical trial protocol. Delays in preclinical and clinical testing
could significantly increase our product development costs and delay product commercialization. In addition, many of the factors
that may cause, or lead to, a delay in the clinical trials may also ultimately lead to denial of regulatory approval of a product
candidate.
The commencement of
clinical trials can be delayed for a variety of reasons, including delays in:
·
demonstrating sufficient safety and efficacy to obtain regulatory approval to commence a clinical trial;
·
reaching agreement on acceptable terms with prospective contract research organizations and trial sites;
·
manufacturing sufficient quantities of a product candidate; and
·
obtaining institutional review board approval to conduct a clinical trial at a prospective site.
Once a clinical trial
has begun, it may be delayed, suspended or terminated by us or the FDA or other regulatory authorities due to a number of factors,
including:
·
ongoing discussions with the FDA or other regulatory authorities regarding the scope or design of our clinical trials;
·
failure to conduct clinical trials in accordance with regulatory requirements;
·
lower than anticipated recruitment or retention rate of patients in clinical trials;
·
inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
·
lack of adequate funding to continue clinical trials;
·
negative results of clinical trials; or
·
side-effects of CBP.
13
If clinical trials
are unsuccessful, and we are not able to obtain regulatory approvals for our product candidates under development, we will not
be able to commercialize these products, and therefore may not be able to generate sufficient revenues to support our business.
If we are unable to file for approval
under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act or if we are required to generate additional data related to
safety and efficacy in order to obtain approval under Section 505(b)(2), we may be unable to meet our anticipated development and
commercialization timelines.
Our current plans for
filing NDAs for our product candidates include efforts to minimize the data we will be required to generate in order to obtain
marketing approval for our product candidates and therefore possibly obtain a shortened review period for the applications. While
we met with the FDA at a pre-IND meeting in August 2011 to discuss initial plans for the future development of TNX-102 gelcap,
we have not yet met with the FDA to discuss the future development of our lead product candidate, TNX-102 SL, although a meeting
is scheduled in February 2013. We have also not yet come to full agreement with the FDA as to the nature or extent of any studies
we may be required to conduct in order to achieve approval for any of our product candidates. The timeline for filing and review
of our NDAs is based on our plan to submit those NDAs under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, wherein
we will rely in part on data in the public domain or elsewhere. We have not yet filed an NDA under Section 505(b)(2) for any of
our lead product candidates. Depending on the data that may be required by the FDA for approval, some of the data may be related
to products already approved by the FDA. If the data relied upon is related to products already approved by the FDA and covered
by third-party patents we would be required to certify that we do not infringe the listed patents or that such patents are invalid
or unenforceable. As a result of the certification, the third-party would have 45 days from notification of our certification to
initiate an action against us. In the event that an action is brought in response to such a certification, the approval of our
NDA could be subject to a stay of up to 30 months or more while we defend against such a suit. Approval of our product candidates
under Section 505(b)(2) may therefore be delayed until patent exclusivity expires or until we successfully challenge the applicability
of those patents to our product candidates. Alternatively, we may elect to generate sufficient additional clinical data so that
we no longer rely on data which triggers a potential stay of the approval of our product candidates. Even if no exclusivity periods
apply to our applications under Section 505(b)(2), the FDA has broad discretion to require us to generate additional data on the
safety and efficacy of our product candidates to supplement third-party data on which we may be permitted to rely. In either event,
we could be required, before obtaining marketing approval for any of our product candidates, to conduct substantial new research
and development activities beyond those we currently plan to engage in order to obtain approval of our product candidates. Such
additional new research and development activities would be costly and time consuming.
We may not be able
to obtain shortened review of our applications, and the FDA may not agree that our products qualify for marketing approval. If
CBP-containing products are withdrawn from the market by the FDA for any reason, we may not be able to reference such products
to support a 505(b)(2) NDA for TNX-102 SL, and we may need to fulfill the more extensive requirements of Section 505(b)(1). If
we are required to generate additional data to support approval, we may be unable to meet our anticipated development and commercialization
timelines, may be unable to generate the additional data at a reasonable cost, or at all, and may be unable to obtain marketing
approval of our product candidates.
Our executive officers and other
key personnel are critical to our business, and our future success depends on our ability to retain them.
Our success depends
to a significant extent upon the continued services of Dr. Seth Lederman, our President and Chief Executive Officer. Dr. Lederman
has overseen Tonix Sub since inception and provides leadership for our growth and operations strategy as well as being an inventor
on many of our patents. Loss of the services of Dr. Lederman would have a material adverse effect on our growth, revenues, and
prospective business. We have key-man insurance on the life of Dr. Lederman. We are also highly dependent on the other principal
members of our management and scientific team. We are not aware of any present intention of any of our key personnel to leave our
company or to retire. However, we have no employment agreement with Dr. Lederman and while we have employment agreements with certain
of our employees, all of our employees may terminate their employment at any time. The loss of any of our key personnel, or the
inability to attract and retain qualified personnel, may significantly delay or prevent the achievement of our research, development
or business objectives and could materially adversely affect our business, financial condition and results of operations.
14
Any employment agreement
we enter into will not ensure the retention of the employee who is a party to the agreement. In addition, we have only limited
ability to prevent former employees from competing with us. Furthermore, our future success will also depend in part on the continued
service of our key scientific and management personnel and our ability to identify, hire, and retain additional personnel. We experience
intense competition for qualified personnel and may be unable to attract and retain the personnel necessary for the development
of our business. Moreover, our work force is located in the "Pharmaceutical Corridor" that spans New York, New Jersey
and Pennsylvania, where competition for personnel with the scientific and technical skills that we seek is extremely high and is
likely to remain high. Because of this competition, our compensation costs may increase significantly.
If we are unable to hire additional
qualified personnel, our ability to grow our business may be harmed.
Over time we will need
to hire additional qualified personnel with expertise in drug development, product registration, clinical and non-clinical research,
quality compliance, government regulation, formulation and manufacturing, financial matters and sales and marketing. We compete
for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions. Competition
for such individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and
retaining qualified personnel will be critical to our success.
We rely on third parties to manufacture
the compounds used in our trials, and we intend to rely on them for the manufacture of any approved products for commercial sale.
If these third parties do not manufacture our product candidates in sufficient quantities and at an acceptable cost, clinical development
and commercialization of our product candidates could be delayed, prevented or impaired.
We have no manufacturing
facilities, and we have no experience in the clinical or commercial-scale manufacture of drugs or in designing drug manufacturing
processes. We intend to rely on third-party Contract Manufacturing Organizations, or CMOs, to manufacture some or all of our product
candidates in clinical trials and our products that reach commercialization. Completion of our clinical trials and commercialization
of our product candidates requires manufacturing of a sufficient supply of our product candidates. We have contracted with outside
sources to manufacture our development compounds, including TNX-102 SL. If, for any reason, we become unable to rely on our current
sources for the manufacture of our product candidates, either for clinical trials or, at some future date, for commercial quantities,
then we would need to identify and contract with additional or replacement third-party manufacturers to manufacture compounds for
pre-clinical, clinical, and commercial purposes. Although we are in discussions with other manufacturers we have identified as
potential alternative CMOs of TNX-102 SL, we may not be successful in negotiating acceptable terms with any of them.
We believe that there
are a variety of manufacturers that we may be able to retain to produce these products. However, once we retain a manufacturing
source, if our manufacturers do not perform in a satisfactory manner, we may not be able to develop or commercialize potential
products as planned. Certain specialized manufacturers are expected to provide us with modified and unmodified pharmaceutical compounds,
including finished products, for use in our preclinical and clinical studies. Some of these materials are available from only one
supplier or vendor. Any interruption in or termination of service by such sole source suppliers could result in a delay or interruption
in manufacturing until we locate an alternative source of supply. Any delay or interruption in manufacturing operations (or failure
to locate a suitable replacement for such suppliers) could materially adversely affect our business, prospects, or results of operations.
We do not have any short-term or long-term manufacturing agreements with many of these manufacturers. If we fail to contract for
manufacturing on acceptable terms or if third-party manufacturers do not perform as we expect, our development programs could be
materially adversely affected. This may result in delays in filing for and receiving FDA approval for one or more of our products.
Any such delays could cause our prospects to suffer significantly.
15
Failure by our third-party manufacturers
to comply with the regulatory guidelines set forth by the FDA with respect to our product candidates could delay or prevent the
completion of clinical trials, the approval of any product candidates or the commercialization of our products.
Such third-party manufacturers
must be inspected by FDA for cGMP compliance before they can produce commercial product. We may be in competition with other companies
for access to these manufacturers' facilities and may be subject to delays in manufacture if the manufacturers give other clients
higher priority than they give to us. If we are unable to secure and maintain third-party manufacturing capacity, the development
and sales of our products and our financial performance may be materially affected.
Manufacturers are obligated
to operate in accordance with FDA-mandated requirements. A failure of any of our third-party manufacturers to establish and follow
cGMP requirements and to document their adherence to such practices may lead to significant delays in the availability of material
for clinical trials, may delay or prevent filing or approval of marketing applications for our products, and may cause delays or
interruptions in the availability of our products for commercial distribution following FDA approval. This could result in higher
costs to us or deprive us of potential product revenues.
Complying with cGMP
and non-U.S. regulatory requirements will require that we expend time, money, and effort in production, recordkeeping, and quality
control to assure that the product meets applicable specifications and other requirements. We, or our contracted manufacturing
facility, must also pass a pre-approval inspection prior to FDA approval. Failure to pass a pre-approval inspection may significantly
delay FDA approval of our products. If we fail to comply with these requirements, we would be subject to possible regulatory action
and may be limited in the jurisdictions in which we are permitted to sell our products. As a result, our business, financial condition,
and results of operations may be materially harmed.
Drug manufacturers
are subject to ongoing periodic unannounced inspections by the FDA, the DEA and corresponding state and foreign agencies to ensure
strict compliance with cGMP requirements and other requirements under Federal drug laws, other government regulations and corresponding
foreign standards. If we or our third-party manufacturers fail to comply with applicable regulations, sanctions could be imposed
on us, including fines, injunctions, civil penalties, failure by the government to grant marketing approval of drugs, delays, suspension
or withdrawal of approvals, seizures or recalls of product, operating restrictions and criminal prosecutions.
Corporate and academic collaborators
may take actions to delay, prevent, or undermine the success of our products.
Our operating and financial
strategy for the development, clinical testing, manufacture, and commercialization of drug candidates is heavily dependent on our
entering into collaborations with corporations, academic institutions, licensors, licensees, and other parties. Our current strategy
assumes that we will successfully establish these collaborations, or similar relationships; however, there can be no assurance
that we will be successful establishing such collaborations. Some of our existing collaborations are, and future collaborations
may be, terminable at the sole discretion of the collaborator. Replacement collaborators might not be available on attractive terms,
or at all. The activities of any collaborator will not be within our control and may not be within our power to influence. There
can be no assurance that any collaborator will perform its obligations to our satisfaction or at all, that we will derive any revenue
or profits from such collaborations, or that any collaborator will not compete with us. If any collaboration is not pursued, we
may require substantially greater capital to undertake development and marketing of our proposed products and may not be able to
develop and market such products effectively, if at all. In addition, a lack of development and marketing collaborations may lead
to significant delays in introducing proposed products into certain markets and/or reduced sales of proposed products in such markets.
Data provided by collaborators and
others upon which we rely that has not been independently verified could turn out to be false, misleading, or incomplete.
We rely on third-party
vendors, scientists, and collaborators to provide us with significant data and other information related to our projects, clinical
trials, and our business. If such third parties provide inaccurate, misleading, or incomplete data, our business, prospects, and
results of operations could be materially adversely affected.
16
Our product candidates are novel
and still in development
.
We are a pharmaceutical
company focused on the development of drug product candidates, all of which are still in development. Our drug development methods
may not lead to commercially viable drugs for any of several reasons. For example, we may fail to identify appropriate targets
or compounds, our drug candidates may fail to be safe and effective in clinical trials, or we may have inadequate financial or
other resources to pursue development efforts for our drug candidates. Our drug candidates will require significant additional
development, clinical trials, regulatory clearances and additional investment by us or our collaborators before they can be commercialized.
Successful development of our products
is uncertain
.
Our development of
current and future product candidates is subject to the risks of failure and delay inherent in the development of new pharmaceutical
products, including: delays in product development, clinical testing, or manufacturing; unplanned expenditures in product development,
clinical testing, or manufacturing; failure to receive regulatory approvals; emergence of superior or equivalent products; inability
to manufacture on its own, or through any others, product candidates on a commercial scale; and failure to achieve market acceptance.
Because of these risks,
our research and development efforts may not result in any commercially viable products. If a significant portion of these development
efforts are not successfully completed, required regulatory approvals are not obtained or any approved products are not commercially
successfully, our business, financial condition, and results of operations may be materially harmed.
Clinical trials required for our
product candidates are expensive and time-consuming, and their outcome is uncertain
.
In order to obtain
FDA approval to market a new drug product, we must demonstrate proof of safety and effectiveness in humans. To meet these requirements,
we must conduct "adequate and well controlled" clinical trials. Conducting clinical trials is a lengthy, time-consuming,
and expensive process. The length of time may vary substantially according to the type, complexity, novelty, and intended use of
the product candidate, and often can be several years or more per trial. Delays associated with products for which we are directly
conducting clinical trials may cause us to incur additional operating expenses. The commencement and rate of completion of clinical
trials may be delayed by many factors, including, for example: inability to manufacture sufficient quantities of qualified materials
under cGMP, for use in clinical trials; slower than expected rates of patient recruitment; failure to recruit a sufficient number
of patients; modification of clinical trial protocols; changes in regulatory requirements for clinical trials; the lack of effectiveness
during clinical trials; the emergence of unforeseen safety issues; delays, suspension, or termination of the clinical trials due
to the institutional review board responsible for overseeing the study at a particular study site; and government or regulatory
delays or "clinical holds" requiring suspension or termination of the trials.
The results from early
clinical trials are not necessarily predictive of results obtained in later clinical trials. Accordingly, even if we obtain positive
results from early clinical trials, we may not achieve the same success in future clinical trials. Clinical trials may not demonstrate
statistically significant safety and effectiveness to obtain the requisite regulatory approvals for product candidates.
Our clinical trials
may be conducted in patients with CNS conditions, and in some cases, our products are expected to be used in combination with approved
therapies that themselves have significant adverse event profiles. During the course of treatment, these patients could suffer
adverse medical events or die for reasons that may or may not be related to our products. We cannot ensure that safety issues will
not arise with respect to our products in clinical development.
The failure of clinical
trials to demonstrate safety and effectiveness for the desired indications could harm the development of that product candidate
and other product candidates. This failure could cause us to abandon a product candidate and could delay development of other product
candidates. Any delay in, or termination of, our clinical trials would delay the filing of our NDAs with the FDA and, ultimately,
our ability to commercialize our product candidates and generate product revenues. Any change in, or termination of, our clinical
trials could materially harm our business, financial condition, and results of operation.
17
We are subject to extensive and costly
government regulation.
Product candidates
employing our technology are subject to extensive and rigorous domestic government regulation including regulation by the FDA,
the Centers for Medicare and Medicaid Services, other divisions of the United States Department of Health and Human Services, the
United States Department of Justice, state and local governments, and their respective foreign equivalents. The FDA regulates the
research, development, preclinical and clinical testing, manufacture, safety, effectiveness, record-keeping, reporting, labeling,
storage, approval, advertising, promotion, sale, distribution, import, and export of biopharmaceutical products. The FDA regulates
small molecule chemical entities as drugs, subject to a New Drug Application, or NDA, under the Federal Food, Drug, and Cosmetic
Act. If products employing our technologies are marketed abroad, they will also be subject to extensive regulation by foreign governments,
whether or not they have obtained FDA approval for a given product and its uses. Such foreign regulation may be equally or more
demanding than corresponding United States regulation.
Government regulation
substantially increases the cost and risk of researching, developing, manufacturing, and selling our products. The regulatory review
and approval process, which includes preclinical testing and clinical trials of each product candidate, is lengthy, expensive,
and uncertain. We or our collaborators must obtain and maintain regulatory authorization to conduct clinical trials. We or our
collaborators must obtain regulatory approval for each product we intend to market, and the manufacturing facilities used for the
products must be inspected and meet legal requirements. Securing regulatory approval requires the submission of extensive preclinical
and clinical data and other supporting information for each proposed therapeutic indication in order to establish the product's
safety and efficacy, and in the case of biologics also potency and purity, for each intended use. The development and approval
process takes many years, requires substantial resources, and may never lead to the approval of a product.
Even if we are able
to obtain regulatory approval for a particular product, the approval may limit the indicated medical uses for the product, may
otherwise limit our ability to promote, sell, and distribute the product, may require that we conduct costly post-marketing surveillance,
and/or may require that we conduct ongoing post-marketing studies. Material changes to an approved product, such as, for example,
manufacturing changes or revised labeling, may require further regulatory review and approval. Once obtained, any approvals may
be withdrawn, including, for example, if there is a later discovery of previously unknown problems with the product, such as a
previously unknown safety issue.
If we, our collaborators,
or our contract manufacturers fail to comply with applicable regulatory requirements at any stage during the regulatory process,
such noncompliance could result in, among other things delays in the approval of applications or supplements to approved applications;
refusal of a regulatory authority, including the FDA, to review pending market approval applications or supplements to approved
applications; warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions; total or partial
suspension of production; civil penalties; withdrawals of previously approved marketing applications or licenses; recommendations
by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.
We do not have, and may never obtain,
the regulatory approvals we need to market our product candidates.
Following completion
of clinical trials, the results are evaluated and, depending on the outcome, submitted to the FDA in the form of an NDA in order
to obtain FDA approval of the product and authorization to commence commercial marketing. In responding to an NDA, the FDA may
require additional testing or information, may require that the product labeling be modified, may impose post-approval study or
reporting requirements or other restrictions on product distribution, or may deny the application. The FDA has established performance
goals for review of NDAs - six months for priority applications and ten months for standard applications. However, the FDA is not
required to complete its review within these time periods. The timing of final FDA review and action varies greatly, but can take
years in some cases and may involve the input of an FDA advisory committee of outside experts. Product sales in the United States
may commence only when an NDA is approved.
18
To date, we have not
applied for or received the regulatory approvals required for the commercial sale of any of our products in the United States or
in any foreign jurisdiction. None of our product candidates has been determined to be safe and effective, and we have not submitted
an NDA to the FDA or an equivalent application to any foreign regulatory authorities for any of our product candidates.
It is possible that
none of our product candidates will be approved for marketing. Failure to obtain regulatory approvals, or delays in obtaining regulatory
approvals, may adversely affect the successful commercialization of any drugs or biologics that we or our partners develop, may
impose additional costs on us or our collaborators, may diminish any competitive advantages that we or our partners may attain,
and/or may adversely affect our receipt of revenues or royalties.
Even if approved, our products will
be subject to extensive post-approval regulation.
Once a product is approved,
numerous post-approval requirements apply. Among other things, the holder of an approved NDA is subject to periodic and other FDA
monitoring and reporting obligations, including obligations to monitor and report adverse events and instances of the failure of
a product to meet the specifications in the NDA. Application holders must submit new or supplemental applications and obtain FDA
approval for certain changes to the approved product, product labeling, or manufacturing process. Application holders must also
submit advertising and other promotional material to the FDA and report on ongoing clinical trials.
Depending on the circumstances,
failure to meet these post-approval requirements can result in criminal prosecution, fines, injunctions, recall or seizure of products,
total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter
into supply contracts, including government contracts. In addition, even if we comply with FDA and other requirements, new information
regarding the safety or effectiveness of a product could lead the FDA to modify or withdraw product approval.
Even if we obtain regulatory approval
to market our product candidates, our product candidates may not be accepted by the market.
Even if the FDA approves
one or more of our product candidates, physicians and patients may not accept it or use it. Even if physicians and patients would
like to use our products, our products may not gain market acceptance among healthcare payors such as managed care formularies,
insurance companies or government programs such as Medicare or Medicaid. Acceptance and use of our products will depend upon a
number of factors including: perceptions by members of the health care community, including physicians, about the safety and effectiveness
of our drug or device product; cost-effectiveness of our product relative to competing products; availability of reimbursement
for our product from government or other healthcare payers; and effectiveness of marketing and distribution efforts by us and our
licensees and distributors, if any.
The degree of market
acceptance of any pharmaceutical product that we develop will depend on a number of factors, including:
·
cost-effectiveness;
·
the safety and effectiveness of our products, including any significant potential side effects (including drowsiness and dry mouth), as compared to alternative products or treatment methods;
·
the timing of market entry as compared to competitive products;
·
flat or declining use of off-label muscle-relaxant products for fibromyalgia prior to the launch of TNX-102 SL;
·
the rate of adoption of our products by doctors and nurses;
·
product labeling or product insert required by the FDA for each of our products;
·
reimbursement policies of government and third-party payors;
·
effectiveness of our sales, marketing and distribution capabilities and the effectiveness of such capabilities of our collaborative partners, if any; and
·
unfavorable publicity concerning our products or any similar products.
19
Our product candidates,
if successfully developed, will compete with a number of products manufactured and marketed by major pharmaceutical companies,
biotechnology companies and manufacturers of generic drugs. Our products may also compete with new products currently under development
by others. Physicians, patients, third-party payors and the medical community may not accept and utilize any of our product candidates.
If our products do not achieve market acceptance, we will not be able to generate significant revenues or become profitable.
Because we expect sales
of our current product candidates, if approved, to generate substantially all of our product revenues for the foreseeable future,
the failure of these products to find market acceptance would harm our business and could require us to seek additional financing.
If we fail to establish marketing,
sales and distribution capabilities, or fail to enter into arrangements with third parties, we will not be able to create a market
for our product candidates.
Our strategy with our
lead product candidates is to control, directly or through contracted third parties, all or most aspects of the product development
process, including marketing, sales and distribution. Currently, we do not have any sales, marketing or distribution capabilities.
In order to generate sales of any product candidates that receive regulatory approval, we must either acquire or develop an internal
marketing and sales force with technical expertise and with supporting distribution capabilities or make arrangements with third
parties to perform these services for us. The acquisition or development of a sales and distribution infrastructure would require
substantial resources, which may divert the attention of our management and key personnel and defer our product development efforts.
To the extent that we enter into marketing and sales arrangements with other companies, our revenues will depend on the efforts
of others. These efforts may not be successful. If we fail to develop sales, marketing and distribution channels, or enter into
arrangements with third parties, we will experience delays in product sales and incur increased costs.
Sales of pharmaceutical
products largely depend on the reimbursement of patients' medical expenses by government health care programs and private health
insurers. Without the financial support of the government or third-party payors, the market for our products will be limited. These
third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services.
Recent proposals to change the health care system in the United States have included measures that would limit or eliminate payments
for medical products and services or subject the pricing of medical treatment products to government control. Significant uncertainty
exists as to the reimbursement status of newly approved health care products. Third-party payors may not reimburse sales of our
products or enable our collaborators to sell them at profitable prices.
Our business strategy
might involve out-licensing product candidates to or collaborating with larger firms with experience in marketing and selling pharmaceutical
products. There can be no assurance that we will be able to successfully establish marketing, sales, or distribution relationships;
that such relationships, if established, will be successful; or that we will be successful in gaining market acceptance for our
products. To the extent that we enter into any marketing, sales, or distribution arrangements with third parties, our product revenues
will be lower than if we marketed and sold our products directly, and any revenues we receive will depend upon the efforts of such
third-parties. If we are unable to establish such third-party sales and marketing relationships, or choose not to do so, we will
have to establish and rely on our own in-house capabilities.
We, as a company, have
no experience in marketing or selling pharmaceutical products and currently have no sales, marketing, or distribution infrastructure.
To market any of our products directly, we would need to develop a marketing, sales, and distribution force that both has technical
expertise and the ability to support a distribution capability. The establishment of a marketing, sales, and distribution capability
would significantly increase our costs, possibly requiring substantial additional capital. In addition, there is intense competition
for proficient sales and marketing personnel, and we may not be able to attract individuals who have the qualifications necessary
to market, sell, and distribute our products. There can be no assurance that we will be able to establish internal marketing, sales,
or distribution capabilities. If we are unable to, or choose not to establish these capabilities, or if the capabilities we establish
are not sufficient to meet our needs, we will be required to establish collaborative marketing, sales, or distribution relationships
with third parties.
20
In the event that we are successful
in bringing any products to market, our revenues may be adversely affected if we fail to obtain acceptable prices or adequate reimbursement
for our products from third-party payors.
Our ability to commercialize
pharmaceutical products successfully may depend in part on the availability of reimbursement for our products from:
·
government and health administration authorities;
·
private health insurers; and
·
other third party payors, including Medicare.
We cannot predict the
availability of reimbursement for newly-approved health care products. Third-party payors, including Medicare, are challenging
the prices charged for medical products and services. Government and other third-party payors increasingly are limiting both coverage
and the level of reimbursement for new drugs. Third-party insurance coverage may not be available to patients for any of our products.
The continuing efforts
of government and third-party payors to contain or reduce the costs of health care may limit our commercial opportunity. If government
and other third-party payors do not provide adequate coverage and reimbursement for any prescription product we bring to market,
doctors may not prescribe them or patients may ask to have their physicians prescribe competing drugs with more favorable reimbursement.
In some foreign markets, pricing and profitability of prescription pharmaceuticals are subject to government control. In the United
States, we expect that there will continue to be federal and state proposals for similar controls. In addition, we expect that
increasing emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products.
Cost control initiatives could decrease the price that we receive for any products in the future. Further, cost control initiatives
could impair our ability to commercialize our products and our ability to earn revenues from this commercialization.
We face the risk of product liability
claims and may not be able to obtain insurance.
Our business exposes
us to the risk of product liability claims that are inherent in the development of drugs. If the use of one or more of our or our
collaborators' drugs harms people, we may be subject to costly and damaging product liability claims brought against us by clinical
trial participants, consumers, health care providers, pharmaceutical companies or others selling our products. Our inability to
obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could
prevent or inhibit the commercialization of pharmaceutical products we develop, alone or with collaborators. We currently do not
carry clinical trial insurance or product liability insurance. We intend to obtain such insurance in the future. We cannot predict
all of the possible harms or side effects that may result and, therefore, the amount of insurance coverage we hold now or in the
future may not be adequate to cover all liabilities we might incur. We intend to expand our insurance coverage to include the sale
of commercial products if we obtain marketing approval for our drug candidates in development, but we may be unable to obtain commercially
reasonable product liability insurance for any products approved for marketing. If we are unable to obtain insurance at an acceptable
cost or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which may
materially and adversely affect our business and financial position. If we are sued for any injury allegedly caused by our or our
collaborators' products, our liability could exceed our total assets and our ability to pay the liability. A product liability
claim or series of claims brought against us would decrease our cash and could cause our stock price to fall.
We use hazardous chemicals in our
business. Potential claims relating to improper handling, storage or disposal of these chemicals could affect us and be time consuming
and costly.
Our research and development
processes and/or those of our third party contractors may involve the controlled use of hazardous materials and chemicals. These
hazardous chemicals are reagents and solvents typically found in a chemistry laboratory. Our operations also produce hazardous
waste products. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous
materials. While we attempt to comply with all environmental laws and regulations, including those relating to the outsourcing
of the disposal of all hazardous chemicals and waste products, we cannot eliminate the risk of contamination from or discharge
of hazardous materials and any resultant injury. In the event of such an accident, we could be held liable for any resulting damages
and any liability could materially adversely affect our business, financial condition and results of operations.
21
Compliance with environmental
laws and regulations may be expensive. Current or future environmental regulations may impair our research, development or production
efforts. We might have to pay civil damages in the event of an improper or unauthorized release of, or exposure of individuals
to, hazardous materials. We are not insured against these environmental risks.
If we enter into collaborations
with third parties, they might also work with hazardous materials in connection with our collaborations. We may agree to indemnify
our collaborators in some circumstances against damages and other liabilities arising out of development activities or products
produced in connection with these collaborations.
In addition, the federal,
state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive
materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business,
financial condition and results of operations.
If we retain collaborative partners
and our partners do not satisfy their obligations, we will be unable to develop our partnered product candidates.
In the event we enter
into any collaborative agreements, we may not have day-to-day control over the activities of our collaborative partners with respect
to any of these product candidates. Any collaborative partner may not fulfill its obligations under these agreements. If a collaborative
partner fails to fulfill its obligations under an agreement with us, we may be unable to assume the development of the products
covered by that agreement or enter into alternative arrangements with a third party. In addition, we may encounter delays in the
commercialization of the product candidate that is the subject of the agreement. Accordingly, our ability to receive any revenue
from the product candidates covered by these agreements will be dependent on the efforts of our collaborative partner. We could
also become involved in disputes with a collaborative partner, which could lead to delays in or termination of our development
and commercialization programs and time-consuming and expensive litigation or arbitration. In addition, any such dispute could
diminish our collaborators' commitment to us and reduce the resources they devote to developing and commercializing our products.
Conflicts or disputes with our collaborators, and competition from them, could harm our relationships with our other collaborators,
restrict our ability to enter future collaboration agreements and delay the research, development or commercialization of our product
candidates. If any collaborative partner terminates or breaches its agreement, or otherwise fails to complete its obligations in
a timely manner, our chances of successfully developing or commercializing these product candidates would be materially and adversely
affected. We may not be able to enter into collaborative agreements with partners on terms favorable to us, or at all. Our inability
to enter into collaborative arrangements with collaborative partners, or our failure to maintain such arrangements, would limit
the number of product candidates that we could develop and ultimately, decrease our sources of any future revenues.
RISKS RELATED TO OUR STOCK
There has been a limited trading
market for our Common Stock and almost no market activity to date.
Currently, our Common
Stock is available for quotation on the OTCQB under the symbol "TNXP." However, prior to February 2012, there was no
trading activity in our Common Stock and limited trading has occurred to date. As of December 31, 2012, trading occurred on only
82 out of 229 possible trading days, with an average of less than 3,200 shares per possible trading day and less than 8,900 shares
trades on each day when shares actually traded. It is anticipated that there will be a limited trading market for the Common Stock
on the OTCQB. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at
a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive
market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other
companies or technologies by using Common Stock as consideration.
22
You may have difficulty trading and
obtaining quotations for our Common Stock.
Our Common Stock may
not be actively traded, and the bid and asked prices for our Common Stock on the OTCQB may fluctuate widely. As a result, investors
may find it difficult to dispose of, or to obtain accurate quotations of the price of, our securities. This severely limits the
liquidity of the Common Stock, and would likely reduce the market price of our Common Stock and hamper our ability to raise additional
capital.
The market price for our Common Stock
may be volatile, and your investment in our Common Stock could decline in value.
The stock market in
general has experienced extreme price and volume fluctuations. The market prices of the securities of biotechnology and specialty
pharmaceutical companies, particularly companies like ours without product revenues and earnings, have been highly volatile and
may continue to be highly volatile in the future. This volatility has often been unrelated to the operating performance of particular
companies. The following factors, in addition to other risk factors described in this section, may have a significant impact on
the market price of our common stock:
·
announcements of technological innovations or new products by us or our competitors;
·
announcement of FDA approval or disapproval of our products or other product-related actions;
·
developments involving our discovery efforts and clinical trials;
·
developments or disputes concerning patents or proprietary rights, including announcements of infringement, interference or other litigation against us or our potential licensees;
·
developments involving our efforts to commercialize our products, including developments impacting the timing of commercialization;
·
announcements concerning our competitors, or the biotechnology, pharmaceutical or drug delivery industry in general;
·
public concerns as to the safety or efficacy of our products or our competitors' products;
·
changes in government regulation of the pharmaceutical or medical industry;
·
changes in the reimbursement policies of third party insurance companies or government agencies;
·
actual or anticipated fluctuations in our operating results;
·
changes in financial estimates or recommendations by securities analysts;
·
developments involving corporate collaborators, if any;
·
changes in accounting principles; and
·
the loss of any of our key scientific or management personnel.
In the past, securities
class action litigation has often been brought against companies that experience volatility in the market price of their securities.
Whether or not meritorious, litigation brought against us could result in substantial costs and a diversion of management's
attention and resources, which could adversely affect our business, operating results and financial condition.
Investor relations activities, nominal
"float" and supply and demand factors may affect the price of our stock.
We expect to utilize
various techniques such as non-deal road shows and investor relations campaigns in order to create investor awareness for our company.  These
campaigns may include personal, video and telephone conferences with investors and prospective investors in which our business
practices are described.  We may provide compensation to investor relations firms and pay for newsletters, websites,
mailings and email campaigns that are produced by third-parties based upon publicly-available information concerning our company.  We
will not be responsible for the content of analyst reports and other writings and communications by investor relations firms not
authored by us or from publicly available information.  We do not intend to review or approve the content of such analysts'
reports or other materials based upon analysts' own research or methods.  Investor relations firms should generally
disclose when they are compensated for their efforts, but whether such disclosure is made or complete is not under our control.  
In addition, investors in our company may be willing, from time to time, to encourage investor awareness through similar activities.  Investor
awareness activities may also be suspended or discontinued which may impact the trading market our common stock.
23
The SEC and FINRA enforce
various statutes and regulations intended to prevent manipulative or deceptive devices in connection with the purchase or sale
of any security and carefully scrutinize trading patterns and company news and other communications for false or misleading information,
particularly in cases where the hallmarks of "pump and dump" activities may exist, such as rapid share price increases
or decreases.  We, and our shareholders may be subjected to enhanced regulatory scrutiny due to the small number of holders
who initially will own the registered shares of our common stock publicly available for resale, and the limited trading markets
in which such shares may be offered or sold which have often been associated with improper activities concerning penny-stocks,
such as the OTC Bulletin Board or the OTCQB Marketplace (Pink OTC) or pink sheets.  Until such time as our restricted
shares are registered or available for resale under Rule 144, there will continue to be a small percentage of shares held by a
small number of investors, many of whom acquired such shares in privately negotiated purchase and sale transactions that will constitute
the entire available trading market.  The Supreme Court has stated that manipulative action is a term of art connoting
intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities.  Often
times, manipulation is associated by regulators with forces that upset the supply and demand factors that would normally determine
trading prices.  Since a small percentage of the outstanding common stock of our company will initially be available
for trading, held by a small number of individuals or entities, the supply of our common stock for sale will be extremely limited
for an indeterminate amount of time, which could result in higher bids, asks or sales prices than would otherwise exist.  Securities
regulators have often cited thinly-traded markets, small numbers of holders, and awareness campaigns as components of their claims
of price manipulation and other violations of law when combined with manipulative trading, such as wash sales, matched orders or
other manipulative trading timed to coincide with false or touting press releases.  There can be no assurance that our
or third-parties' activities, or the small number of potential sellers or small percentage of stock in the "float,"
or determinations by purchasers or holders as to when or under what circumstances or at what prices they may be willing to buy
or sell stock will not artificially impact (or would be claimed by regulators to have affected) the normal supply and demand factors
that determine the price of the stock.
We do not anticipate paying dividends
on our Common Stock.
We have never declared
or paid cash dividends on our common stock and do not expect to do so in the foreseeable future. The declaration of dividends is
subject to the discretion of our board of directors and will depend on various factors, including our operating results, financial
condition, future prospects and any other factors deemed relevant by our board of directors. You should not rely on an investment
in our company if you require dividend income from your investment in our company. The success of your investment will likely depend
entirely upon any future appreciation of the market price of our common stock, which is uncertain and unpredictable. There is no
guarantee that our common stock will appreciate in value.
We expect that our quarterly results
of operations will fluctuate, and this fluctuation could cause our stock price to decline.
Our quarterly operating
results are likely to fluctuate in the future. These fluctuations could cause our stock price to decline. The nature of our business
involves variable factors, such as the timing of the research, development and regulatory pathways of our product candidates, which
could cause our operating results to fluctuate.
Due to the possibility
of fluctuations in our revenues and expenses, we believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance.
If we or our existing shareholders
sell a substantial number of shares of our common stock in the public market, our stock price may decline.
If we or our existing
shareholders sell a large number of shares of our common stock, or the public market perceives that we or our existing shareholders
might sell shares of common stock, particularly with respect to our affiliates, directors, executive officers or other insiders,
the market price of our common stock could decline significantly.
24
In the future, we may
issue additional shares to our employees, directors or consultants, in connection with corporate alliances or acquisitions, or
to raise capital. Due to these factors, sales of a substantial number of shares of our common stock in the public market could
occur at any time.
Our officers, directors and principal
shareholders own a controlling interest in our voting stock and Investors will not have any voice in our management.
Our officers, directors
and principal shareholders, in the aggregate, beneficially own or control the votes of approximately 46.5% of our outstanding Common
Stock. As a result, these stockholders, acting together, will have the ability to control substantially all matters submitted to
our stockholders for approval, including:
·
election of our board of directors;
·
removal of any of our directors;
·
amendment of our certificate of incorporation or bylaws; and
·
adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.
As a result of their
ownership and positions, our directors, executive officers and principal shareholders collectively are able to influence all matters
requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition,
sales of significant amounts of shares held by our directors, executive officers or principal shareholders, or the prospect of
these sales, could adversely affect the market price of our Common Stock. Management's stock ownership may discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price
or prevent our stockholders from realizing a premium over our stock price.
Our common stock is not currently
traded at high volume, and you may be unable to sell at or near ask prices or at all if you need to sell or liquidate a substantial
number of shares at one time.
Our common stock is
currently traded, but with very low, if any, volume, based on quotations on the OTCQB, meaning that the number of persons interested
in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent. This situation
is attributable to a number of factors, including the fact that we are a small company which is still relatively unknown to stock
analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume,
and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven
company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable.
As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent,
as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market
for our common stock will develop or be sustained, or that trading levels will be sustained.
Shareholders should
be aware that, according to Commission Release No. 34-29093, the market for "penny stocks" has suffered in recent years
from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers
that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales
and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers;
and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware
of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate
the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical
limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns
or practices could increase the future volatility of our share price.
25
Efforts to comply with recently enacted
changes in securities laws and regulations will increase our costs and require additional management resources, and we still may
fail to comply.
As directed by Section
404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on their
internal controls over financial reporting in their annual reports on Form 10-K. In addition, in the event we are no longer a smaller
reporting company, the independent registered public accounting firm auditing our financial statements would be required to attest
to the effectiveness of our internal controls over financial reporting. Such attestation requirement by our independent registered
public accounting firm would not be applicable to us until the report for the year ended December 31, 2013 at the earliest, if
at all. If we are unable to conclude that we have effective internal controls over financial reporting or if our independent registered
public accounting firm is required to, but is unable to provide us with a report as to the effectiveness of our internal controls
over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in
a decrease in the value of our securities.
Our common stock is subject to the
"penny stock" rules of the SEC and the trading market in our securities is limited, which makes transactions in our
stock cumbersome and may reduce the value of an investment in our stock.
The Securities and
Exchange Commission ("SEC") has adopted Rule 15g-9 which establishes the definition of a "penny stock,"
for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise
price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt,
the rules require:
·
that a broker or dealer approve a person's account for transactions in penny stocks; and
·
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person's account
for transactions in penny stocks, the broker or dealer must:
·
obtain financial information and investment experience objectives of the person; and
·
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer
must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny
stock market, which, in highlight form:
·
sets forth the basis on which the broker or dealer made the suitability determination; and
·
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers
may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more
difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure also has
to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions
payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies
available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing
recent price information for the penny stock held in the account and information on the limited market in penny stocks.
26
FINRA sales practice requirements
may also limit a shareholder's ability to buy and sell our stock.
In addition to the
"penny stock" rules described above, FINRA has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending
speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and other information. Under interpretations of
these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at
least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
USE OF PROCEEDS
We will not receive
any proceeds from the sale of common stock offered by the selling stockholders under this prospectus. However, we will receive
up to $5,342,500 in the aggregate from the selling stockholders if they exercise in full, on a cash basis, the Class A Warrants
to purchase 8,904,167 shares of common stock issued to the selling stockholders that are being offered by the selling stockholders
under this prospectus. All of the Class A Warrants entitle the holder to exercise their warrants on a cashless basis under certain
conditions. In the event that any selling stockholder exercises their Class A Warrants on a cashless basis, then we will not receive
any proceeds from the exercise of those warrants. We would use such proceeds from the exercise of the Class A Warrants for working
capital and other corporate purposes.
The warrant holders
may exercise their Class A Warrants at any time until their expiration, as further described under "Description of Capital
Stock." Because the warrant holders may exercise the Class A Warrants in their own discretion, if at all, we cannot plan
on specific uses of proceeds beyond application of proceeds to general corporate purposes. We have agreed to bear the expenses
(other than any underwriting discounts or commissions or agent's commissions) in connection with the registration of the
common stock being offered hereby by the selling stockholders.
27
MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Our common stock is
currently traded on the OTCQB under the symbol "TNXP." Prior to July 23, 2012, our common stock was quoted on the Over-the-Counter
Bulletin Board under the symbol "TNXP." Prior to October 19, 2011, our common stock was quoted on the Over-the-Counter
Bulletin Board under the symbol "TAEI." Prior to February 2012, no public trades occurred in our common stock. For
the periods indicated, the following table sets forth the high and low sale prices of our common stock as reported by NASDAQ.
Fiscal Year 2012
High
Low
First Quarter
$
2.06
$
2.00
Second Quarter
$
2.00
$
0.83
Third Quarter
$
1.00
$
0.74
Fourth Quarter
$
0.82
$
0.25
Fiscal Year 2013
High
Low
First Quarter (1)
$
0.73
$
0.44
(1)
As of January 22, 2013.
Holders
As of January 22, 2013,
we had approximately 199 holders of our common stock. The number of record holders was determined from the records of our transfer
agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers,
and registered clearing agencies. The transfer agent of our common stock is vStock Transfer, LLC, 77 Spruce Street, Suite 201,
Cedarhurst, NY 11516.
Dividends
We have not declared
or paid any cash dividends on our common stock and we do not anticipate paying any cash dividends to stockholders in the foreseeable
future. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent
upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem
relevant.
28
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Some of the information
in this Form S-1 contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements
by forward-looking words such as "may," "will," "expect," "anticipate," "believe,"
"estimate" and "continue," or similar words. You should read statements that contain these words carefully
because they:
·
discuss our future expectations;
·
contain projections of our future results of operations or of our financial condition; and
·
state other "forward-looking" information.
We believe it is important
to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over
which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors," "Business"
and elsewhere in this prospectus. See "Risk Factors."
Business Overview
We are a specialty
pharmaceutical company focused on developing novel pharmaceutical products for challenging disorders of the CNS. We search for
potential therapeutic solutions among known pharmaceutical agents that lack regulatory approval for the indications we seek, but
may be approved for use in other indications. The ongoing evolution in the understanding of certain CNS disorders provides us with
opportunities to develop such agents as proprietary products for new indications. We typically seek to create new dose and formulation
options that are tailored to the therapeutic uses to which we apply these agents.
We are currently devoting
the majority of our efforts to the development of our lead product candidate, TNX-102 sublingual tablet, or TNX-102 SL. TNX-102
SL is a novel dose and formulation of CBP, the active pharmaceutical ingredient of two widely prescribed muscle relaxant products,
Flexeril and Amrix. TNX-102 SL is distinct from these products as it is being developed at a dose level significantly below the
lowest marketed doses of Flexeril and Amrix. TNX-102 SL is also distinct from these products with regard to its route of administration,
as it is designed to be placed under the tongue and disintegrated to provide sublingual absorption, whereas Flexeril and Amrix
are designed to be swallowed. TNX-102 SL is also intended for chronic use, whereas Flexeril and Amrix are marketed for two to three
weeks of use. We are currently developing TNX-102 SL for the treatment of FM under an IND and under three CTAs filed in Canada.
We are also developing TNX-102 SL for the treatment of PTSD for which we held a pre-IND meeting in October 2012. We expect that
any applications we submit for FDA approval of TNX-102 SL will be submitted under Section 505(b)(2) of the FDCA, which we believe
will allow for a shorter timeline of clinical development as compared to that needed to fulfill the requirements of Section 505(b)(1),
under which NCEs are generally reviewed.
TNX-102 SL is a small,
rapidly disintegrating tablet containing CBP for sublingual administration at bedtime. We designed TNX-102 SL to enable the efficient
delivery of CBP to the systemic circulation via sublingual transmucosal absorption and to avoid first-pass liver metabolism. We
also designed TNX-102 SL to provide CBP at doses lower than those currently available. We have conducted several clinical and pre-clinical
pharmacokinetic studies of TNX-102 SL which we believe support its development as a novel therapeutic product for FM and PTSD,
and which demonstrate a number of potentially advantageous characteristics as compared to current CBP-containing products, none
of which are approved for these indications. Based on our Phase 1 comparative study, we have observed that, as compared to oral
CBP tablets, TNX-102 SL results in faster systemic absorption and significantly higher plasma levels of CBP in the first hour following
administration. TNX-102 SL was generally well-tolerated, with no serious adverse events reported in this study. Some subjects experienced
transient numbness on the tongue after TNX-102 SL administration, and other side-effects reported were similar to those associated
with current CBP products.
29
We also have a pipeline
of other product candidates, including TNX-201 and TNX-301. TNX-201 is based on isometheptene mucate and is under development as
a treatment for certain types of headaches. For competitive reasons, we do not disclose the identities of the active ingredients
or targeted indications in our pipeline until a U.S. patent has been allowed or issued. Consistent with our mission, these product
candidates are or likely will be reformulations of active ingredients that have been used in humans in other products and that
are designed for new CNS therapeutic indications.
In other cases, the
products will be formulated to match predicate products closely enough to be considered generic copies or similarly enough to other
marketed products to rely (in part) on their regulatory review and approval, as well as available published data. The predicate
product may be approved by the FDA under an NDA or may have been reviewed for safety and effectiveness by the National Academy
of Sciences under the DESI program, in which case they would be considered by FDA to be "unapproved products". For
DESI products, it is our intent to develop NDA versions to meet cGMP and the ICH requirements to seek approval under the 505(b)(2)
regulatory pathway.
Because of our size
and being in the development stage, we do not currently devote a significant amount of time or resources towards our other pipeline
candidates. We anticipate that sometime in 2013 we will begin developing formulations for TNX-201 and possibly TNX-301, but do
not expect to start clinical trials until 2014 at the earliest.
On October 7, 2011,
we executed and consummated the Share Exchange Agreement with Tonix Sub. Pursuant to the Share Exchange, each share of Tonix Sub's
common stock was exchanged for 0.9 shares of our common stock, and each share of Tonix Sub's Series A and B preferred stock
was exchanged for 4.8 shares of our common stock. Upon completion of the Share Exchange, the Tonix Sub shareholders, including
holders of 1,396,982 restricted shares, which were subject to accelerated vesting, received in exchange for all of their shares,
an aggregate of 22,666,667 shares of our common stock and our existing stockholders retained 4,000,000 shares of common stock.
The 22,666,667 shares issued to the Tonix Sub shareholders constituted approximately 85% of our 26,666,667 shares of common stock
issued and outstanding after the Share Exchange. Upon completion of the Share Exchange, Tonix Sub became our wholly-owned subsidiary.
For accounting purposes, the acquisition has been treated as a recapitalization of Tonix Sub, accompanied by the issuance of our
common stock for the outstanding common stock of Toxic Sub, which was recorded at a nominal value. The historical financial statements
are those of Tonix Sub. The accompanying financial statements give retroactive effect to the recapitalization as if it had occurred
on June 7, 2007 (inception date). Also, professional services expenses were allocated to research and development and general and
administrative expenses in the 2010 and cumulative from inception through December 31, 2011 statement of operations to be consistent
with the current period's presentation.
Current Operating Trends
Our current research
and development efforts are focused on developing our lead product, TNX-102 SL, but we also expend some effort on our earlier pipeline
programs. Our research and development expenses consist of manufacturing work and the cost of drug ingredients used in such work,
fees paid to providers for conducting various clinical studies as well as for the analysis of the results of such studies, and
for other medical research addressing the potential efficacy of our drugs. We believe that significant investment in product development
is a competitive necessity, and we plan to continue these investments in order to be in a position to realize the potential of
our product candidates and proprietary technologies.
We plan to start the
next phase of clinical development for TNX-102 SL over the next six months, subject to raising necessary funds. Clinical trials
can be very expensive. If these and additional necessary clinical trials are successful, we plan to prepare and submit applications
to the FDA for marketing approval for our drug candidates. This process entails significant costs. As a result of these and other
factors, we expect our research and development expenses to increase significantly over the next 12 to 24 months.
We expect that a larger
percentage of our research and development expenses in the future will be incurred in support of our current and future preclinical
and clinical development programs rather than technology development. These expenditures are subject to numerous uncertainties
relating to timing and cost to completion. We test compounds in numerous preclinical studies for safety, toxicology and efficacy.
At the appropriate time, subject to the approval of regulatory authorities, we expect to conduct early-stage clinical trials for
each drug candidate. We anticipate funding these trials ourselves, and possibly with the assistance of federal grants. As we obtain
results from trials, we may elect to discontinue or delay clinical trials for certain products in order to focus our resources
on more promising products. Completion of clinical trials may take several years, and the length of time generally varies substantially
according to the type, complexity, novelty and intended use of a product candidate.
30
The commencement and
completion of clinical trials for our products may be delayed by many factors, including lack of efficacy during clinical trials,
unforeseen safety issues, slower than expected patient recruitment, or government delays. In addition, we may encounter regulatory
delays or rejections as a result of many factors, including results that do not support the intended safety or efficacy of our
product candidates, perceived defects in the design of clinical trials and changes in regulatory policy during the period of product
development. As a result of these risks and uncertainties, we are unable to accurately estimate the specific timing and costs of
our clinical development programs or the timing of material cash inflows, if any, from our product candidates. Our business, financial
condition and results of operations may be materially adversely affected by any delays in, or termination of, our clinical trials
or a determination by the FDA that the results of our trials are inadequate to justify regulatory approval, insofar as cash in-flows
from the relevant drug or program would be delayed or would not occur.
Results of Operations
We anticipate that
our results of operations will fluctuate for the foreseeable future due to several factors, such as the 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, 2011
Compared to Fiscal year Ended December 31, 2010
Revenues and
Cost of Goods Sold
. We had no revenues or cost of goods sold during the fiscal years ended December 31, 2011 and 2010.
Research and
Development Expenses
.
Research and development expenses for the fiscal year ended December 31, 2011 were $1,158,167, an
increase of $573,869, or 98.2%, from $584,298 for the fiscal year ended December 31, 2010. In 2011, we incurred $342,398 and $318,616
in clinical cost and activities, respectively, as compared to $0 in 2010 for both.
General and Administrative
Expenses
.
General and administrative expenses for the fiscal year ended December 31, 2011 were $2,220,361, an increase
of $875,971, or 65%, from $1,344,390 incurred in the fiscal year ended December 31, 2010. This increase is primarily due to payroll
related expenses and professional services.
Payroll related expenses
increased to $731,284 in the current year from $413,954 for the fiscal year ended December 31, 2010, an increase of $317,330, or
77%. Payroll related expenses include both cash and non-cash compensation associated with the vesting of restricted stock grants.
The increase in payroll related costs was a result of a full year of payments to our members of the core management team who joined
in June through August of 2010, along with the acceleration of vesting in conjunction with our reverse merger in 2011 of restricted
stock previously issued to our employees.
Professional services
for the fiscal year ended December 31, 2011 totaled $1,121,547, an increase of $440,642, or 65%, over the $680,905 recognized for
the fiscal year ended December 31, 2010. Of professional services, legal fees totaled $373,075 for the fiscal year ended December
31, 2011, an increase of $15,657, or 4.4%, from $357,418 incurred for the fiscal year ended December 31, 2010. Consulting fees
totaled $299,144 for the fiscal year ended December 31, 2011, an increase of $139,903 or 87.9%, from $159,241 for the fiscal year
ended December 31, 2010. The increase was primarily a result of $189,691 in regulatory costs in the fiscal year ended December
31, 2011 compared to $0 in 2010, offset by a reduction in public relations expenses of $45,513. Accounting fees incurred in fiscal
2011 amounted to $243,003, an increase of $145,400, or 149%, from $97,603 incurred in fiscal 2010. The increase included costs
associated with the audit of Tonix Sub's financial statements for the year ended December 31, 2010, review of our interim
financial statements and filings with the SEC related to our recent reverse merger, completed in October 2011.
31
Travel, meals and entertainment
costs for fiscal 2011 were $69,268, an increase of $34,548, or 100%, from $34,720 incurred in fiscal 2010. Travel, meals and entertainment
costs include travel related to medical and life sciences conferences. Rent for fiscal 2011 totaled $128,228, an increase of $85,657,
or 201%, from $42,571 incurred in fiscal 2010, due primarily to the opening of new office space in New York. Depreciation expense
in fiscal 2011 totaled $9,300, an increase of $5,446, or 141%, over the expense of $3,854 incurred in fiscal 2010, as a result
of the purchase of new office computers.
Interest Expense
.
Interest expense for the fiscal year ended December 31, 2011 totaled $91,585, an increase of $55,803, or 156%, from $35,782 incurred
during the fiscal year ended December 31, 2010. In 2011, our interest costs were comprised primarily of amortization of deferred
financing costs in conjunction with the issuance of our secured convertible debentures in October 2011. We incurred an aggregate
of $249,543 in deferred financing costs, of which we amortized $53,377 as interest expense for the fiscal year ended December 31,
2011. In addition, we incurred interest expense related to $500,000 of notes payable and our secured convertible debentures.
Net Loss
.
As a result of the foregoing, net loss for the year ended December 31, 2011 was $3,470,113, compared to a net loss of $1,964,470
for the year ended December 31, 2010.
Three Months Ended September 30, 2012
Compared to Three Months September 30, 2011
Revenues and
Cost of Goods Sold
. We had no revenues or cost of goods sold during the three month periods ended September 30, 2012 and
2011.
Research and
Development Expenses
.
Research and development expenses for the three months ended September 30, 2012 were $658,143, an
increase of $166,119, or 34%, from $492,024 for the three months ended September 30, 2011. The increase in clinical and non-clinical
cost and activities is primarily due to increased development work related to TNX-102 SL, including formulation development, manufacturing,
human pharmacokinetic studies, and market research.
General and Administrative
Expenses
.
General and administrative expenses for the three months ended September 30, 2012 were $1,076,199, an increase
of $553,737, or 106%, from $522,462 incurred in the three months ended September 30, 2011. This increase is primarily due to an
increase in payroll-related expenses, along with increases in investor and public relations expense, travel, meals and entertainment
expense, and related-party consulting agreement expense, offset by decreases in accounting expense, rent, and other professional
fees.
Payroll-related expenses
increased to $554,753 in the current period from $149,936 for the three months ended September 30, 2011, an increase of $404,817,
or 270%, primarily related to stock-based compensation and additional personnel. Payroll-related expenses include both cash and
non-cash compensation associated with restricted stock grants in 2011 of $13,768 and options granted in 2012 of $342,798.
Professional services
for the three months ended September 30, 2012 totaled $334,810, an increase of $59,377, or 22%, over the $275,433 incurred for
the three month period ended September 30, 2011. The increase was primarily a result of $98,101 in investor and public relations
in the three months ended September 30, 2012 compared to $24,675 in 2011. Accounting fees incurred in the three months ended September
30, 2012 amounted to $15,536, a decrease of $27,513, or 64%, from $43,049 incurred in the three months ended September 30, 2011.
The decrease in accounting fees was a result of our public reporting obligations incurred prior to our merger in 2011, as we were
still a private company at that time, although we were in the process of preparing to go public. Legal fees totaled $76,279 for
the three months ended September 30, 2012, a decrease of $23,998, or 24%, from $100,277 incurred for the three months ended September
30, 2011. The decrease in legal fees is due to legal expenses incurred when we were a private company preparing for our merger
in 2011, offset by expenses related to SEC filings. Other professional fees totaled $100,304 for the three months ended September
30, 2012, a decrease of $7,128 or 7%, from $107,432 for the three months ended September 30, 2011.
Travel, meals and entertainment
costs for three months ended September 30, 2012 were $19,375, an increase of $4,592, or 31%, from $14,783 incurred in the three
months ended September 30, 2011. Travel, meals and entertainment costs primarily include travel to contractors and consultants
engaged in research and development activities related to TNX-102 as well as travel related to investor relations activities.
32
Rent for three months
ended September 30, 2012 totaled $28,595, a decrease of $1,765, or 6%, from $30,360 incurred in the three months ended September
30, 2011. Depreciation expense in the three months ended September 30, 2012 totaled $4,076, an increase of $1,722, or 73%, over
the expense of $2,354 incurred in the three months ended September 30, 2011, as a result of the purchase of new office computers.
Interest and
Other Financing Costs
. Interest income for the three months ended September 30, 2012 totaled $440, an increase of $432
from $8 income earned during the three months ended September 30, 2011. The increase was a result of having significantly more
cash on hand during the quarter ended September 30, 2012.
Net Loss
.
As a result of the foregoing, net loss for the three months ended September 30, 2012 was $1,732,027, compared to a net loss of
$1,014,478 for the three months ended September 30, 2011, an increase of $717,549, or 71%.
Nine Months Ended September 30, 2012
Compared to Nine Months September 30, 2011
Revenues and
Cost of Goods Sold
. We had no revenues or cost of goods sold during the nine month periods ended September 30, 2012 and
2011.
Research and
Development Expenses
.
Research and development expenses for the nine months ended September 30, 2012 were $1,883,559, an
increase of $1,249,063, or 197%, from $634,496 for the nine months ended September 30, 2011. The increase in clinical and non-clinical
cost and activities is primarily due to increased development work related to TNX-102, including formulation development, manufacturing,
human and animal pharmacokinetic studies, and market research.
General and Administrative
Expenses
.
General and administrative expenses for the nine months ended September 30, 2012 were $2,862,085, an increase
of $1,612,585, or 129%, from $1,249,500 incurred in the nine months ended September 30, 2011. This increase is primarily due to
payroll-related expenses, professional services, travel, meals and entertainment expense, and marketing related expenses.
Payroll-related expenses
increased to $1,350,267 in the current period from $442,924 for the nine months ended September 30, 2011, an increase of $907,343,
or 205%. Payroll-related expenses include both cash and non-cash compensation associated with the restricted stock grants in 2011
of $139,063 and options granted in 2012 of $571,330. The increase in payroll-related costs was a result of headcount increases,
salary increases and bonuses to our core management team along with the increase in stock based compensation. Upon closing of the
private placement financing in January 2012, the salaries for our core management team were increased, and one-time bonuses were
paid.
Professional services
for the nine months ended September 30, 2012 totaled $942,665, an increase of $367,323, or 64%, over the $575,342 incurred for
the nine month period ended September 30, 2011. The increase was primarily a result of $290,544 in investor and public relations
activities in the nine months ended September 30, 2012 compared to $60,878 in 2011, an increase of $229,666, or 377%. Legal fees
totaled $253,961 for the nine months ended September 30, 2012, an increase of $65,292, or 35%, from $188,669 incurred for the nine
months ended September 30, 2011. The increase related to filings with the SEC, as we were a private company during the nine months
ended September 30, 2011, as well as to the preparation and filing of patent applications. Accounting fees incurred in the nine
months ended September 30, 2012 amounted to $149,417, an increase of $41,319, or 38%, from $108,098 incurred in the nine months
ended September 30, 2011. The increase in accounting fees was a result of our public reporting obligations, which we did not have
in 2011 as we were still a private company at that time although we were in the process of preparing to go public. Other professional
fees totaled $204,155 for the nine months ended September 30, 2012, an increase of $40,232 or 25%, from $163,923 for the nine months
ended September 30, 2011.
Travel, meals and entertainment
costs for nine months ended September 30, 2012 were $84,507, an increase of $47,143, or 126%, from $37,364 incurred in the nine
months ended September 30, 2011. Travel, meals and entertainment costs include travel to contractors and consultants engaged in
research and development activities related to TNX-102 as well as travel related to investor relations activities.
33
Marketing related expenses
for the nine months ended September 30, 2012 were $212,401, an increase of $179,816, or 452%, from $32,585 incurred in the nine
months ended September 30, 2011. The increase in marketing is primarily due to $167,954 invested in market research in current
period compared to $1,890 during the same period, last year.
Rent for nine months
ended September 30, 2012 totaled $88,138, a decrease of $9,730, or 10%, from $97,868 incurred in the nine months ended September
30, 2011. Depreciation expense in the nine months ended September 30, 2012 totaled $10,192, an increase of $3,246, or 47%, over
the expense of $6,946 incurred in the nine months ended September 30, 2011, as a result of the purchase of new office computers.
Other general expenses
for the nine months ended September 30, 2012 were $136,147, an increase of $99,314, or 277%, from $35,833 incurred in the nine
months ended September 30, 2011. Other general expenses are comprised of office operations, conventions and other administrative
expenses. The increase primarily were financial reporting expenses associated with a public entity of $31,883 and conventions of
$42,049 incurred in the current period as compared to $-0- and $9,404 during the same period, last year.
Interest and
Other Financing Costs
. Interest income (expense) for the nine months ended September 30, 2012 totaled $(899,909), a decrease
of $(899,961) from $52 income earned during the nine months ended September 30, 2011. In 2012, our interest costs were comprised
primarily of amortization and write-off of $196,166 of deferred financing costs related to the issuance of our secured convertible
debentures in October 2011, allocated offering costs of $270,743 charged to interest as part of a financing and the fair value
of $426,153, net with prior period accrual, of common stock and warrants issued to convertible debentures holders in connection
with the conversion to a financing. In addition, we incurred interest expense related to our convertible debentures.
Change in fair
value of warrant liability.
In connection with our January and March 2012 financing, we issued warrants that contained
certain reset provisions. As such, we were required to record the fair value as a liability and mark to market each reporting period.
In June 2012, upon the effectiveness of our registration statement, these reset provisions expired. Therefore we adjusted the fair
value of the warrants from their initial issuance in January and March 2012, charged operations for the increase in fair value
of $1,177,026 and reclassified the fair value of warrants to equity.
Net Loss
.
As a result of the foregoing, net loss for the nine months ended September 30, 2012 was $6,820,705, compared to a net loss of $1,883,944
for the nine months ended September 30, 2011, an increase of $4,936,761, or 262%.
Liquidity and Capital Resources
As of September 30,
2012, we had a working capital deficit of $758,068, comprised primarily of cash of $35,653 and prepaid expenses of $43,076, which
was offset by $697,383 of accounts payable and $136,303 of accrued expenses. For the nine months ended September 30, 2012, we used
$4,207,624 of cash in operating activities. Cash provided by financing activities totaled $4,237,894 from the sale of shares of
capital stock and warrants of $4,387,894, net with repayments of our convertible debentures of $150,000. In the comparable 2011
period, $612,000 was raised through the sale of shares of capital stock and $500,000 through issuance of convertible debentures.
At September 30, 2012, we had cash of $35,653 compared to $41,123 at December 31, 2011. Our cash is held in bank deposit accounts.
At September 30, 2012 and December 31, 2011, we had nil and $2,075,000 of secured convertible debentures outstanding, respectively.
Cash used in operations
for the nine months ended September 30, 2012 and 2011 was $4,207,624 and $1,170,873, respectively, which represent cash outlays
for research and development and general and administrative expenses in such periods. Increase in cash outlays principally resulted
from manufacturing, pre-clinical, and clinical cost and activities, regulatory cost, payroll and rent.
34
Cash used in investing
activities for the nine months ended September 30, 2012 was $35,740 compared to cash provided by investing activities of $347 in
the nine months ended September 30, 2011. In the nine month periods ended September 30, 2012 and 2011, we purchased office furniture
and computer equipment of $35,673 and $2,764, respectively.
In their report dated
March 30, 2012, our independent registered public accounting firm stated at December 31, 2011, there is substantial doubt about
our ability to continue as a going concern. Our ability to continue as a going concern is an issue raised due to our net losses
and negative cash flows from operations since inception and our expectation that these conditions will continue for the foreseeable
future. In addition, we will require additional financing to fund future operations. Further, we do not have any commercial products
available for sale and have not generated revenues and there is no assurance that if approval of our products is received that
we will be able to generate cash flow to fund operations. In addition, there can be no assurance that our research and development
will be successfully completed or that any product will be approved or commercially viable. Our ability to continue as a going
concern is subject to our ability to obtain necessary funding from outside sources, including obtaining additional funding from
the sale of our securities, obtaining loans from various financial institutions or being awarded grants from government agencies,
where possible. Our continued net operating losses increase the difficulty in meeting such goals and there can be no assurances
that such methods will prove successful.
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. We expect that our general and administrative expenses will increase in the future as we
expand our business development, add infrastructure and incur additional costs related to being a public company, including incremental
audit fees, investor relations programs and increased professional services.
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 believe our existing cash will be sufficient to fund our operating
expenses and capital equipment requirements for the next six months. We anticipate we will need approximately $2,000,000 in addition
to our current cash to fund our operating expenses and capital equipment requirements for the next 12 months. We will have to raise
additional funds to continue our operations and, while we have been successful in doing so in the past, there can be no assurance
that we will be able to do so in the future. Our continuation as a going concern is dependent upon our ability to obtain necessary
additional funds to continue operations and the attainment of profitable operations.
We presently do not
have any available credit, bank financing or other external sources of liquidity. Due to our history and historical operating losses,
our operations have not been a source of liquidity. We will need to obtain additional capital in order to expand operations and
fund 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, stockholders 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 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.
March 2012 Private Placement
Between January and
March, 2012, we consummated a private placement financing transaction (the "March 2012 Financing") pursuant to which
we issued an aggregate of 264.7106 units (the "March 2012 Units") to certain investors for aggregate cash proceeds
of $4,692,765 and the exchange of $1,925,000 in previously issued debentures that were converted into March 2012 Units.
35
Each March 2012 Unit
had a purchase price of $25,000 per March 2012 Unit and consisted of twenty five thousand (25,000) shares of our Common Stock,
a Class A warrant to purchase twenty five thousand (25,000) shares of common stock (the "March 2012 Class A Warrants"),
and a Class B warrant to purchase up to twenty five thousand (25,000) shares of common stock (the "March 2012 Class B Warrants"
and together with the March 2012 Class A Warrants, the "March 2012 Warrants").
The March 2012 Class
A Warrants have an exercise price of $1.25 per share of Common Stock and will be exercisable for a period of five years from the
date of issuance. The March 2012 Class B Warrants expired unexercised effective April 24, 2012.
In connection with
the March 2012 Financing, we paid Dawson James Securities, Inc., a FINRA registered broker-dealer ("Dawson James")
a cash payment of $466,777, which represented an 8% commission and a 2% non-accountable expense allowance of the gross proceeds
delivered by investors in the March 2012 Financing. In addition, Dawson James earned warrants to purchase 466,777 shares of Common
Stock (the "March 2012 Agent Warrants"), which have an exercise price of $1.25 per share of common stock, will be exercisable
for a period of seven years, contain customary anti-dilution protection and are entitled to piggy-back registration rights.
2012 Promissory Notes
Between October and
November 2012, we issued promissory notes in the amount of $320,000 (the "Notes") in exchange for $320,000 borrowed
from six affiliated investors. The Notes bear no interest and were payable on demand.
2012 Bridge Financing
On November 14, 2012,
we sold to accredited investors for aggregate cash proceeds of $390,000, convertible debentures (the "Debentures")
in the principal face amount of $390,000 and the exchange of the Notes for Debentures in the principal face amount of $320,000.
The Debentures mature
on the earlier of (i) November 14, 2013 or (ii) the date of closing of a private placement of equity, equity equivalent, convertible
debt or debt financing in which we receive gross proceeds, in one or more transactions, of at least $100,000 (a "Subsequent
Financing"). The Debentures bear interest at 8% per annum and are convertible at the holder's option into either (i)
a Subsequent Financing at a price equal to a 25% discount to the price of securities sold in the Subsequent Financing or (ii) shares
of our common stock at a conversion price per share equal to $1.00.
December 2012 Private Placement
In December 2012, we
consummated the December 2012 Financing, pursuant to which we issued an aggregate of 8,904,167 Units to the Purchasers for aggregate
cash proceeds of $2,615,000, at a price per Unit of $0.40, and the exchange of $710,000 in Debentures of the Company that were
converted into Units at a price of $0.30 per Unit. The December 2012 Financing satisfied the requirements for the Subsequent Financing
discussed above.
Each Unit consisted
of one share of Common Stock, a Class A Warrant to purchase one share of Common Stock and a Class B Warrant to purchase one share
of Common Stock. The Class A Warrants have an exercise price of $0.60 per share of Common Stock and will be exercisable for a period
of five years from the date of issuance. The Class A Warrants may be exercised on a cashless basis under certain circumstances.
The Class B Warrants have an exercise price of $0.40 per share of Common Stock and will be exercisable for a period of one year
from the date of issuance.
36
In connection with
the December 2012 Financing, we paid Kema Partners a cash payment of $70,000, which represented a 7% commission of the gross proceeds
delivered by Purchasers introduced by Kema Partners in the December 2012 Financing.
Other
In July 2011, we entered
into a contract with a contract research organization, or CRO, to investigate the feasibility of developing a new, proprietary
formulation of CBP at a cost of $58,080. In August 2011, we authorized the initiation of formulation work and manufacturing of
TNX-102 gelcap for clinical trials pursuant to a contract with Lipocine with respect to a research and development project for
reformulation work on our leading products for a fee of $235,000. In September 2011, we entered into a contract with a CRO, Pharmanet
Canada, for contract research work with respect to a pharmacokinetic study for TNX-102 gelcap. The full cost of the work to be
performed is $637,231. Payment is due in four installments based on the achievement of certain performance milestones. In October
2011, we entered into an agreement with another CRO to develop, and perform an exploratory non-clinical pharmacokinetic study on,
a new formulation of CBP for an approximate cost of $180,000.
In December 2011, we
entered into an agreement with a public relations firm to provide news media placement and political intelligence from January
2012 through June 2012 for a total cost of $60,000, but subsequently amended the agreement to cover the period May 2012 through
October 2012. In April 2012, we entered into an agreement with a CMO to formulate and manufacture TNX-102 SL drug material for
clinical testing at a cost of $93,000. In May and June 2012, we entered into five contracts with a CMO to develop and manufacture
sublingual formulations of CBP and related compounds for an approximate total cost of $335,000. Payment is due in four installments
in four of these contracts, and is due in five installments in one contract. In May 2012, we entered into a contract with a CRO
to perform an exploratory pharmacokinetic study, which evaluated TNX-102 SL, at a cost of $283,000, with payment due in three installments.
In May 2012, we entered into an agreement with an investor relations firm to provide investor relations services, at a cost of
$50,000 to be paid in four equal monthly installments. In September 2012, we entered into a contract with a CRO to perform technology
transfer of manufacturing and formulation at a cost of $44,500, with payment due in two installments. In September 2012, we entered
into a contract with a CMO to perform analytical work on TNX-102 SL at an approximate cost of $95,000, with payment due in three
installments.
Transactions with Related Parties
Dr. Seth Lederman,
our Chief Executive Officer and Chairman of the Board, and Dr. Donald Landry, one of our directors, are the primary founders of
Tonix Sub. We have entered into various transactions with several companies under their control, including L&L Technologies,
Plumbline, Targent Pharmaceuticals, LLC and Lederman & Co. In 2010, we entered into a two-year consulting agreement with Lederman
& Co. for clinical development, strategic, management and operational consulting services. Lederman & Co. received $250,000
per annum for its services, until August 1, 2011, when it received $127,000 per annum until such time as we closed on the 2012
Financing. We first closed on the 2012 Financing in January 2012, and effective February 1, 2012, Lederman & Co. receives $250,000
per annum for its services. The consulting agreement renews automatically for subsequent terms of one year at $250,000 per annum.
In January 2012, the related party companies received interest on the convertible notes in the aggregate amount of $6,183.
In connection with
the March 2012 Financing, related party convertible debenture holders received an aggregate of 84,150 shares of common stock and
10,000 warrants to purchase the Company's common stock at an exercise price of $1.00 for three years (see Note 10 on page F-28).
Upon exchange of debentures for units in the March 2012 Financing, related party debenture holders received an aggregate of 275,000
shares of the Company's common stock, 275,000 March 2012 Class A Warrants and 275,000 March 2012 Class B Warrants (see Note 10
pn page F-28).
37
Stock Compensation
In February 2012, we
approved the 2012 Incentive Stock Options Plan ("2012 Plan"). The 2012 Plan provides for the issuance of options to
purchase up to 4,000,000 shares of our common stock to officers, directors, employees and consultants. Under the terms of the 2012
Plan, we may issue Incentive Stock Options, as defined by the Internal Revenue Code, and nonstatutory options. The Board of Directors
determines the exercise price, vesting and expiration period of the options granted under the 2012 Plan. However, the exercise
price of an Incentive Stock Option must be at least 100% of fair value of the common stock at the date of the grant (or 110% for
any stockholder that owns 10% or more of our common stock). The fair market value of the common stock determined based on quoted
market price or in absence of such quoted market price, by the Board of Directors in a good faith. Additionally, the vesting period
of the grants under the 2012 Plan should not be more than five years and expiration period not more than ten years. We reserved
4,000,000 shares of our common stock for future issuance under the terms of the 2012 Plan. In May 2012, we issued options to purchase
3,500,000 shares of common stock pursuant to the 2012 Plan, with such options vesting 1/3
rd
on May 9, 2013 and 1/36
th
on the 9
th
of each month thereafter for 24 months, having an exercise price of $1.50 and expiring 10 years from date
of issuance.
Lease Commitments
In September 2010,
we entered into a five-year lease for office space in New York City, with monthly payments escalating from approximately $10,000
in the first year to approximately $11,000 in the fifth year. The Company received a rent credit of $9,420 in each of the months
of November 2010, December 2010 and January 2011. We issued a letter of credit in the amount of approximately $60,000 for the benefit
of the landlord, which is collateralized by a money market account. Our future minimum lease payments under the operating lease
are as follows:
Year Ending December 31,
2013
$
127,889
2014
131,513
2015
100,719
$
360,121
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 of America. 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.
Research and Development
.
Tonix outsources its research and development efforts and expenses 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.
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. Restricted stock payments to nonemployees are recognized as an expense
over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is
reached or the date performance is completed. In addition, for awards that vest immediately and are nonforfeitable, the measurement
date is the date the award is issued.
38
Income Taxes
.
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit
carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting
amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income
tax assets if it is not more likely than not that these deferred income tax assets will be realized. The Company recognizes a tax
benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination
by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial
statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement.
Recent Accounting Pronouncements
There were various
updates recently issued, most of which represented technical corrections to the accounting literature or application to specific
industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations
or cash flows.
39
BUSINESS
Corporate Structure
We were incorporated
on November 16, 2007 under the laws of the State of Nevada as Tamandare Explorations Inc. From inception through October 2011,
we were involved in the acquisition, exploration and development of natural resource properties in the State of Nevada. On October
7, 2011 ("Closing Date" and the closing of the share exchange transaction, the "Closing"), we executed
and consummated a share exchange agreement by and among Tonix Sub and the stockholders of 100% of the equity securities of Tonix
Sub, including, the holders of 5,207,500 shares of common stock, 1,500,000 shares of Series A Preferred Stock and 2,275,527 shares
of Series B Preferred Stock (the "Tonix Shareholders"), on the one hand, and us and David Moss ("Moss"),
our then sole officer and director and majority shareholder, on the other hand (the "Share Exchange Agreement" and
the transaction, the "Share Exchange").
In the Share Exchange,
the Tonix Shareholders exchanged their shares of Tonix Sub for newly issued shares of our common stock ("Common Stock").
As a result, upon completion of the Share Exchange, Tonix Sub became our wholly-owned subsidiary.
Upon completion of
the Share Exchange, the Tonix Shareholders received an aggregate of 22,666,667 shares of our Common Stock. Moss returned 1,500,000
shares of Common Stock to us, which were retired, and our existing stockholders retained 4,000,000 shares of Common Stock. The
22,666,667 shares issued to the Tonix Shareholders constituted approximately 85% of our 26,666,667 issued and outstanding shares
of Common Stock post-Closing.
As a result of the
Share Exchange, we acquired 100% of the capital stock of Tonix Sub and consequently, control of the business and operations of
Tonix Sub and Krele. From and after the Closing Date of the Share Exchange, our primary operations consist of the business and
operations of Tonix Sub and Krele.
On October 11, 2011,
we changed our name to Tonix Pharmaceuticals Holding Corp. to reflect our new business.
Corporate Background
In 1996, Seth Lederman,
MD, and Donald Landry, MD, PhD, formed L&L to develop medications for CNS conditions. Dr. Lederman is our Chairman and Chief
Executive Officer and Dr. Landry is a Director. L&L was a founder of Janus Pharmaceuticals, Inc., which later became Vela Vela,
which developed various therapeutics, including a VLD version of CBP under an agreement with L&L. Vela decided to focus its
resources on other programs and transferred the rights in VLD CBP and certain other technologies to L&L in March 2006.
Tonix Sub formed in
June 2007 as Krele Pharmaceuticals, Inc. by L&L and Plumbline. Dr. Lederman is managing partner of Plumbline. Plumbline possessed
rights to certain technology for the treatment of alcohol dependence and abuse. In connection with founding Tonix Sub, L&L
and Plumbline entered into an intellectual property transfer and assignment agreement with Tonix Sub for the purpose of assigning
patents and transferring intellectual property and know-how in exchange for shares of common stock of Tonix Sub. As a result of
economic conditions related to the financial crisis of 2007 and 2008, Tonix Sub was not successful in raising money to fund its
programs until 2009. As a result, Tonix Sub was unable to advance the development programs and had little activity except for prosecuting
and maintaining patents and maintaining contracts.
In 2009, Tonix Sub
contracted with the Toronto Psychiatric Research Foundation to analyze the sleep data from the Moldofsky Study, who were treated
with bedtime VLD CBP or placebo. The Moldofsky Study was conducted in Canada by the Toronto Psychiatric Research Foundation, and
Tonix Sub obtained the data from this study from L&L. In addition, in 2009, Tonix Sub contracted with Caliper to analyze the
interactions of CBP with certain receptors. In June 2010, Tonix Sub entered into consulting agreements with L&L and Lederman
& Co and also acquired certain rights to develop isometheptene mucate as a treatment for certain types of headaches from Lederman
& Co., which we are developing as TNX-201. Dr. Lederman is managing partner of Lederman & Co. Between June 2010 and October
2011, Tonix Sub was active in recruiting new officers and directors and initiating preclinical and clinical development of novel
CBP formulations.
40
Lederman & Co predominantly
provides us with clinical development expertise. L&L predominantly provided us with scientific development expertise until
the termination of the consulting agreement in June 2012. Relative to traditional pharmaceutical development companies, we can
be considered a virtual company, since we contract with third-party vendors to provide many functions that are core to traditional
pharmaceutical companies. For example, we have contracted with PharmaNet Canada to develop methods for analyzing CBP in the blood
and to conduct human clinical studies to evaluate the performance of our formulation technology. Lederman & Co is responsible
for overseeing the scientific and technical aspects of PharmaNet's contract work product.
In July 2010, Tonix
Sub changed its name to Tonix Pharmaceuticals, Inc. In August 2010, Tonix Sub formed Krele.
Business Overview
We are a specialty
pharmaceutical company focused on developing novel pharmaceutical products for challenging disorders of the CNS. We search for
potential therapeutic solutions among known pharmaceutical agents that lack regulatory approval for the indications we seek, but
may be approved for use in other indications. The ongoing evolution in the understanding of certain CNS disorders provides us with
opportunities to develop such agents as proprietary products for new indications. We typically seek to create new dose and formulation
options that are tailored to the therapeutic uses to which we apply these agents.
Many CNS drugs have
been identified by physicians who observe unexpected improvements in their patients' CNS conditions despite being prescribed
for a different purpose. One of our goals is to establish formal clinical study programs to determine if such anecdotal observations
are, in fact, reflections of a compound's ability to treat a particular CNS condition. While some new applications can use
the commercially-available form of a given drug, in other cases, reformulating the active ingredient may improve the active ingredient's
safety or effectiveness in treating the condition. If we demonstrate success in our formal development programs, we will seek marketing
approval from the FDA.
We are currently devoting
the majority of our efforts to the development of our lead product candidate, TNX-102 SL. TNX-102 SL is a novel dose and formulation
of CBP, the active pharmaceutical ingredient of two widely prescribed muscle relaxant products, Flexeril and Amrix. TNX-102 SL
is distinct from these products as it is being developed at a dose level significantly below the lowest marketed doses of Flexeril
and Amrix. TNX-102 SL is also distinct from these products with regard to its route of administration, as it is designed to be
placed under the tongue and disintegrated to provide sublingual absorption, whereas Flexeril and Amrix are designed to be swallowed.
TNX-102 SL is also intended for chronic use, whereas Flexeril and Amrix are marketed for two to three weeks of use. We are currently
developing TNX-102 SL for the treatment of FM under an IND and under three CTAs filed in Canada. We are also developing TNX-102
SL for the treatment of PTSD for which we held a pre-IND meeting in October 2012. We expect that any applications we submit for
FDA approval of TNX-102 SL will be submitted under Section 505(b)(2) of FDCA, which we believe will allow for a shorter timeline
of clinical development as compared to that needed to fulfill the requirements of Section 505(b)(1), under which NCEs are generally
reviewed.
TNX-102 SL is a small,
rapidly disintegrating tablet containing CBP for sublingual administration at bedtime. We designed TNX-102 SL to enable the efficient
delivery of CBP to the systemic circulation via sublingual transmucosal absorption and to avoid first-pass liver metabolism. We
also designed TNX-102 SL to provide CBP at doses lower than those currently available. We have conducted several clinical and pre-clinical
pharmacokinetic studies of TNX-102 SL which we believe support its development as a novel therapeutic product for FM and PTSD,
and which demonstrate a number of potentially advantageous characteristics as compared to current CBP-containing products, none
of which are approved for these indications. Based on our Phase 1 comparative study, we have observed that, as compared to oral
CBP tablets, TNX-102 SL results in faster systemic absorption and significantly higher plasma levels of CBP in the first hour following
administration. TNX-102 SL was generally well-tolerated, with no serious adverse events reported in this study. Some subjects experienced
transient numbness on the tongue after TNX-102 SL administration, and other side-effects reported were similar to those associated
with current CBP products.
41
Based on these promising
results, we are advancing TNX-102 SL for the management of FM. We believe that TNX-102 SL could be approved by the FDA for the
treatment of FM following two adequate, well-controlled safety and efficacy studies and, if required, a long-term safety exposure
study that, together, would confirm the safety and efficacy of TNX-102 SL in a sufficient number of FM patients to satisfy the
approval requirements under Section 505(b)(2). New drug products based on novel active ingredients, approved under Section 505(b)(1),
need significantly more clinical studies, e.g. drug-drug interaction, special population pharmacokinetic, and long-term safety
exposure studies, than will be required for TNX-102 SL. Under the IND, we plan to initiate a potential pivotal efficacy trial in
the first half of 2013 that will evaluate this candidate in FM. A Type B Pre-Phase 3 meeting has been scheduled with the FDA in
February 2013, at which we plan to discuss the design of the clinical program, including the acceptability of the pivotal study
design and the proposed registration plan, to support the approval of TNX-102 SL for the management of FM.
We are also advancing
TNX-102 SL for the management of PTSD. We held a pre-IND meeting with the FDA in October 2012, and we plan to file an IND for this
indication in the first half of 2013. We then plan to conduct a clinical proof-of-concept trial of TNX-102 SL in PTSD in the second
half of 2013.
CBP is the active pharmaceutical
ingredient in our lead product candidate, TNX-102 SL. We are utilizing drug delivery technology to produce new formulations. In
addition to CBP, TNX-102 SL contains excipients, which are well-characterized, are listed in the IIG, and are approved for pharmaceutical
use. As a result, we anticipate seeking FDA marketing approval of TNX-102 SL through a 505(b)(2) NDA. As one of three types of
new drug applications, the 505(b)(2) NDA allows drug companies to obtain FDA approval of new drug products without having to conduct
the full complement of safety and efficacy trials, which is often the most time-consuming and expensive part of the drug development
process. As the 505(b)(2) NDA permits the drug manufacturer to rely on the agency's findings for a previously-approved drug,
published literature, or both, it permits the FDA to make some safety and effectiveness determinations through the review of materials
in the public domain or in already approved NDAs of products containing CBP. The 505(b)(2) regulatory pathway would spare us some
of the burden of generating all of this data for ourselves and may allow TNX-102 SL to progress through a shorter development pathway
than is typical for pharmaceutical products based on novel active ingredients. We have not filed an NDA for TNX-102 SL for any
indications.
In addition to TNX-102
SL, we have developed other innovative formulations of CBP, including TNX-102 gelcap. We have developed TNX-102 gelcap under an
agreement with Lipocine, a contract formulation developer and small-scale manufacturer. Although we had met with the FDA to discuss
the TNX-102 gelcap development program in August 2011 and we have generated clinical data that support the further development
of TNX-102 gelcap, we currently do not plan to advance this candidate.
We also have a pipeline
of other product candidates, including TNX-201 and TNX-301. TNX-201 is based on isometheptene mucate and is under development as
a treatment for certain types of headaches. For competitive reasons, we do not disclose the identities of the active ingredients
or targeted indications in our pipeline until a U.S. patent has been allowed or issued. Consistent with our mission, these product
candidates are or likely will be reformulations of active ingredients that have been used in humans in other products and that
are designed for new CNS therapeutic indications.
In other cases, the
products will be formulated to match predicate products closely enough to be considered generic copies or similarly enough to other
marketed products to rely (in part) on their regulatory review and approval, as well as available published data. The predicate
product may be approved by the FDA under an NDA or may have been reviewed for safety and effectiveness by the National Academy
of Sciences under the DESI program, in which case they would be considered by FDA to be "unapproved products". For
DESI products, it is our intent to develop NDA versions to meet cGMP and the ICH requirements to seek approval under the 505(b)(2)
regulatory pathway.
Because of our size
and being in the development stage, we do not currently devote a significant amount of time or resources towards our other pipeline
candidates. We anticipate that sometime in 2013 we will begin developing formulations for TNX-201 and possibly TNX-301, but do
not expect to start clinical trials until 2014 at the earliest.
42
The process of taking
a new drug formulation from concept through testing to approval for a new indication by the FDA is a time-consuming, costly and
a high-risk process. Once a drug formulation has been tested in laboratories, we need to conduct clinical trials of the product
candidate to test its uptake into the blood stream, elimination, effectiveness and safety. Neither laboratory nor animal studies
predict the properties of drugs in humans, so designing new formulations can result in a large number of unexpected outcomes. The
Phase 1 studies are performed by administering new drug formulations to a limited number of healthy human volunteers and are designed
to test the initial concept of the drug formulation and to determine the correct dosage to be tested subsequently on patients affected
with the target disorder. The initial Phase 1 studies can take up to a year to complete, however, since we reformulate versions
of approved drugs for new uses, we may need to devote less time to Phase I studies since our testing is informed by significant
prior human research that we believe allows us to reduce the possible safety-related outcomes. The next step in the process is
to conduct a proof-of-concept efficacy study to identify the effective dose(s). A small Phase 2a efficacy study in the representative
patient population will be done either using a pilot formulation or the formulation selected for further development. A larger
study in which the selected formulation has been optimized for the target indication can be referred to as a first pivotal study,
a Phase 2b study or a Phase 3 study. If the results of this study are positive and are accepted by the FDA as fulfilling the requirements
of a registrational study, then it may be considered to be one of the two pivotal studies typically required for drug approval.
The first pivotal study for a condition like FM typically takes a year to complete and then two to three months to interpret the
data, but we believe we will be able to conduct our first pivotal study of TNX-102 SL in less time due to the nature of the trial
design. If the first pivotal study suggests the drug is safe and effective, then a second pivotal Phase 3 study is conducted. The
second pivotal study in FM typically takes 18 months to complete if no additional long-term safety exposure data are necessary
for an NDA filing. After the second pivotal study is completed, and if the results are deemed a success, we would submit an NDA
to the FDA seeking approval of the new drug product. We believe it would take approximately six months to prepare and file the
NDA and another 14 months for FDA approval. The drug could be marketed shortly after FDA approval. Therefore, it typically takes
more than five years to bring a new formulation of a drug to market for a new indication, and any delays in the process, such as
lack of capital necessary to run clinical trials, unexpected results, adverse effects, or difficulty in recruiting willing subjects
for trials, would result in additional time before a drug could be approved for marketing.
In August 2010, we
formed Krele to commercialize products that are generic versions of predicate NDA products. We anticipate that when our branded
products lose patent protection, Krele may market authorized generic versions of them. Krele also may develop or acquire generic
products approved under ANDAs and we may market branded versions (branded generics) of such products. Krele has been issued a state
license in New York.
Our Strategy
Our objective is to
develop and commercialize our product candidates to treat CNS conditions, including FM and PTSD. The principal components of our
strategy to achieve this objective are to:
·
pursue development and regulatory approval pathways by reformulating versions of approved drugs for new uses and by using the Section 505(b)(2) regulatory pathway for NDA approval;
·
adopt a multi-pronged patent strategy to protect our products, including patents which protect methods of use for the active ingredients in our products, the formulation technology employed in our products, and the performance characteristics of our products in the human body;
·
provide clear value propositions to third-party payers, such as managed care companies or government programs like Medicare, to merit reimbursement for our product candidates; and
·
enter into collaborations with other pharmaceutical companies with respect to, among others, our FM and PTSD product candidates and other products that will benefit from development or marketing resources beyond those in our Company.
43
Pursue development
and regulatory approval pathways
. We believe our lead product candidates may be approvable under pathways that are potentially
shorter than those typically available for drug products based on novel active ingredients (Section 505(b)(1)). By focusing on
developing new formulations of approved drugs for new uses, we believe that we will be able to use the Section 505(b)(2) regulatory
pathway for NDA approval. This pathway can reduce the time and expense required for our development programs by allowing our use
of previously-generated safety and efficacy information regarding the active pharmaceutical ingredients in our lead product candidates
to support the filing and approval of our NDA application. Doing so may help reduce the size and scope of our preclinical and clinical
trials. The FDA has strict requirements on the marketing of drugs, and FDA approves each drug for specific uses which are called
the label indications. The use of a drug product for the treatment of a condition other than one of its approved label indications
is called off-label use. The development of an existing FDA-approved drug for the treatment of a condition other than one of its
approved label indications is considered a "new use". For companies involved in the ethical development and marketing
of prescription drugs in the US, FDA approval of a new use or new label indication is the only legal basis of marketing claims
for that use or indication. Off-label use is not recognized by the FDA or FDA-regulated companies as a new use.
Adopt a multi-pronged
patent strategy.
We are pursuing a multi-pronged patent strategy by seeking intellectual property protection on several aspects
of our products. Aspects we seek to protect include, among others, methods of use for certain known active pharmaceutical ingredients,
formulation technologies incorporated into our products, and performance characteristics of our products in the human body. With
respect to methods of use patents, we believe the therapeutic uses we target are new uses for these active ingredients and we have
been issued patents directed to certain aspects of our new uses. For example, the invention of bedtime VLD CBP as a treatment for
FM was novel and unexpected when our patents were filed in 2000. We are seeking additional patents to cover other new uses. For
example, we filed a patent application seeking to protect the use of CBP in PTSD. With respect to formulation patents, we believe
our products will be protected by patents that describe inventions of technology for making new formulations, which may include
novel routes of delivery for the active ingredients. With respect to patents related to the performance characteristics of our
products in the human body, we believe our products will be protected by patents that describe novel pharmacokinetic properties
of the active ingredient, as well as of its active metabolites, at certain times after administration. For example, we filed a
patent application seeking to protect novel pharmacokinetic properties of CBP as enabled by TNX-102 SL.
Provide clear value
propositions to third-party payors to merit reimbursement for our product candidates
. We are designing our clinical development
programs to demonstrate compelling competitive advantages to patients and prescribers and also to demonstrate value propositions
to third-party payors. We believe TNX-102 SL might help in the management of FM by reducing pain and other symptoms, such as fatigue.
In addition, we believe that bedtime treatment with TNX-102 SL will have fewer day time side-effects than off-label bedtime treatment
with immediate release CBP. For FM, we believe an FDA-approved product would capture some of the off-label use of generic CBP.
Because FDA approvals are based on objective data, we believe that third-party payors will provide reimbursement for an FDA approved
product, even at a premium price relative to other drugs that are used off-label, such as immediate-release CBP, tizanidine, baclofen,
carisoprodol or metaxalone. For example, third-party payors reimburse the use of Lyrica® and Cymbalta® for FM despite the
availability of off-label generic versions of drugs with similar mechanisms of action, for example, Neurontin® (gabapentin)
and generic anti-depressants, respectively.
Enter into collaborations
to maximize the value of our technology
. We believe certain of our drug development candidates, including TNX-102 SL, can be
developed and marketed more effectively by companies that already have significant drug development and marketing capabilities.
We will seek to enter into collaborations with pharmaceutical or biotechnology companies for the commercialization of these product
candidates at the times we believe most effective.
Our Lead Product Candidates
Our lead product candidate
is TNX-102 SL, for the treatment of FM and PTSD. TNX-102 SL consists of CBP in a mixture of inactive ingredients that are called
"excipients", which we believe will improve the absorption rate of CBP in ways that will optimize the product for bedtime
treatment. The excipients used in TNX-102 SL are approved by the FDA for pharmaceutical uses.
44
Cyclobenzaprine
CBP was first synthesized
in 1961 by Merck, and the 10 mg Flexeril immediate-release dose form was FDA approved in 1977 for the relief of muscle spasm associated
with acute, painful musculoskeletal conditions as an adjunct to rest and physical therapy.
Although a number of
clinical studies have addressed the potential use and benefit of CBP in treating symptoms of FM, to our knowledge these studies
have not motivated a sponsor to pursue FDA approval.
Based on CBP's
safety and efficacy for treating muscle spasm, in the 1990s, Merck conducted studies to support an application to market a 5 mg
Flexeril tablet (low dose) for the over-the-counter, or OTC, market, whereby patients can purchase medicine without a physician's
prescription. Although Merck's studies re-affirmed the safety and demonstrated efficacy of 5 mg Flexeril in several large
trials, the OTC division of the FDA rejected the application for use without a prescription, apparently, we believe, because muscle
spasm was deemed a condition that required a physician to diagnose and supervise treatment.
Merck divested the
Flexeril franchise to Alza Pharmaceuticals, or Alza. Alza subsequently was acquired by Johnson and Johnson and Flexeril is part
of their McNeil Specialty Pharmaceuticals division. Based largely on the Merck studies, McNeil won approval of Flexeril 5 mg tablets
as a prescription medicine to treat muscle spasm. McNeil promoted Flexeril 5 mg tablets for the three year period of market exclusivity
based on The Drug Price Competition and Patent Term Restoration Act of 1984, generally referred to as the Hatch-Waxman Act. Following
this exclusivity period, several generics entered the market and took market share from Flexeril. McNeil continues to manufacture
Flexeril, but we believe McNeil no longer actively promotes it.
Despite the approved
uses of CBP in treating muscle spasm, we believe current marketed formulations of CBP are limited for treating FM by unpredictable
absorption. As described in the Flexeril package insert, the amount of CBP absorbed into the bloodstream varies between 33-55%
of the dose ingested. The variability in absorption may be due to several factors, including effects of the stomach pH (acidity
or base) on the dissolution of the tablets, as well as the context of either an empty stomach or a recent meal. Food in the stomach
and small intestine from a recent meal contributes to variability in absorbing other drugs. The uncertainties in absorption rates
make it challenging for a physician contemplating a bedtime treatment for FM to ensure the intended therapeutic effect is achieved
without risking side effects like next-day drowsiness, which could result if the patient has too much CBP remaining in the bloodstream
the next day.
If a product could
deliver a predictable absorption rate of CBP, it would mean patients would be less likely to receive too little drug to receive
a therapeutic effect. Conversely, patients would be less likely to be over-dosed, which might lead to potential side effects, including
next-day drowsiness. An optimal VLD CBP product could have faster absorption, faster clearance and more predictable effects than
the immediate release tablet format. We have tested a number of technologies to optimize the properties of VLD CBP as a bedtime
therapy for FM and PTSD. Our lead product, TNX-102 SL is a novel sublingual tablet form of VLD CBP that we have tested in pre-clinical
and clinical studies. We intend to enter TNX-102 SL into a potential pivotal clinical trial program in FM in the first half of
2013, and into a Phase 2 trial in PTSD in the second half of 2013. We believe the unique properties of TNX-102 SL, as demonstrated
by the results of our studies, support its development in both FM and PTSD. We have developed other innovative formulations of
CBP, including TNX-102 gelcap. Although we had met with the FDA to discuss the TNX-102 gelcap development program in August 2011
and we have generated clinical data that support the further development of TNX-102 gelcap, we currently do not plan to advance
this candidate.
TNX-102 SL in Fibromyalgia Syndrome
TNX-102 SL, our most
advanced product candidate, is a rapidly disintegrating tablet containing VLD CBP that is designed to be placed under the tongue
at bedtime. The development of TNX-102 SL is supported by the results of the Moldofsky study, which evaluated oral administration
of CBP at doses below the lowest marketed dose in the evening, as well as by preclinical and comparative clinical pharmacokinetic
studies.
In the Moldofsky study,
which was a randomized, double-blind, placebo-controlled, Phase 2a trial, it was demonstrated that VLD CBP in a capsule swallowed
between dinner and bedtime resulted in significant decreases in next-day pain and other core FM symptoms, as well as in a significant
improvement in sleep quality. We believe that CBP exerts its benefit in FM via its ability to improve the restorative quality of
sleep, which has been shown to be frequently impaired in patients with FM or PTSD. Current CBP products are believed to be widely
used off-label by FM patients.
45
FM is diagnosed by
groups of symptoms that have been defined by committees of the American College of Rheumatology, or ACR, and a committee of experts
from the organization Outcome Measures in Rheumatology. In 2007, Pfizer's Lyrica (pregabalin) became the first medicine approved
by the FDA for the management of FM. In 2008, Eli Lilly's Cymbalta (duloxetine) became the second medicine approved by the
FDA for the management of FM. In 2009, Savella® (milnacipran) was the third medicine approved by the FDA for the management
of FM. Savella is marketed by Forest Laboratories.
Product Development Plan
Phase 2a Data of VLD Cyclobenzaprine
in FM Patients
Our motivation to focus
our efforts on developing TNX-102 SL for FM stems from the results of the Moldofsky study, the related rights to which we acquired
from L&L. Specifically, this study was a randomized, double-blind, placebo-controlled, dose-escalating eight week trial conducted
at two study centers. The study subjects met ACR criteria for FM.
Patients received VLD
CBP immediate-release 1 mg capsules or corresponding placebo capsules to ingest after dinner and before bedtime. Initially, patients
took one capsule each evening, but over the course of the study, they were allowed to increase the number of tablets taken in increments
of one capsule per week. The maximum number of capsules allowed was four per evening, which would be a total dose of 4 mg immediate-release
CBP.
Patients treated with
VLD CBP demonstrated significant improvements in pain, fatigue and tenderness at week 8 relative to baseline, whereas placebo-treated
patients did not improve (Figure 1). Although this study excluded patients who met formal criteria for major depressive disorder
or any anxiety disorder, there is a high degree of co-existing symptoms of depression and anxiety associated with FM. VLD CBP treatment
resulted in significant reductions in total Hospital Anxiety and Depression Scale, or HAD, which measures symptoms of anxiety and
depression, and the HAD depression subscale which measures depressive symptoms (Figure 1).
This study showed treatment
with VLD CBP:
·
provided benefit in core symptoms of FM, including pain and fatigue;
46
·
improved mood, by demonstrating a significant decrease in HAD scores; and
·
was well tolerated, with no serious adverse events, or SAEs, or discontinuations due to adverse events, or AEs.
This study also showed
that VLD CBP taken between dinner and bedtime resulted in a significant improvement in sleep quality. We believe that CBP exerts
its benefit in FM via its ability to improve the restorative quality of sleep, which has been shown to be frequently impaired in
patients with FM.
This research was published
in the
Journal of Rheumatology
, in an article entitled "Effects of Bedtime Very Low Dose (VLD) Cyclobenzaprine (CBP)
on Symptoms and Sleep Physiology in Patients with Fibromyalgia Syndrome (FM): A Double-blind, Randomized, Placebo-controlled Study."
The citation is: Moldofsky H, Harris H, Kwong T, Archambault WT and Lederman S.
J
Rheum
2011 Dec;38(12):2653-63.
Pharmacokinetic and Bioequivalence Studies
We have conducted two
preclinical and two clinical studies of our sublingual formulations of CBP, which have evaluated the pharmacokinetics of these
formulations as well as their bioequivalence to oral CBP.
Our preclinical animal
studies demonstrated that our sublingual formulations provide faster delivery and more efficient systemic absorption of CBP as
compared to current oral forms of the drug.
Our first clinical
study of sublingual CBP evaluated a solution formulation in which certain key ingredients of TNX-102 SL were delivered under the
tongue in a small volume of water. This single-dose study was conducted in Canada. The trial enrolled 23 healthy volunteers, and
subjects received one of: a sublingual solution containing 2.4 mg of CBP and sublingual absorption-enabling ingredients of TNX-102
SL (Arm 1), a sublingual solution that was designed to simulate crushed immediate-release CBP tablets, i.e., without the sublingual
absorption-enabling ingredients (2.4 mg) (Arm 2), an immediate-release oral CBP tablet (5 mg) (Arm 3), or intravenous CBP (2.4
mg) (Arm 4). The study measured circulating blood levels of CBP at pre-defined time-points over six days after receiving study
medication. Patients receiving sublingual formulations were instructed to spit and rinse 90 seconds following administration. The
results demonstrated that the solution formulation of TNX-102 SL (Arm 1) delivered CBP to the systemic circulation more efficiently
than the sublingual solution of a simulated crushed tablet (Arm 2) and faster than the ingested tablet (Arm 3). In the study, all
of the CBP formulations were well-tolerated, and there were no unexpected adverse events.
Our second clinical
study of sublingual CBP evaluated TNX-102 SL, the tablet formulation we expect to advance into further development. This study
was conducted in Canada under the U.S. IND. This study enrolled 24 healthy volunteers and evaluated a single dose of one 2.4 mg
tablet or two tablets (4.8 mg) of TNX-102 SL or the currently-marketed 5 mg CBP tablet. In comparison to oral administration of
the 5 mg CBP tablet, both sublingual doses of TNX-102 SL demonstrated faster systemic absorption. After administration of TNX-102
SL, blood levels of CBP were significantly higher at 20, 30, 45 and 60 minutes relative to administration of the 5 mg CBP tablet.
In the study, TNX-102 SL was generally well tolerated. There were no unexpected adverse events, with the exception of a mild, temporary
numbness at the tongue experienced by less than one-third of the subjects that received TNX-102 SL tablets.
Prospective Phase 2b Study
We expect to advance
the clinical development of TNX-102 SL for the management of FM by conducting a Phase 2b study. In this multicenter, randomized,
double-blind, placebo-controlled clinical trial, FM patients will be administered either TNX-102 SL or placebo at bedtime nightly
for 12 weeks. We expect to enroll 100-200 patients into this study. We expect that our proposed Phase 2b study, if successful and
accepted by the FDA, will be one of the two pivotal studies required to support the NDA approval.
We expect the primary
efficacy measure in this study will be the change in pain severity at week 12 with TNX-102 SL as compared to placebo, as assessed
by the Numeric Rating Scale, or NRS. This endpoint is similar to that utilized by drug products currently approved for use in FM.
We will also collect information on other outcome measures, including NRS scores at other timepoints, the Fibromyalgia Impact Questionnaire,
and the Patient Global Impression of Change. We will seek FDA concurrence on the study design at the February 2013 Pre-Phase 3
meeting, and expect to engage a CRO to conduct and manage this study under our direction. We expect the study will begin enrollment
in the first half of 2013 and will be completed in the first quarter of 2014.
47
Prospective Multi-dose Pharmacokinetic Study
Since CBP will be used
chronically in TNX-102 SL, we will study TNX-102 SL in comparison to immediate-release CBP in multiple-day dosing (once daily).
Subjects will receive TNX-102 SL or immediate-release CBP for four or more consecutive days. Peak and trough blood levels of CBP
will be measured. The results of this study will provide information regarding blood levels of CBP resulting from use of the marketed
immediate-release tablet and our sublingual tablet when taken in a multiple day regimen. We expect the data from this study to
serve as a 'bridge', in that they will allow us to use the immediate-release CBP tablet as the reference product in
our submission of a Section 505(b)(2) NDA for TNX-102 SL.
Prospective Study Comparing Side-effects
of TNX-102 SL with Immediate-Release Cyclobenzaprine
We plan to conduct
a small study designed to compare the bedtime use of TNX-102 SL and immediate-release CBP on next morning drowsiness. The goal
of this study is to determine the potential benefit of TNX-102 SL compared with immediate-release CBP on next morning drowsiness.
Prospective Phase 3 Study
If our Phase 2b study
of TNX-102 SL is successful, then we expect to conduct a Phase 3 confirmatory study in support of product registration. At that
time, we plan to conduct a randomized, double-blind, placebo-controlled Phase 3 study in which patients with FM will receive TNX-102
SL or placebo at bedtime nightly for 12 weeks. It is likely that the primary efficacy measure in this study will be the change
in pain severity with TNX-102 SL as compared to placebo at week 12, assessed by the NRS, similar to the primary efficacy measure
of the Phase 2b study. Secondary outcome measures will be carefully considered to best support desired label claims and to optimize
the marketing message for product differentiation. We expect approximately 300 FM patients will be enrolled in this trial.
Safety Exposure Study
To study the safety
of our product in chronic use, we expect to conduct an open label study in which approximately 300 FM subjects would receive TNX-102
SL for up to one year. Together with our other studies, we believe this safety exposure study will be sufficient to meet ICH long-term
safety exposure requirements, which require us to provide data for at least 300 subjects treated with TNX-102 SL for six months
and at least 100 subjects treated for one year.
Regulatory Strategy
The FDA approvals of
Lyrica, Cymbalta and Savella establish a regulatory approval standard for the management of FM. However, given the heterogeneity
of patients with this disease, it may not prove to be the only pathway or approval requirement. We hope to register TNX-102 SL
with the FDA through the provisions of Section 505(b)(2). This regulatory pathway may help to accelerate product development and
reduce overall business risk. The 505(b)(2)-based product development plan for TNX-102 SL is designed to leverage the safety data
that have been generated by other manufacturers for CBP-containing products and accepted by the FDA in support of their product
registrations, in addition to the safety data we generate. TNX-102 SL contains significantly less active CBP than other marketed
products. We believe that the safety data package from these products and the CBP prescriptions utilization database analyzed by
IMS Health Incorporated will provide adequate safety margin to support TNX-102 SL development. A Type B Pre-Phase 3 meeting
with the FDA is scheduled for February 2013, at which we plan to discuss the design of our anticipated Phase 2b and Phase 3
trials for TNX-102 SL so as to receive regulatory acceptance of our proposed NDA plan for a differentiated product for the management
of FM.
If NDA approval of
TNX-102 SL is granted, in addition to the three-year marketing exclusivity granted by law, we expect this product to be protected
by patents that extend through at least 2021, during which time it should not be subject to generic substitution. We plan to continue
to support the TNX-102 SL program with new patent applications as we obtain data from the clinical evaluation of our new formulation
in healthy human subjects and FM patients. For example, we have recently filed patent applications on TNX-102 SL which, if issued,
would be expected to provide protection from generic substitution until 2033.
48
TNX-102 SL in Post-Traumatic Stress
Disorder
We are also developing
TNX-102 SL for the management of PTSD, a psychiatric disorder that begins in the aftermath of traumatic experiences. A Type B pre-IND
meeting was held with the FDA in October 2012, at which our clinical program for PTSD was discussed. We have not yet conducted
any clinical trials on PTSD patients.
Parallels Between FM and PTSD
A number of parallels
have been noted between FM and PTSD. In addition, symptom overlaps may exist between patients diagnosed with FM or PTSD. In a survey
of males with PTSD or major depression (Amital, Fostick et al, Posttraumatic stress disorder, tenderness, and fibromyalgia syndrome:
are they different entities? J. Psychosom Res 2006. 61(5):663-9.2006), 49% of PTSD patients met the ACR criteria for FM compared
to 5% of major depression patients. Conversely, in a different survey of FM patients (Cohen, Neumann et al., Prevalence of post-traumatic
stress disorder in fibromyalgia patients: overlapping syndromes or post-traumatic fibromyalgia syndrome? Semin Arthritis Rheum
2002. 32(1):38-50), 57% of the sample had symptoms associated with PTSD.
A core feature of PTSD is sleep
disturbance, including insomnia and nightmares. Sleep disturbances are believed to exacerbate daytime symptoms of PTSD, including
irritability, poor concentration, and diminished interest in significant activities. We believe the sleep disturbances of PTSD
bear similarity to those associated with FM.
Emerging Market Opportunity
The selective serotonin
reuptake inhibitors Paxil® (paroxetine) and Zoloft® (sertraline) are FDA approved for PTSD, but are not satisfactory treatments
for many patients. Other drugs that show promise for the treatment of PTSD, but are not FDA approved, include antidepressants such
as nefazodone, mirtazapine and trazodone; the antihistamine cyproheptadine; certain atypical antipsychotics such as olanzapine
and risperidone; and an adrenergic alpha-1 receptor blocker, prazosin. Prazosin may decrease nightmares and insomnia and has been
associated with improvements in daytime PTSD symptoms, depression, and quality of life.
Our rationale for studying
the effects of CBP in PTSD derives from the following:
·
our clinical studies that very
low dose CBP improves FM symptoms, a disorder having significant overlap with PTSD;
·
our clinical studies that very
low dose CBP can improve sleep quality, which is impaired in PTSD; and
·
in studies conducted by Caliper, CBP interacts with a receptor on brain cells called the serotonin type 2a receptor. Based on numerous peer-reviewed scientific publications, we have identified a number of compounds that bind this receptor that have been shown to have effects in treating PTSD. Therefore, it is our belief that CBP, because it binds to the serotonin type 2a receptor, will have a therapeutic effect in treating PTSD like other compounds that bind to it.
As very little information
was available on the biochemical effects of CBP and its primary metabolite, norcyclobenzaprine, or nCBP, in the central nervous
system, we have engaged several CROs to better understand the interactions of these agents with certain receptors in the brain.
CROs we have engaged in this effort include Caliper, Cerep, Millipore, and DiscoveRx. Results from a series of binding and functional
studies show that both of these molecules are potent antagonists of the serotonin type 2a and the histamine H1 receptors, which
known to have effects on sleep and sleep maintenance. The results also show that CBP and nCBP antagonize the adrenergic alpha 1A
and 1B receptors, which may have effects on autonomic dysfunction. The results of some of these studies were presented at a poster
session during the 2012 American College of Rheumatology Annual Meeting (Daugherty et al, "Cyclobenzaprine (CBP) and its
Major Metabolite Norcyclobenzaprine (nCBP) are Potent Antagonists of Human Serotonin Receptor 2a (5-HT2a), Histamine Receptor H1
and Alpha-Adrenergic Receptors: Mechanistic and Safety Implications for Treating Fibromyalgia Syndrome by Improving Sleep Quality",
Abstract #960).
49
Product Development Path
We anticipate that
the dose of TNX-102 SL sufficient to treat PTSD symptoms may be higher than that sufficient to treat FM. We plan to utilize the
data obtained from our pharmacokinetic studies of TNX-102 SL to inform the design of efficacy trials in PTSD.
Based on the recommendations
and guidance received at the October 2012 pre-IND meeting with the FDA, we plan to file an IND application for TNX-102 SL in the
PTSD indication in the first half of 2013, and to conduct a Phase 2 trial in the second half of 2013. We expect to be able to use
TNX-102 SL tablets manufactured for the FM studies in the initial PTSD clinical trials.
Prospective Proof-of-Concept Phase 2
Study
We plan to use the
IND to support a small clinical study to ascertain the potential efficacy of TNX-102 SL in this disorder. This randomized, double-blind,
placebo-controlled, crossover study will enroll approximately 15 subjects with PTSD. TNX-102 SL and placebo will be administered
once daily at bedtime. The primary efficacy measure will be the change in the Clinician-Administered PTSD Scale from baseline to
week six. Secondary outcome variables may include the PTSD Dream Rating Scale, PTSD Checklist, CGI-I, Pittsburgh Sleep Quality
Index and the Beck Depression Inventory. In addition, polysomnograms will be obtained at baseline and at specified times during
the trial.
Prospective Phase 3 Studies
If our Phase 2 trial
of TNX-102 SL in PTSD is successful, we intend to conduct two multicenter, double-blind, placebo-controlled, Phase 3 studies designed
to evaluate the efficacy, safety, and tolerability of TNX-102 SL in patients with PTSD. We expect both of these Phase 3 studies
to be of crossover design. We plan to conduct one 24-week study (TNX-102 SL and placebo treatment for 12 weeks) and one six-month
study (TNX-102 SL and placebo treatment for 3 months). We expect the results of the Phase 2 trial to determine dosing in these
Phase 3 trials, but like the Phase 2 trial, TNX-102 SL may be dosed flexibly. The primary endpoints for both Phase 3 studies are
anticipated to be similar to those proposed to be feature in the Phase 2 study, and as with the Phase 2 study, in addition to standardized
measures of PTSD symptomatology and severity, polysomnograms will be obtained.
Regulatory Strategy
The approvals by the
FDA of Paxil (paroxetine) and Zoloft (sertraline) for treating PTSD establish a regulatory approval pathway for symptom reduction
in PTSD. We believe our clinical development program of TNX-102 SL and the chronic safety data generated from the TNX-102 SL FM
NDA program will result in a differentiated product for the treatment of PTSD. We believe that our planned clinical trials in PTSD,
if successful, will provide sufficient evidence of clinical efficacy and safety to support a Section 505(b)(2) NDA.
Drug Delivery Technology
TNX-102 SL
TNX-102 SL is a small
tablet that rapidly disintegrates in saliva and transmucosally delivers CBP into the systemic circulation. TNX-102 SL contains
sublingual absorption-enabling ingredients that promote a local oral environment that facilitates oromucosal absorption of CBP.
We own all rights to TNX-102 SL in all geographies, and we bear no obligations to third-parties for any future development or commercialization.
50
TNX-102 Gelcap
In June 2007, we entered
into a Feasibility and Option Agreement with Lipocine, which was amended in October 2010 (the "Feasibility Agreement").
Pursuant to the Feasibility Agreement, we identified and obtained an exclusive worldwide option on technology from Lipocine that
employs mixtures of different types of lipids to envelop CBP molecules in the small intestine and facilitate absorption into the
bloodstream. We believe this approach has potential for more consistent absorption and decreased variability in blood levels.
The Feasibility Agreement
provided for two stages of work, stated as Stage I and Stage II. The Stage I work involved developing methods and testing compatibility
between Lipocine's technology and our drug formulation. The Stage II work involved supporting us in our efforts to conduct
a clinical trial study, based on the Stage I work, and is expected to conclude upon the completion of a final report on the results
of the clinical study (the "Final Report"). Upon completion of the Final Report, we have the right, within 30 days
after the Final Report, to exercise an exclusive worldwide license to the Lipocine technology.
Under the Feasibility
Agreement, Lipocine completed the Stage I work, which involved studying a number of combinations of lipids for their ability to
form micelles that solubilize the free base of CBP and which might serve as inactive ingredients in a gelatin capsule formulation.
We selected a candidate formulation, TNX-102 gelcap, based on properties that included the dispersion of the active ingredient
in simulated gastric or small-intestinal fluids and the stability of the formulation over time prior to testing. Lipocine was also
engaged to manufacture gelatin capsules of TNX-102 gelcap for use in a pharmacokinetic trial.
In August 2011, we
provided notice to Lipocine that we intended to move forward with the Stage II work. The clinical phase of the Stage II trial was
completed during the fourth quarter of 2011. Some of the data has been collected and some data is still awaiting the development
and validation of assays. We are working to analyze the data and write the Final Report, which is anticipated to be completed in
2013. After completion of the Final Report, we will have 30 days to decide whether to exercise the option to license Lipocine's
US patent 6,294,192 "Triglyceride-free compositions and methods for improved delivery of hydrophobic therapeutic agents"
and US Patent 6,451,339 "Compositions and methods for improved delivery of hydrophobic agents". These patents expire
on September 24, 2021 and September 16, 2022, respectively.
If we elect to exercise
the option, we will execute a license agreement with Lipocine. If we exercise the option to license these patents, we will be obligated
to pay Lipocine low single-digit percentage royalties based on net sales or mid-teen sublicense fees based on the consideration
that we receive from a licensee. The maximum amount of milestone payments we could be required to pay to Lipocine pursuant to the
Feasibility Agreement is $3,000,000. We currently do not plan to exercise the option with Lipocine.
Market Dynamics
We believe the U.S.
market for products that treat CNS conditions has several characteristics that make it an attractive market for pharmaceuticals,
including that the customer base is driven by physicians who are involved in long-term care of patients with chronic disorders.
Patients with CNS disorders sometimes carry disease burdens that require long-term treatment.
We believe the market
for FDA-approved FM treatments is underserved and that there is a constant need for new treatment options, since many prescription
drugs provide relief only to some of the affected patients, only to some of some patients' symptoms, or provide relief only
for limited periods of time.
In 2007, Lyrica (pregabalin)
became the first medicine approved by the FDA for the management of FM. Lyrica previously had been approved and marketed to treat
pain in other conditions as well as epilepsy. In 2008, Cymbalta (duloxetine) became the second medicine approved by the FDA for
the management of FM. Cymbalta previously had been approved and marketed to treat depression. FM shares a number of symptoms with
depression, and a number of FM patients are believed to experience depression as a co-existing condition. Savella (milnacipran)
was the third medicine approved by the FDA for the management of FM. Savella's active ingredient, milnacipran, is approved
in Europe to treat depression.
51
As many products used
for the treatment of FM are approved and marketed for other conditions, sales of these products related specifically to FM can
only be estimated. According to Decision Resources, U.S. sales of prescription drugs specifically for the treatment of FM totaled
$1.4 billion in 2011. This figure includes sales of Cymbalta, Lyrica, and Savella of $595 million, $504 million, and $110 million,
respectively. Despite the availability of FDA approved products, we believe the current treatment options for FM continue to leave
many patients dissatisfied.
Prior to 2007, the
landscape of prescription drugs used to treat FM was characterized by off-label use of generically-available therapies. Drugs that
had been prescribed as the primary treatments for FM were approved for other indications, with analgesics, antidepressants, and
muscle relaxants among the categories receiving the greatest use by the FM population. Despite the significant FM-related sales
growth of the three products approved for FM following their approvals for this indication, according to Adivo Associates, the
unit volume of medications prescribed to specifically treat FM has been nearly flat since 2007, implying that the sales growth
of the approved products was mainly driven by patients switching from off-label, generic medications to on-label, branded medications.
In particular, these market dynamics are consistent with the interpretation that Lyrica's growth came at the expense of off-label
analgesics and Cymbalta's and Savella's growth came at the expense of off-label anti-depressants.
Despite the wide use
of muscle relaxants by FM patients, this category lacks a product approved for FM. Demand continues to be satisfied by off-label
medicines such as CBP, tizanidine, baclofen, carisoprodol and metaxalone. These muscle relaxants have generic and branded versions.
According to Adivo Associates, 20 million daily doses of the Flexeril brand and its associated immediate-release CBP generic products
were prescribed off-label for FM in 2011 and accounted for approximately 48% of the daily doses of muscle relaxants prescribed
for FM that year. These figures indicate that muscle relaxants in general, and CBP in particular, have been widely adopted in FM
despite the lack of an approval for this disorder.
Challenges in the Market for CNS Therapies
Developers of pharmaceutical
treatments for syndromes and disorders that affect the CNS face special challenges. In many cases, the causes and exacerbating
factors of CNS conditions remain unknown. Frequently, key symptoms are known only by patient reports and cannot be objectively
validated or measured. Symptoms like pain, fatigue, disturbed sleep or altered mood are characteristics of more than one condition.
Often, physicians may not agree that a particular patient is affected by one or another condition or by more than one co-existing
conditions.
CNS conditions are
typically defined by committees of expert professionals who set criteria based on the presence of several symptoms or groups of
symptoms. Sometimes groups of subjective symptoms are insufficient to describe CNS disorders and further refinement of diagnostic
categories can be achieved by patient demographics, such as gender, age or concurrent medical processes, such as menopause or adolescence.
Many CNS conditions, including syndromes and disorders, have not yet been characterized by laboratory tests, such as blood tests
or x-ray imaging. However, laboratory tests are often important to exclude other conditions, such as inflammatory or infectious
processes. Consequently, a CNS condition is sometimes called a diagnosis of exclusion because inflammation and infection should
typically be ruled out by laboratory tests before applying the criteria of groups of symptoms to diagnose it.
Once a CNS condition
is diagnosed, physicians may select from among treatment options based on a patient's symptoms and history. Some medications
improve or relieve only one or another symptom in a condition. Consequently, physicians may prescribe several different medications
concurrently to treat individual symptoms or groups of symptoms. A desirable quality for CNS medications is the ability to relieve
more than one symptom of a CNS condition. Another desirable quality for CNS medications is safety, particularly if a medicine is
safe enough to be used with other medicines concurrently or at different times of the day.
Opportunity for New Treatments of FM
We believe the market
for the treatment of FM is underserved, which we believe fuels a need for new therapeutic options. Due to the market acceptance
of FM treatments (such as Lyrica, Cymbalta and Savella), we believe there will be a growing interest in alternative drug treatment
options.
52
We believe that if
TNX-102 SL won FDA approval, it would be an appealing option because it has an entirely different mechanism of action from the
currently approved products and we expect TNX-102 SL will be recommended for use at bedtime. Lyrica is recommended for twice or
three-times daily dosing. Cymbalta was found effective at once-daily dosing and is generally restricted to daytime use and not
recommended for bedtime use. Cymbalta and Savella act on the CNS in ways that are believed to interfere with sleep, while data
support the view that CBP, the active ingredient in TNX-102 SL, improves sleep quality.
Competition
Our industry is highly
competitive and subject to rapid and significant technological change. Our potential competitors include large pharmaceutical and
biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research
institutions. We believe that key competitive factors that will affect the development and commercial success of our product candidates
are efficacy, safety, tolerability, reliability, price and reimbursement level. Many of our potential competitors, including many
of the organizations named below, have substantially greater financial, technical and human resources than we do and significantly
greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products
and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining FDA
approval for drugs and achieving widespread market acceptance. Our competitors' drugs may be more effective, or more effectively
marketed and sold, than any drug we may commercialize and may render our product candidates obsolete or non-competitive before
we can recover the expenses of developing and commercializing any of our product candidates. We anticipate that we will face intense
and increasing competition as new drugs enter the market and advanced technologies become available. Further, the development of
new treatment methods for the conditions we are targeting could render our drugs non-competitive or obsolete.
The markets for medicines
to treat FM, PTSD and other CNS conditions are well developed and populated with established drugs marketed by large and small
pharmaceutical, biotechnology and generic drug companies. Pfizer (Lyrica), Eli Lilly (Cymbalta) and Forest Laboratories/Cyprus
Biosciences (Savella) market FDA approved drugs for FM. Pfizer (Zoloft) and GlaxoSmithKline (Paxil) market FDA approved drugs for
PTSD.
As of January 2013,
we are aware of several companies pursuing treatments for FM, including Chelsea Therapeutics, Johnson and Johnson, Meda, Pfizer,
Synthetic Biologics, Teva, and Theravance. Clinical trials in the U.S. are registered with the FDA and reported on the website
www.clinicaltrials.gov.
A number of companies
are specifically engaged in developing drugs for PTSD, including AstraZeneca, UCB, GlaxoSmithKline, Ortho-McNeil Janssen Scientific
Affairs, and Pfizer. Medications that may be used for the treatment of PTSD include anti-depressants such as: nefazodone and trazodone;
the antihistamine cyproheptadine and certain atypical antipsychotics such as olanzapine and risperidone. Several of these products
are supported by companies such as AstraZeneca, GlaxoSmithKline and Pfizer.
Intellectual Property
Proprietary protection
for our product candidates, technology and processes are important to our business and we seek patent protection in the U.S. and
internationally when we deem appropriate. We also rely on trade secrets, know-how and continuing technological advances to protect
various aspects of our core technology. We require our employees, consultants and scientific collaborators to execute confidentiality
and invention assignment agreements with us.
We own numerous patents
and have patent applications pending in the United States and abroad. In addition, we have one trademark application pending.
Our commercial success
will depend in part on obtaining and maintaining patent protection and trade secret protection of our current and future product
candidates and the methods used to manufacture them, as well as successfully defending these patents against third-party challenges.
Our ability to stop third parties from making, using, selling, offering to sell or importing our products depends on the extent
to which we have rights under valid and enforceable patents or trade secrets that cover these activities. We cannot assure you
that our pending patent applications will result in issued patents.
53
Approved Patents
Our current patents
owned are as follows:
Number
Name
Jurisdiction
Expiration
Date
6,541,523
"Methods For Treating Or Preventing Fibromyalgia Using Very Low Doses Of Cyclobenzaprine"
U.S.A.
August 11, 2020
6,395,788
"Methods And Compositions For Treating Or Preventing Sleep Disturbances And Associated Illnesses Using Very Low Doses Of Cyclobenzaprine"
U.S.A.
August 11, 2020
6,358,944
"Methods And Compositions For Treating Generalized Anxiety Disorder"
U.S.A.
August 11, 2020
EP 1202722
"Uses of Compositions for Treating or Preventing Sleep Disturbances Using Very  Low Doses of Cyclobenzaprine"
European Patent Office, Belgium, France, Ireland, Luxembourg, Monaco, Portugal, Switzerland and United Kingdom
August 11, 2020
AT 299369
"Uses of Compositions for Treating or Preventing Sleep Disturbances Using Very  Low Doses of Cyclobenzaprine"
Austria
August 11, 2020
DE 60021266
"Uses of Compositions for Treating or Preventing Sleep Disturbances Using Very  Low Doses of Cyclobenzaprine"
Germany
August 11, 2020
NZ 516749
"Uses of Compositions for Treating or Preventing Sleep Disturbances Using Very  Low Doses of Cyclobenzaprine"
New Zealand
August 11, 2020
ES 2245944
"Uses of Compositions for Treating or Preventing Sleep Disturbances Using Very  Low Doses of Cyclobenzaprine"
Spain
August 11, 2020
HK 1047691
"Uses of Compositions for Treating or Preventing Sleep Disturbances Using Very  Low Doses of Cyclobenzaprine"
Hong Kong
August 11, 2020
8,093,300
"Compositions and Methods for Increasing Compliance with Therapies using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism"
U.S.A.
May 25, 2023
AU 2002354017
"Compositions and Methods for Increasing Compliance with Therapies using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism"
Australia
November 4, 2022
CA 2463987
"Compositions and Methods for Increasing Compliance with Therapies using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism"
Canada
November 4, 2022
EP 1441708
"Compositions and Methods for Increasing Compliance with Therapies using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism"
European Patent Office, Austria, Belgium,
        Switzerland, Denmark, Luxembourg, Monaco, Germany, France, Portugal and
United Kingdom
November 4, 2022
NZ 532583
"Compositions and Methods for Increasing Compliance with Therapies using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism"
New Zealand
November 4, 2022
54
Patent Applications
Our current patent
applications that are pending are as follows:
Number
Name
Jurisdiction
61/660,593
"Compositions and Methods for Transmucosal Absorption"
U.S.A.
61/667,774
"Compositions and Methods for Transmucosal Absorption"
U.S.A.
61/725,402
"Compositions and Methods for Transmucosal Absorption"
U.S.A.
61/281,661
"Methods and Compositions for Treating Symptoms Associated with Post-Traumatic Stress Disorder Using Cyclobenzaprine"
U.S.A.
12/948,828
"Methods And Compositions For Treating Symptoms Associated With Post-Traumatic Stress Disorder Using Cyclobenzaprine"
U.S.A.
10831895.7
"Methods And Compositions For Treating Symptoms Associated With Post-Traumatic Stress Disorder Using Cyclobenzaprine"
European Patent Office
61/449,838
"Methods and Compositions for Treating Depression Using Cyclobenzaprine"
U.S.A.
13/157,270
"Method for Improving Fatigue Using Low Dose Cyclobenzaprine"
U.S.A.
PCT/US 10/02979
"Methods And Compositions For Treating Symptoms Associated With Post-Traumatic Stress Disorder Using Cyclobenzaprine"
PCT
PCT/US 11/01529
"Method for Treating Cocaine Addiction"
PCT
12/151,200
"Method For Treating Neurodegenerative Dysfunction"
U.S.A.
CA 2723688
"Method For Treating Neurodegenerative Dysfunction"
Canada
EP 2299822
"Method For Treating Neurodegenerative Dysfunction"
European Patent Office
Trademark Application
We have one trademark
application that is pending as follows:
Number
Name
Jurisdiction
85088881
Tonix Pharmaceuticals
U.S.A.
Research and Development
We have one employee
dedicated to research and development. We anticipate that our research and development expenditures will increase several fold
as we advance TNX-102 SL into late-stage clinical development and advance other candidates in our pipeline. We need to raise additional
capital to fund our development plans and there is no certainty that we will be successful in continuing to attract new investments.
Our research and development operations are located in New York, NY. We have used, and expect to continue to use, third parties
to conduct our preclinical and clinical studies.
Manufacturing
We have contracted
with third parties for the manufacture of TNX-102 SL for investigational purposes, including preclinical and clinical testing,
as follows:
CMO
Purpose
Lipocine Inc.
TNX-102 gelcap used in our completed pharmacokinetic study on this candidate
KABS Laboratories, Inc. (Quebec, Canada)
TNX-102 intravenous and sublingual solutions
Laboratorio Farmacologico Milanese S.r.l. (Milan, Italy)
TNX-102 SL tablets used in our completed pharmacokinetic studies
Pharmatek Laboratories
TNX-102 SL tablets to be used in our planned Phase 2b study
All of our compounds
are small molecules, generally constructed using industry standard processes and use readily accessible raw materials.
55
Government Regulation
The FDA and other federal,
state, local and foreign regulatory agencies impose substantial requirements upon the clinical development, approval, labeling,
manufacture, marketing and distribution of drug products. These agencies regulate, among other things, research and development
activities and the testing, approval, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, advertising
and promotion of our product candidates. The regulatory approval process is generally lengthy and expensive, with no guarantee
of a positive result. Moreover, failure to comply with applicable FDA or other requirements may result in civil or criminal penalties,
recall or seizure of products, injunctive relief including partial or total suspension of production, or withdrawal of a product
from the market.
The FDA regulates,
among other things, the research, manufacture, promotion and distribution of drugs in the United States under the FDCA and other
statutes and implementing regulations. The process required by the FDA before prescription drug product candidates may be marketed
in the United States generally involves the following:
·
completion of extensive nonclinical laboratory tests, animal studies and formulation studies, all performed in accordance with the FDA's Good Laboratory Practice regulations;
·
submission to the FDA of an IND, which must become effective before human clinical trials may begin;
·
for some products, performance of adequate and well-controlled human clinical trials in accordance with the FDA's regulations, including Good Clinical Practices, to establish the safety and efficacy of the product candidate for each proposed indication;
·
submission to the FDA of an NDA;
·
satisfactory completion of an FDA preapproval inspection of the manufacturing facilities at which the product is produced to assess compliance with current Good Manufacturing Practice, or cGMP, regulations; and
·
FDA review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug.
The testing and approval
process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product
candidates will be granted on a timely basis, if at all.
Nonclinical tests include
laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animals and
other animal studies. The results of nonclinical tests, together with manufacturing information and analytical data, are submitted
as part of an IND to the FDA. Some nonclinical testing may continue even after an IND is submitted. The IND also includes one or
more protocols for the initial clinical trial or trials and an investigator's brochure. An IND automatically becomes effective
30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions relating to
the proposed clinical trials as outlined in the IND and places the clinical trial on a clinical hold. In such cases, the IND sponsor
and the FDA must resolve any outstanding concerns or questions before any clinical trials can begin. Clinical trial holds also
may be imposed at any time before or during studies due to safety concerns or non-compliance with regulatory requirements. An independent
institutional review board, or IRB, at each of the clinical centers proposing to conduct the clinical trial must review and approve
the plan for any clinical trial before it commences at that center. An IRB considers, among other things, whether the risks to
individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves
the consent form signed by the trial participants and must monitor the study until completed.
Clinical Trials
Clinical trials involve
the administration of the product candidate to human subjects under the supervision of qualified medical investigators according
to approved protocols that detail the objectives of the study, dosing procedures, subject selection and exclusion criteria, and
the parameters to be used to monitor participant safety. Each protocol is submitted to the FDA as part of the IND.
56
Human clinical trials
are typically conducted in three sequential phases, but the phases may overlap, or be combined.
·
Phase 1 clinical trials typically involve the initial introduction of the product candidate into healthy human volunteers. In Phase 1 clinical trials, the product candidate is typically tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.
·
Phase 2 clinical trials are generally conducted in a limited patient population to gather evidence about the efficacy of the product candidate for specific, targeted indications; to determine dosage tolerance and optimal dosage; and to identify possible adverse effects and safety risks. Phase 2 clinical trials, in particular Phase 2b trials, can be undertaken to evaluate clinical efficacy and to test for safety in an expanded patient population at geographically dispersed clinical trial sites.
·
Phase 3 clinical trials are undertaken to evaluate clinical efficacy and to test for safety in an expanded patient population at geographically dispersed clinical trial sites. The size of Phase 3 clinical trials depends upon clinical and statistical considerations for the product candidate and disease, but sometimes can include several thousand patients. Phase 3 clinical trials are intended to establish the overall risk-benefit ratio of the product candidate and provide an adequate basis for product labeling.
Clinical testing must
satisfy extensive FDA regulations. Reports detailing the results of the clinical trials must be submitted at least annually to
the FDA and safety reports must be submitted for serious and unexpected adverse events. Success in early stage clinical trials
does not assure success in later stage clinical trials. The FDA, an IRB or we may suspend a clinical trial at any time on various
grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.
New Drug Applications
Assuming successful
completion of the required clinical trials, the results of product development, nonclinical studies and clinical trials are submitted
to the FDA as part of an NDA. An NDA also must contain extensive manufacturing information, as well as proposed labeling for the
finished product. An NDA applicant must develop information about the chemistry and physical characteristics of the drug and finalize
a process for manufacturing the product in accordance with cGMP. The manufacturing process must be capable of consistently producing
quality product within specifications approved by the FDA. The manufacturer must develop methods for testing the quality, purity
and potency of the final product. In addition, appropriate packaging must be selected and tested and stability studies must be
conducted to demonstrate that the product does not undergo unacceptable deterioration over its shelf life. Prior to approval, the
FDA will conduct an inspection of the manufacturing facilities to assess compliance with cGMP.
The FDA reviews all
NDAs submitted before it accepts them for filing. The FDA may request additional information rather than accept an NDA for filing.
In this event, the NDA must be resubmitted with the additional information and is subject to review before the FDA accepts it for
filing. After an application is filed, the FDA may refer the NDA to an advisory committee for review, evaluation and recommendation
as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory
committee, but it considers them carefully when making decisions. The FDA may deny approval of an NDA if the applicable regulatory
criteria are not satisfied. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently
than we interpret the same data. The FDA may issue a complete response letter, which may require additional clinical or other data
or impose other conditions that must be met in order to secure final approval of the NDA. If a product receives regulatory approval,
the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited,
which could restrict the commercial value of the product. In addition, the FDA may require us to conduct Phase 4 testing which
involves clinical trials designed to further assess a drug's safety and effectiveness after NDA approval, and may require
surveillance programs to monitor the safety of approved products which have been commercialized. Once issued, the FDA may withdraw
product approval if ongoing regulatory requirements are not met or if safety or efficacy questions are raised after the product
reaches the market.
57
Section 505(b)(2) NDAs
There are two types
of NDAs: the Section 505(b)(1) NDA, or full NDA, and the Section 505(b)(2) NDA. When possible, we intend to file Section 505(b)(2)
NDAs that might, if accepted by the FDA, save time and expense in the development and testing of our product candidates. A full
NDA is submitted under Section 505(b)(1) of the FDCA, and must contain full reports of investigations conducted by the applicant
to demonstrate the safety and effectiveness of the drug. A Section 505(b)(2) NDA may be submitted for a drug for which one
or more of the investigations relied upon by the applicant was not conducted by or for the applicant and for which the applicant
has no right of reference from the person by or for whom the investigations were conducted. A Section 505(b)(2) NDA may be
submitted based in whole or in part on published literature or on the FDA's finding of safety and efficacy of one or more
previously approved drugs, which are known as reference drugs. Thus, the filing of a Section 505(b)(2) NDA may result in approval
of a drug based on fewer clinical or nonclinical studies than would be required under a full NDA. The number and size of studies
that need to be conducted by the sponsor depends on the amount and quality of data pertaining to the reference drug that are publicly
available, and on the similarity of and differences between the applicant's drug and the reference drug. In some cases, extensive,
time-consuming, and costly clinical and nonclinical studies may still be required for approval of a Section 505(b)(2) NDA.
Because we are developing
new formulations of previously approved chemical entities, such as CBP, our drug approval strategy is to submit Section 505(b)(2)
NDAs to the FDA. The FDA may not agree that our product candidates are approvable as Section 505(b)(2) NDAs. If the FDA determines
that Section 505(b)(2) NDAs are not appropriate and that full NDAs are required for our product candidates, the time and financial
resources required to obtain FDA approval for our product candidates could substantially and materially increase, and our products
might be less likely to be approved. If the FDA requires full NDAs for our product candidates, or requires more extensive testing
and development for some other reason, our ability to compete with alternative products that arrive on the market more quickly
than our product candidates would be adversely impacted. If CBP-containing products are withdrawn from the market by the FDA for
any reason, we may not be able to reference such products to support our anticipated TNX-102 SL 505(b)(2) NDA, and we may be required
to follow the requirements of Section 505(b)(1).
Based on our intent
to file under Section 505(b)(2) with respect to our lead product candidate, we believe it is unlikely the development process for
this product candidate will follow the ordinary course of Phase 1, Phase 2 and Phase 3 studies. Our human pharmacokinetic studies
of reformulated CBP dosage forms represented the first use of TNX-102 SL and TNX-102 gelcap, or collectively, TNX-102, in humans
and could therefore be described as "Phase 1." However, because these studies compared TNX-102 to existing approved
formulations of CBP and specified the comparable ability to deliver effective levels of CBP to the bloodstream of FM patients,
these studies provide a reference to the therapeutic effects previously observed in our dose-ranging clinical study of immediate-release
CBP capsules in FM patients. For these reasons, rather than always identifying clinical trials by Phase, we find it more illustrative
to describe in a narrative form the purpose of the studies and the nature and potential significance of the results. Because our
double-blind, randomized, placebo-controlled, dose-ranging study on bedtime CBP was performed in Canada, we did not meet with the
FDA's Center for Drug Evaluation and Research to discuss our approach and plans until August 2011.
Patent Protections
An applicant submitting
a Section 505(b)(2) NDA must certify to the FDA with respect to the patent status of the reference drug upon which the applicant
relies in support of approval of its drug. With respect to every patent listed in the FDA's Orange Book, which is the FDA's
list of approved drug products, as claiming the reference drug or an approved method of use of the reference drug, the Section 505(b)(2)
applicant must certify that: (1) there is no patent information listed by the FDA for the reference drug; (2) the listed
patent has expired; (3) the listed patent has not expired, but will expire on a particular date; (4) the listed patent
is invalid, unenforceable, or will not be infringed by the manufacture, use, or sale of the product in the Section 505(b)(2)
NDA; or (5) if the patent is a use patent, that the applicant does not seek approval for a use claimed by the patent. If the
applicant files a certification to the effect of clause (1), (2) or (5), FDA approval of the Section 505(b)(2) NDA may
be made effective immediately upon successful FDA review of the application, in the absence of marketing exclusivity delays, which
are discussed below. If the applicant files a certification to the effect of clause (3), the Section 505(b)(2) NDA approval
may not be made effective until the expiration of the relevant patent and the expiration of any marketing exclusivity delays.
58
If the Section 505(b)(2)
NDA applicant provides a certification to the effect of clause (4), referred to as a paragraph IV certification, the applicant
also must send notice of the certification to the patent owner and the holder of the NDA for the reference drug. The filing of
a patent infringement lawsuit within 45 days of the receipt of the notification may prevent the FDA from approving the Section 505(b)(2)
NDA for 30 months from the date of the receipt of the notification unless the court determines that a longer or shorter period
is appropriate because either party to the action failed to reasonably cooperate in expediting the action. However, the FDA may
approve the Section 505(b)(2) NDA before the 30 months have expired if a court decides that the patent is invalid, unenforceable,
or not infringed, or if a court enters a settlement order or consent decree stating the patent is invalid or not infringed.
Notwithstanding the
approval of many products by the FDA pursuant to Section 505(b)(2), over the last few years certain brand-name pharmaceutical
companies and others have objected to the FDA's interpretation of Section 505(b)(2). If the FDA's interpretation
of Section 505(b)(2) is successfully challenged in court, the FDA may be required to change its interpretation of Section 505(b)(2)
which could delay or even prevent the FDA from approving any Section 505(b)(2) NDA that we submit. The pharmaceutical industry
is highly competitive, and it is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA
seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions
can significantly delay, or even prevent, the approval of the new product. Moreover, even if the FDA ultimately denies such a petition,
the FDA may substantially delay approval while it considers and responds to the petition.
Marketing Exclusivity
Market exclusivity
provisions under the FDCA can delay the submission or the approval of Section 505(b)(2) NDAs, thereby delaying a Section 505(b)(2)
product from entering the market. The FDCA provides five-year marketing exclusivity to the first applicant to gain approval of
an NDA for a new chemical entity, or NCE, meaning that the FDA has not previously approved any other drug containing the same active
moiety. This exclusivity prohibits the submission of a Section 505(b)(2) NDA for any drug product containing the active ingredient
during the five-year exclusivity period. However, submission of a Section 505(b)(2) NDA that certifies that a listed patent
is invalid, unenforceable, or will not be infringed, as discussed above, is permitted after four years, but if a patent infringement
lawsuit is brought within 45 days after such certification, FDA approval of the Section 505(b)(2) NDA may automatically
be stayed until 7 1/2 years after the NCE approval date. The FDCA also provides three years of marketing exclusivity for the
approval of new and supplemental NDAs for product changes, including, among other things, new indications, dosage forms, routes
of administration or strengths of an existing drug, or for a new use, if new clinical investigations, other than bioavailability
studies, that were conducted or sponsored by the applicant are deemed by FDA to be essential to the approval of the application.
Five-year and three-year exclusivity will not delay the submission or approval of another full NDA; however, as discussed above,
an applicant submitting a full NDA under Section 505(b)(1) would be required to conduct or obtain a right of reference to
all of the preclinical and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
Other types of exclusivity
in the United States include orphan drug exclusivity and pediatric exclusivity. The FDA may grant orphan drug designation to a
drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals
in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that
the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered
from sales in the United States for that drug. Seven-year orphan drug exclusivity is available to a product that has orphan drug
designation and that receives the first FDA approval for the indication for which the drug has such designation. Orphan drug exclusivity
prevents approval of another application for the same drug for the same orphan indication, for a period of seven years, regardless
of whether the application is a full NDA or a Section 505(b)(2) NDA, except in limited circumstances, such as a showing of
clinical superiority to the product with orphan exclusivity. Pediatric exclusivity, if granted, provides an additional six months
to an existing exclusivity or statutory delay in approval resulting from a patent certification. This six-month exclusivity, which
runs from the end of other exclusivity protection or patent delay, may be granted based on the voluntary completion of a pediatric
study in accordance with an FDA-issued "Written Request" for such a study.
59
Section 505(b)(2)
NDAs are similar to full NDAs filed under Section 505(b)(1) in that they are entitled to any of these forms of exclusivity
if they meet the qualifying criteria. They also are entitled to the patent protections described above, based on patents that are
listed in the FDA's Orange Book in the same manner as patents claiming drugs and uses approved for NDAs submitted as full
NDAs.
Other Regulatory Requirements
Maintaining substantial
compliance with appropriate federal, state and local statutes and regulations requires the expenditure of substantial time and
financial resources. Drug manufacturers are required to register their establishments with the FDA and certain state agencies,
and after approval, the FDA and these state agencies conduct periodic unannounced inspections to ensure continued compliance with
ongoing regulatory requirements, including cGMPs. In addition, after approval, some types of changes to the approved product, such
as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval.
The FDA may require post-approval testing and surveillance programs to monitor safety and the effectiveness of approved products
that have been commercialized. Any drug products manufactured or distributed by us pursuant to FDA approvals are subject to continuing
regulation by the FDA, including:
·
record-keeping requirements;
·
reporting of adverse experiences with the drug;
·
providing the FDA with updated safety and efficacy information;
·
reporting on advertisements and promotional labeling;
·
drug sampling and distribution requirements; and
·
complying with electronic record and signature requirements.
In addition, the FDA
strictly regulates labeling, advertising, promotion and other types of information on products that are placed on the market. There
are numerous regulations and policies that govern various means for disseminating information to health-care professionals as well
as consumers, including to industry sponsored scientific and educational activities, information provided to the media and information
provided over the Internet. Drugs may be promoted only for the approved indications and in accordance with the provisions of the
approved label.
The FDA has very broad
enforcement authority and the failure to comply with applicable regulatory requirements can result in administrative or judicial
sanctions being imposed on us or on the manufacturers and distributors of our approved products, including warning letters, refusals
of government contracts, clinical holds, civil penalties, injunctions, restitution and disgorgement of profits, recall or seizure
of products, total or partial suspension of production or distribution, withdrawal of approvals, refusal to approve pending applications,
and criminal prosecution resulting in fines and incarceration. The FDA and other agencies actively enforce the laws and regulations
prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject
to significant liability. In addition, even after regulatory approval is obtained, later discovery of previously unknown problems
with a product may result in restrictions on the product or even complete withdrawal of the product from the market.
Food and Drug Administration Amendments
Act of 2007
In September 2007,
the Food and Drug Administration Amendments Act of 2007, or FDAAA, became law. This legislation grants significant new powers to
the FDA, many of which are aimed at improving drug safety and assuring the safety of drug products after approval. In particular,
the new law authorizes the FDA to, among other things, require post-approval studies and clinical trials, mandate changes to drug
labeling to reflect new safety information, and require risk evaluation and mitigation strategies for certain drugs, including
certain currently approved drugs. In addition, the new law significantly expands the federal government's clinical trial
registry and results databank and creates new restrictions on the advertising and promotion of drug products. Under the FDAAA,
companies that violate these and other provisions of the new law are subject to substantial civil monetary penalties.
60
The FDA has not yet
implemented many of the provisions of the FDAAA, so we cannot predict the impact of the new legislation on the pharmaceutical industry
or our business. However, the requirements and changes imposed by the FDAAA may make it more difficult, and more costly, to obtain
and maintain approval for new pharmaceutical products, or to produce, market and distribute existing products. In addition, the
FDA's regulations, policies and guidance are often revised or reinterpreted by the agency or the courts in ways that may
significantly affect our business and our products. It is impossible to predict whether additional legislative changes will be
enacted, or FDA regulations, guidance or interpretations changed, or what the impact of such changes, if any, may be.
Employees
As of December 31,
2012, we had two full-time employees, Leland Gershell, our Chief Financial Officer, and Bruce Daugherty, our Senior Director of
Drug Development and Controller, as well as one part-time senior director of research.
In addition, we rely
on consultants instead of employees for critical activities, including Seth Lederman who serves as our Chief Executive Officer
and as President of Tonix Sub pursuant to a consulting agreement with Lederman & Co. None of our employees are represented
by a labor union, and we believe that our relations with our employees are good.
DESCRIPTION OF PROPERTIES
We maintain our principal
office at 509 Madison Avenue, Suite 306, New York, New York 10022.  Our telephone number at that office is (212) 980-9155
and our fax number is (212) 923-5700. Our current office space consists of approximately 2,355 square feet. The lease expires in
September 2015. The base rent is as follows:
Lease Period
Amount Per Annum
October 1, 2010 – September 30, 2011
$
120,105.00
October 1, 2011 – September 30, 2012
$
123.496.20
October 1, 2012 – September 30, 2013
$
126,989.14
October 1, 2013 – September 30, 2014
$
130,586.86
October 1, 2014 – September 30, 2015
$
134,292.52
We believe that our
existing facilities are suitable and adequate to meet our current business requirements. We maintain websites at www.tonixpharma.com
and www.krele.com and the information contained on those websites is not deemed to be a part of this prospectus.
LEGAL PROCEEDINGS
From time to time,
we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm
our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in
the aggregate, a material adverse effect on our business, financial condition or operating results.
61
MANAGEMENT
The names of our executive
officers and directors and their age, title, and biography as of December 31, 2012 are set forth below:
Name
Age
Title
Seth Lederman
55
President, CEO and Chairman of the Board of Directors
Leland Gershell
40
Chief Financial Officer and Treasurer
Bruce Daugherty
55
Senior Director of Drug Development, Controller and Secretary
Stuart Davidson
55
Director
Patrick Grace
56
Director
Donald W. Landry
58
Director
Ernest Mario
74
Director
Charles E. Mather IV
52
Director
John Rhodes
56
Director
Samuel Saks
58
Director
Directors are elected
annually and hold office until the next annual meeting of the stockholders of the Company and until their successors are elected.
Officers are elected annually and serve at the discretion of the Board of Directors.
Seth Lederman,
MD
became our President, Chief Executive Officer, Chairman of the Board and a Director in October 2011. Dr. Lederman founded
Tonix Sub in June of 2007 and has acted as its Chairman of the Board of Directors since inception and as President since June 2010.
Dr. Lederman has been the Chairman of Krele since its inception in August 2010. Since 1996, Dr. Lederman has been an Associate
Professor at Columbia University. As an Assistant Professor at Columbia, Dr. Lederman discovered and characterized the CD40-ligand
and invented therapeutic candidates to treat autoimmune diseases and transplant rejection. Dr. Lederman has been a Manager of L&L
Technologies LLC since 1996. In addition, Dr. Lederman has been the Managing Member of Seth Lederman Co, LLC since January 2007
and the Managing Member of Lederman & Co, LLC since 2002, both of which are biopharmaceutical consulting and investing companies.
Dr. Lederman has also been the Managing Member of Targent Pharmaceuticals since 2000, and Managing Member of Plumbline LLC since
2002. Targent Pharmaceuticals, LLC was a founder of Targent Pharmaceuticals Inc. on which Board of Directors Dr. Lederman served
from inception in 2001 until the sale of its assets to Spectrum Pharmaceuticals Inc. in 2006. Between January 2007 and November
2008, Dr. Lederman was a Managing Partner of Konanda Pharma Partners, LLC, a Director of Konanda Pharma Fund I, LP, and a Managing
Partner of Konanda General Partner, LLC, which were related private growth equity fund entities. As well, between January 2007
and November 2008, Dr. Lederman was Chairman of Validus Pharmaceuticals, Inc. and Fontus Pharmaceuticals, Inc., which were portfolio
companies of the Konanda private growth equity fund. Since December 2011, Dr. Lederman has served as CEO and Chairman of Leder
Laboratories Inc. and Starling Pharmaceuticals Inc, which are biopharmaceutical development companies. Between 2006 and 2011, Dr.
Lederman was a director of Research Corporation, a New York-based non-profit Dr. Lederman received his BA degree in Chemistry from
Princeton University in 1979 and his MD from Columbia University in 1983. Dr. Lederman has been a New York State licensed physician
since 1985. Dr. Lederman's significant experience with our patent portfolio and his experience as an entrepreneur, seed
capital investor, fund manager, and director of start-up biopharmaceutical companies were instrumental in his selection as a member
of the board of directors.
Leland Gershell,
MD PhD
became our Chief Financial Officer on April 1, 2012 and our Treasurer in November 2012. From May 2011 to December
2011, Dr. Gershell was Managing Director and Senior Analyst at Madison Williams and Company, where he was responsible for equity
research coverage of specialty pharmaceutical and biotechnology companies. From April 2010 to October 2010, Dr. Gershell was Senior
Analyst at Favus Institutional Research, where he was responsible for issuing research reports on a variety of healthcare companies
to institutional investors. From October 2008 to October 2009, Dr. Gershell was Senior Analyst at Apothecary Capital, a healthcare
investment firm. From November 2004 to September 2008, Dr. Gershell was an equity research analyst at Cowen and Company, most recently
as Vice President, where he was responsible for the equity research coverage of small and middle capitalization biotechnology companies.
Dr. Gershell earned his M.D. and Ph.D. in Organic Chemistry from Columbia University and his B.A. magna cum laude in Chemistry
and Asian Studies from Dartmouth College. Dr. Gershell is an inventor on Columbia's patents for SAHA/vorinostat, which is
marketed by Merck as Zolinza® and is the first histone deacetylase (HDAC) inhibitor to receive FDA approval.
62
Bruce Daugherty,
PhD
became our Senior Director of Drug Development and Controller on April 1, 2012 and our Secretary in November 2012.
Since January 2009, Dr. Daugherty has worked as a consultant to academia and biotechnology companies in drug discovery/development
and licensing through his consulting company, LeClair Pharma Consulting, LLC. Dr. Daugherty was a consultant to our company between
November 2011 and March 2012. In 2009, Dr. Daugherty was employed at Assumption College in Mendham, New Jersey, where he was a
lecturer in Biology for freshman students. From 1987 to 2008, Dr. Daugherty was employed at Merck & Co., where he was a scientist
in drug discovery and development. Dr. Daugherty earned his MBA from Emory University's Goizueta Business School, his PhD
in Molecular Genetics and Microbiology from UMDNJ-Robert Wood Johnson Medical School, his MS in Zoology from Rutgers University
and his BA in Biology from Washington University in St. Louis.
Stuart Davidson
became a Director in October 2011. Between July 2010 and October 2011, Mr. Davidson served as a director of Tonix Sub. Since 2011,
Mr. Davidson has been a Managing Director of Sonen Capital. Since 1994, Mr. Davidson has been a Managing Partner of Labrador Ventures.
Prior to Labrador, Mr. Davidson founded and served as CEO of Combion, Inc., which was acquired by Incyte. He also served as President
of Alkermes, Inc., a biotechnology company focused on drug delivery. Mr. Davidson received his Bachelor's Degree from Harvard
College in 1978 and his MBA from Harvard Business School in 1984. Mr. Davidson's prior experience as a venture capital
investor, entrepreneur, and biotechnology industry executive experience leading pharmaceutical companies was instrumental in his
selection as a member of our board of directors.
Patrick Grace
became a Director in October 2011. Between June 2007 and October 2011, Mr. Grace served as a director of Tonix Sub. Mr. Grace
was the co-founder of and has served as the Managing Partner of Apollo Philanthropy Partners, L.L.C. since October 2008.
He has also been President of MLP Capital, Inc., New York, New York, an investment holding company, since 1996.
Mr. Grace served in various senior management roles with W. R. Grace & Co. from 1977-1995, and was last President and
CEO of Grace Logistics Services, Inc. From January 2002 to August 2002, Mr. Grace was also President and Chief Executive
Officer of Kingdom Group, LLC ("Kingdom"), New York, New York (a provider of turnkey compressed natural gas fueling
systems), which filed for bankruptcy January 2002, and he was Executive Vice President of Kingdom from August 1999 to
December 2000. Since 1996, he has been a director of Chemed Corporation. Mr. Grace was a liberal arts major
at the University of Notre Dame and earned a MBA in finance from Columbia University. Mr. Grace's extensive
executive experience, along with his membership on the board of directors of a public company was instrumental in
his selection as a member of our board of directors.
Donald W. Landry,
MD, PhD
became a Director in October 2011. Between June 2007 and October 2011, Dr. Landry served as a director of Tonix
Sub. Dr. Landry has been a member of the faculty of Columbia University since 1986, and has served as the Samuel Bard Professor
of Medicine, Chair of the Department of Medicine and Physician-in-Chief at New York Presbyterian Hospital/Columbia University since
2008. Dr. Landry was a co-founder and has been a member of L&L Technologies, LLC since 1996. Dr. Landry received his BS degree
in Chemistry from Lafayette College in 1975, his PhD in Organic Chemistry from Harvard University in 1979 and his M.D. from Columbia
University in 1983. Dr. Landry has been a New York State licensed physician since 1985. In 2008, Dr. Landry was awarded the Presidential
Citizens Medal, the second-highest award that the President can confer upon a civilian. Dr. Landry's significant medical
and scientific background was instrumental in his selection as a member of the board of directors.
Ernest Mario,
PhD
became a Director in October 2011. Between September 2010 and October 2011, Dr. Mario served as a director of Tonix
Sub. Dr. Mario is a former Deputy Chairman and Chief Executive of Glaxo Holdings plc and a former Chairman and Chief Executive
Officer of ALZA Corporation. Since August 2007, Dr. Mario has served as the Chief Executive Officer and Chairman of Capnia,
Inc., a privately held specialty pharmaceutical company in Palo Alto, CA.  From 2003 to 2007, he was Chairman and Chief Executive
of Reliant Pharmaceuticals, Inc.  Dr. Mario is currently a Director of Boston Scientific Corp. (since 2001), Celgene Corp.
(since 2007), Maxygen Inc. (since 2001), VIVUS Inc. (since 2012) and XenoPort Inc. (since 2012).   He is Chairman of
the American Foundation for Pharmaceutical Education and serves as an advisor to The Ernest Mario School of Pharmacy at Rutgers
University. In 2007, Dr. Mario was awarded the Remington Medal by the American Pharmacists' Association, pharmacy's
highest honor. Dr. Mario received a PhD and an MS in physical sciences from the University of Rhode Island and a BS in pharmacy
from Rutgers University. Dr. Mario brings to his service as a director his significant executive leadership experience, including
his experience leading several pharmaceutical companies, as well as his membership on public company boards and foundations. He
also has extensive experience in financial and operations management, risk oversight, and quality and business strategy.
63
Charles E. Mather
IV
became a Director in October 2011. Between April and October 2011, Mr. Mather served as a director of Tonix Sub. Mr.
Mather has been the Head of Private and Alternative Capital and Co-Head of ECM at Janney Montgomery Scott since December 2009.
Between October 2008 and December 2009, Mr. Mather served as an independent consultant to various securities firms. Between May
2007 and September 2008, Mr. Mather was the head of the Structured Equity Group at Jefferies Group Inc. Prior to that, Mr. Mather
held various senior investment banking positions at Cowen and Company, including as Co-Head of the Private Equity Group. Mr. Mather
received a BA in History from Brown University and an MBA in Finance from The Wharton School, University of Pennsylvania. Mr. Mather's
extensive experience as an investment banker was instrumental in his selection as a member of our board of directors.
John Rhodes
became a Director in October 2011. Mr. Rhodes has served as director of the Center for Market Innovation at Natural Resources Defence
Council since January 2012. Between October 2010 and October 2011, Mr. Rhodes served as a director of Tonix Sub. Mr. Rhodes has
been a director of Dewey Electronics Company, a manufacturer of electronic and electromechanical systems for the military and commercial
markets, since 2005. Between April 2007 and June 2010, Mr. Rhodes was a Senior Advisor to Good Energies, Inc., a renewable energy
company. Mr. Rhodes is a former Vice President of Booz Allen Hamilton, Inc. Mr. Rhodes is a graduate of Princeton University and
the Yale School of Management. Mr. Rhodes' extensive business and consulting experience, along with his membership on
the board of directors of a public company was instrumental in his selection as a member of our board of directors.
Samuel Saks,
MD
became a Director in May 2012. Between 2003 and April 2009, Dr. Saks was the chief executive officer and a director
of Jazz Pharmaceuticals, Inc., a publicly-held biopharmaceutical company, which he co-founded in 2003. From April 2011 until February
2012, Dr. Saks served as interim Chief Medical Officer of Threshold Pharmaceuticals, a publicly-held biopharmaceutical company.
From 2001 until 2003, Dr. Saks was company group chairman of ALZA Corporation and a member of the Johnson & Johnson Pharmaceuticals
Operating Committee. From 1992 until 2001, Dr. Saks held various positions at ALZA, including Chief Medical Officer and Group Vice
President, where he was responsible for clinical, regulatory and commercial activities. Previously, Dr. Saks held clinical research
and development management positions with Schering-Plough, Xoma and Genentech. Dr. Saks formerly served as a scientific advisor
to ArQule Pharmaceuticals, CMEA Ventures and ProQuest Investments. Dr. Saks is currently a Director of Auspex Pharmaceuticals,
Inc. (since 2009), Depomed (since 2012), Bullet Biotechnology, Inc. (since 2012) and Velocity Pharmaceutical Development LLC (since
2011).  From September 2005 until October 2010, Dr. Saks served on the board of directors of Trubion Pharmaceuticals, a publicly-held
biopharmaceutical company. Between September 2007 and July 2009, Dr. Saks served on the board of directors of Cougar Biotechnology,
a publicly-held biopharmaceutical company. Dr. Saks has also served on the board of directors of Corixa, Coulter and Ribozyme.
Dr. Saks is board certified in oncology and received a B.S. and an M.D. from the University of Illinois. Mr. Saks'
extensive
scientific and medical expertise and experience in formulating partnering
and business development strategies, including those involving larger pharmaceutical companies,
was instrumental in his
selection as a member of our board of directors.
Family Relationships
None.
Board Independence
We are not required
to have any independent members of the Board of Directors. The board of directors has determined that (i) Seth Lederman, has a
relationship which, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director and is not an "independent director" as defined in the Marketplace Rules of
The NASDAQ Stock Market and (ii) Stuart Davidson, Patrick Grace, Donald Landry, Ernest Mario, Charles Mather, John Rhodes and Samuel
Saks are each an independent director as defined in the Marketplace Rules of The NASDAQ Stock Market.
64
Meetings and Committees of the Board
of Directors
During the fiscal year
ended December 31, 2012, our board of directors held five meetings and approved certain actions by unanimous written consent. We
expect our directors to attend all board and committee meetings and to spend the time needed and meet as frequently as necessary
to properly discharge their responsibilities.
Audit Committee
Our Audit Committee
consists of Patrick Grace, Charles Mather and John Rhodes, with Mr. Grace elected as Chairman of the Committee. Our Board of Directors
has determined that each of Messrs. Grace, Mather and Rhodes are "independent" as that term is defined under applicable
SEC rules and under the current listing standards of the NASDAQ Stock Market. Mr. Grace is our audit committee financial expert.
Our Audit Committee's
responsibilities include: (i) reviewing the independence, qualifications, services, fees, and performance of the independent auditors,
(ii) appointing, replacing and discharging the independent auditor, (iii) pre-approving the professional services provided by the
independent auditor, (iv) reviewing the scope of the annual audit and reports and recommendations submitted by the independent
auditor, and (v) reviewing our financial reporting and accounting policies, including any significant changes, with management
and the independent auditor. The Audit Committee has reviewed and discussed with management the Company's audited financial
statements for the year ended December 31, 2011.
Compensation Committee
Our Compensation Committee
consists of Stuart Davidson, Ernest Mario and Samuel Saks, with Mr. Davidson elected as Chairman of the Committee. Our Board of
Directors has determined that all of the members are "independent" under the current listing standards of the NASDAQ
Stock Market. Our Board of Directors has adopted a written charter setting forth the authority and responsibilities of the Compensation
Committee.
Our
Compensation Committee has responsibility for assisting the Board of Directors in, among other things, evaluating and making recommendations
regarding the compensation of our executive officers and directors, assuring that the executive officers are compensated effectively
in a manner consistent with our stated compensation strategy, producing an annual report on executive compensation in accordance
with the rules and regulations promulgated by the SEC, periodically evaluating the terms and administration of our incentive plans
and benefit programs and monitoring of compliance with the legal prohibition on loans to our directors and executive officers.
Governance and Nominating Committee
Our Governance and
Nominating Committee consists of Donald Landry, Charles Mather and John Rhodes, with Mr. Rhodes elected as Chairman of the Committee.
The Board of Directors has determined that all of the members are "independent" under the current listing standards
of the NASDAQ Stock Market.
Our Governance and
Nominating Committee has responsibility for assisting the Board in, among other things, effecting the organization, membership
and function of the Board and its committees. The Governance and Nominating Committee shall identify and evaluate the qualifications
of all candidates for nomination for election as directors. In addition, the Governance and Nominating Committee is responsible
for developing, recommending and evaluating corporate governance standards and a code of business conduct and ethics.
65
Involvement in Certain Legal Proceedings
Our Directors and Executive
Officers have not been involved in any of the following events during the past ten years:
1.
any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;
4.
being found by a court of competent jurisdiction in a civil action, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
5.
being subject of, or a party to, any federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
6.
being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
66
EXECUTIVE COMPENSATION
The following table
provides certain summary information concerning compensation awarded to, earned by or paid to our Chief Executive Officer, the
two highest paid executive officers and up to two other highest paid individuals whose total annual salary and bonus exceeded $100,000
for fiscal years 2012 and 2011.
Name & Principal
Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Change in
Pension
Value and
Non-
Qualified
Deferred
Compensation
Earnings ($)
All Other
Compensation
($)
Total ($)
Seth Lederman (1)
2012
-
-
-
822,715
-
-
277,167
(2)
1,099,882
Chief Executive Officer
2011
-
-
-
-
-
-
300,750
(2)
300,750
Leland Gershell (3)
2012
138,542
-
-
587,654
-
-
-
726,196
Chief Financial Officer
Bruce Daugherty (4)
2012
110,833
-
-
470,123
-
-
-
580,956
Senior Director of Drug Development
Benjamin Selzer (5)
2012
192,708
-
-
-
-
-
-
192,708
Chief Operating Officer
David J. Moss (6)
2011
-
-
-
-
-
-
-
-
Chief Executive Officer
Rhonda Rosen (7)
160,104
160,104
Chief Financial Officer
2011
140,463
-
-
-
-
-
-
140,463
Susan Oliver (8)
2011
113,249
-
-
-
-
-
-
113,249
Secretary
(1)
Dr. Lederman became our President and Chief Executive Officer on October 7, 2011. His compensation reflects payments made to him either through Tonix or Tonix Sub.
(2)
Represents $48,000 and $96,000 of consulting fees paid to L&L Technologies, $229,167 and $198,750 of consulting fees paid to Lederman & Co. and $0 and $6,000 of director fees paid for the years ended December 31, 2012 and 2011, respectively.
(3)
Dr. Gershell became our Chief Financial Officer on April 1, 2012 and our Treasurer in November 2012.
(4)
Dr. Daugherty became our Senior Director of Drug Development and Controller on April 1, 2012 and our Secretary in November 2012
(5)
Mr. Selzer became our Chief Operating Officer in October 2011 and our interim Chief Financial Officer, Secretary and Treasurer in February 2012. Mr. Selzer resigned as our interim Chief Financial Officer on April 1, 2012. Mr. Selzer was terminated effective October 26, 2012.
(6)
Mr. Moss become our Chief Executive Officer on November 22, 2010 and resigned effective October 7, 2011.
(7)
Ms. Rosen become our Chief Financial Officer on October 7, 2011. Her compensation reflects payments made to her either through Tonix or Tonix Sub. Ms. Rosen was terminated effective February 16, 2012.
(8)
Ms. Oliver was terminated effective October 20, 2011.
67
Option/SAR Grants in Fiscal Year Ended December 31, 2012
Name
Grant
Date
All Other Option Awards:
Number of Securities
Underlying Options (#)
Exercise or Base Price
of Option Awards
($/Share)
Grant Date Fair Value
of Stock and Option
Awards ($)
Seth Lederman
5/9/2012
700,000
$
1.50
$
822,715
Leland Gershell
5/9/2012
500,000
$
1.50
$
587,654
Bruce Daugherty
5/9/2012
400,000
$
1.50
$
470,123
Outstanding Equity Awards at Fiscal Year-End Table
The following table
sets forth information for the named executive officers regarding the number of shares subject to both exercisable and unexercisable
stock options, as well as the exercise prices and expiration dates thereof, as of December 31, 2012.
Name
Number of
Securities
underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
underlying
Unexercised
Options (#)
Unexercisable
Option
Exercise
Price
($/Sh)
Option Expiration Date
Seth Lederman
-
700,000
$
1.50
5/9/2022
Leland Gershell
-
500,000
$
1.50
5/9/2022
Bruce Daugherty
-
400,000
$
1.50
5/9/2022
Equity Compensation Plan Information
Plan category
Number of
securities to
be issued
upon
exercise of
outstanding
options
(a)
Weighted-
average
exercise
price of
outstanding
options
(b)
Securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(c)
Equity compensation plans approved by security holders
3,000,000
$
1.50
1,000,000
Equity compensation plans not approved by security holders
-
-
-
Total
3,000,000
$
1.50
1,000,000
68
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
Employment Agreement with Leland Gershell
Effective April 1,
2012, we entered into an employment agreement (the "Gershell Agreement") with Dr. Gershell to serve as Chief Financial
Officer. The base salary under the Gershell Agreement is $175,000 per annum, which shall increase to $325,000 per annum upon our
consummation of an equity sale of securities in excess of $20 million (the "Gershell Threshold"). The Gershell Agreement
provides for at-will employment and can be terminated at any time by either party, provided, however, that if we terminate Dr.
Gershell for any reason other than cause (as defined in the Gershell Agreement), then Dr. Gershell shall be entitled to six weeks
of severance, which severance payment shall increase to six months if such termination occurs after the Gershell Threshold. In
addition, Dr. Gershell is entitled to participate in any and all benefit plans, from time to time, in effect for our employees,
along with vacation, sick and holiday pay in accordance with its policies established and in effect from time to time.
Employment Agreement with Bruce Daugherty
Effective April 1,
2012, we entered into an employment agreement (the "Daugherty Agreement") with Dr. Daugherty to serve as Senior Director
of Drug Development. The base salary under the Daugherty Agreement is $140,000 per annum, which shall increase to $220,000 per
annum upon our consummation of an equity sale of securities in excess of $20 million (the "Daugherty Threshold"). The
Daugherty Agreement provides for at-will employment and can be terminated at any time by either party, provided, however, that
if we terminate Dr. Daugherty for any reason other than cause (as defined in the Daugherty Agreement), then Dr. Daugherty shall
be entitled to six weeks of severance, which severance payment shall increase to six months if such termination occurs after the
Daugherty Threshold. In addition, Dr. Daugherty is entitled to participate in any and all benefit plans, from time to time, in
effect for our employees, along with vacation, sick and holiday pay in accordance with its policies established and in effect from
time to time.
Director Compensation
The following table
sets forth summary information concerning the total compensation paid to our non-employee directors in 2012 for services to our
company.
Name
Fees Earned
or Paid in
Cash ($)
Option
Awards ($)
Total ($)
Stuart Davidson
-
235,062
235,062
Patrick Grace
-
235,062
235,062
Donald Landry
-
235,062
235,062
Ernest Mario
-
235,062
235,062
Charles Mather IV
-
235,062
235,062
John Rhodes
-
235,062
235,062
Samuel Saks
-
235,062
235,062
Total:
-
1,645,434
1,645,434
69
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than as disclosed
below, since January 1, 2011, there have been no transactions, or proposed transactions, which have materially affected or will
materially affect us in which any director, executive officer or beneficial holder of more than 5% of the outstanding common, or
any of their respective relatives, spouses, associates or affiliates, has had or will have any direct or material indirect interest.
We have no policy regarding entering into transactions with affiliated parties.
On June 4, 2010, Tonix
Sub entered into a consulting agreement with Lederman & Co., LLC, of which our Chairman, CEO and President Seth Lederman is
the Managing Member. Pursuant to this agreement, Lederman & Co. shall provide clinical development, strategic, management and
operational consulting services. In exchange for its services, Tonix Sub shall pay Lederman & Co. compensation of $250,000
per annum and issued to Lederman & Co. 261,784 shares of its common stock, 20% of which vested on the date of the agreement
and the remainder vesting in equal amounts on each of the first, second, third and fourth anniversaries of the date of the agreement.
On August 1, 2011, the cash compensation was reduced to $127,000 per annum. On February 1, 2012, the cash compensation was increased
to $250,000 per annum. Immediately prior to the Share Exchange, the unvested shares of common stock vested.
On June 4, 2010, Tonix
Sub entered into a technology transfer and assignment agreement with Lederman & Co., LLC. Pursuant to this agreement, Lederman
& Co. transferred intellectual property rights related to isometheptene mucate to Tonix Sub. In exchange for the assignment
of the intellectual property rights, Tonix Sub issued to Lederman & Co. 1,308,921 shares of its common stock.
On June 4, 2010 Tonix
Sub entered into a consulting agreement with L&L Technologies, LLC, of which our Chairman, CEO and President Seth Lederman
is the Manager. Pursuant to this agreement, L&L Technologies shall provide scientific and medical consulting services. In exchange
for its services, Tonix Sub shall pay L&L Technologies compensation of $96,000 per annum, or such greater amount as the Board
may designate from time to time, and issued to L&L Technologies 1,026,194 shares of its common stock, 25% of which vested on
the date of the agreement and the remainder vesting in equal amounts on each of the first, second and third anniversaries of the
date of the agreement. Immediately prior to the Share Exchange, the unvested shares of common stock vested.
70
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table
sets forth certain information regarding beneficial ownership of our common stock as of January 22, 2013:
•
by each person who is known by us to beneficially own more than 5% of our common stock;
•
by each of our officers and directors; and
•
by all of our officers and directors as a group.
Unless otherwise indicated
in the footnotes to the following table, each person named in the table has sole voting and investment power and that person's
address is c/o Tonix Pharmaceuticals Holding Corp., 509 Madison Avenue, Suite 306, New York New York 10022.
NAME OF OWNER
TITLE OF
CLASS
NUMBER OF
SHARES OWNED (1)
PERCENTAGE OF
COMMON STOCK (2)
Seth Lederman
Common Stock
9,508,949
(3)
35.06
%
Leland Gershell
Common Stock
162,500
(4)
*
Bruce Daugherty
Common Stock
500,001
(5)
*
Stuart Davidson
Common Stock
1,838,289
(6)
3.90
%
Patrick Grace
Common Stock
130,906
*
Donald Landry
Common Stock
1,933,532
(7)
6.83
%
Ernest Mario
Common Stock
1,663,746
(8)
3.39
%
Charles Mather IV
Common Stock
260,569
(9)
*
John Rhodes
Common Stock
1,651,936
(10)
2.63
%
Samuel Saks
Common Stock
500,001
(11)
*
Officers and Directors as a Group (10 persons)
Common Stock
16,115,488
(12)
42.74
%
Lederman & Co., LLC (13)
Common Stock
5,963,565
(14)
17.35
%
Eli Lederman (15)
Common Stock
2,352,810
(16)
6.85
%
Technology Partners Fund VIII, LP (17)
Common Stock
1,924,857
(18)
5.61
%
* Denotes less than 1%
(1) Beneficial Ownership is determined
in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of
common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days
of January 22, 2013 are deemed outstanding for computing the percentage of the person holding such option or warrant but are not
deemed outstanding for computing the percentage of any other person.
(2) Percentage based upon
43,182,599
shares of common stock issued and outstanding as of January 22, 2013.
(3) Includes 3,692,558 shares of common
stock and 2,090,000 shares of common stock underlying warrants owned by Lederman & Co., LLC, 649,138 shares of common stock
and 486,666 shares of common stock underlying warrants owned by L&L Technologies, LLC, 1,179,424 shares of common stock and
165,000 shares of common stock underlying warrants owned by Targent Pharmaceuticals, LLC, 83,333 shares of common stock and 166,666
shares of common stock underlying warrants owned by Leder Laboratories, Inc. and 83,333 shares of common stock and 166,666 shares
of common stock underlying warrants owned by Starling Pharmaceuticals, Inc. Seth Lederman, as the Managing Member of Lederman &
Co., LLC and Targent Pharmaceuticals, LLC, the Manager of L&L Technologies, Inc. and the Chairman of Leder Laboratories, Inc.
and Starling Pharmaceuticals, Inc., has investment and voting control over the shares held by these entities.
(4) Includes 100,000 shares of common stock
underlying warrants.
71
(5) Includes 333,334 shares of common stock
underlying warrants.
(6) Includes 1,324,049 shares of common
stock and 383,334 shares of common stock underlying warrants owned by Lysander, LLC and 130,906 shares owned by Oystercatcher Trust.
Stuart Davidson, as the Member of Lysander, LLC and Trustee of Oystercatcher Trust, has investment and voting control over the
shares held by these entities.
(7) Includes 649,138 shares of common stock
and 486,666 shares of common stock underlying warrants owned by L&L Technologies, LLC. Donald Landry, as a Member of L&L
Technologies, LLC, has investment and voting control over the shares held by this entity.
(8) Includes 383,334 shares of common stock
underlying warrants.
(9) Includes 110,000 shares of common stock
underlying warrants.
(10) Includes 550,000 shares of common
stock underlying warrants.
(11) Includes 333,334 shares of common
stock underlying warrants.
(12) Includes 3,692,558 shares of common
stock and 2,090,000 shares of common stock underlying warrants owned by Lederman & Co., LLC, 649,138 shares of common stock
and 486,666 shares of common stock underlying warrants owned by L&L Technologies, LLC, 1,179,424 shares of common stock and
165,000 shares of common stock underlying warrants owned by Targent Pharmaceuticals, LLC, 83,333 shares of common stock and 166,666
shares of common stock underlying warrants owned by Leder Laboratories, Inc., 83,333 shares of common stock and 166,666 shares
of common stock underlying warrants owned by Starling Pharmaceuticals, Inc., 1,324,049 shares of common stock and 383,334 shares
of common stock underlying warrants owned by Lysander, LLC, 130,906 shares owned by Oystercatcher Trust and 1,835,002 shares of
common stock underlying warrants owned directly by the executive officers and directors.
(13) Seth Lederman, our President and Chief
Executive Officer, has investment and voting control over the shares held by this entity. The mailing address for this entity is
245 E. 93
rd
St. 14E, New York, New York 10128.
(14) Includes 2,090,000 shares of common
stock underlying warrants.
(15) The mailing address for this beneficial
owner is Malt House Cottage, Hurley, Berkshire, SL6 5LT, United Kingdom.
(16) Includes 300,000 shares of common
stock underlying warrants.
(17) The mailing address for this beneficial
owner is 100 Shoreline Highway, Suite 282-B, Mill Valley, California 94941. Sheila Mutter and Roger Quy are the managing members
of TP Management VIII, LLC, the general partner of Technology Partners Fund VIII, LP and have voting and investment power over
the securities owned by it.
(16) Includes 2,015,266 shares of common
stock underlying warrants and represents the maximum beneficial ownership percentage pursuant to exercise limitations contained
within warrants owned by this beneficial owner.
72
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to
issue up to 150,000,000 shares of our common stock, par value $0.001 per share. As of January 22, 2013, there were
43,182,599
shares of our common stock issued and outstanding. The outstanding shares of our common stock are validly issued, fully
paid and nonassessable.
Holders of our common
stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of our common stock do not
have cumulative voting rights. Therefore, holders of a majority of the shares of our common stock voting for the election of directors
can elect all of the directors. Holders of our common stock representing a majority of the voting power of our capital stock issued,
outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of stockholders.
A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such
as liquidation, merger or an amendment to our articles of incorporation.
Holders of our common
stock are entitled to share in all dividends that our Board of Directors, in its discretion, declares from legally available funds.
In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in
all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over
our common stock. Our common stock has no pre-emptive, subscription or conversion rights and there are no redemption provisions
applicable to our common stock.
Preferred Stock
We are authorized to
issue up to 5,000,000 shares of preferred stock, par value $.001 per share, none of which are currently outstanding. The shares
of preferred stock may be issued in series, and shall have such voting powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the resolution or resolutions providing for the issuance of such stock adopted from time to
time by the board of directors. The board of directors is expressly vested with the authority to determine and fix in the resolution
or resolutions providing for the issuances of preferred stock the voting powers, designations, preferences and rights, and the
qualifications, limitations or restrictions thereof, of each such series to the full extent now or hereafter permitted by the laws
of the State of Nevada.
Options
As of January 22, 2013,
there are an aggregate of 3,000,000 options to purchase shares of our common stock issued and outstanding. All of the options are
exercisable at $1.50 per share, expire on May 9, 2022 and vest 1/3
rd
on May 9, 2013 and 1/36
th
on the 9
th
of each month thereafter for 24 months
Warrants
In
connection with the 2011 Financing, we issued Conversion Warrants to purchase 275,000 shares of Common Stock. In addition, we issued
2011 Agent Warrants to the placement agents to purchase
an aggregate of 30,750 shares of Common Stock.
The
Conversion Warrants have a three year term and $1.00 exercise price. The 2011 Agent Warrants have a $1.00 exercise price and 15,000
have a two year term and the remaining 15,750 have a three year term. The Conversion Warrants may be exercised on a cashless basis.
In
connection with the March 2012 Financing, we issued March 2012 Class A Warrants to purchase 6,617,765 shares of Common Stock. In
addition, we issued 2012 Agent Warrants to the placement agent to purchase
466,777 shares of Common Stock.
The
March 2012 Class A Warrants have a five year term and $1.25 exercise price. The 2012 Agent Warrants have a seven year term and
$1.25 exercise price. The March 2012 Class A Warrants and 2012 Agent Warrants may be exercised on a cashless basis and contain
customary anti-dilution protection.
73
In
connection with the December 2012 Financing, we issued Class A Warrants to purchase 8,904,167 shares of Common Stock and Class
B Warrants to purchase 8,904,167 shares of Common Stock. The Class A Warrants have a five year term and $0.60 exercise price and
the Class B Warrants have a one year term and $0.40 exercise price. The Class A Warrants may be exercised on a cashless basis
under
certain conditions
.
Convertible Securities
None.
74
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Chapter 78 of the Nevada
Revised Statutes ("NRS") provides that a corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action,
suit or proceeding if he is not liable pursuant to NRS Section 78.138 or acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. NRS Chapter 78 further provides that a corporation similarly may indemnify
any such person serving in any such capacity who was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of such action
or suit if he is not liable pursuant to NRS Section 78.138 or acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent
that the court or other court of competent jurisdiction in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court or other court of competent jurisdiction shall deem proper.
Our bylaws provide
that we may indemnify our officers, directors, employees, agents and any other persons to the maximum extent permitted by the NRS.
75
PLAN OF DISTRIBUTION
We are registering
the shares of common stock previously issued and the shares of common stock issuable upon exercise of the warrants to permit the
resale of these shares of common stock by the holders of the common stock and warrants from time to time after the date of this
prospectus.  We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common
stock.  We will bear all fees and expenses incident to our obligation to register the shares of common stock.
The selling stockholders
may sell all or a portion of the shares of common stock held by them and offered hereby from time to time directly or through one
or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers,
the selling stockholders will be responsible for underwriting discounts or commissions or agent's commissions. The shares
of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at
varying prices determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve
crosses or block transactions, pursuant to one or more of the following methods:
·
on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
·
in the over-the-counter market;
·
in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
·
through the writing or settlement of options, whether such options are listed on an options exchange or otherwise;
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
·
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
·
an exchange distribution in accordance with the rules of the applicable exchange;
·
privately negotiated transactions;
·
settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;
·
in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share;
·
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
·
a combination of any such methods of sale; or
·
any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares
under Rule 144 under the Securities Act of 1933, as amended (the "
Securities Act
"), if available, rather than
under this prospectus.
In addition, the selling
stockholders may transfer the shares of common stock by other means not described in this prospectus. If the selling stockholders
effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders
or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal
(which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of
common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock short
and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection
with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may
sell such shares.
76
The selling stockholders
may pledge or grant a security interest in some or all of the warrants or shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock
from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors
in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of
common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.
To the extent required
by the Securities Act and the rules and regulations thereunder, the selling stockholders and any broker-dealer participating in
the distribution of the shares of common stock may be deemed to be "underwriters" within the meaning of the Securities
Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus
supplement, if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered
and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other
terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or re-allowed
or paid to broker-dealers.
Under the securities
laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance
that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement,
of which this prospectus forms a part.
The selling stockholders
and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation
M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders
and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged
in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock.
All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage
in market-making activities with respect to the shares of common stock.
We will pay all expenses
of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be approximately
$106,336 in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with
state securities or "blue sky" laws; provided, however, a selling stockholder will pay all underwriting discounts and
selling commissions, if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the
Securities Act in accordance with the registration rights agreements or the selling stockholders will be entitled to contribution.
We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act that
may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance
with the related registration rights agreements or we may be entitled to contribution.
Once sold under the
registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands
of persons other than our affiliates.
77
SELLING STOCKHOLDERS
This prospectus relates
to the offering by the selling stockholders identified in the table below of up to 17,808,334 shares of common stock, par value
$0.001 per share. All of the shares of common stock offered by this prospectus are being sold by the selling stockholders.
These shares consist of (i) 8,904,167 shares of common stock issued to investors in our December 2012 Financing and (ii) 8,904,167
shares of common stock issuable upon exercise of warrants to purchase 8,904,167 shares issued to investors in our December 2012
Financing.
The table below has
been prepared based upon the information furnished to us by the selling stockholders. The selling stockholders identified
below may have sold, transferred or otherwise disposed of some or all of their shares since the date on which the information in
the following table is presented in transactions exempt from, or not subject to, the registration requirements of the Securities
Act. Information concerning the selling stockholders may change from time to time and, if necessary, we will amend or supplement
this prospectus accordingly. We cannot provide an estimate as to the number of shares of common stock that will be held by
the selling stockholders upon termination of the offering covered by this prospectus because the selling stockholders may offer
some or all of their shares of common stock under this prospectus. The selling stockholders may also sell, transfer or otherwise
dispose of all or a portion of their shares in transactions exempt from the registration requirements of the Securities Act or
pursuant to another effective registration statement covering those shares.
The following table
sets forth, based on information provided to us by the selling stockholders or known to us, the name of each selling stockholder,
the nature of any position, office or other material relationship, if any, which the selling stockholder has had, within the past
three years, with us or with any of our predecessors or affiliates, and the number of shares of our common stock beneficially owned
by the stockholder before this offering. The number of shares owned are those beneficially owned, as determined under the
rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under these
rules, beneficial ownership includes any shares of common stock as to which a person has sole or shared voting power or investment
power and any shares of common stock which the person has the right to acquire within 60 days through the exercise of any option,
warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation
of a trust, discretionary account or similar arrangement.
We have assumed all
shares of common stock reflected on the table will be sold from time to time in the offering covered by this prospectus. Because
the selling stockholders may offer all or any portions of the shares of common stock listed in the table below, no estimate can
be given as to the amount of those shares of common stock covered by this prospectus that will be held by the selling stockholders
upon the termination of the offering.
Selling Stockholder
Shares of
Common
Stock Owned
Before this
Offering
Shares of
Common Stock
Underlying
Warrants Owned
Before this
Offering (1)
Percentage of
Common Stock
Beneficially
Owned Before
this Offering (2)
Shares of
Common
Stock Being
Offered in
this Offering
(3)
Shares of
Common
Stock
Beneficially
Owned
After this
Offering (4)
Percentage of
Common Stock
Beneficially
Owned After this
Offering (2)
Bruce Daugherty (5)
166,667
333,334
1.15
%
333,334
166,667
*
Lysander, LLC (6)
1,324,049
383,334
3.92
%
333,334
1,374,049
2.63
%
L&L Technologies, LLC (7)
649,138
486,666
2.60
%
466,666
669,138
1.28
%
Lederman & Co., LLC (8)
3,692,558
2,090,000
12.77
%
2,000,000
3,782,558
7.11
%
Leder Laboratories, Inc. (9)
83,333
166,666
*
166,666
83,333
*
Starling Pharmaceuticals, Inc. (10)
83,333
166,666
*
166,666
83,333
*
Charles E. Mather IV (11)
150,569
110,000
*
100,000
160,569
*
John Rhodes (12)
1,101,936
550,000
3.78
%
500,000
1,151,936
2.20
%
Ernest Mario (13)
1,280,412
383,334
3.82
%
333,334
1,330,412
2.54
%
Marcia Fox
62,500
125,000
*
125,000
62,500
*
Eli Lederman (14)
2,427,810
300,000
6.27
%
250,000
2,477,810
4.74
%
Samuel Saks (15)
166,667
333,334
1.15
%
333,334
166,667
*
78
Selling Stockholder
Shares of
Common
Stock Owned
Before this
Offering
Shares of
Common Stock
Underlying
Warrants Owned
Before this
Offering (1)
Percentage of
Common Stock
Beneficially
Owned Before
this Offering (2)
Shares of
Common
Stock Being
Offered in
this Offering
(3)
Shares of
Common
Stock
Beneficially
Owned
After this
Offering (4)
Percentage of
Common Stock
Beneficially
Owned After this
Offering (2)
Theodore A. McGraw, Jr.
125,000
250,000
1.37
%
250,000
125,000
*
Charles Lowery
250,000
500,000
1.72
%
500,000
250,000
*
David Lummis
250,000
500,000
1.72
%
500,000
250,000
*
Matthew Harad
62,500
125,000
*
125,000
62,500
*
Ju Innovation Partners I, L.P. (16)
125,000
250,000
*
250,000
125,000
*
Peabody Capital Partners, LP (17)
500,000
1,000,000
3.40
%
1,000,000
500,000
*
Gates P. Torrey
125,000
250,000
*
250,000
125,000
*
Leland & Lauren Gershell, JTWROS (18)
62,500
100,000
*
75,000
87,500
*
Jupiter Financial Services, LLC (19)
1,540,000
3,080,000
4.99%
                                                                                              (25)
3,080,000
1,540,000
2.87
%
The Fontinalis Trust (20)
125,000
250,000
*
250,000
125,000
*
The 1901 Trust (21)
125,000
250,000
*
250,000
125,000
*
Bluestein Capital Opportunities Fund, L.P. (22)
125,000
250,000
*
250,000
125,000
*
Richard M. Furlaud, Jr.
125,000
250,000
*
250,000
125,000
*
Technology Partners Fund VIII, LP (23)
2,500,000
5,000,000
9.99%
                                                                                              (25)
5,000,000
2,500,000
4.58
%
The 2012 Quinine Fund (24)
335,000
670,000
2.29
%
670,000
335,000
*
TOTALS:
17,782,150
18,153,334
17,808,334
18,127,150
*
Represents less than 1%.
(1)
Represents shares of our common stock remaining issuable under warrants issued in connection with the 2011 Financing, the 2012 Financing and/or the December 2012 Financing. All warrants are immediately exercisable, subject to exercise limitations contains therein relating to beneficial ownership percentages.
(2)
Applicable percentage ownership before the offering is based on
43,182,599
shares of common stock outstanding as of December 31, 2012. Applicable percentage ownership after the offering is based on 52,086,766 shares of common stock, which includes the 8,904,167 shares of common stock issuable upon exercise of the Class A Warrants to purchase common stock registered pursuant to this prospectus.
(3)
Assumes that (i) all of the shares of common stock to be registered on the registration statement of which this prospectus is a part, including all shares of common stock underlying warrants held by the selling stockholders, are sold in the offering and (ii) that no other shares of common stock are acquired or sold by the selling stockholder prior to the completion of the offering. However, subject to the restrictions of transfer agreed to by the selling stockholders (see "Plan of Distribution" in this prospectus), the selling stockholders may sell all, some or none of the shares offered pursuant to this prospectus and may sell other shares of our common stock that they may own pursuant to another registration statement under the Securities Act or sell some or all of their shares pursuant to an exemption from the registration provisions of the Securities Act, including under Rule 144.
(4)
50% of such total shares represent shares of common stock issuable upon exercise of the Class A Warrants.
(5)
Bruce Daugherty is an executive officer of the Company.
(6)
Stuart Davidson, a member of our board of directors, is a member of Lysander LLC and has voting and investment power over the securities owned by it.
(7)
Seth Lederman, our chairman and chief executive officer, is the manager of L&L Technologies, LLC and has voting and investment power over the securities owned by it.
(8)
Seth Lederman, our chairman and chief executive officer, is the managing member of Lederman & Co, LLC and has voting and investment power over the securities owned by it.
(9)
Seth Lederman, our chairman and chief executive officer, is the chairman of Leder Laboratories, Inc. and has voting and investment power over the securities owned by it.
79
(10)
Seth Lederman, our chairman and chief executive officer, is the chairman of Starling Pharmaceuticals, Inc. and has voting and investment power over the securities owned by it.
(11)
Charles Mather IV is a member of our board of directors.
(12)
John Rhodes is a member of our board of directors.
(13)
Ernest Mario is a member of our board of directors.
(14)
Eli Lederman is the brother of Seth Lederman, our chairman and chief executive officer. Seth Lederman disclaims beneficial ownership of the securities held by Eli Lederman.
(15)
Samuel Saks is a member of our board of directors.
(16)
William Ju is the member of William David Ju, L.L.C., the general partner of Ju Innovation Partners I, L.P. and has voting and investment power over the securities owned by it.
(17)
James A. Torrey is the general partner of Peabody Capital Partners, LP and has voting and investment power over the securities owned by it.
(18)
Leland Gershell is an executive officer of the Company.
(19)
David T. Altshuler is the member of Jupiter Financial Services, LLC and has voting and investment power over the securities owned by it.
(20)
William C. Ford, Jr. is the trustee of The Fontinalis Trust and has voting and investment power over the securities owned by it.
(21)
Elena A. Ford is the trustee of The 1901 Trust and has voting and investment power over the securities owned by it.
(22)
Robert H. Bluestein and Jeffrey N. Bluestein are the president and senior managing director, respectively, of R. J. Bluestein & Company, the general partner of Bluestein Capital Opportunities Fund, L.P. and have voting and investment power over the securities owned by it.
(23)
Sheila Mutter and Roger Quy are the managing members of TP Management VIII, LLC, the general partner of Technology Partners Fund VIII, LP and have voting and investment power over the securities owned by it.
(24)
Hill C. Snellings is the trustee of The 2012 Quinine Fund and has voting and investment power over the securities owned by it.
(25)
Represents maximum beneficial ownership percentage pursuant to exercise limitations contained within the warrants.
December 2012 Private Placement
In December 2012, we
consummated the December 2012 Financing, pursuant to which we issued an aggregate of 8,904,167 Units to the Purchasers for aggregate
cash proceeds of $2,615,000, at a price per Unit of $0.40, and the exchange of $710,000 in Debentures of the Company that were
converted into Units at a price of $0.30 per Unit.
Each Unit consisted
of one share of Common Stock, a Class A Warrant to purchase one share of Common Stock and a Class B Warrant to purchase one share
of Common Stock. The Class A Warrants have an exercise price of $0.60 per share of Common Stock and will be exercisable for a period
of five years from the date of issuance. The Class A Warrants may be exercised on a cashless basis under certain circumstances.
The Class B Warrants have an exercise price of $0.40 per share of Common Stock and will be exercisable for a period of one year
from the date of issuance.
In connection with
the December 2012 Financing, we granted each Purchaser registration rights.  We are obligated to use our best efforts
to cause a registration statement registering for resale the Common Stock included in the Units and the Common Stock underlying
the Class A Warrants to be filed no later than 60 days from the date of the last closing of the December 2012 Financing and must
be declared effective no later than 120 days from the date of the last closing of the December 2012 Financing.  Moreover,
we will maintain the effectiveness of the registration statement from its effective date unless all securities registered under
the registration statement have been sold or are otherwise able to be sold pursuant to Rule 144 of the Securities Act of 1933,
as amended (the "Securities Act").  If we fail to comply with the registration statement filing or effective
date requirements, we are required to pay the investors a fee equal to 1.0% of the Purchaser's investment, for each 30-day
period of delay, subject to a maximum payment of 10% to each Purchaser.
The shares included
in the Units and shares underlying the Class A Warrants are registered pursuant to this prospectus.
80
LEGAL MATTERS
Sichenzia Ross Friedman
Ference LLP, New York, New York will issue an opinion with respect to the validity of the shares of common stock being offered
hereby.
EXPERTS
EisnerAmper LLP, an
independent registered public accounting firm, has audited, as set forth in its report thereon appearing elsewhere herein, our
financial statements at December 31, 2011 and 2010 and for the years then ended that appear in the prospectus. The financial statements
referred to above are included in this prospectus in reliance upon the independent registered public accounting firm's report
given on their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
We have filed a registration
statement on Form S-1 under the Securities Act of 1933, as amended, relating to the shares of common stock being offered by this
prospectus, and reference is made to such registration statement. This prospectus constitutes the prospectus of Tonix Pharmaceuticals
Holding Corp., filed as part of the registration statement, and it does not contain all information in the registration statement,
as certain portions have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission.
We are subject to the
informational requirements of the Securities Exchange Act of 1934 which requires us to file reports, proxy statements and other
information with the Securities and Exchange Commission. Such reports, proxy statements and other information may be inspected
at public reference facilities of the SEC at 100 F Street, N.E., Washington D.C. 20549. Copies of such material can be obtained
from the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. Because we file
documents electronically with the SEC, you may also obtain this information by visiting the SEC's Internet website at http://www.sec.gov.
81
INDEX TO FINANCIAL STATEMENTS
TONIX PHARMACEUTICALS HOLDING CORP.
INDEX TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2011 and 2010
Report of Independent Registered Public Accounting Firm
F-1
Consolidated balance sheets as of December 31, 2011 and 2010
F-2
Consolidated statements of operations for the years ended December 31, 2011 and 2010 and for the period from June 7, 2007 (date of inception) through December 31, 2011
F-3
Consolidated statements of stockholders' deficiency for the years ended December 31, 2011, 2010, 2009, 2008 and for the period from June 7, 2007 (date of inception) through December 31, 2007
F-4
Consolidated statements of cash flows for the years ended December 31, 2011 and 2010 and for the period from June 7, 2007 (date of inception) through December 31, 2011
F-5
Notes to consolidated financial statements
F-6 to F-16
For the Three and Nine Months Ended September 30, 2012 and 2011
Condensed consolidated balance sheets as of September 30, 2012 (unaudited) and December 31, 2011
F-17
Condensed consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011 and for the period from June 7, 2007 (date of inception) through September 30, 2012 (unaudited)
F-18
Condensed consolidated statement of stockholders' deficiency for the nine months ended March 31, 2012 (unaudited)
F-19
Condensed consolidated statements of cash flows for the nine months ended September 30, 2012 and 2011 and for the period from June 7, 2007 (date of inception) through September 30, 2012 (unaudited)
F-20
Notes to condensed consolidated financial statements (unaudited)
F-21 to F-29
82
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Tonix Pharmaceuticals Holding Corp.
We have audited the accompanying consolidated
balance sheets of Tonix Pharmaceuticals Holding Corp. (a development stage company) (the "Company") as of December
31, 2011 and 2010, the related consolidated statements of operations and cash flows for the years then ended and for the period
from June 7, 2007 (inception) through December 31, 2011 and the consolidated statements of stockholders' deficiency for each
of the four years in the period ended December 31, 2011 and for the period from June 7, 2007 (inception) through December 31, 2007.
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not
engaged to perform an audit of the Company's internal control over financial reporting. Our audits include consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the consolidated financial position of Tonix Pharmaceuticals Holding
Corp. as of December 31, 2011 and 2010, the consolidated results of its operations and its cash flows for the years ended December
31, 2011 and 2010 and for the period from June 7, 2007 (inception) through December 31, 2011 and consolidated changes in stockholders'
deficiency for each of the four years in the period ended December 31, 2011 and for the period June 7, 2007 through December 31,
2007, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the
Company has incurred recurring net losses and negative cash flows from operations, has both working capital and stockholders' deficiencies
at December 31, 2011 and requires additional financing to fund future operations. These events and conditions, among others referred
to in Note 2, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning
these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/EisnerAmper LLP
EisnerAmper LLP
New York, New York
March 30, 2012
F-
1
TONIX PHARMACEUTICALS HOLDING
CORP.
(Formerly known as Tamandare
Explorations Inc.)
(a development stage company)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2011 AND 2010
2011
2010
ASSETS
Current assets:
Cash
$
41,123
$
65,359
Prepaid expenses
102,430
23,313
Total current assets
143,553
88,672
Furniture and equipment, net
25,550
32,086
Deferred financing costs, net
196,166
-
Restricted cash
60,177
60,087
Security deposit
-
3,156
$
425,446
$
184,001
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable
$
695,198
$
317,745
Accrued expenses
10,229
22,533
Accrued interest, including $5,006 to related parties
38,306
-
Liability to placement agent
31,543
-
Convertible Debentures
150,000
-
Total current liabilities
925,276
340,278
Convertible Debentures, including $265,000 to related parties
1,925,000
-
Deferred rent payable
29,083
19,174
Total liabilities
2,879,359
359,452
Commitments (Note 6)
-
-
Stockholders' deficiency:
Common stock, $0.001 par value; 75,000,000 shares authorized, 27,066,667 and 18,034,483 shares issued and outstanding as of December 31, 2011 and 2010, respectively
27,067
18,035
Additional paid in capital
3,913,700
2,731,081
Deficit accumulated during development stage
(6,394,680
)
(2,924,567
)
Total stockholders' deficiency
(2,453,913
)
(175,451
)
$
425,446
$
184,001
See notes to consolidated financial statements
F-
2
TONIX PHARMACEUTICALS HOLDING
CORP.
(Formerly known as Tamandare
Explorations Inc.)
(a development stage company)
CONSOLIDATED STATEMENTS OF
OPERATIONS
From June 7, 2007
(date of inception)
Year ended December 31,
Through
2011
2010
December 31, 2011
Costs and expenses:
Research and development
$
1,158,167
$
584,298
$
1,951,954
General and administrative
2,220,361
1,344,390
4,255,247
3,378,528
1,928,688
6,207,201
Operating loss
(3,378,528
)
(1,928,688
)
(6,207,201
)
Gain on extinguishment of debt
-
-
7,908
Interest expense, net
(91,585
)
(35,782
)
(195,387
)
Net loss
$
(3,470,113
)
$
(1,964,470
)
$
(6,394,680
)
Net loss per common share, basic and  diluted
$
(0.16
)
$
(0.18
)
Weighted average common shares outstanding, basic and diluted
21,425,632
11,175,096
See notes to consolidated financial statements
F-
3
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIENCY
Deficit
Accumulated
Additional
During
Common stock
Paid in
Development
Shares
Amount
Capital
Stage
Total
Shares issued to founders for intellectual property
    in June 2007 ($0.15 per share)
589,014
$
589
$
87,161
$
-
$
87,750
Shares issued to bankers for services in June 2007 ($0.15 per share)
65,446
66
9,684
-
9,750
Compensation related to restricted share awards issued to directors
    in November 2007
-
-
24,187
-
24,187
Net loss
-
-
-
(537,001
)
(537,001
)
Balance at December 31, 2007
654,460
655
121,032
(537,001
)
(415,314
)
Compensation related to cancelled restricted share awards in December
    2008
-
-
72,563
-
72,563
Net loss
-
-
-
(202,262
)
(202,262
)
Balance at December 31, 2008
654,460
655
193,595
(739,263
)
(545,013
)
Conversion of senior convertible notes into capital stock in June
    2009 ($0.03 per share)
7,200,000
7,200
192,800
-
200,000
Shares issued to directors in July 2009 ($0.15 per share)
31,414
31
4,649
-
4,680
Capital contribution in June 2009
-
-
23,725
-
23,725
Net loss
-
-
-
(220,834
)
(220,834
)
Balance at December 31, 2009
7,885,875
7,886
414,769
(960,097
)
(537,442
)
Conversion of demand notes into capital stock in July 2010 ($0.23
    per share)
2,094,547
2,095
477,905
-
480,000
Conversion of accrued interest on demand notes into capital stock
    in July 2010 ($0.23 per share)
301,430
301
68,777
-
69,078
Issuance of capital stock in August to December 2010 ($0.23 per share)
5,856,005
5,856
1,336,145
-
1,342,001
Shares issued to founders for intellectual property in June 2010
    ($0.23 per share)
1,308,921
1,309
294,191
-
295,500
Issuance of restricted shares to directors, employees and consultants
    in June to November 2010 ($0.24 per share)
587,705
588
139,294
-
139,882
Net loss
-
-
-
(1,964,470
)
(1,964,470
)
Balance at December 31, 2010
18,034,483
18,035
2,731,081
(2,924,567
)
(175,451
)
Vesting and issuance of capital stock in January to September 2011
    ($0.23 per share)
2,670,548
2,670
609,330
-
612,000
Vesting and issuance of restricted shares to directors, employees
    and consultants in February to April  2011 and vesting of restricted shares pursuant to Share Exchange in October 2011
1,961,636
1,962
433,689
-
435,651
Common stock issued in connection with the share exchange transaction
    in October 2011
4,000,000
4,000
(4,000
)
-
-
Common stock issued in October 2011 in exchange for services rendered
    ($0.36 per share)
400,000
400
143,600
-
144,000
Net loss
-
-
-
(3,470,113
)
(3,470,113
)
Balance at December 31, 2011
27,066,667
$
27,067
$
3,913,700
$
(6,394,680
)
$
(2,453,913
)
See notes to consolidated financial statements
F-
4
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
From June 7, 2007
(date of inception)
Year ended December 31,
Through
2011
2010
December 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(3,470,113
)
$
(1,964,470
)
$
(6,394,680
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
9,300
3,854
17,312
Amortization of deferred financing costs
53,377
-
53,377
Common stock issued in exchange for intellectual property
-
295,500
383,250
Stock based compensation
435,651
139,882
686,713
Gain on extinguishment of debt
-
-
(7,908
)
Changes in operating assets and liabilities:
Prepaid expenses
(79,117
)
(19,315
)
(102,430
)
Accounts payable
377,453
294,132
695,198
Accrued interest
38,306
32,691
38,306
Accrued expenses
(12,304
)
(34,789
)
110,940
Deferred rent payable
9,909
19,174
29,083
Net cash used in operating activities
(2,637,538
)
(1,233,341
)
(4,490,839
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment
(2,764
)
(34,279
)
(42,862
)
Repayment of security deposit
3,156
-
-
Payment of restricted cash
(90
)
(60,087
)
(60,177
)
Net cash provided by (used in) investing activities
302
(94,366
)
(103,039
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from demand notes
-
50,000
480,000
Proceeds from notes payable
500,000
-
700,000
Proceeds from Convertible Debentures
1,501,000
-
1,501,000
Proceeds from the sale of capital stock
612,000
1,342,001
1,954,001
Net cash provided by financing activities
2,613,000
1,392,001
4,635,001
Net (decrease) increase in cash
(24,236
)
64,294
41,123
Cash, beginning of the period
65,359
1,065
-
Cash, end of period
$
41,123
$
65,359
$
41,123
Non cash investing and financing activities:
Senior convertible notes exchanged for preferred shares
$
-
$
200,000
$
200,000
Capital contribution of accrued interest on convertible notes
$
-
$
-
$
23,725
Demand notes together with accrued interest converted into capital stock
$
-
$
549,078
$
549,078
Common stock issued for deferred financing costs
$
144,000
$
-
$
144,000
See notes to consolidated financial statements
F-
5
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
NOTE 1 –BUSINESS AND RECAPITALIZATION
Tonix Pharmaceuticals Holding Corp. through
its wholly owned subsidiary Tonix Pharmaceuticals, Inc. is attempting to develop safer and more effective versions of widely prescribed
central nervous system ("CNS") drugs. While some new applications can use the commercially available form of the drug,
in other cases reformulating the active ingredient improves its safety or effectiveness in treating the CNS condition. When formal
development programs have proven successful in clinical tests, Tonix Pharmaceuticals, Inc. intends to seek marketing approval from
the Food and Drug Administration ("FDA").
On August 16, 2010, Tonix Pharmaceuticals,
Inc. formed Krele LLC ("Krele") in the state of Delaware. Krele is a limited liability corporation whose sole member
is Tonix Pharmaceuticals Inc. Krele was established to commercialize products that are generic versions of predicate new drug application
products or versions of drug efficacy study implementation products. The Company expects that its relationship to Krele will be
similar to that of several other pharmaceutical companies and their subsidiaries that market generic versions of the parent's branded
products at different periods in their product life-cycle.
On October 7, 2011, Tonix Pharmaceuticals,
Inc. (formerly Krele Pharmaceuticals, Inc. incorporated on June 7, 2007 in the State of Delaware) and a publicly traded non-operating
shell company Tamandare Explorations Inc. ("Tamandare"), incorporated under the laws of the State of Nevada, along
with certain other parties executed and consummated a share exchange agreement (the "Share Exchange"). Pursuant to
the Share Exchange, each share of Tonix Pharmaceuticals Inc.'s common stock was exchanged for 0.9 shares of Tamandare's
common stock and each share of Tonix Pharmaceuticals, Inc.'s Series A and B preferred stock was exchanged for 4.8 shares
of Tamandare's common stock. Upon completion of the Share Exchange, the Tonix Pharmaceuticals, Inc. shareholders, including
holders of restricted shares, which were subject to accelerated vesting, received in exchange for all of their shares, an aggregate
of 22,666,667 shares of Tamandare's common stock and Tamandare's existing stockholders retained 4,000,000 shares of
common stock. The 22,666,667 shares issued to the Tonix Pharmaceuticals, Inc. shareholders constituted approximately 85% of Tamandare's
26,666,667 issued and outstanding shares of common stock after the Share Exchange. Upon completion of the Share Exchange, Tonix
Pharmaceuticals, Inc. became Tamandare's wholly-owned subsidiary and in October 2011 Tamandare was renamed Tonix Pharmaceuticals
Holding Corp. As the owners and management of Tonix Pharmaceuticals, Inc. obtained voting and operating control of Tamandare after
the Share Exchange and Tamandare was non-operating, had no assets or liabilities and did not meet the definition of a business,
the transaction has been accounted for as a recapitalization of Tonix Pharmaceuticals, Inc., accompanied by the issuance of its
common stock for outstanding common stock of Tamandare, which was recorded at a nominal value. The accompanying financial statements
and related notes give retroactive effect to the recapitalization as if it had occurred on June 7, 2007 (inception date) and accordingly
all share and per share amounts have been adjusted.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation:
The consolidated financial statements include
the accounts of Tonix Pharmaceuticals Holding Corp. and its wholly owned subsidiaries, Tonix Pharmaceuticals, Inc. and Krele
LLC (hereafter referred to as the "Company" or "Tonix"). All significant intercompany balances and transactions
have been eliminated in consolidation.
As the Company is devoting substantially
all of its efforts to establishing a new business, and while planned principal operations have commenced, there has been no revenue
generated from sales, license fees or royalties, the Company is considered a development stage enterprise. Accordingly, the Company's
consolidated financial statements are presented in accordance with authoritative accounting guidance related to a development stage
enterprise. Financial position, results of operations and cash flows of a development stage enterprise are presented in conformity
with generally accepted accounting principles that apply to established operating enterprises.
As a development stage enterprise, the
Company's primary efforts are devoted to conducting research and development for the treatment of CNS diseases. The Company has
experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the
foreseeable future. In addition, the Company has both working capital and stockholders' deficiencies at December 31, 2011
and requires additional financing to fund future operations. Although, in the first quarter of 2012, the Company raised approximately
$4,700,000 (see Note 11), it's expected that cash used in operations will increase significantly over the next several years.
The Company intends to raise additional capital to complete the development and commercialization of its current product candidates
through equity or debt financing; however the Company does not have any commitments or definitive or binding arrangements for such
funds. There can be no assurance that such funds, if available at all, can be obtained on terms reasonable to the Company. If the
Company is unsuccessful in raising additional capital it will need to reduce costs and operations substantially. Further, the Company
does not have any commercial products available for sale and has not generated revenues and there is no assurance that if approval
of their products is received that the Company will be able to generate cash flow to fund operations. In addition, there can be
no assurance that the Company's research and development will be successfully completed or that any product will be approved or
commercially viable.
F-
6
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
The above factors raise substantial doubt
as to the Company's ability to continue as a going concern. The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern and do not include any adjustments that may result from the outcome
of this uncertainty.
Use of estimates
The preparation of financial statements
in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant estimates include the useful life of fixed assets and assumptions used in the fair value of stock-based
compensation.
Research and Development costs
The Company outsources its research and
development efforts and expenses 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 in 2007 and 2010 as research and development costs, as it related to particular research and development
projects and had no alternative future uses.
Reclassifications
The accompanying 2010 financial statements
together with cumulative amounts from inception have been reclassified to allocate professional services expenses to research and
development and general and administrative expenses to be consistent with current year presentation.
Furniture and equipment
Furniture and equipment are stated at cost,
less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset's estimated useful life,
which is three years for computer assets and five years for furniture and all other equipment. Expenditures for maintenance and
repairs are expensed as incurred.
Income taxes
Deferred income tax assets and liabilities
are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences
between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted
tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than
not that these deferred income tax assets will be realized.
The Company recognizes a tax benefit from
an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a
position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
As of December 31, 2011 and 2010, the Company has not recorded any unrecognized tax benefits.
F-
7
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
Stock-based compensation
All stock-based payments to employees and
to nonemployee directors for their services as directors, including grants of restricted stock and stock options, are measured
at fair value on the grant date and recognized in the consolidated statements of operations as compensation or other expense over
the relevant vesting period. Stock-based payments to nonemployees are recognized as an expense over the period of performance.
Such payments are measured at fair value at the earlier of the date a performance commitment is reached or the date performance
is completed. In addition, for awards that vest immediately and are non forfeitable the measurement date is the date the award
is issued.
Per share data:
Basic and diluted net loss per common share
is calculated by dividing net loss, by the weighted average number of outstanding shares of common stock, adjusted to give effect
to the exchange ratio in the Share Exchange in October 2011 (see Note 1), which was accounted for as recapitalization of the Company.
In October 2011, upon completion of the
share exchange referred to above, the Company issued Convertible Debentures in the amount of $2,075,000 which as of December 31,
2011 were convertible into approximately 3,985,000 common shares. In computing diluted net loss per share, no effect has been given
to such shares as their effect would be antidilutive. See Notes 5 and 10 for subsequent issuance of securities.
NOTE 3 – FURNITURE AND EQUIPMENT
Furniture and equipment as of December
31, 2011 and 2010 is summarized as follows:
2011
2010
Office furniture and equipment
$
42,862
$
40,098
Less:  accumulated depreciation
(17,312
)
(8,012
)
$
25,550
$
32,086
Depreciation expense for the years ended December 31, 2011 and
2010 was $9,300 and $3,854, respectively.
NOTE 4 - RESTRICTED CASH
Restricted cash at December 31, 2011 and
2010 collateralizes a letter of credit in the amount of approximately $60,000 issued in connection with the lease of office space
in New York City (see Note 6).
NOTE 5 - CONVERTIBLE DEBENTURES
On October 7, 2011, concurrently with the
Share Exchange, the Company issued secured Convertible Debentures ("Convertible Debentures") in the amount of $1,625,000
of which $1,125,000 were sold to certain investors for aggregate cash proceeds of $1,065,000, net of selling commissions to a placement
agent of $40,000 and $20,000 of legal fees, and $500,000 were exchanged for 8% Notes Payable ("Notes Payable") issued
on September 9, 2011. In addition, 400,000 shares of common stock with the fair market value of $144,000 were issued to a second
placement agent. On November 16, the Company issued Convertible Debentures in the amount of $450,000 for aggregate cash proceeds
of $436,000, net of selling commissions to a third placement agent of $14,000.
The Convertible Debentures mature on the
earlier of (i) one year from the date of issuance or (ii) the date of closing of a private placement of equity, equity equivalent,
convertible debt or debt financing in which the Company receives gross proceeds, in one or more transactions, of at least $3,425,000
(a "Subsequent Financing"). The Convertible Debentures bear interest at 8% per annum and are convertible at the holder's
option into a Subsequent Financing. In the event that a Subsequent Financing has not occurred within 12 months from the date of
issuance of the Convertible Debentures, the holder has the option to convert into a number of shares of the Company's common stock
equal to 1% of the Company's shares of common stock on a fully diluted basis for every $125,000 of Convertible Debentures (the
"Conversion Shares") or an aggregate of approximately 3,985,000 shares based on the outstanding shares of the Company
common stock as of December 31, 2011. A Subsequent Financing comprised of Units consisting of common stock and warrants took place
on January 20, 2012 and $1,925,000 of debentures were exchanged for Units (see Note 10). The remaining $150,000 of debentures were
repaid. As a result of the exchange, $1,925,000 principal amount of debentures are classified as a non-current liability in the
accompanying balance sheet at December 31, 2011.
F-
8
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
Upon conversion or repayment of the Convertible
Debenture, the holder is entitled to receive, at the holder's option, either (i) a warrant (the "Warrant"), which
has a three year term and is exercisable at the offering price in a Subsequent Financing, to purchase such number of shares of
the Company's common stock equal to the principal amount of the Convertible Debenture divided by the offering price in a Subsequent
Financing, (the "Warrant Shares") or (ii) shares of the Company's common stock equal to 33% of the principal amount
of the Debenture divided by the offering price in a Subsequent Financing (the "Incentive Shares"). The value of the
Warrant Shares or Incentive Shares will be measured and number of such shares determined upon occurrence of any Subsequent Financing.
The Conversion Shares, Warrant Shares and Incentive Shares are entitled to piggyback registration rights. Upon the Subsequent Financing
on January 20, 2012, the holders $1,925,000 principal amount of Convertible Debentures elected to receive 250,000 Warrants exercisable
at $1 per share and 536,250 Incentive Shares, and holders of the remaining $150,000 principal amount of Convertible Debentures,
which were redeemed, received 25,000 Warrants exercisable at $1 per share and 57,750 Incentive Shares. The value of the Warrants
and Incentive Shares will be charged to operations in the first quarter of 2012.
In addition to selling commissions paid
to the placement agents on the sale of certain Convertible Debentures, the placement agents received warrants which expire in October
2013 and November 2013, respectively, and are exercisable at the offering price in a Subsequent Financing to purchase shares of
the Company's common stock equal to 3% and 9%, respectively, of the gross proceeds delivered by purchasers introduced by such placement
agents divided by the purchase price per share in the Subsequent Financing. In the event that the Subsequent Financing has not
occurred within 12 months from the date of issuance of the Convertible Debentures, the placement agents will receive, in lieu of
the warrants, shares of common stock equal to 3% and 9%, respectively, of the number of shares of the Company's common stock such
purchasers are entitled to receive upon conversion of their Convertible Debentures or an aggregate of approximately 88,000 shares
based on the outstanding shares of the Company's common stock as of December 31, 2011. The Company recognized a liability to placement
agents to issue shares of its common stock based on their fair value of approximately $32,000 as of December 31, 2011. Upon the
Subsequent Financing on January 20, 2012, the placement agents become entitled to receive 30,750 warrants exercisable at $1.00
per share.
The following expenses in connection with
the issuance of Convertible Debenture are recorded as deferred financing costs: fair value of 400,000 shares of the Company's
common stock issued to the placement agent valued at $144,000, cash payments to the placement agents of $54,000, legal expenses
of $20,000 and fair value of the liability to placement agent to issue the Company's shares of common stock in the amount
of $32,000. The deferred financing costs are being amortized using the effective interest method over the twelve month term of
the Convertible Debentures. During the year ended December 31, 2011, amortization of deferred financing costs amounted to approximately
$53,000 and charged to interest expenses in the statement of operations. The unamortized balance will be charged to operations
in connection with the extinguishment of the debentures resulting from their exchange for the Units and repayment in 2012.
Pursuant to a Pledge and Security Agreement
and Subsidiary Guaranty, the Company granted the Debenture holders a first priority lien on all its assets.
NOTE 6 - COMMITMENTS
Operating leases
On September 28, 2010, the Company entered
into a five-year lease for office space in New York City, with monthly payments escalating from approximately $10,000 in first
year to approximately $11,000 in fifth year. The Company received a rent credit of $9,420 in each of the months of November 2010,
December 2010 and January 2011. The Company has posted a letter of credit in the amount of approximately $60,000 for the benefit
of the landlord which is collateralized by a money market account (see Note 4 - Restricted Cash).
F-
9
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
Future minimum lease payments under the operating lease are
as follows:
Year Ending December 31,
2012
$
124,370
2013
127,889
2014
131,513
2015
100,719
$
484,491
Rent expense charged to operations, which
differs from rent paid due to the rent credits and to increasing amounts of base rent, is calculated by allocating total rental
payments on a straight-line basis over the term of the lease. During the years ended December 31, 2011 and 2010, rent expense was
$128,228 and $42,570, respectively and as of December 31, 2011 and 2010 deferred rent payable was $29,083 and $19,174, respectively.
The Company utilized office space in New York City provided by founders without remuneration until October 2010.
Consulting agreements
In June 2010, the Company entered into
a two-year consulting agreement with L&L Technologies, an entity controlled by a member of the Company's Board of Directors,
for scientific and medical consulting services. In consideration for such services, L&L Technologies will receive $96,000 per
annum and 1,026,194 shares of restricted common stock which were granted at the inception of the agreement. The consulting agreement
renews automatically for subsequent terms of one year at $96,000 per annum. The restricted shares vest as follows: 25% on the grant
date (June 4, 2010) and 25% on each of the first and second annual anniversaries of the grant date and, if the consulting agreement
is renewed, 25% on the third anniversary of the grant date. Vesting of the unvested 513,097 restricted shares accelerated on October
7, 2011, the date of the Share Exchange.
In June 2010, the Company entered into
a two-year consulting agreement with Lederman & Co., an entity controlled by a member of the Company's Board of Directors,
for clinical development, strategic, management and operational consulting services. In consideration for such services, Lederman
& Co. will receive $250,000 per annum and 261,784 shares of restricted common stock which were granted at the inception of
the agreement. The consulting agreement renews automatically for subsequent terms of one year at $250,000 per annum. The restricted
shares vest as follows: 20% on the grant date (June 4, 2010) and 20% on each of the first and second anniversaries of the grant
date and, if the consulting agreement is renewed, 20% on each of the third and fourth anniversaries of the grant date. Vesting
of the unvested 157,087 restricted shares accelerated on October 7, 2011, the date of the Share Exchange.
In June 2010, the Company entered into
an agreement with Burns McClellan, Inc. to provide media and investor relations services, including preparation of investor presentations
and press releases, media outreach and training and investor targeting and introductions, for a fee of $20,000 per month, plus
expenses. The agreement was terminated in January 2011.
In October 2010, the Company entered into
an agreement with Frost & Sullivan to prepare an assessment of the U.S. fibromyalgia market, including current market size
and historical and projected growth rates, as well as a formal presentation supporting their findings for a fee of $109,400, all
of which was recognized in 2010.
In July 2011, the Company entered into
an agreement with Catalent Pharma Solutions, LLC to investigate, for $58,080, the feasibility of developing the active pharmaceutical
ingredient ("API") used in TNX-102, one of the Company's product candidates, for use in a new, proprietary formulation
In August 2011, the Company entered into
an agreement with Porter, LeVay & Rose, Inc. to provide media and investor relations services, including preparation of investor
presentations and press releases, media outreach and training and investor targeting and introductions, for a fee of $12,000 per
month, plus expenses.  Also in August 2011, the Company entered into an agreement with JFC Technologies, LLC ("JFC")
for product development work for an initial fee of $75,000, of which $35,000 was paid upon signing. In September 2011, JFC was
acquired by Cyalume Specialty Products, Inc. ("Cyalume") and the Company's agreement was transferred to Cyalume.  Additionally,
in August 2011 the Company authorized the initiation of stage 2 work pursuant to a contract with Lipocine Inc. with respect to
a research and development project for reformulation work on TNX-102 for a fee of $235,000, which work started in the third quarter
of 2011.
F-
10
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
In September 2011, the Company entered
into two contracts with Pharmanet Canada for contract research work with respect to the development of methods to measure the active
ingredient of TNX-102 in blood and urine. The full cost of the work to be performed is approximately $90,000.  Payment
is due in three installments based on the achievement of certain performance milestones. Also, in September 2011, the Company entered
into a contract with Pharmanet Canada for contract research work with respect to the pharmacokinetic study for TNX-102. The full
cost of the work to be performed is $637,231.  Payment is due in four installments based on the achievement of certain
performance milestones.
In October 2011, the Company entered into
an agreement with Applied Pharma Research to develop, and perform an exploratory pharmacokinetic study on a new formulation of
the API used in TNX-102 for an approximate cost of $180,000.
Employment agreements
In 2010, the Company entered into employment
agreements with the Chief Operating Officer and the Vice President of Marketing which expire in August 2012 and June 2012, respectively.
Under the terms of the employment agreements, the Chief Operating Officer and the Vice President of Marketing shall receive annual
base compensation of $250,000 and $150,000, respectively, which shall be adjusted to $320,000 and $200,000, respectively, or such
other rate as the Board may designate from time to time, upon completion of an initial public offering with net proceeds of at
least $15,000,000. The agreements will be automatically renewed for additional one-year periods (the "Renewal Terms")
unless either party notifies the other in writing of its intention not to renew within 90 days prior to the expiration of
the Initial Term or any Renewal Terms. Upon termination without cause, as defined in the agreements, the executives will continue
to receive compensation for up to nine months if termination is in connection with or following an initial public offering.
In February 2011, the Company entered into
an employment agreement with the Chief Business Officer which expires in February 2013. Under the terms of the employment agreement,
the Chief Business Officer shall receive annual base compensation of $150,000 which shall increase, with a retroactive adjustment,
upon the completion of an underwritten public offering, as defined, or certain other events. The employment agreement will be automatically
renewed for additional renewal terms unless either party notifies the other in writing of its intention not to renew within 90
days prior to the expiration of the initial term or any renewal terms. Upon termination without cause, as defined in the employment
agreement, the Chief Business Officer will continue to receive compensation for six months, or nine months if termination is in
connection with or following certain events.
In April 2011, the Company terminated existing
employment agreements with the three executive employees referred to in the first two paragraphs above and entered into new employment
agreements which stipulate such employees will receive minimum wage salary ($7.25 per hour) for a 40 hour week until the Company
receives new capital of at least $500,000 through the sale of equity securities. The expiration dates of the new agreements remain
the same as the terminated agreements. In addition, the Chief Business Officer assumed the title of Chief Operating Officer and
the Chief Operating Officer assumed the title of Chief Financial Officer and Chief Administrative Officer and the Vice President
of Marketing assumed the title of Vice President of Strategy. Upon receipt of $500,000 or more in new capital, the employees will
receive a lump sum payment in the amount of $50,000 each for the Chief Operating Officer and Chief Financial Officer and $30,000
for the Vice President of Strategy. Further, base salaries for all three employees will be increased with a retroactive adjustment
upon the completion of an underwritten offering, as defined, or certain other events. All other terms remain the same.  In
October 2011, the position of Vice President of Strategy was eliminated and the employment agreement was terminated. In conjunction
with this event, the Company paid $37,500 in December 2011 in exchange for the release from future obligations. In February 2012,
the Company terminated its employment agreement with its Chief Financial Officer and in accordance with the agreement paid such
officer approximately $88,000.
In July 2011, the Company entered into
agreements with the executive employees to defer payment of the lump sum amounts referred to above until the closing of a private
placement of securities, as defined.  In addition, salaries of the Chief Financial Officer and Chief Operating Officer
were adjusted to $175,000 per annum effective August 2011. The salary of the Chief Operating Officer shall increase to $250,000
per annum on the first anniversary of the Share Exchange provided that the Company has raised at least $500,000 in additional equity
securities.
F-
11
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
NOTE 7 - INCOME TAXES
There is no provision for federal or state
income taxes for the years ended December 31, 2011 and 2010 since the Company has established a valuation allowance equal
to the total deferred tax asset related to losses incurred during such periods.
Deferred tax assets and liabilities and
related valuation allowance as of December 31, 2011 and 2010 are as follows:
December 31,
2011
2010
Deferred tax assets:
Organization costs
$
733
$
2,494
Research and development credit carryforward
6,188
6,188
Net operating loss carryforwards
2,329,829
1,107,688
Other
132,482
121,091
Total deferred tax assets
2,469,232
1,237,461
Deferred tax liabilities:
Restricted stock compensation(1)
-
(148,871
)
Net deferred tax assets
2,469,232
1,088,590
Valuation allowance
(2,469,232
)
(1,088,590
)
Net deferred tax assets
$
0
$
0
(1)
Relates to restricted stock grants for which Internal Revenue Code ("IRC") Section 83(b) elections were filed in 2010, resulting in tax deductions in excess of related compensation expense for financial reporting purposes in 2010.
Based on the Company's historical losses
and its expectation of continuation of losses for the foreseeable future, the Company has determined that it is not more likely
than not that the deferred tax assets will be realized and, accordingly, has provided a valuation allowance. The increase in the
valuation allowance for the years ended December 31, 2011 and 2010 was $1,380,642 and $783,696, respectively.
At December 31, 2011, the Company
has available unused net operating loss carryforwards of approximately $5.8 million that expire from 2027 to 2031 for federal tax
purposes and the same amount for New Jersey state tax purposes, which expire from 2014 to 2018. The Company also has approximately
$3 million of net operating loss carryforwards for New York state purposes expiring in 2031. These net operating loss carryforwards
may be subject to annual limitations in their use in accordance with IRC Section 382. Accordingly, the extent to which the net
operating loss carryforwards can be used to offset future taxable income may be limited. At December 31, 2011, the Company has
a research and development credit carryforward of $6,188 for federal tax purposes that expires in 2027.
The Company's federal and state tax returns
remain open and subject to examination by the tax authorities for the tax years 2008 and 2007, respectively through 2011.
A reconciliation of the effect of applying
the federal statutory rate and the effective income tax rate used to calculate the Company's income tax provision is as follows:
F-
12
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
Year Ended
December 31,
2011
2010
Statutory federal income tax
(34.0
)%
(34.0
)%
State income tax, net of federal tax effect
(5.9
)%
(5.9
)%
Permanent difference
0.0
%
5.0
%
Increase in valuation allowance
39.9
%
34.9
%
Income tax provision
0
%
0
%
NOTE 8 – STOCK PLAN
In June and August 2010, respectively,
the board of directors and stockholders of Tonix Pharmaceuticals, Inc. approved, and in December 2010 and February 2011, the board
of directors amended, the terms and provisions of the 2010 Stock Plan ("Plan") whereby the Company reserved 4,564,641
shares of its Common Stock for issuance pursuant to the Plan. The Plan allowed for grants of options to purchase shares of Common
Stock and awards of restricted Common Stock to employees, officers, directors, consultants and advisors of the Company.
In 2010, the Company granted shares of
restricted Common Stock under the Plan to employees ("Employee Granted Shares") as follows: 196,359 shares to the Chief
Operating Officer, 109,088 shares to the Vice President of Clinical Development, 130,906 shares to the Vice President of Marketing
and 196,359 shares to the Chief Medical Officer. Employee Granted Shares vest: 20% on the grant date and 20% on each of the first,
second, third and fourth anniversaries of the grant date. Upon termination of the Chief Medical Officer's employment with Tonix,
157,087 unvested shares held by him were forfeited and he retained 39,272 shares of fully vested Common Stock. Upon termination
of the Vice President of Clinical Development's employment with Tonix, 87,270 unvested shares held by him were forfeited and he
retained 21,818 shares of fully vested Common Stock.
In 2010, the Company granted 1,288,112
shares of restricted Common Stock under the Plan to consultants.
In 2010, the Company granted 556,786 shares
of restricted Common Stock under the Plan to directors and also granted 52,362 shares of restricted Common Stock under the Plan
to members of the Scientific Advisory Board which vest: 25% on the grant date and 25% on each of the first, second and third anniversaries
of the grant date.
In February 2011, the Company granted shares
of restricted Common Stock to employees as follows: 196,359 shares to the Chief Business Officer and 130,906 shares to the incoming
President of Krele. The shares vest: 20% on the grant date and 20% on each of the first, second, third and fourth anniversaries
of the grant date. In August 2011, upon resignation of the President of Krele, 104,725 unvested shares were forfeited.
In March and April 2011, the Company granted
19,636 and 21,818 shares of restricted Common Stock, respectively, to newly appointed members of the Scientific Advisory Board
and the Board of Directors which vest: 25% on the grant date and 25% on each of the first, second and third anniversaries of the
grant date.
F-
13
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
Following is a summary of the status of
the Company's nonvested restricted stock as of December 31, 2011 and the changes during the years 2010 and 2011:
Weighted
Number of
Average
Restricted
Grant-Date
Nonvested Restricted Stock
Shares
Fair Value
Nonvested at January 1, 2010
Granted
2,529,971
$
0.23
Vested
(587,767
)
$
0.23
Forfeited
(244,357
)
$
0.23
Nonvested at December 31, 2010
1,697,847
$
0.23
Granted
368,718
$
0.23
Vested prior to Share Exchange
(564,858
)
$
0.23
Vested pursuant to Share Exchange
(1,396,982
)
$
0.23
Forfeited
(104,725
)
$
0.23
Nonvested at December 31, 2011
0
$
0
Restricted stock is not considered to be issued until the stock
vests.
The Company recognized share-based compensation
expense of $139,063 prior to Share Exchange and remaining expense of $296,588 was recognized on October 7, 2011, the date of Share
Exchange, upon which all nonvested restricted shares vested and the Plan ceased to exist. Stock based compensation expense for
the year ended December 31, 2010 was $139,882.
NOTE 9 - RELATED PARTY TRANSACTIONS
Dr. Seth Lederman and Dr. Donald Landry
are primary founders of the Company and serve on the board of directors. They have entered into various transactions with the Company
through several companies under their control, including L&L Technologies and Lederman & Co as described in Note 6.
D
uring
2007, the Company issued senior convertible promissory notes (the "Senior Convertible Notes") pursuant to the Note Purchase
Agreements among the Company and National Holdings Corporation, Lederman & Co., LLC, Eli Lederman PhD and Dr. Seth Lederman,
all but one of whom are direct or indirect stockholders of the Company (collectively referred to herein as the "Noteholders"),
in the amount of $50,000 per Senior Convertible Note, or $200,000 in the aggregate. The Senior Convertible Notes bore interest
at the rate of 8% per annum and were payable together with the interest accrued thereon on the two year anniversary of the Senior
Convertible Notes. The outstanding principal and interest accrued thereon were to be automatically converted into fully paid shares
of capital stock upon the closing of a Qualified Financing of capital stock or securities convertible into preferred stock which
resulted in gross proceeds of at least $2,000,000.
In June 2009, although a Qualified Financing
had not occurred, the Noteholders agreed to exchange the Senior Convertible Notes for shares of capital stock of the Company at
the rate of one share of capital per $0.13 of the outstanding principal balance of such notes. The accrued interest on the notes
in the amount of $31,633 was forgiven. The excess of the carrying value of the notes including accrued interest over the fair value
of the capital stock for which they were exchanged amounted to $31,633 of which $23,725, representing the excess related to the
Noteholders who are direct or indirect stockholders, has been accounted for as a capital contribution and credited to additional
paid-in capital and the remaining $7,908 was recorded as a gain on extinguishment of debt. Interest expense relating to the Senior
Convertible Notes for the year ended December 31, 2009 was $8,044.
In 2007, Lederman & Co. loaned the
Company $10,000. On December 19, 2008, the Company issued to Lederman & Co. a demand note in the amount of $280,000, which
included new cash proceeds of $270,000 as well as the amount loaned in 2007, with interest accruing on the total demand note balance
commencing December 19, 2008. On December 7, 2009, the Company borrowed an additional $150,000 from Lederman & Co. and issued
a demand note. The principal balance of the demand notes outstanding as of December 31, 2009 was $430,000 with accrued interest
owed at December 31, 2009 of $36,387. On March 5, 2010, the Company issued to Dr. Donald Landry a demand note in the amount
of $50,000. The demand notes accrue interest at the rate of 12% per annum.
F-
14
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
On July 30, 2010, the demand notes and
all interest accrued thereon were converted into shares of capital stock. Demand notes held by Lederman & Co. totaling $430,000
and accrued interest thereon of $66,629 were converted into 2,166,444 shares of capital stock, at a conversion price of $0.23 per
share of capital stock. The demand note held by Donald Landry totaling $50,000 and accrued interest thereon of $2,449 was converted
into 228,835 shares of capital stock, at a conversion price of $0.23 per share of capital stock.
On September 9, 2011, the Company sold
$500,000 principal amount of 8% convertible notes (the "Notes") to members of the board of directors and their related
parties. The Notes were due one year from the date of issuance, and were exchangeable for a future financing (the "New Financing")
at the option of the holders. Interest is payable on either the maturity date or on the date the Notes are exchanged into the New
Financing, or such accrued interest can be converted into the New Financing. On October 7, 2011, the Notes were exchanged into
debentures issued by the Company concurrently with the Share Exchange (see Note 5).
Interest expense on the demand notes for
the years ended December 31, 2010 and 2009 was $32,691 and $35,267, respectively.
NOTE 10 - SUBSEQUENT EVENTS
The Company amended and restated its Bylaws
and Articles of Incorporation on February 16, 2012 and among other changes, increased the number of authorized shares of common
stock, $0.001 par value to 150,000,000. Additionally, the Company is now authorized to issue 5,000,000 shares of preferred stock,
$0.001 par value with such designations, references and participating, optional or other special rights and qualifications, limitations
or restrictions thereof as shall be determined by the Company's Board of Directors.
On February 12, 2012 the Company's
Board of Directors approved the 2012 Incentive Stock Options Plan (the "Plan"). The Plan provides for the issuance
of options to purchase up to 4,000,000 shares of the Company's common stock to officers, directors, employees and consultants
of the Company. Under the terms of the Plan the Company may issue Incentive Stock Options as defined by the Internal Revenue Code
to employees of the Company only and nonstatutory options. The Board of Directors of the Company determines the exercise price,
vesting and expiration period of the grants under the Plan. However, the exercise price of an Incentive Stock Option should not
be less than 110% of fair value of the common stock at the date of the grant for a 10% or more stockholder and 100% of fair value
for a grantee who is not 10% stockholder. 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 vesting period of the grants under the
Plan should not be more than five years and expiration period not more than ten years. The Company reserved 4,000,000 shares of
its common stock for future issuance under the terms of the Plan.
Subsequent financing
On January 20, 2012, the Company issued
an aggregate of 172.118 units ("Units") to certain investors (the "Purchasers") for aggregate cash proceeds
of $2,377,950 and $1,925,000 in previously issued Convertible Debentures of the Company that were exchanged for Units (the "Financing").
On March 1, 2012, the Company issued an aggregate of 92.5926 units to certain investors for aggregate cash proceeds of $2,314,815.
Each Unit had a purchase price of $25,000
per Unit and consisted of twenty five thousand (25,000) shares of the Company's common stock, a Class A Warrant to purchase
twenty five thousand (25,000) shares of Common Stock (the "Class A Warrants"), and a Class B Warrant to purchase up
to twenty five thousand (25,000) shares of Common Stock (the "Class B Warrants" and together with the Class A Warrants,
the "Warrants").
The Class A Warrants have an exercise price
of $1.25 per share of common stock and will be exercisable for a period of five years from the date of issuance. The Class B Warrants
are exercisable automatically on their expiration date by cashless exercise or expire without exercise. In the event that the average
of the Company's daily volume weighted average price is below $0.75 during the 10 trading days after the Announcement Date
(as hereinafter defined) (the "Measuring Period"), then the holder will be entitled to receive additional shares of
the Company's Common Stock upon the exercise of the Class B Warrants on the expiration date, which is the 12
th
trading day after the Announcement Date. In the event that the Company's average daily volume weighted average price is at
or above $0.75 during the Measuring Period, the Class B Warrants will expire unexercised. The Announcement Date is the earlier
of (1) the date on which the Company announces via press release the results of the pharmacokinetic study of its TNX-102 drug formulation;
or (2) June 1, 2012.
F-
15
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
In connection with the Financing, the Company
paid a placement agent (the "Agent") an aggregate cash payment of $466,777, which represented an 8% commission and
a 2% non-accountable expense allowance of the gross proceeds delivered by Purchasers in the Financing. In addition, the Agent earned
warrants to purchase shares of Common Stock equal to 10% of the gross proceeds delivered by Purchasers in the Financing (the "Agent
Warrants"), which have an exercise price of $1.25 per share of common stock, exercisable for a period of seven years, contain
customary anti-dilution protection and are entitled to piggy-back registration rights.
Pursuant to the Warrants, no Purchaser
may exercise such Purchaser's Warrant if such exercise would result in the Purchaser beneficially owning in excess of 4.99%
of the Company's then issued and outstanding common stock. A Purchaser may, however, increase or decrease this limitation
(but in no event exceed 9.99% of the number of shares of Common Stock issued and outstanding) by providing the Company with 61
days' notice that such holder wishes to increase or decrease this limitation.
In connection with the Financing, the Company
entered into a Registration Rights Agreements with Purchasers.  The Company is required to file a registration statement
registering for resale the common stock included in the Units and the common stock underlying the Warrants and the Agent Warrants
to be filed no later than 60 days from the date of termination of the Financing on March 1, 2012 and must be declared effective
no later than 120 days from the date of termination of the Financing (June 29, 2012).  The Company is required to maintain
the effectiveness of the registration statement from its effective date unless all securities registered under the registration
statement have been sold or are otherwise able to be sold.  If the Company fails to comply with the registration statement
filing or effective date requirements, the Company is required to pay the investors a fee equal to 1.0% of the Purchaser's
investment, for each 30-day period of delay, subject to a maximum payment of 10% to each Purchaser.
The Company determined the offering price
for the purpose of calculation of number of Warrants or Incentive Share to be issued to Convertible Debenture holders and warrants
to be issued the placement agents of Convertible Debentures to be $1.00 (see Note 5).
F-
16
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30,
December 31,
2012
2011
(unaudited)
ASSETS
Current assets:
Cash
$
35,653
$
41,123
Prepaid expenses and other
43,076
102,430
Total current assets
78,729
143,553
Furniture and equipment, net
51,031
25,550
Deferred financing costs, net
-
196,166
Restricted cash
60,244
60,177
Total assets
$
190,004
$
425,446
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
Current liabilities:
Accounts payable, including $20,778 and $27,483 to related parties as of September 30, 2012 and December 31, 2011, respectively
$
697,383
$
695,198
Accrued expenses
136,303
10,229
Accrued interest, including $3,111 and $5,006 to related parties as of September 30, 2012 and December 31, 2011, respectively
3,111
38,306
Liability to placement agent
-
31,543
Convertible debentures
-
150,000
Total current liabilities
836,797
925,276
Convertible debentures, including $265,000 to related parties
-
1,925,000
Deferred rent payable
27,543
29,083
Total liabilities
864,340
2,879,359
Commitments
-
-
Stockholders' (deficiency):
Preferred stock, $0.001 par value; 5,000,000 and -0- authorized as of September 30, 2012 and December 31, 2011, respectively; none issued or outstanding
-
-
Common stock, $0.001 par value; 150,000,000 and 75,000,000 authorized as of September 30, 2012 and December 31, 2011, respectively; 34,278,432 and 27,066,667 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively
34,278
27,067
Additional paid in capital
12,506,771
3,913,700
Deficit accumulated during development stage
(13,215,385
)
(6,394,680
)
Total stockholders' (deficiency)
(674,336
)
(2,453,913
)
Total liabilities and stockholders' (deficiency)
$
190,004
$
425,446
See the accompanying notes to condensed
consolidated financial statements
F-
17
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited)
From June 7, 2007
(date of inception)
Three months ended September 30,
Nine months ended September 30,
through
2012
2011
2012
2011
September 30, 2012
COSTS AND EXPENSES:
Research and development
$
658,143
$
492,024
$
1,883,559
$
634,496
$
3,835,513
General and administrative
1,076,199
522,462
2,862,086
1,249,500
7,117,333
1,734,342
1,014,486
4,745,645
1,883,996
10,952,846
Operating Loss
(1,734,342
)
(1,014,486
)
(4,745,645
)
(1,883,996
)
(10,952,846
)
Gain on extinguishment of debt
-
-
-
-
7,908
Other income
1,875
-
1,875
-
1,875
Change in fair value of warrants liability
-
-
(1,177,026
)
-
(1,177,026
)
Interest and other financing costs, net
440
8
(899,909
)
52
(1,095,296
)
NET LOSS
$
(1,732,027
)
$
(1,014,478
)
$
(6,820,705
)
$
(1,883,944
)
$
(13,215,385
)
Net loss per common share, basic and diluted
$
(0.05
)
$
(0.05
)
$
(0.20
)
$
(0.10
)
Weighted average common shares outstanding, basic and diluted
34,278,432
20,667,466
33,405,648
19,687,742
See the accompanying notes to condensed
consolidated financial statements
F-
18
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
(DEFICIENCY)
For the Nine Months Ended September 30,
2012
(unaudited)
Deficit
Accumulated
Additional
During
Preferred stock
Common stock
Paid in
Development
Shares
Amount
Shares
Amount
Capital
Stage
Total
Balance at December 31, 2011
-
$
-
27,066,667
$
27,067
$
3,913,700
$
(6,394,680
)
$
(2,453,913
)
Common stock issued in January 2012 to holders of convertible debentures
    ($0.62 per share)
-
-
594,000
594
367,686
-
368,280
Issuance of common stock in January and March 2012 ( $0.62 per share)
    net of transaction expenses
-
-
6,617,765
6,617
3,625,694
-
3,632,311
Warrants issued in January 2012 to holders of convertible debentures
-
-
-
-
83,289
-
83,289
Warrants issued to placement agent in January 2012
-
-
-
-
6,126
-
6,126
Warrants reclassified to equity upon expiry of reset provisions
-
-
-
-
3,938,946
-
3,938,946
Stock based compensation
-
-
-
-
571,330
-
571,330
Net loss
-
-
-
-
-
(6,820,705
)
(6,820,705
)
Balance at September 30, 2012
-
$
-
34,278,432
$
34,278
$
12,506,771
$
(13,215,385
)
$
(674,336
)
See the accompanying notes to condensed
consolidated financial statements
F-
19
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
From June 7, 2007
(date of inception)
Nine months ended September 30,
through
2012
2011
September 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(6,820,705
)
$
(1,883,944
)
$
(13,215,385
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
10,192
6,946
27,504
Amortization and write down of deferred financing costs
196,166
-
249,543
Non cash interest, consisting of common stock and warrants issued in connection with convertible debentures
426,152
-
426,152
Non-cash financing costs related to January and March 2012 financing
81,337
-
81,337
Stock based compensation
571,330
139,064
1,258,043
Loss in change in fair value of warrant liability
1,177,026
-
1,177,026
Common stock issued in exchange for intellectual property
-
-
383,250
Gain on extinguishment of debt
-
-
(7,908
)
Changes in operating assets and liabilities:
Prepaid expenses
59,354
20,539
(43,076
)
Accounts payable
2,185
539,571
697,383
Accrued interest
(35,195
)
-
3,111
Accrued expenses
126,074
(3,472
)
237,014
Deferred rent payable
(1,540
)
10,423
27,543
Net cash used in operating activities
(4,207,624
)
(1,170,873
)
(8,698,463
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and fixtures
(35,673
)
(2,764
)
(78,535
)
Proceeds from security deposit
-
3,156
-
Payment of restricted cash and interest earned on restricted cash
(67
)
(45
)
(60,244
)
Net cash (used in) provided by investing activities
(35,740
)
347
(138,779
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from demand notes
-
-
480,000
Proceeds from other notes payable
-
-
700,000
Proceeds, net of expenses of $24,000 from Convertible Debentures
-
500,000
1,501,000
Repayment of Convertible Debentures
(150,000
)
-
(150,000
)
Proceeds, net of expenses of $304,870, from sale of units consisting of common stock and warrants
4,387,894
-
4,387,894
Proceeds from the sale of capital stock
-
612,000
1,954,001
Net cash provided by financing activities
4,237,894
1,112,000
8,872,895
Net (decrease) increase in cash
(5,470
)
(58,526
)
35,653
Cash, beginning of the period
41,123
65,359
-
Cash, end of period
$
35,653
$
6,833
$
35,653
Supplemental disclosures of cash flow information:
Interest paid
$
35,195
$
-
$
-
Non cash investing and financing activities:
Senior convertible notes exchanged for preferred shares
$
-
$
-
$
200,000
Capital contribution of accrued interest
$
-
$
-
$
23,725
Demand notes together with accrued interest converted into capital stock
$
-
$
-
$
549,078
Common stock issued for deferred financing costs
$
-
$
-
$
144,000
Exchange of Notes Payable for Convertible Debenture
$
-
$
-
$
500,000
Warrants Liability reclassified to Stockholders' Equity
$
3,938,946
$
-
$
3,938,946
Exchange of Convertible Debenture for Units consisting of common stock and warrants
$
1,925,000
$
-
$
1,925,000
See the accompanying notes to condensed
consolidated financial statements
F-
20
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)
NOTE 1 – BUSINESS AND RECAPITALIZATION
Tonix Pharmaceuticals Holding Corp. (the
"Company"), through its wholly owned subsidiary Tonix Pharmaceuticals, Inc., or Tonix Sub, is attempting to develop safer
and more effective versions of widely prescribed central nervous system ("CNS") drugs. While some new applications can
use the commercially available form of the drug, in other cases, reformulating the active ingredient improves its safety or effectiveness
in treating the CNS condition. When formal development programs have proven successful in clinical tests, Tonix Sub intends to
seek marketing approval from the Food and Drug Administration ("FDA").
On August 16, 2010, Tonix Sub formed Krele
LLC ("Krele") in the state of Delaware. Krele is a limited liability corporation whose sole member is Tonix Sub. Krele
was established to commercialize products that are generic versions of predicate new drug application products or versions of drug
efficacy study implementation products. The Company expects that its relationship to Krele will be similar to that of several other
pharmaceutical companies and their subsidiaries that market generic versions of the parent's branded products at different periods
in their product life-cycle.
On October 7, 2011, Tonix Sub (formerly
Krele Pharmaceuticals, Inc. incorporated on June 7, 2007 in the State of Delaware) and a publicly traded non-operating shell company
Tamandare Explorations Inc. ("Tamandare"), incorporated under the laws of the State of Nevada, along with certain other
parties executed and consummated a share exchange agreement (the "Share Exchange"). Pursuant to the Share Exchange,
each share of Tonix Sub's common stock was exchanged for 0.9 shares of Tamandare's common stock and each share of Tonix
Sub's Series A and B preferred stock was exchanged for 4.8 shares of Tamandare's common stock. Upon completion of the
Share Exchange, the Tonix Sub shareholders, including holders of restricted shares, which were subject to accelerated vesting,
received in exchange for all of their shares, an aggregate of 22,666,667 shares of Tamandare's common stock and Tamandare's
existing stockholders retained 4,000,000 shares of common stock. The 22,666,667 shares issued to the Tonix Sub shareholders constituted
approximately 85% of Tamandare's 26,666,667 issued and outstanding shares of common stock after the Share Exchange. Upon
completion of the Share Exchange, Tonix Sub became Tamandare's wholly-owned subsidiary and in October 2011 Tamandare was
renamed Tonix Pharmaceuticals Holding Corp. As the owners and management of Tonix Sub obtained voting and operating control of
Tamandare after the Share Exchange and Tamandare was non-operating, had no assets or liabilities and did not meet the definition
of a business, the transaction has been accounted for as a recapitalization of Tonix Sub, accompanied by the issuance of its common
stock for outstanding common stock of Tamandare, which was recorded at a nominal value. The accompanying financial statements and
related notes give retroactive effect to the recapitalization as if it had occurred on June 7, 2007 (inception date) and accordingly
all share and per share amounts have been adjusted.
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES
Interim Financial Statements
The unaudited condensed consolidated interim
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States ("GAAP") for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have
been included.
The condensed consolidated balance sheet
as of December 31, 2011 contained herein have been derived from audited financial statements.
Operating results for the three and nine
months ended September 30, 2012 are not necessarily indicative of results that may be expected for the year ending December 31,
2012. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and notes thereto for the year ended December 31, 2011 included in the Company's Annual Report on Form 10-K, filed with the
Securities and Exchange Commission ("SEC") on March 30, 2012.
F-
21
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)
Basis of presentation
As a development stage enterprise, the
Company's primary efforts are devoted to conducting research and development for the treatment of CNS diseases. The Company has
experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the
foreseeable future. In addition, the Company has working capital and stockholders' deficiencies as of September 30, 2012, The Company
requires additional financing, for which there are no existing commitments to fund its working capital deficiency and future operations
and no assurances can be given that the Company will be able to obtain sufficient financing on terms acceptable to it, if at all.
Further, the Company does not have any commercial products available for sale and there is no assurance that if approval of their
products is received that the Company will be able to generate cash flow to fund operations. In addition, there can be no assurance
that the Company's research and development will be successfully completed or that any product will be approved or commercially
viable.
The above factors raise substantial doubt
as to the Company's ability to continue as a going concern. The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern and do not include any adjustments that may result from the outcome
of this uncertainty.
During the nine months ended September
30, 2012, the Company issued common stock and warrants and obtained net cash proceeds in the aggregate of $4,387,894. In addition,
$1,925,000 in previously issued notes were exchanged for common stock and warrants (see Note 6). The Company expects that cash
used in operations will increase significantly over the next several years and it is the Company's intent to raise additional capital
to complete the development and commercialization of its current product candidates through equity or debt financing. There can
be no assurance that such funds, if available at all, can be obtained on terms reasonable to the Company. If the Company is unsuccessful
in raising additional capital it will need to reduce costs and may be required to reduce or cease operations.
Use of estimates
The preparation of financial statements
in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities and expenses and disclosures of contingent assets and liabilities at the
date of the financial statements. Actual results could differ from those estimates. Significant estimates include the useful life
of fixed assets and assumptions used in the fair value of stock-based compensation.
Research and development costs
The Company outsources its research and
development efforts and expenses related costs as incurred, including the cost of manufacturing products 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 in 2007 and 2010 as research and development costs, as it related to particular research and development
projects and had no alternative future uses.
Income taxes
Income tax provisions or benefits for interim
periods are computed based on the Company's estimated annual effective tax rate. Based on the Company's historical losses
and its expectation of continuation of losses for the foreseeable future, the Company has determined that it is more likely than
not that deferred tax assets will not be realized and, accordingly, has provided a full valuation allowance. As the Company anticipates
or anticipated that its net deferred tax assets at December 31, 2012 and 2011 would be fully offset by a valuation allowance, there
is no federal or state income tax benefit for the periods ended September 30, 2012 and 2011 related to losses incurred during such
periods.
Per share data
Basic and diluted net loss per common share
is calculated by dividing net loss, by the weighted average number of outstanding shares of common stock, adjusted to give effect
to the exchange ratio in the Share Exchange in October 2011 (see Note 1), which was accounted for as a recapitalization of the
Company.
F-
22
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)
During the nine months ended September
30, 2012, upon the completion of the January and March financing (see Note 6), the Company issued warrants to purchase an aggregate
7,390,292 shares of the Company's common stock. In addition, in May 2012, the Company issued to employees options to acquire an
aggregate of 3,500,000 shares of the Company's common stock (see Note 8). In computing diluted net loss per share, no effect has
been given to such options and warrants as their effect would be anti-dilutive.
NOTE 3 – FURNITURE AND EQUIPMENT
Furniture and equipment as of September
30, 2012 and December 31, 2011 is summarized as follows:
September 30,
2012
December 31,
2011
Office furniture and equipment
$
78,535
$
42,862
Less:  accumulated depreciation
(27,504
)
(17,312
)
$
51,031
$
25,550
Depreciation expense for the three and
nine months ended September 30, 2012 was $4,076 and $10,192, respectively; and $2,354 and $6,946 for the three and nine months
ended September 30, 2011, respectively.
NOTE 4 – RESTRICTED CASH
Restricted cash at September 30, 2012 and
December 31, 2011 collateralizes a letter of credit in the amount of approximately $60,000 issued in connection with the lease
of office space in New York City.
NOTE 5 – CONVERTIBLE DEBENTURES
On October 7, 2011, concurrently with the
Share Exchange, the Company issued secured Convertible Debentures ("Convertible Debentures") in the amount of $1,625,000
of which $1,125,000 were sold to certain investors for aggregate cash proceeds of $1,065,000, net of selling commissions to a placement
agent of $40,000 and $20,000 of legal fees, and $500,000 were exchanged for 8% Notes Payable ("Notes Payable") issued
on September 9, 2011. In addition, 400,000 shares of common stock with the fair market value of $144,000 were issued to a second
placement agent. On November 16, the Company issued Convertible Debentures in the amount of $450,000 for aggregate cash proceeds
of $436,000, net of selling commissions to a third placement agent of $14,000.
The Convertible Debentures mature on the
earlier of (i) one year from the date of issuance or (ii) the date of closing of a private placement of equity, equity equivalent,
convertible debt or debt financing in which the Company receives gross proceeds, in one or more transactions, of at least $3,425,000
(a "Subsequent Financing"), which took place on January 20, 2012 ("January 2012 Financing") (see Note 6).
The Convertible Debentures bear interest at 8% per annum and were convertible at the holder's option into a Subsequent Financing.
In the event that a Subsequent Financing has not occurred within 12 months from the date of issuance of the Convertible Debentures,
the holder had the option to convert into a number of shares of the Company's common stock equal to 1% of the Company's shares
of common stock on a fully diluted basis for every $125,000 of Convertible Debentures (the "Conversion Shares") or
an aggregate of approximately 3,985,000 shares based on the outstanding shares of the Company common stock as of December 31, 2011.
Upon the January 2012 Financing, $1,925,000
of debentures were exchanged for Units and the remaining $150,000 of debentures were repaid. As a result of the exchange, $1,925,000
principal amount of debentures are classified as a non-current liability in the accompanying balance sheet at December 31, 2011.
Upon conversion or repayment of the Convertible
Debenture, the holder was entitled to receive, at the holder's option, either (i) a warrant (the "Debenture Warrant"),
which has a three year term and is exercisable at the offering price in a Subsequent Financing, to purchase such number of shares
of the Company's common stock equal to the principal amount of the Convertible Debenture divided by the offering price in a Subsequent
Financing, (the "Warrant Shares") or (ii) shares of the Company's common stock equal to 33% of the principal amount
of the Convertible Debenture divided by the offering price in a Subsequent Financing (the "Incentive Shares"). The
Conversion Shares, Warrant Shares and Incentive Shares are entitled to piggyback registration rights. Upon the January 2012 Financing,
the holders of the Convertible Debenture elected to receive 275,000 Debenture Warrants exercisable at $1 per share with fair value
of $83,289 and 594,000 Incentive Shares valued at $368,280. The value of the Debenture Warrants and Incentive Shares was charged
to operations as interest expense in the first quarter of 2012.
F-
23
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)
In addition to selling commissions paid
to the placement agents on the sale of certain Convertible Debentures, the placement agents received warrants that expire in January
2014 and 2015 ("Agents Warrants"), respectively, and are exercisable at the offering price in a Subsequent Financing
to purchase shares of the Company's common stock equal to 3% and 9%, respectively, of the gross proceeds delivered by purchasers
introduced by such placement agents divided by the purchase price per share in the Subsequent Financing. In the event that the
Subsequent Financing has not occurred within 12 months from the date of issuance of the Convertible Debentures, the placement agents
were entitled to receive, in lieu of the warrants, shares of common stock equal to 3% and 9%, respectively, of the number of shares
of the Company's common stock such purchasers were entitled to receive upon conversion of their Convertible Debentures or an aggregate
of approximately 88,000 shares based on the outstanding shares of the Company's common stock as of December 31, 2011. The Company
recognized a liability to placement agents to issue shares of its common stock based on their fair value of approximately $32,000
as of December 31, 2011. Upon the January 2012 Financing, the placement agents become entitled to receive 30,750 warrants exercisable
at $1.00 per share with a fair value $6,126, which was charged to operations as interest expense in the first quarter of 2012.
Additionally the liability to placement agent of $32,000 was credited to interest expense in the first quarter of 2012.
The fair value of the Debenture and Agents
Warrants was determined using the Black Scholes option pricing model with the following assumptions: fair value of the Company's
common stock $0.62 per share determined based on January and March 2012 proceeds; dividends yield 0%; expected terms 2 to 3 years;
risk free interest rate: 0.91%; and expected volatility: 73 to 94%.
The following expenses in connection with
the issuance of Convertible Debenture were recorded as deferred financing costs: fair value of 400,000 shares of the Company's
common stock issued to the placement agent valued at $144,000, cash payments to the placement agents of $54,000, legal expenses
of $20,000 and fair value of the liability to placement agent to issue the Company's shares of common stock in the amount
of $32,000. The deferred financing costs were amortized using the effective interest method over the twelve month term of the Convertible
Debentures. During the year ended December 31, 2011, amortization of deferred financing costs amounted to approximately $53,000
and charged to interest expense in the statement of operations and remaining balance was charged to operations in connection with
the extinguishment of the debentures resulting from their exchange and repayment in 2012.
Pursuant to a Pledge and Security Agreement
and Subsidiary Guaranty, the Company granted the Debenture holders a first priority lien on all its assets.
NOTE 6 – JANUARY AND MARCH 2012
FINANCING
On January 20, 2012, the Company issued
an aggregate of 172.118 units ("Units") to certain investors (the "Purchasers") for aggregate cash proceeds
of $2,377,950 and $1,925,000 in previously issued Convertible Debentures of the Company that were exchanged for Units ("January
2012 Financing"). On March 1, 2012, the Company issued an aggregate of 92.5926 units to certain investors for aggregate cash
proceeds of $2,314,815 ("March 2012 Financing").
Each Unit had a purchase price of $25,000
per Unit and consisted of twenty five thousand (25,000) shares of the Company's common stock, a Class A Warrant to purchase
twenty five thousand (25,000) shares of Common Stock (the "Class A Warrants"), and a Class B Warrant to purchase up
to twenty five thousand (25,000) shares of Common Stock (the "Class B Warrants" and together with the Class A Warrants,
the "Warrants").
The Class A Warrants have an exercise price
of $1.25 per share of common stock and will be exercisable for a period of five years from the date of issuance. The warrants had
certain anti-dilutive provisions that were set to expire the earlier of i) one year or ii) upon effectiveness of a registration
of all shares covered by Class A Warrants, which took place on June 6, 2012. The Company determined the fair value of the Class
A Warrants and the Agent Warrants, described below, to be $2,549,684 and $212,235 on the issuance dates and initially classified
them as a liability due to transactions which cause an adjustment to the conversion rate (reset provisions) contained in the warrant
agreements. On June 6, 2012, upon the Company's registration statement being declared effective by the Securities and Exchange
Commission, the reset provisions expired and the Company reclassified $3,938,946, the fair value of the Class A Warrants and Agent
Warrants as of that date to equity. The increase of $1,177,026 in fair value of warrants liability was included in results of operations
for the nine months ended September 30, 2012.
F-
24
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)
The following assumptions were used in
the Binomial Lattice model to determine fair value of the Class A Warrants and the Agent Warrants:
Issuance date
January 20 and
March 1, 2012
Expiration date
June 6, 2012
Price of the Company's common stock
$
0.62
$
0.85
Dividend yield
0
%
0
%
Expected terms
5 – 7 years
4.6 - 6.7 years
Risk free interest rate
0.89 - 1.47
%
0.73 - 1.11
%
Expected volatility
96.68 - 96.69
%
95.73
%
Expected price at which holders are likely to exercise their warrants
$
1.25
$
1.25
The Class B Warrants were exercisable automatically
on their expiration date by cashless exercise or expire without exercise. In the event that the average of the Company's
daily volume weighted average price was below $0.75 during the 10 trading days after the Announcement Date (as hereinafter defined)
(the "Measuring Period"), then the holder was entitled to receive additional shares of the Company's Common Stock
upon the exercise of the Class B Warrants on the expiration date, which is the 12
th
trading day after the Announcement
Date. In the event that the Company's average daily volume weighted average price was at or above $0.75 during the Measuring
Period, the Class B Warrants were to expire unexercised. The Announcement Date was the earlier of (1) the date on which the Company
announces via press release the results of the pharmacokinetic study of its TNX-102 drug formulation; or (2) June 1, 2012. On April
5, 2012 the Company issued a press release announcing the results of the pharmacokinetic study of its TNX-102 drug formulation,
which is defined as an Announcement Date for the purpose of the Class B Warrants. Based on the Company's average daily volume
weighted average price, which was $1.73 per share, during the Measuring Period, the Class B Warrants expired unexercised.
In connection with the January and March
2012 Financing, the Company paid a placement agent (the "Agent") an aggregate cash payment of $466,777, which represented
an 8% commission and a 2% non-accountable expense allowance of the gross proceeds delivered by Purchasers in the January and March
2012 Financing. In addition, the Agent earned an aggregate of 466,777 warrants to purchase shares of common stock equal to 10%
of the gross proceeds delivered by Purchasers in the January and March 2012 Financing (the "Agent Warrants"), which
have an exercise price of $1.25 per share of common stock, exercisable for a period of seven years, contained anti-dilution protection
and are entitled to piggy-back registration rights. Total expenses related to the financing, including cash and the fair value
of warrants given to the Agent, amounted to $706,511, of which $435,713 was charged to additional paid-in capital and $270,798,
deemed initially allocable to the warrant liability, was charged to current and other financing costs.
In connection with the financings, the
Company entered into a Registration Rights Agreement with Purchasers.  The Company is required to file a registration
statement registering for resale the common stock included in the Units and the common stock underlying the Class A Warrants and
the Agent Warrants to be filed no later than 60 days from the date of termination of the financings on March 1, 2012 and must be
declared effective no later than 120 days from the date of termination of the Financing (June 29, 2012).  On April 26, 2012,
the Company filed the registration statement, which was declared effective on June 6, 2012. The Company is required to maintain
the effectiveness of the registration statement from its effective date unless all securities registered under the registration
statement have been sold or are otherwise able to be sold.  If the Company failed to comply with the registration statement
filing or effective date requirements, the Company was required to pay the investors a fee equal to 1.0% of the Purchaser's
investment, for each 30-day period of delay, subject to a maximum payment of 10% to each Purchaser.
NOTE 7 – STOCKHOLDERS' EQUITY
On May 2, 2012, the Company filed amended
and restated Articles of Incorporation. Among other changes, the Company increased the number of authorized shares of common stock,
$0.001 par value to 150,000,000. Additionally, the Company is now authorized to issue 5,000,000 shares of preferred stock, $0.001
par value with such designations, preferences and participating, optional or other special rights and qualifications, limitations
or restrictions thereof as shall be determined by the Company's Board of Directors.
F-
25
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)
NOTE 8 – SHARE BASED COMPENSATION
2010 Stock Plan
In June and August 2010, respectively,
the Board of Directors and stockholders of Tonix Sub. approved, and in December 2010 and February 2011, the Board of Directors
amended, the terms and provisions of the 2010 Stock Plan (the "2010 Plan") whereby the Company reserved 4,564,641 shares
of its Common Stock for issuance pursuant to the 2010 Plan. The 2010 Plan allowed for grants of options to purchase shares of Common
Stock and awards of restricted Common Stock to employees, officers, directors, consultants and advisors of the Company.
In February 2011, the Company granted shares
of restricted Common Stock to employees as follows: 196,359 shares to the Chief Business Officer and 130,906 shares to the incoming
President of Krele. The shares vest: 20% on the grant date and 20% on each of the first, second, third and fourth anniversaries
of the grant date. In August 2011, upon resignation of the President of Krele, 104,725 unvested shares were forfeited.
In March and April 2011, the Company granted
19,636 and 21,818 shares of restricted Common Stock, respectively, to newly appointed members of the Scientific Advisory Board
and the Board of Directors which vest: 25% on the grant date and 25% on each of the first, second and third anniversaries of the
grant date.
The Company recognized share-based compensation
expense of $139,063 prior to Share Exchange and remaining expense of $296,588 was recognized on October 7, 2011, the date of Share
Exchange, upon which all non vested restricted shares vested and the 2010 Plan ceased to exist.
2012 Incentive Stock Option Plan
On February 12, 2012, the Company's
Board of Directors approved the 2012 Incentive Stock Option Plan (the "2012 Plan"). The 2012 Plan provides for the
issuance of options to purchase up to 4,000,000 shares of the Company's common stock to officers, directors, employees and
consultants of the Company. Under the terms of the 2012 Plan, the Company may issue Incentive Stock Options as defined by the Internal
Revenue Code to employees of the Company only and nonstatutory options. The Board of Directors of the Company determines the exercise
price, vesting and expiration period of the grants under the 2012 Plan. However, the exercise price of an Incentive Stock Option
should not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more stockholder and 100%
of fair value for a grantee who is not 10% stockholder. 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 vesting period of the
grants under the 2012 Plan should not be more than five years and expiration period not more than ten years. The Company reserved
4,000,000 shares of its common stock for future issuance under the terms of the 2012 Plan. On May 9, 2012, 3,500,000 options had
been granted under the 2012 Plan (all of which are outstanding at September 30, 2012) with an exercise price of $1.50, a 10 year
life and fair value of $1.175. The options vest 1/3rd on May 9, 2013 and 1/36th on the 9th of each month thereafter for 24 months.
The Company measures the fair value of
stock options on the date of grant, based on a Binomial option pricing model using certain assumptions discussed in the following
paragraph, and the closing market price of the Company's common stock on the date of the grant. Stock options granted vest over
a three year period and expire ten years from the date of grant. Share-based compensation expense related to awards is amortized
over the applicable vesting periods using the straight-line method. Share-based compensation expense of $571,330 was recognized
for the nine month period ended September 30, 2012.
The assumptions used in the valuation of
stock options granted during the nine months ended September 30, 2012 were as follows:
Risk-free interest rate
1.87
%
Expected term of option
6.5 years
Expected stock price volatility
95.89
%
Expected dividend yield
$
0.0
F-
26
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)
The risk-free rate of return is based on
the yield of Daily U.S. Treasury Yield Curve Rates with terms equal to the expected life of the options as of the grant date.  The
expected term of options determined using the simplified method and the expected stock price volatility is based on comparable
companies' historical stock price volatility since the Company does not have sufficient historical exercise data because
its equity shares have been publicly traded for only a limited period of time.
As of September 30, 2012, the Company had
approximately $3,542,246 of total unrecognized compensation cost related to non-vested awards granted under the Company's
2012 Plan, which the Company expects to recognize over approximately a three-year period.
NOTE 9 – STOCK WARRANTS
The following table summarizes information
with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable, at September 30, 2012:
Exercise
Number
Expiration
Price
Outstanding
Date
$
1.00
305,750
January 2014 to January 2015
1.25
7,084,542
January 2017 to March 2019
7,390,292
On January 20, 2012, the Company issued
an aggregate of 275,000 and 30,750 warrants to purchase the Company's common stock at an exercise price of $1.00 per share expiring
five and seven years from the date of issuance to convertible debenture holders and debenture placement agents, respectively (see
Note 5).
In connection with the January 2012 and
March 2012 Financing, the Company issued to investors an aggregate of 4,302,950 and 2,314,815 warrants, respectively, to purchase
the Company's common stock at an exercise price of $1.25 per share expiring five years from the date of issuance. In addition,
the Company issued an aggregate of 235,295 and 231,482 warrants to purchase the Company's common stock at an exercise price of
$1.25 per share expiring seven years from the date of issuance to placement agents. These warrants contained certain anti-dilutive
provisions and are covered under a registration rights agreement (see Note 6).
NOTE 10 – RELATED PARTY TRANSACTIONS
Dr. Seth Lederman, our Chief Executive
Officer and Chairman of the Board, and Dr. Donald Landry, one of our directors, are the primary founders of Tonix Sub. We have
entered into various transactions with several companies under their control, including L&L Technologies, Plumbline, Targent
Pharmaceuticals, LLC and Lederman & Co. Lederman & Co. received $250,000 per annum for its services, until August 1, 2011,
when it received $127,000 per annum until such time as we closed on the 2012 Financing. We first closed on the 2012 Financing in
January 2012, and effective February 1, 2012, Lederman & Co. receives $250,000 per annum for its services. The consulting agreement
renews automatically for subsequent terms of one year at $250,000 per annum. Total expenses paid under these agreements were $107,333
and $246,083 during the three and nine months ended September 30, 2012, respectively; and $44,281 and $239,000 during the three
and nine months ended September 30, 2011, respectively. In January 2012, the related party companies received interest on the convertible
notes in the aggregate amount of $6,183.
In connection with the January 2012 Financing,
related party convertible debenture holders received an aggregate of 84,150 shares of common stock and 10,000 warrants to purchase
the Company's common stock at an exercise price of $1.00 for three years (see Note 5). Upon exchange of debentures for units in
the January 2012 Financing, related party debenture holders received an aggregate of 275,000 shares of the Company's common stock,
275,000 Class A Warrants and 275,000 Class B Warrants (see Note 6).
F-
27
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)
NOTE 11 – COMMITMENTS
Employment agreements
Effective April 1, 2012, the Company entered
into an employment agreement with Leland Gershell (the "Gershell Agreement") to serve as Chief Financial Officer.  The
base salary under the Gershell Agreement is $175,000 per annum, which shall increase to $325,000 per annum upon the Company consummating
an equity sale of securities in excess of $20 million (the "Gershell Threshold"). The Gershell Agreement provides for
at-will employment and can be terminated at any time by either party, provided, however, that if the Company terminates Dr. Gershell
for any reason other than cause (as defined in the Gershell Agreement), then Dr. Gershell shall be entitled to six weeks of severance,
which severance payment shall increase to six months if such termination occurs after the Gershell Threshold. In addition, Dr.
Gershell is entitled to participate in any and all benefit plans, from time to time, in effect for the Company's employees,
along with vacation, sick and holiday pay in accordance with its policies established and in effect from time to time.
Effective April 2, 2012, the Company entered
into an employment agreement (the "Selzer Agreement") with Benjamin Selzer to serve as Chief Operating Officer.  The
Selzer Agreement replaces and terminates the employment agreement Mr. Selzer had previously entered into with Tonix Sub. The base
salary under the Selzer Agreement is $175,000 per annum, which shall increase to $250,000 per annum effective October 7, 2012,
and shall increase to $320,000 per annum upon the Company consummating an underwritten public offering of equity securities in
excess of $10 million net to the Company (the "Selzer Threshold"). In the event that the Selzer Threshold occurs subsequent
to October 7, 2012, Mr. Selzer shall be entitled to retroactive adjustment of the base salary to the $320,000 per annum rate, not
to exceed an aggregate adjustment of $170,000. The Selzer Agreement has an initial term of two years, and renews thereafter for
additional one year terms unless either party provides 90 days written notice prior to the termination of a term not to extend
the Selzer Agreement.
NOTE 12 – SUBSEQUENT EVENTS
Effective October 5, 2012, the Company
entered into an amendment to its employment agreement (the "Selzer Amendment") with Benjamin Selzer, which amended
the employment agreement entered into with Mr. Selzer on April 2, 2012 (the "Selzer Agreement") to serve as Chief Operating
Officer.  Pursuant to the Selzer Amendment, the base salary under the Selzer Agreement remains $175,000 per annum through
March 31, 2013, at which time it shall increase to $250,000 per annum, and shall increase to $320,000 per annum upon the Company
consummating an underwritten public offering of equity securities in excess of $10 million net to the Company (the "Selzer
Threshold").
Pursuant to the Selzer Agreement, the base
salary was to increase to $250,000 effective October 7, 2012. In addition, pursuant to the Selzer Amendment, a retroactive adjustment
of the base salary to the $320,000 per annum rate, not to exceed an aggregate adjustment of $170,000, that Mr. Selzer would have
been entitled to upon the Selzer Threshold occurring after October 7, 2012 was eliminated.
On October 26, 2012, the Company elected
to voluntarily terminate Benjamin Selzer as Chief Operating Officer, Secretary and Treasurer, effective immediately. In conjunction
with the termination, 500,000 unvested options previously issued to Mr. Selzer were cancelled.
Between October and November 2012, the
Company issued promissory notes in the amount of $320,000 (the "Notes") in exchange for $320,000 borrowed from six
affiliated investors. The Notes bear no interest and were payable on demand.
On November 14, 2012, the Company sold
to accredited investors for aggregate cash proceeds of $390,000, convertible debentures (the "Debentures") in the principal
face amount of $390,000 and the exchange of the Notes for Debentures in the principal face amount of $320,000.
The Debentures mature on the earlier of
(i) November 14, 2013 or (ii) the date of closing of a private placement of equity, equity equivalent, convertible debt or debt
financing in which we receive gross proceeds, in one or more transactions, of at least $100,000 (a "Subsequent Financing").
The Debentures bear interest at 8% per annum and are convertible at the holder's option into either (i) a Subsequent Financing
at a price equal to a 25% discount to the price of securities sold in the Subsequent Financing or (ii) shares of the Company's
common stock at a conversion price per share equal to $1.00.
F-
28
TONIX PHARMACEUTICALS HOLDING CORP.
(Formerly known as Tamandare Explorations
Inc.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)
In December 2012, the Company issued an
aggregate of 8,904,167 units ("Units") to certain accredited investors (the "Purchasers") for aggregate
cash proceeds of $2,615,000, at a price per Unit of $0.40, and the exchange of $710,000 in previously issued convertible debentures
(the "Prior Debentures") of the Company that were converted into Units at a price of $0.30 per Unit.
Each Unit consisted of one share of the
Company's common stock, $0.001 par value (the "Common Stock"), a Class A Warrant to purchase one share of Common
Stock (the "Class A Warrants"), and a Class B Warrant to purchase one share of Common Stock (the "Class B Warrants"
and together with the Class A Warrants, the "Warrants").The Class A Warrants have an exercise price of $0.60 per share
of Common Stock and will be exercisable for a period of five years from the date of issuance. The Class A Warrants may be exercised
on a cashless basis under certain circumstances. The Class B Warrants have an exercise price of $0.40 per share of Common Stock
and will be exercisable for a period of one year from the date of issuance.
F-
29
Tonix Pharmaceuticals Holding Corp.
PROSPECTUS
Up to 17,808,334 shares of
Common Stock, par value $0.001 per share
__________________ , 2013
Dealer Prospectus Delivery Obligation
Until [*], 2013, all dealers that effect
transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with information different from that which is set forth
in this prospectus. We are offering to sell shares of our common stock and seeking offers to buy shares of our common stock only
in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the
date of this prospectus, regardless of the time of delivery of this prospectus or any sale of these securities. Our business, financial
condition, results of operation and prospects may have changed after the date of this prospectus.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table
sets forth the estimated costs and expenses to be incurred in connection with the issuance and distribution of the securities registered
under this Registration Statement. All amounts are estimates except the Securities and Exchange Commission registration fee. The
total expenses for this offering, borne solely by the registrant, are estimated to be approximately $106,336, including:
SEC registration fee
$
1,336
Legal fees and expenses
$
60,000
Accounting fees and expenses
$
40,000
Miscellaneous expenses
$
5,000
Total
$
106,336
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our bylaws, as amended,
provide to the fullest extent permitted by Nevada law, our directors or officers shall not be personally liable to us or our shareholders
for damages for breach of such director's or officer's fiduciary duty. The effect of this provision of our bylaws, as amended,
is to eliminate our right and our shareholders (through shareholders' derivative suits on behalf of our company) to recover damages
against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from
negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification
provisions in our bylaws, as amended, are necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three
years, the registrant has sold the following securities which were not registered under the Securities Act of 1933, as amended.
On October 7, 2011,
we issued 22,666,667 shares of our common stock to the shareholders of Tonix Sub in exchange for 100% of the issued and outstanding
shares of common stock of Tonix Sub. The shares were issued to accredited investors pursuant to Rule 506 of Regulation D or non-U.S.
Persons pursuant to Rule 903 of Regulation S of the Securities Act of 1933, as amended.
On October 7, 2011,
we issued 400,000 shares of our common stock to a placement agent in connection with an amendment to a placement agent agreement.
The shares were issued to an accredited investor pursuant to Rule 506 of Regulation D or Section 4(2) of the Securities Act of
1933, as amended.
II-
1
Between October and
November 2011, we sold to certain investors (the "Purchasers") for aggregate cash proceeds of $1,575,000, secured convertible
debentures (the "Debentures") in the principal face amount of $1,575,000 and the exchange of $500,000 in previously
issued notes of Tonix Sub that were converted into Debentures in the principal face amount of $500,000 (the "2011 Financing").
The Debentures were sold to accredited investors pursuant to Rule 506 of Regulation D or non-U.S. Persons pursuant to Rule 903
of Regulation S of the Securities Act of 1933, as amended.
The Debentures mature
on the earlier of (i) one year from the date of issuance or (ii) the date of closing of a private placement of equity, equity equivalent,
convertible debt or debt financing in which we receive gross proceeds, in one or more transactions, of at least $3,425,000 (a "Subsequent
Financing"). The Debentures bear interest at 8% per annum and are convertible at the holder's option into a Subsequent
Financing. In the event that a Subsequent Financing has not occurred within 12 months from the date of issuance of the Debenture,
the holder has the option to convert the Debenture into a number of shares of our common stock equal to 1% of our shares of common
stock on a fully diluted basis for every $125,000 of Debentures (the "Conversion Shares").
In addition, upon conversion
or repayment of the Debenture, the holder is entitled to receive, at the holder's option, either (i) a warrant (the "Warrant")
to purchase such number of shares of common stock equal to the principal amount of the Debenture divided by the offering price
in a Subsequent Financing (the "Warrant Shares") or (ii) shares of our common stock equal to 33% of the principal amount
of the Debenture divided by the offering price in a Subsequent Financing (the "Incentive Shares").
In connection with
the 2011 Financing, placement agents earned warrants to purchase shares of our common stock equal to 3% or 9% of the gross proceeds
delivered by Purchasers introduced by such placement agents in the 2011 Financing divided by the purchase price per share in the
Subsequent Financing (collectively, the "2011 Agent Warrants"). In the event that the Subsequent Financing has not
occurred within 12 months from the date of issuance of the Debentures, the placement agents will receive, in lieu of the 2011 Agent
Warrants, shares of common stock equal to 3% or 9% of the number of shares of our common stock such Purchasers introduced by such
placement agent in the 2011 Financing are entitled to receive upon conversion of their Debentures.
Between January and
March, 2012, we consummated the 2012 Financing pursuant to which we issued an aggregate of 264.7106 Units to certain investors
for aggregate cash proceeds of $4,692,765 and the exchange of $1,925,000 in previously issued debentures that were converted into
Units.
Each Unit had a purchase
price of $25,000 per Unit and consisted of twenty five thousand (25,000) shares of our Common Stock, 25,000 Class A Warrants and
25,000 Class B Warrants.
The Class A Warrants
have an exercise price of $1.25 per share of Common Stock and will be exercisable for a period of five years from the date of issuance.
The Class B Warrants were not exercisable by the Purchasers and would be exercised automatically on their expiration date by cashless
exercise or expire without exercise. Effective April 24, 2012, the Class B Warrants expired unexercised.
In connection with
the Financing, we issued Dawson James 466,777 2012 Agent Warrants.
Between October and
November 2012, we issued promissory notes in the amount of $320,000 (the "Notes") in exchange for $320,000 borrowed
from six affiliated investors. The Notes bear no interest and were payable on demand.
On November 14, 2012,
we sold to accredited investors for aggregate cash proceeds of $390,000, convertible debentures (the "Debentures")
in the principal face amount of $390,000 and the exchange of the Notes for Debentures in the principal face amount of $320,000.
The Debentures mature
on the earlier of (i) November 14, 2013 or (ii) the date of closing of a private placement of equity, equity equivalent, convertible
debt or debt financing in which we receive gross proceeds, in one or more transactions, of at least $100,000 (a "Subsequent
Financing"). The Debentures bear interest at 8% per annum and are convertible at the holder's option into either (i)
a Subsequent Financing at a price equal to a 25% discount to the price of securities sold in the Subsequent Financing or (ii) shares
of our common stock at a conversion price per share equal to $1.00.
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In December 2012, the
Company issued an aggregate of 8,904,167 units ("Units") to certain accredited investors (the "Purchasers")
for aggregate cash proceeds of $2,615,000, at a price per Unit of $0.40, and the exchange of $710,000 in previously issued convertible
debentures (the "Prior Debentures") of the Company that were converted into Units at a price of $0.30 per Unit.
Each Unit consisted
of one share of the Company's common stock, $0.001 par value (the "Common Stock"), a Class A Warrant to purchase
one share of Common Stock (the "Class A Warrants"), and a Class B Warrant to purchase one share of Common Stock (the
"Class B Warrants" and together with the Class A Warrants, the "Warrants").The Class A Warrants have an
exercise price of $0.60 per share of Common Stock and will be exercisable for a period of five years from the date of issuance.
The Class A Warrants may be exercised on a cashless basis under certain circumstances. The Class B Warrants have an exercise price
of $0.40 per share of Common Stock and will be exercisable for a period of one year from the date of issuance.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits
are included as part of this Form S-1. References to "the Company" in this Exhibit List mean Tonix Pharmaceuticals
Holding Corp., a Nevada corporation.
2.01
Share Exchange Agreement, dated as of October 7, 2011 by and among Tamandare Explorations Inc., David J. Moss, Tonix Pharmaceuticals, Inc. and the shareholders of Tonix Pharmaceuticals, Inc. filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
3.01
Articles of Incorporation, filed as an exhibit to the Registration Statement on Form S-1, filed with the Securities and Exchange Commission (the "Commission") on April 9, 2008 and incorporated herein by reference.
3.02
Articles of Merger between Tamandare Explorations Inc. and Tonix Pharmaceuticals Holding Corp., effective October 11, 2011, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 17, 2011 and incorporated herein by reference.
3.03
Amended and Restated Bylaws, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on February 23, 2012 and incorporated herein by reference.
5.01
Opinion of Sichenzia Ross Friedman Ference LLP.
10.01
Feasibility and Option Agreement, dated as of June 20, 2007, by and between Krele Pharmaceuticals, Inc. (now, Tonix Pharmaceuticals, Inc.) and Lipocine, Inc., filed as an exhibit to the amended Current Report on Form 8-K/A, filed with the Commission on April 3, 2012 and incorporated herein by reference. †
10.02
Consulting Agreement, dated as of June 4, 2010, by and between Krele Pharmaceuticals, Inc. (now, Tonix Pharmaceuticals, Inc.) and Lederman & Co., LLC, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.03
Technology Transfer and Assignment Agreement, dated as of June 4, 2010, by and between Krele Pharmaceuticals, Inc. (now, Tonix Pharmaceuticals, Inc.) and Lederman & Co., LLC, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.04
Lease Agreement, dated as of September 28, 2010, by and between 509 Madison Avenue Associates, L.P. and Tonix Pharmaceuticals, Inc., filed as an exhibit to the amended Current Report on Form 8-K/A, filed with the Commission on February 3, 2012 and incorporated herein by reference.
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10.05
Amendment to Feasibility and Option Agreement, dated as of October 4, 2010, by and between Tonix Pharmaceuticals, Inc. and Lipocine, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference. †
10.06
Engagement Agreement, dated as of October 6, 2010, by and between Tonix Pharmaceuticals, Inc. and Frost and Sullivan, filed as an exhibit to the amended Current Report on Form 8-K/A, filed with the Commission on April 3, 2012 and incorporated herein by reference.
10.07
Amendment to Consulting Agreement, dated as of December 9, 2010, by and between Tonix Pharmaceuticals, Inc. and Lederman & Co., LLC, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.08
Employment Agreement, dated as of April 1, 2011, by and between Tonix Pharmaceuticals, Inc. and Rhonda Rosen, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.09
Employment Agreement, dated as of April 1, 2011, by and between Tonix Pharmaceuticals, Inc. and Benjamin A. Selzer, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.10
Employment Agreement, dated as of April 1, 2011, by and between Tonix Pharmaceuticals, Inc. and Susan Oliver (now, Susan Kerridge), filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.11
API Supply and Development Agreement, dated as of April 7, 2011, by and between Tonix Pharmaceuticals, Inc. and JFC Technologies, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.12
Consulting Agreement, dated as of June 2, 2011, by and between Tonix Pharmaceuticals, Inc. and Pharmanet Canada, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.13
Amendment to Employment Agreement, dated as of July 27, 2011, by and between Tonix Pharmaceuticals, Inc. and Rhonda Rosen, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.14
Amendment to Employment Agreement, dated as of July 27, 2011, by and between Tonix Pharmaceuticals, Inc. and Benjamin A. Selzer, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.15
Amendment to Employment Agreement, dated as of July 27, 2011, by and between Tonix Pharmaceuticals, Inc. and Susan Oliver (now, Susan Kerridge), filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.16
Financial Public Relations Agreement, dated as of August 1, 2011, by and between Tonix Pharmaceuticals, Inc. and Porter, LeVay & Rose, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.17
Form of 8% Secured Convertible Debenture, issued October 7, 2011, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.18
Form of Subscription Agreement, dated October 7, 2011, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
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10.19
Form of Pledge and Security Agreement, dated as of October 7, 2011, by and among Tamandare Explorations Inc., Tonix Pharmaceuticals, Inc., Krele LLC and the investors, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.20
Form of Subsidiary Guaranty, dated as of October 7, 2011, by and among Tonix Pharmaceuticals, Inc., Krele LLC and Sandor Capital Master Fund L.P., on behalf of the investors, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
10.21
Form of Subscription Agreement, dated January 20, 2012, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on January 23, 2012 and incorporated herein by reference.
10.22
Form of Class A Warrant, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on January 23, 2012 and incorporated herein by reference.
10.23
Form of Class B Warrant, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on January 23, 2012 and incorporated herein by reference.
10.24
Form of Registration Rights Agreement, dated January 20, 2012, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on January 23, 2012 and incorporated herein by reference.
10.25
Amendment to Consulting Agreement, dated as of March 30, 2012 but effective as of July 27, 2011, by and between Tonix Pharmaceuticals, Inc. and Lederman & Co., LLC, filed as an exhibit to the Annual Report on Form 10-K filed with the Commission on March 30, 2012 and incorporated herein by reference.
10.26
Employment Agreement, between Tonix Pharmaceuticals Holding Corp. and Leland Gershell, dated April 1, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on April 5, 2012 and incorporated herein by reference.
10.27
Employment Agreement, between Tonix Pharmaceuticals Holding Corp. and Benjamin Selzer, dated April 2, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on April 5, 2012 and incorporated herein by reference.
10.28
Amendment to Employment Agreement, between Tonix Pharmaceuticals Holding Corp. and Benjamin Selzer, dated October 5, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on October 10, 2012 and incorporated herein by reference.
10.29
Form of Subscription Agreement, dated November 13, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on November 14, 2012 and incorporated herein by reference.
10.30
Form of Convertible Debenture, dated November 13, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on November 14, 2012 and incorporated herein by reference.
10.31
Form of Subscription Agreement, dated December 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 5, 2012 and incorporated herein by reference.
10.32
Form of Class A Warrant, dated December 4, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 5, 2012 and incorporated herein by reference.
10.33
Form of Class B Warrant, dated December 4, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 5, 2012 and incorporated herein by reference.
10.34
Form of Registration Rights Agreement, dated December 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 5, 2012 and incorporated herein by reference.
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10.35
Form of Class A Warrant, dated December 21, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 27, 2012 and incorporated herein by reference.
10.36
Form of Class B Warrant, dated December 21, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 27, 2012 and incorporated herein by reference.
10.37
Form of Amendment No. 1 to the Purchase Agreement, Registration Rights Agreement and Escrow Agreement, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 27, 2012 and incorporated herein by reference.
21.01
List of Subsidiaries, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
23.01
Consent of EisnerAmper LLP
24.01
Power of Attorney
(included on signature page to the registration statement).
99.01
Frost & Sullivan Fibromyalgia Market Study, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
99.02
Lipocine Cyclobenzaprine Study Results, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 14, 2011 and incorporated herein by reference.
†           Confidential
treatment granted for certain confidential portions of this exhibit pursuant to Rule 24b-2 under the Exchange Act. In accordance
with Rule 24b-2, these confidential portions have been omitted from this exhibit and filed separately with the Commission.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1)          To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)          To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act");
(ii)         To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective registration statement, and
(iii)       To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
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(2)          That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3)          To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4)          For
determining liability of the undersigned registrant under the Securities Act to any purchaser in the initial distribution of the
securities, the undersigned undertakes that in a primary offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i)          Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed
pursuant
to
Rule 424
;
(ii)        Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to
by the undersigned registrant;
(iii)       The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and
(iv)        Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a
claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
Each prospectus filed
pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying
on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such date of first use.
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SIGNATURES
Pursuant to the requirements
of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on this 25th
day of January, 2013.
TONIX PHARMACEUTICALS HOLDING CORP.
Date:  January 25, 2013
By:
/s/ SETH
LEDERMAN
Seth Lederman
Chief Executive Officer (Principal Executive
Officer)
Date:  January 25, 2013
By:
/s/ LELAND GERSHELL
Leland Gershell
Chief Financial Officer (Principal Accounting
Officer)
Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ SETH LEDERMAN
Chief Executive Officer (Principal Executive
January 25, 2013
Seth Lederman
Officer) and Director
/s/ LELAND GERSHELL
Chief Financial Officer (Principal Financial
January 25, 2013
Leland Gershell
Officer and Principal Accounting Officer)
/s/ STUART DAVIDSON
Director
January 25, 2013
Stuart Davidson
/s/ PATRICK GRACE
Director
January 25, 2013
Patrick Grace
/s/ DONALD W. LANDRY
Director
January 25, 2013
Donald W. Landry
/s/ ERNEST MARIO
Director
January 25, 2013
Ernest Mario
/s/ CHARLES MATHER IV
Director
January 25, 2013
Charles Mather IV
/s/ JOHN RHODES
Director
January 25, 2013
John Rhodes
/s/ SAMUEL SAKS
Director
January 25, 2013
Samuel Saks
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