atxi20240331

atxi20240331_10q.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-38114

AVENUE THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware	47-4113275
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1111 Kane Concourse, Suite 301, Bay Harbor Islands, FL 33154

(Address of principal executive offices and zip code)

(781) 652‑4500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Class	Trading Symbol(s)	Exchange Name
Common Stock	ATXI	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer” , “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class of Common Stock		Outstanding Shares as of May 13, 2024
Common Stock, $0.0001 par value		940,986

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AVENUE THERAPEUTICS, INC.

Form 10‑Q

For the Quarter Ended March 31, 2024

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		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements

	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	1

	Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023	2

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three months ended March 31, 2024 and 2023	3

	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023	4

	Notes to Unaudited Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15

Item 4.	Controls and Procedures	15

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	16

Item 1A.	Risk Factors	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3.	Defaults Upon Senior Securities	16

Item 4.	Mine Safety Disclosures	16

Item 5.	Other Information	16

Item 6.	Exhibits	17

Signatures		18

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AVENUE THERAPEUTICS, INC.

Unaudited Condensed Consolidated Balance Sheets

($ in thousands, except share and per share amounts)

	*March 31,*			*December 31,*
	*2024*			*2023*

ASSETS
Current assets:
Cash and cash equivalents	$	3,194		$	1,783
Prepaid expenses and other current assets		116			67
Total assets	$	3,310		$	1,850

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	647		$	287
Accounts payable and accrued expenses - related party		352			323
Warrant liability		413			586
Total current liabilities		1,412			1,196

Total liabilities		1,412			1,196

Commitments and contingencies

Stockholders’ equity (deficit)
Preferred stock ($0.0001 par value), 2,000,000 shares authorized
Class A Preferred Stock, 250,000 shares issued and outstanding as of March 31, 2024 and December 31, 2023		—			—
Common stock ($0.0001 par value), 200,000,000 and 75,000,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively
Common shares, 590,188 and 341,324 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		—			3
Additional paid-in capital		98,104			92,507
Accumulated deficit		(95,268	)		(90,928	)
Total stockholders’ equity attributed to the Company		2,836			1,582

Non-controlling interests		(938	)		(928	)
Total stockholders’ equity		1,898			654
Total liabilities and stockholders’ equity	$	3,310		$	1,850

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AVENUE THERAPEUTICS, INC.

Unaudited Condensed Consolidated Statements of Operations

($ in thousands, except share and per share amounts)

	*For the Three Months Ended March 31,*
	*2024*			*2023*
Operating expenses:
Research and development	$	2,392		$	1,215
Research and development – licenses acquired		—			4,230
General and administrative		1,316			984
Loss from operations		(3,708	)		(6,429	)

Other income (expense):
Interest income		49			37
Financing costs – warrant liabilities		—			(332	)
Loss on settlement of common stock warrant liabilities		(574	)		—
Change in fair value of warrant liabilities		(116	)		(878	)
Total other income (expense)		(641	)		(1,173	)
Net loss	$	(4,349	)	$	(7,602	)

Net loss attributable to non-controlling interests		(9	)		(66	)
Net loss attributable to common stockholders	$	(4,340	)	$	(7,536	)

Net loss per common share attributable to common stockholders, basic and diluted	$	(15.40	)	$	(101.57	)

Weighted average number of common shares outstanding, basic and diluted		562,031			74,198

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AVENUE THERAPEUTICS, INC.

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

($ in thousands, except share amounts)

*Three months ended March 31, 2024*

	*Class A Preferred*									*Additional*						*Non-*			*Total*
	*Shares*				*Common Shares*					*Paid-in*			*Accumulated*			*Controlling*			*Stockholders’*
	*Shares*		*Amount*		*Shares*		*Amount*			*Capital*			*Deficit*			*Interests*			*Equity (Deficit)*
Balance at December 31, 2023		250,000	$	—		341,324	$	3		$	92,507		$	(90,928	)	$	(928	)	$	654
Share based compensation		—		—		283		—			191			—			—			191
Common shares issuable - Founders Agreement		—		—		—		—			(363	)		—			—			(363	)
Issuance of common stock to Fortress		—		—		28,019		—			371			—			—			371
Loss on settlement of common stock warrant liabilities		—		—		—		—			574			—			—			574
Exercise of warrants		—		—		220,538		1			5,261			—			—			5,262
Warrant inducement offering costs		—		—		—		—			(442	)		—			—			(442	)
Reverse split (1-for-75)						24		(4	)		4			—			—			—
Non-controlling interest in subsidiaries		—		—		—		—			1			—			(1	)		—
Net loss attributable to non-controlling interest		—		—		—		—			—			—			(9	)		(9	)
Net loss attributable to common stockholders		—		—		—		—			—			(4,340	)		—			(4,340	)
Balance at March 31, 2024		250,000	$	—		590,188	$	—		$	98,104		$	(95,268	)	$	(938	)	$	1,898

*Three months ended March 31, 2023*

	*Class A Preferred*								*Additional*					*Non-*			*Total*
	*Shares*				*Common Shares*				*Paid-in*		*Accumulated*			*Controlling*			*Stockholders’*
	*Shares*		*Amount*		*Shares*		*Amount*		*Capital*		*Deficit*			*Interests*			*Equity (Deficit)*
Balance at December 31, 2022		250,000	$	—		63,671	$	—	$	84,456	$	(80,551	)	$	(639	)	$	3,266
Share based compensation		—		—		—		—		11		—			—			11
Issuance of common stock to Fortress		—		—		4,997		—		72		—			—			72
Issuance of common stock and pre-funded warrants, net of offering costs - registered direct offering and private placement		—		—		5,974		—		865		—			—			865
Issuance of common stock for license acquisition		—		—		11,089		—		1,231		—			—			1,231
Exercise of warrants		—		—		5,335		—		—		—			—			—
Net loss attributable to non-controlling interest		—		—		—		—		—		—			(66	)		(66	)
Net loss attributable to common stockholders		—		—		—		—		—		(7,536	)		—			(7,536	)
Balance at March 31, 2023		250,000	$	—		91,066	$	—	$	86,635	$	(88,087	)	$	(705	)	$	(2,157	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AVENUE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

($ in thousands)

	*For the Three Months Ended*
	*March 31, 2024*			*March 31, 2023*
Cash flows from operating activities:
Net loss	$	(4,349	)	$	(7,602	)
Reconciliation of net loss to net cash used in operating activities:
Share based compensation		191			11
Loss on settlement of common stock warrant liabilities		574			—
Change in fair value of warrant liabilities		116			878
Issuance of common stock for licenses acquired		—			1,230
Issuance of common stock to Fortress		371			72
Common shares issuable - Founders Agreement		(363	)		—
Changes in operating assets and liabilities:
Other receivables - related party		—			(13	)
Prepaid expenses and other current assets		(49	)		(61	)
Accounts payable and accrued expenses		360			889
Accrued licenses acquired		—			3,000
Accounts payable and accrued expenses - related party		29			23
Net cash used in operating activities		(3,120	)		(1,573	)

Cash flows from financing activities:
Issuance of common stock and pre-funded warrants, net of offering costs - registered direct offering and private placement		—			3,101
Exercise of warrants		4,973			—
Warrant transaction costs		(442	)		—
Net cash provided by financing activities		4,531			3,101

Net change in cash and cash equivalents		1,411			1,528
Cash and cash equivalents, beginning of period		1,783			6,708
Cash and cash equivalents, end of period	$	3,194		$	8,236

Supplemental cash flow information:
Unpaid research and development licenses acquired	$	—		$	3,000
Issuance of common shares - Founders Agreement	$	371		$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AVENUE THERAPEUTICS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization, Plan of Business Operations

Avenue Therapeutics, Inc. (the “Company” or “Avenue”) was incorporated in Delaware on February 9, 2015, as a wholly-owned subsidiary of Fortress Biotech, Inc. (“Fortress”). Avenue is a specialty pharmaceutical company focused on the development and commercialization of therapies for the treatment of neurologic diseases. Avenue's current product candidates include AJ201 for the treatment of spinal and bulbar muscular atrophy ("SBMA", also known as Kennedy's Disease), intravenous tramadol ("IV tramadol") for the treatment of post-operative acute pain, and BAER-101 for the treatment of epilepsy and panic disorders.

Authorized Share Increase

On January 9, 2024, stockholders holding a majority of the outstanding voting power of the Company executed and delivered to the Board of Directors of the Company a written consent approving, among other items, an increase in the number of shares of common stock, par value $0.0001 per share ("common stock"), authorized under the Company’s Third Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), from 75,000,000 to 200,000,000 (the “Authorized Shares Increase”). On February 20, 2024, the Company filed a Certificate of Amendment to its Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State for the State of Delaware effectuating the Authorized Shares Increase.

Reverse Stock Split

On April 25, 2024, the Company filed an amendment (the “Reverse Split Amendment”) to the Company’s Third Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the 1-for-75 reverse stock split of the Company's shares of common stock ("Reverse Stock Split"). As a result of the Reverse Stock Split, every 75 shares of common stock outstanding immediately prior to effectiveness of the Reverse Stock Split were combined and converted into one share of common stock without any change in the par value per share. The Reverse Stock Split became effective on April 26, 2024, and the common stock was quoted on the Nasdaq Stock Market on a post-split basis at the open of business on April 26, 2024. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would have otherwise been entitled to a fraction of one share of common stock as a result of the Reverse Stock Split instead received one whole share of common stock.

All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated.

Going Concern

These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, as described below, substantial doubt about the Company’s ability to continue as a going concern exists.

The Company is not yet generating revenue, has incurred substantial operating losses since its inception and expects to continue to incur significant operating losses for the foreseeable future as it executes on its product development plan and may never become profitable. As of March 31, 2024, the Company had an accumulated deficit of $95.3 million. Due to uncertainties regarding future operations of the Company for an ongoing Phase 1b/2a trial of AJ201, a potential Phase 3 safety study for IV tramadol, and the expansion of the Company's development portfolio within neuroscience with the consummation of the transaction with Baergic Bio, Inc. ("Baergic"), the Company will need to secure additional funds through equity or debt offerings, including through at-the-market ("ATM") offerings or other potential sources, the timing of which is unknown at this time. The Company will require additional funds to cover operational expenses over the next 12 months. The Company cannot be certain that additional funding will be available to it on acceptable terms, or at all. These factors individually and collectively cause substantial doubt about the Company’s ability to continue as a going concern to exist within one year from the date of this report. The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

Note 2 - Significant Accounting Policies

Basis of Presentation

The Company’s consolidated financial statements have been prepared in conformity with U.S. GAAP, include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented and are stated in U.S. dollars. The Company’s consolidated financial statements include the accounts of the Company and the accounts of the Company’s subsidiary. All intercompany balances and transactions have been eliminated.

The accompanying unaudited interim condensed financial statements include the accounts of the Company's subsidiary, Baergic. Because the Company owns less than 100% of Baergic, the Company records net loss attributable to non-controlling interests in its consolidated statements of operations equal to the percentage of the economic or ownership interest retained in Baergic by the respective non-controlling parties. The Company continually assesses whether changes to existing relationships or future transactions may result in the consolidation or deconsolidation of its' subsidiary.

Certain information and footnote disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited interim condensed financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period. Therefore, these unaudited interim condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the fiscal year ended December 31, 2023, which were included in the Company’s Annual Report on Form 10-K (the “2023 Form 10-K”) and filed with the U.S. Securities and Exchange Commission (“SEC”) on March 18, 2024.

Segments

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and assessing performance. The Company views its operations and manages its business in one operating and reportable segment.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Fair Value Measurements

The Company follows accounting guidance on fair value measurements for financial assets and liabilities measured at fair value on a recurring basis. Under the accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Level 3: Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as accounts payable, accrued expenses and other current liabilities.

Non-Controlling Interests

Non-controlling interests in consolidated entities represent the component of equity in consolidated entities held by third parties. Any change in ownership of a subsidiary while the controlling financial interest is retained is accounted for as an equity transaction between the controlling and non-controlling interests. Intercompany activity is eliminated entirely in consolidation prior to the allocation of net gain/loss attributable to non-controlling interest, which is based on ownership interests.

Net Loss per Share

Net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Net loss attributable to common stockholders consisted of net loss, as adjusted for deemed dividends. The Company recorded a deemed dividend of $4.3 million for the modification of certain of its existing warrants and issuance of warrants during the three months ended March 31, 2024 (see Note 7 and 8). Diluted net loss per share excludes unvested restricted stock, preferred shares and the effect of shares of common stock to be issued upon the exercise of stock options and warrants, as their inclusion would be anti-dilutive. Dividends declared are paid and set aside among the holders of shares of common stock and Class A Preferred stock pro-rata on an as-if-converted basis.

The following table sets forth the potential common shares that could potentially dilute basic income per share in the future that were not included in the computation of diluted net loss per share because to do so would have been anti-dilutive for the periods presented:

	*For the Three Months Ended*
	*March 31,*
	*2024*		*2023*
Unvested restricted stock units/awards		1,028		177
Warrants		745,139		95,607
Options		22,474		—
Class A Preferred shares		223		223
Total potential dilutive effect		768,864		96,007

Summary of Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2023 Form 10-K.

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Note 3 — Licenses/Supplier Agreements

IV Tramadol License

Effective as of February 17, 2015, Fortress transferred the Revogenex license and all other rights and obligations under the IV Tramadol License Agreement to the Company, pursuant to the terms of the Founders Agreement. In connection with the terms of the IV Tramadol License Agreement, Fortress purchased an exclusive license to IV tramadol for the U.S. market from Revogenex, a privately held company in Dublin, Ireland. Fortress made an upfront payment of $2.0 million to Revogenex upon execution of the exclusive license, and on June 17, 2015, Fortress paid an additional $1.0 million to Revogenex after receiving all the assets specified in the agreement. In December 2019, $1.0 million became due to Revogenex in accordance with the Company’s submission of its NDA. In addition, under the terms of the agreement, Revogenex is eligible to receive an additional milestone payment totaling $3.0 million upon the approval of IV tramadol from the U.S. Food and Drug Administration ("FDA") as well as royalty payments on net sales of the product ranging in the high single digits to low double digits.

On October 29, 2018, the Company and Zaklady Farmaceutyczne Polpharma (“Polpharma”) extended the term of their exclusive supply agreement for drug product of IV tramadol to eight years from the date of the launch of the product. In addition, under the terms of the amended agreement, Polpharma is eligible to receive a milestone payment totaling $2.0 million upon the approval of IV tramadol from the FDA, as well as a low single digit royalty on net sales of the product for five years after launch.

Baergic Licenses

In December 2019, Baergic entered into two license agreements: (i) a license agreement (the “AZ License”) with AstraZeneca AB (“AZ”) to acquire an exclusive license to patent and related intellectual property rights pertaining to their proprietary compound Gamma-aminobutyric acid receptor A alpha 2 & 3 (GABAA α2,3) positive allosteric modulators; and (ii) a license agreement (the “CCHMC License”) with Cincinnati Children’s Hospital Medical Center (“CCHMC”) to acquire patent and related intellectual property rights pertaining to a GABA inhibitor program for neurological disorders. Baergic paid an upfront fee of $3.0 million to AZ and $0.2 million to CCHMC, as well as issued common shares of Baergic of approximately 20% and 5% of Baergic to each at the time of the license agreement, respectively.

Development milestones totaling approximately $81.5 million in the aggregate are due upon achievement of each milestone. Commercial and sales-based milestone payments totaling approximately $151 million are due upon achievement of each milestone, as well as royalty payments in the low to high single digits on any future aggregate, annual, worldwide net sales.

AnnJi License Agreement

On February 28, 2023, the Company entered into a license agreement with AnnJi Pharmaceutical Co. Ltd. ("AnnJi"), whereby the Company obtained an exclusive license (the "AnnJi License Agreement") from AnnJi for certain intellectual property rights pertaining to AJ201. Under the AnnJi License Agreement, in exchange for exclusive rights to the intellectual property underlying the AJ201 product candidates, the Company agreed to pay $3.0 million, of which $2.0 million was paid on April 27, 2023 and $1.0 million was paid on September 8, 2023. The Company is also obligated to make additional payments over the course of the AnnJi License Agreement including: reimbursement payments of up to $10.8 million in connection with the product’s Phase 1b/2a clinical trial (which AnnJi is administering with Joint Steering Committee Oversight before assigning the Investigational New Drug Application ("IND") to the Company upon such trial’s conclusion, and which is reflective of market pricing for the services to be received), up to $14.5 million in connection with certain development milestones pertaining to the first indication in the U.S., up to $27.5 million in connection with certain drug development milestones pertaining to additional indications and development outside the U.S., up to $165 million upon the achievement of certain net sales milestones ranging from $75 million to $750 million in annual net sales, and royalty payments based on a percentage of net sales ranging from mid-single digits (on annual net sales at or below $50 million) to the low double digits (on annual net sales equal to or greater than $300 million), which are subject to potential diminution in certain circumstances.

The license provided under the AnnJi License Agreement is exclusive as to all oral forms of AJ201 for use in all indications (other than androgenetic alopecia and Alzheimer’s disease) in the United States, Canada, the European Union, the United Kingdom and Israel. The AnnJi License Agreement also contains customary representations and warranties and provisions related to confidentiality, diligence, indemnification and intellectual property protection. The Company will initially be obligated to obtain both clinical and commercial supply of AJ201 exclusively through AnnJi. AnnJi retains the manufacturing rights for AJ201 and the Company has the option to acquire those rights from AnnJi as described in the AnnJi License Agreement.

In connection with the signing of the AnnJi License Agreement, the Company issued 11,089 shares of its common stock to AnnJi (“First Tranche Shares”) at a fair value of $0.9 million on March 30, 2023. The Company issued 3,688 shares of common stock ("Second Tranche Shares"), recorded at a fair value of $0.3 million, on September 26, 2023 upon enrollment of the eighth patient in the ongoing Phase 1b/2a SBMA clinical trial. The fair value was calculated based on the closing price of the Company's stock as of February 28, 2023, the date the Company entered into the AnnJi License Agreement. In the event that the common stock of the Company ceases to be traded on a national securities exchange, AnnJi has the right to sell common stock of the Company back to the Company at a price of $2.10 per share subject to the terms in the AnnJi License Agreement.

In connection with execution of the AnnJi License Agreement, Avenue entered into a registration rights agreement with AnnJi, pursuant to which Avenue filed a registration statement to register the resale of the First Tranche Shares and Second Tranche Shares issued to AnnJi. The Company filed such registration statement on Form S-3 with the SEC on June 16, 2023, which was declared effective on June 27, 2023.

Note 4 — Related Party Agreements

Founders Agreement and Management Services Agreement with Fortress

In February 2015, Fortress entered into a Management Services Agreement (the "MSA") with the Company to provide services for the Company pursuant to the terms of the MSA. Expenses related to the MSA are recorded 50% in research and development expenses and 50% in general and administrative expenses in the Unaudited Condensed Consolidated Statements of Operations. For the three months ended March 31, 2024 and 2023, the Company recorded expense related to the MSA of $0.1 million and $0.1 million, respectively.

In February 2015, Fortress entered into a Founders Agreement with the Company, under which the Company agreed to: (i) issue annually to Fortress, shares of common stock equal to two and one half percent (2.5%) of the fully-diluted outstanding equity of the Company at the time of issuance (the "Annual Equity Fee") and (ii) issue shares of the common stock equal to two and one half percent (2.5%) of the gross amount of any equity or debt financing (the "Financing Equity Fee"). Pursuant to the Founders Agreement, for the three months ended March 31, 2024 and 2023, the Company issued common stock to Fortress of 5,543 shares and 1,912 shares, respectively, as a Financing Equity Fee. Additionally, the Company recorded a Financing Equity Fee of 5,513 shares of common stock issuable to Fortress for the three-month period ending March 31, 2024.

Pursuant to the Third Amended and Restated Certificate of Incorporation, the Company issued 22,476 shares of common stock to Fortress for the Annual Equity Fee during the three-month period ending March 31, 2024. The Company recorded an expense of approximately $0.3 million in research and development related to these issuable shares during the year ended December 31, 2023. For the three months ended March 31, 2023, the Company issued 3,085 shares of the Company's common stock as an Annual Equity Fee. The Company recorded an expense of approximately $0.3 million in research and development related to these issuable shares during the year ended December 31, 2022.

Founders Agreement and Management Services Agreement with Baergic

Pursuant to the Share Contribution Agreement between Avenue and Fortress, the Founders Agreement and Management Services Agreement that had previously been existing between Fortress and Baergic were assigned to Avenue, such that they now exist between Avenue and Baergic; those agreements are referred to herein as the Avenue-Baergic Founders Agreement and the Avenue-Baergic MSA, as applicable. The Annual Stock Dividend payable to the Company is 2.5% of common stock calculated as a percentage of fully diluted outstanding capital and became effective as of November 8, 2022.

The Avenue-Baergic Founders Agreement has an effective date of March 9, 2017, and a term of 15 years, which upon expiration automatically renews for successive one-year periods unless terminated by Avenue and Baergic or a Change in Control (as defined in the Avenue-Baergic Founders Agreement) occurs.

As additional consideration under the Avenue-Baergic Founders Agreement, Baergic will also: (i) pay an equity fee in shares of common stock, payable within five (5) business days of the closing of any equity or debt financing for Baergic that occurs after the effective date of the Avenue-Baergic Founders Agreement and ending on the date when Avenue no longer has majority voting control in the Baergic’s voting equity, equal to two and one-half (2.5%) of the gross amount of any such equity or debt financing; and (ii) pay a cash fee equal to four and one-half percent (4.5%) of the Baergic’s annual net sales, payable on an annual basis, within ninety (90) days of the end of each calendar year. In the event of a Change in Control, Baergic will pay a one-time change in control fee equal to five (5x) times the product of (A) net sales for the twelve (12) months immediately preceding the change in control and (B) four and one-half percent (4.5%).

The Avenue-Baergic MSA has an effective date of March 9, 2017, pursuant to which Avenue renders management, advisory and consulting services to the Company. The Avenue-Baergic MSA has an initial term of five years and is automatically renewed for successive five-year terms unless terminated in accordance with its provisions. Services provided under the Avenue-Baergic MSA may include, without limitation, (i) advice and assistance concerning any and all aspects of the Baergic’s operations, clinical trials, financial planning and strategic transactions and financings and (ii) conducting relations on behalf of the Baergic with accountants, attorneys, financial advisors and other professionals (collectively, the “Avenue Services”). Baergic is obligated to utilize clinical research services, medical education, communication and marketing services and investor relations/public relation services of companies or individuals designated by Avenue, provided those services are offered at market prices. However, Baergic is not obligated to take or act upon any advice rendered from Avenue and Avenue shall not be liable for any of its actions or inactions based upon their advice. Pursuant to the Avenue-Baergic MSA and Baergic’s Certificate of Incorporation, Avenue and its affiliates, including all members of Baergic’s Board of Directors, will have no fiduciary or other duty to communicate or present any corporate opportunities to Baergic or to refrain from engaging in business that is similar to that of Baergic. In consideration for the Avenue Services, Baergic will pay Avenue an annual consulting fee of $0.5 million (the “Avenue-Baergic Annual Consulting Fee”), payable in advance in equal quarterly installments on the first business day of each calendar quarter in each year, provided, however, that such Avenue-Baergic Annual Consulting Fee shall be increased to $1.0 million for each calendar year in which Baergic has net assets in excess of $100 million at the beginning of the calendar year.

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Note 5 — Accounts Payable and Accrued Expenses

Accounts payable, accrued expenses, and other liabilities consisted of the following (in thousands):

	*As of March 31,*		*As of December 31,*
	*2024*		*2023*
Accounts payable	$	310	$	78
Accrued employee compensation		94		11
Accrued contracted services and other		243		198
Total accounts payable and accrued expenses	$	647	$	287

Note 6 - Commitments and Contingencies

Leases

The Company is not party to any leases for office space or equipment.

Litigation

The Company recognizes a liability for a contingency when it is probable that liability has been incurred and when the amount of loss can be reasonably estimated. When a range of probable loss can be estimated, the Company will accrue the most likely amount of such loss, and if such amount is not determinable, then the Company will accrue the minimum of the range of probable loss. As of March 31, 2024, there was no litigation against the Company.

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Note 7 - Stockholder's Equity

Class A Preferred Stock

On September 13, 2016, 2,000,000 shares of Preferred Stock were authorized, of which 250,000 have been designated as Class A Preferred Stock and the remainder are undesignated preferred stock. The Class A Preferred Stock, with a par value of $0.0001 per share, is identical to undesignated Common Stock other than as to voting rights, conversion rights, and the Annual Stock Dividend right (as described below). The undesignated Preferred Stock may be issued from time to time in one or more series. The Company’s Board of Directors is authorized to determine or alter the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions, if any), the redemption price or prices, the liquidation preferences and other designations, powers, preferences and relative, participating, optional or other special rights, if any, and the qualifications, limitations and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock, and to fix the number of shares of any series of Preferred Stock (but not below the number of shares of any such series then outstanding).

On any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Class A Preferred Stock shall be entitled to cast for each share of Class A Preferred Stock held by such holder as of the record date for determining stockholders entitled to vote on such matter, the number of votes that is equal to one and one-tenth (1.1) times a fraction, the numerator of which is the sum of (A) the number of shares of outstanding Common Stock and (B) the whole shares of Common Stock in to which the shares of outstanding Class A Preferred Stock are convertible, and the denominator of which is number of shares of outstanding Class A Preferred Stock (the “Class A Preferred Stock Ratio”). Thus, the Class A Preferred Stock will at all times constitute a voting majority.

Each share of Class A Preferred Stock is convertible, at the option of the holder, into one fully paid and nonassessable share of Common Stock (the “Conversion Ratio”), subject to certain adjustments. If the Company, at any time effects a subdivision or combination of the outstanding Common Stock (by any stock split, stock dividend, recapitalization, reverse stock split or otherwise), the applicable Conversion Ratio in effect immediately before that subdivision is proportionately decreased or increased, as applicable, so that the number of shares of Common Stock issuable on conversion of each share of Class A Preferred Stock shall be increased or decreased, as applicable, in proportion to such increase or decrease in the aggregate number of shares of Common Stock outstanding. Additionally, if any reorganization, recapitalization, reclassification, consolidation or merger involving the Company occurs in which the Common Stock (but not the Class A Preferred Stock) is converted into or exchanged for securities, cash or other property, then each share of Class A Preferred Stock becomes convertible into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Company issuable upon conversion of one share of the Class A Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction. Pursuant to the reverse stock splits by the Company in September 2022 and April 2024, the Class A Preferred Stock has a Conversion Ratio of 1,125 Class A Preferred to one share of Common Stock.

Common Stock

On January 9, 2024, the stockholders holding a majority of the outstanding voting power of the Company executed and delivered to the Board of Directors of the Company a written consent approving, among other items, an increase in the number of shares of common stock authorized under the Certificate of Incorporation, from 75,000,000 to 200,000,000. On February 20, 2024, the Company filed the Certificate of Amendment with the Secretary of State for the State of Delaware effectuating the Authorized Shares Increase.

Holders of the Company's common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by the stockholders is determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by the Company's Board of Directors, subject to any preferential dividend rights of outstanding preferred stock.

In the event of the Company's liquidation or dissolution, the holders of common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that the Company may designate and issue in the future.

Capital Raises

2021 Shelf

On December 7, 2021, the Company filed a shelf registration statement (File No. 333-261520) on Form S-3, which was declared effective on December 10, 2021 (the "Shelf"). Approximately $24.9 million of securities remain available for sale under the 2021 Shelf as of March 31, 2024.

January 2024 Warrant Inducement and Private Placement

On January 5, 2024, the Company entered into (i) an inducement offer letter agreement (the “January 2023 Investor Inducement Letter”) with a certain investor (the “January 2023 Investor”) in connection with certain outstanding warrants to purchase up to an aggregate of 25,871 of the Company’s common stock originally issued to the January 2023 Investor on January 31, 2023 (the “January 2023 Warrants”) and (ii) an inducement offer letter agreement (the “November 2023 Investor Inducement Letter Agreement” and, together with the January 2023 Investor Inducement Letter, the “January 2024 Warrant Inducement”) with certain investors (the “November 2023 Investors” and, together with the January 2023 Investor, the “Holders”) in connection with certain outstanding warrants to purchase up to an aggregate of 194,667 shares of common stock, originally issued to the November 2023 Investors on November 2, 2023 (the “November 2023 Warrants” and, together with the January 2023 Warrants, the “Existing Warrants”). The January 2023 Warrants had an exercise price of $116.25 per share, and the November 2023 Warrants had an exercise price of $22.545 per share.

Pursuant to the January 2024 Warrant Inducement, (i) the January 2023 Investor agreed to exercise for cash its January 2023 Warrants at a reduced exercise price of $22.545 per share and (ii) the November 2023 Investors agreed to exercise for cash their November 2023 Warrants at the existing exercise price of $22.545 in consideration for the Company’s agreement to issue in a private placement (x) new Series A common stock purchase warrants (the “New Series A Warrants”) to purchase up to 220,538 shares of common stock (the “New Series A Warrants Shares”) and (y) new Series B common stock purchase warrants (the “New Series B Warrants” and, together with the New Series A Warrants, the “New Warrants”) to purchase up to 220,538 shares of common stock (the “New Series B Warrants Shares”). The New Series A Warrants will expire five years following the issuance date and the New Series B Warrants will expire eighteen months following the issuance date.

The January 2023 Warrants, which were liability classified, were revalued on January 5, 2024 using the Black-Scholes Model to calculate the difference in fair value as a result of the change in exercise price. The difference in fair value of $0.1 million was recorded as a change in fair value of warrant liabilities in the Condensed Consolidated Statements of Operations (see Note 8). The issuance of the New Warrants was considered as part of the cost of the inducement and the New Warrants were valued using the Black-Scholes Model and allocated between the January 2023 Warrants and November 2023 Warrants on a weighted basis. The approximately $0.6 million of the New Warrants fair value allocated to the January 2023 warrants was recorded as a loss on common stock warrant liabilities in the Condensed Consolidated Statements of Operations with a corresponding offset to additional paid-in-capital. Approximately $4.3 million of the New Warrant fair value was allocated to the November 2023 Warrants and deemed to be a dividend and recorded to additional paid-in-capital because the Company had an accumulated deficit on the exercise date. The deemed dividend was included in net loss attributable to common stockholders in the calculation of net loss per share in the condensed consolidated statements of operations (see Note 2).

The Company received aggregate net proceeds of approximately $4.5 million from the exercise of the Existing Warrants by the Holders, after deducting placement agent fees and other expenses payable by the Company.

The Company filed a registration statement on Form S-3 (File No. 333-276671) with the SEC providing for the resale of the New Warrant Shares (the “Resale Registration Statement”) on January 24, 2024, which was declared effective on February 1, 2024.

The key inputs for the Black-Scholes Model calculations on January 5, 2024 were as follows:

	January 2023			New Series A			New Series B
	Warrants			Warrants			Warrants
Stock price	$	14.25		$	14.25		$	14.25
Risk-free interest rate		4.40	%		4.02	%		4.40	%
Expected dividend yield		—			—			—
Expected term in years		2.1			5.0			1.5
Expected volatility		185	%		138	%		187	%

Equity Incentive Plan

The Company has in effect the Avenue Therapeutics, Inc. 2015 Incentive Plan (as amended, the “2015 Incentive Plan"). The 2015 Incentive Plan was adopted in January 2015 by the Company's stockholders and an amendment to the plan to increase the number of authorized shares issuable to 3,556 shares was approved by the Company's stockholders in December 2021. The 2015 Incentive Plan was amended again to increase the number of authorized shares issuable to 70,223 shares and approved by the Company's stockholders on January 30, 2023. Under the 2015 Incentive Plan, the compensation committee of the Company’s board of directors is authorized to grant stock-based awards to directors, officers, employees and consultants. The plan authorizes grants to issue up to 70,223 shares of authorized but unissued common stock and expires 10 years from adoption and limits the term of each option to no more than 10 years from the date of grant.

Total shares available for the issuance of stock-based awards under the Company’s 2015 Incentive Plan was 44,701 shares at March 31, 2024.

Restricted Stock Units and Restricted Stock Awards

The following table summarizes the restricted stock unit and award activity during the three months ended March 31, 2024:

	*Number of*			*Weighted*
	*Units and*			*Average Grant*
	*Awards*			*Date Fair Value*
	(in thousands)
Unvested balance at December 31, 2023		1,311		$	196.21
Granted		—			—
Forfeited		—			—
Vested		(283	)		85.50
Unvested balance at March 31, 2024		1,028		$	226.69

At March 31, 2024, the Company had unrecognized stock-based compensation expense related to restricted stock units and restricted stock awards of $0.1 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.4 years. This amount does not include, as of March 31, 2024, 45 shares of restricted stock outstanding which are performance-based and vest upon achievement of certain corporate milestones. The expense is recognized over the vesting period of the award. Stock-based compensation for awards containing performance conditions will be measured as of the grant date and recorded if and when it is probable that the performance condition will be achieved.

Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2024:

					*Weighted*
					*Average*
	*Number*		*Weighted*		*Remaining*		*Aggregate*
	*of Options*		*Average*		*Contractual*		*Intrinsic Value*
	*(in thousands)*		*Exercise Price*		*Term (years)*		*(in thousands)*
Outstanding at December 31, 2023		22,474	$	85.50		9.5	$	—
Granted		—	$	—			$	—
Exercised		—	$	—			$	—
Cancelled/forfeited		—	$	—			$	—
Expired		—	$	—			$	—
Outstanding at Balance at March 31, 2024		22,474	$	85.50		9.2	$	—
Expected to vest		16,304	$	85.50		9.2	$	—
Exercisable		6,170	$	85.50		9.2	$	—

There were no options granted in the three-month period ending March 31, 2024. The aggregate intrinsic value of options is calculated as the difference between the exercise price of the underlying options and the fair value of the Company's common stock for those options that had exercise prices lower than the fair value of the Company's common stock. As of March 31, 2024, the total compensation cost related to non-vested options awards not yet recognized is approximately $0.7 million with a weighted average remaining vesting period of 1.6 years.

The Company did not grant any stock options in the three months ended March 31, 2024 and 2023.

Stock-based compensation expense has been reported in the Company's condensed consolidated statements of operations as follows:

	*For the three months ended*
	*March 31,*		*March 31,*
	*2024*		*2023*
Research and development	$	45	$	—
General and administrative		146		11
Total stock-based compensation expense	$	191	$	11

Stock Warrants

The following table summarizes the warrant activity for the three months ended March 31, 2024 and 2023:

				*Weighted*
				*Average*		*Aggregate*
				*Exercise*		*Intrinsic Value*
	*Warrants*			*Price*		*(in thousands)*
Outstanding, December 31, 2023		524,601		$	32.42	$	—
Granted		441,076			22.55
Exercised		(220,538	)		22.55
Outstanding, March 31, 2024		745,139		$	29.50	$	—

Upon the exercise of warrants, the Company will issue new shares of its common stock.

InvaGen Share Repurchase

Under the Share Repurchase Agreement, the Company agreed to pay InvaGen an additional amount as a contingent fee, payable in the form of seven and a half percent (7.5%) of the proceeds of future financings, up to $4.0 million. In connection with the closing of the January 2024 Warrant Inducement in January 2024, the Company made a payment of $0.3 million to InvaGen. In connection with the May 2024 Warrant Inducement (see Note 9), the Company made a payment of $0.3 million to InvaGen in May 2024. Payments to InvaGen are recorded in general and administrative expense on the condensed consolidated statements of operations.

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Note 8 - Common Stock Warrant Liabilities

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each consolidated balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a gain or loss on the condensed consolidated statements of operations.

Warrant Liability

The Company has previously issued freestanding warrants to purchase shares of its common stock in connection with financing activities. The outstanding October 2022 Warrants and the fully exercised January 2023 Warrants are classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside the Company's control. The Black-Scholes Model is used to value the warrants classified as liabilities and the approach required management to estimate inputs including expected volatility and expected term and is most significantly impacted by the volatility of the Company's common stock price. These inputs are inherently subjective and require significant analysis and judgment to develop.

The fair value of the warrants was measured at the time of issuance and is re-measured at each financial reporting date with any changes in fair value being recognized in change in fair value of warrant liabilities, a component of other income (expense), in the consolidated statements of operations and comprehensive income (loss). The Company will continue to re-measure the fair value of the October 2022 Warrant liabilities until exercise or expiration of the warrants on October 10, 2027.

In January 2024, the Company entered into an inducement letter with the investor from the January 2023 Registered Direct Offering which provided for the immediate exercise of certain of its existing outstanding warrants to exercise for cash an aggregate of 25,871 shares of the Company’s common stock at a reduced exercise price of $22.545 per share. Included in the exercise were the entirety of the January 2023 Warrants. The Company revalued the January 2023 Warrants on January 5, 2024, resulting in a fair value of $0.3 million. The $0.1 million increase in the fair value of the common stock warrant liability resulted in an offsetting change in fair value of warrant liabilities in the Unaudited Condensed Consolidated Statements of Operations (see Note 7).

Fair Value of Warrant Liabilities

Warrant liabilities are categorized within Level 3 of the fair value hierarchy and are measured at fair value on a recurring basis as follows (in thousands):

	*October 2022*			*January 2023*
	*Warrants*			*Warrants*			*Total*
Fair value of warrants outstanding as of December 31, 2023	$	426		$	160		$	586
Change in fair value of warrants		(13	)		129			116
Exercise of warrants		—			(289	)		(289	)
Fair value of warrants outstanding as of March 31, 2024	$	413		$	—		$	413

The key inputs for the October 2022 Warrants using the Black-Scholes model were as follows:

	*March 31,*			*December 31,*
	*2024*			*2023*
Stock price	$	11.10		$	12.00
Risk-free interest rate		4.21	%		3.84	%
Expected dividend yield		—			—
Expected term in years		3.5			3.8
Expected volatility		162	%		148	%

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Note 9 - Subsequent Events

Reverse Stock Split

On April 25, 2024, the Company filed the Reverse Split Amendment to effect the Reverse Stock Split. As a result of the Reverse Stock Split, every 75 shares of the Company’s pre-reverse split common stock was combined and reclassified as one share of common stock. Proportionate voting rights and other rights of common stockholders were not affected by the reverse. Instead, stockholders who were otherwise entitled to receive fractional shares because they held a number of shares of common stock that was not evenly divided by the reverse split ratio had their fractional shares rounded up to the next whole share in lieu of such fractional shares. No fractional shares were issued in connection with the Reverse Stock Split and no cash payments were made for fractional shares. The Reverse Stock Split became effective on April 26, 2024, and the common stock was quoted on the Nasdaq Stock Market on a post-split basis at market open on April 26, 2024. The par value and other terms of the common stock were not affected by the Reverse Stock Split.

May 2024 Warrant Inducement

On April 28, 2024, the Company entered into inducement offer letter agreements (the “May 2024 Warrant Inducement”) with (i) certain investors (the “October 2022 Investors”) that held certain outstanding October 2022 Warrants to purchase up to an aggregate of 27,271 shares of the Company’s common stock; (ii) certain investors (the “November 2023 Investors”) that hold November 2023 Warrants to purchase up to an aggregate of 221,333 shares of Common Stock; and (iii) certain investors (the “January 2024 Investors” and, collectively with the October 2022 Investors and November 2023 Investors, the “Holders”) that hold New Warrants to purchase up to an aggregate of 441,076 shares of Common Stock. We refer to the New Warrants collectively with the October 2022 Warrants and November 2023 Warrants as the Existing Warrants. The October 2022 Warrants had an exercise price of $116.25 per share, the November 2023 Warrants had an exercise price of $22.545 per share, and the New Warrants had an exercise price of $22.545 per share. Pursuant to the May 2024 Warrant Inducement, the Holders agreed to exercise for cash the Existing Warrants at a reduced exercise price of $6.20 per share in partial consideration for the Company’s agreement to issue in a private placement (x) new Series C Common Stock purchase warrants (the “New Series C Warrants”) to purchase up to 689,680 shares of Common Stock (the “New Series C Warrant Shares”) and (y) new Series D Common Stock Purchase Warrants (the “New Series D Warrants” and, together with the New Series C Warrants, the “May 2024 Warrants”) to purchase up to 689,680 shares of Common Stock (the “New Series D Warrant Shares” and, together with the New Series C Warrant Shares, the “May 2024 Warrant Shares”). The Holders also agreed to make a payment of $0.125 per May 2024 Warrant Share (the “Additional Warrant Consideration”). The closing of the transactions contemplated pursuant to the May 2024 Warrant Inducement occurred on May 1, 2024 (the “Closing Date”). The Company received aggregate gross proceeds of approximately $4.4 million from the exercise of the Existing Warrants by the Holders and the payment of the Additional Warrant Consideration, before deducting placement agent fees and other expenses payable by the Company. The Company intends to use the net proceeds for general corporate purposes.

At-the-Market Facility

In May 2024, the Company entered into an At-the-Market Offering Agreement (the "Offering Agreement") with H.C. Wainwright & Co. LLC ("Wainwright") under which the Company may offer and sell, from time to time at its sole discretion, up to $3,850,000 of shares of its common stock, par value $0.0001 per share (the "Shares"), through or to Wainwright. The offer and sale of the Shares will be made pursuant to the base prospectus forming a part of the Shelf, and the related prospectus supplement dated May 10, 2024 (the "Registration Statement") filed with the SEC on such date pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the "Securities Act").

Under current SEC regulations and General Instruction I.B.6 of Form S-3, if on or after specified measurement periods the Company's public float is less than $75.0 million, and for so long as the Company's public float remains less than $75.0 million, the amount the Company can raise through primary public offerings of securities in any 12-month period using offerings registered under shelf registration statements is limited to an aggregate of one-third of the Company's public float, which is referred to as the baby shelf rules. As of March 31, 2024, the Company's calculated public float was less than $75.0 million.

As a result of the warrant inducement transaction, and as of the date of this filing, the Company believes it has stockholders’ equity of at least $2.5 million as required by Nasdaq Listing Rule 5550(b)(1).

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Item 2. Financial Information.

Management’s Discussion and Analysis of the Results of Operations

Forward-Looking Statements

Certain matters discussed in this report may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of current or historical fact contained in this report, including statements that express our intentions, plans, objectives, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “should,” “project,” “will,” “would,” and similar expressions are generally intended to identify forward-looking statements. These statements are based on current expectations, estimates and projections made by management about our business, our industry and other conditions affecting our financial condition, results of operations or business prospects. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, the forward-looking statements due to numerous risks and uncertainties. Factors that could cause such outcomes and results to differ include, but are not limited to, risks and uncertainties arising from: