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

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"). The Company filed a replacement shelf registration on Form S-3 on December 4, 2024 (the "Replacement Shelf"), which has not yet become effective under the Securities Act of 1933, as amended (the "Securities Act"). However, upon the Company's formal delisting from Nasdaq, effective upon Nasdaq's filing of a Form 25 with the SEC, the Company will be ineligible to use Form S-3 and therefore unable to use the Shelf or the Replacement Shelf.

ATM Facility

On May 10, 2024, the Company entered into an At the Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co. LLC (the “ATM Manager”) under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.0001 per share, through or to the ATM Manager. Offers and sales of the shares are made pursuant to the Shelf, and the related prospectus supplement dated May 10, 2024 (including such replacement registration statement as may be filed with the SEC, the “ATM Registration Statement”) and filed with the SEC on such date pursuant to Rule 424(b) under the Securities Act. As a result of the limitations of General Instruction I.B.6 of Form S-3, the Company may currently sell up to a maximum of $3,850,000 of its shares pursuant to the ATM Agreement.

Under the ATM Agreement, the ATM Manager may sell shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act. The ATM Manager will use commercially reasonable efforts to sell the shares from time to time, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company agreed to pay the ATM Manager a commission of 3.0% of the gross proceeds from the sales of shares sold through the ATM Manager under the ATM Agreement and has provided the ATM Manager with customary indemnification and contribution rights. The Company also agreed to reimburse the ATM Manager for certain expenses incurred in connection with the ATM Agreement. The Company and the ATM Manager may each terminate the ATM Agreement at any time upon specified prior written notice.

For the three months ended March 31, 2025, the Company sold an aggregate of 938,990 shares of its common stock pursuant to the ATM Agreement, resulting in net proceeds of approximately $2.1 million after deducting underwriting discounts. The Company is no longer able to utilize the ATM Agreement as a result of the suspension of its common stock from trading on the Nasdaq.

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 “January 2024 Series A Warrants”) to purchase up to 220,538 shares of common stock (the “January 2024 Series A Warrants Shares”) and (y) new Series B common stock purchase warrants (the “January 2024 Series B Warrants” and, together with the January 2024 Series A Warrants, the “January 2024 Warrants”) to purchase up to 220,538 shares of common stock (the “January 2024 Series B Warrants Shares”). The January 2024 Series A Warrants were to expire five years following the issuance date and the January 2024 Series B Warrants were to expire eighteen months following the issuance date. The January 2024 Warrants were all subsequently exercised, and none remain outstanding as of the date of this report.

The approximately $0.6 million of the January 2024 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 January 2024 Warrants 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).

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, in December 2021, the Company’s stockholders approved an amendment to the plan to increase the number of authorized shares issuable to 3,556 shares. On January 30, 2023, the Company’s stockholders approved an amendment to the 2015 Incentive Plan to increase the number of authorized shares issuable to 70,223 shares. On June 24, 2024, the Company’s stockholders approved an amendment to the 2015 Incentive Plan to increase the number of authorized shares issuable to 5,070,223 shares, which extended the term of the 2015 Incentive Plan to June 24, 2034, to increase the limit of the number of shares that may be issued upon exercise of incentive stock options by 5,000,000 shares, and to increase the annual share limit awards for non-employee directors to 500,000. 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 2015 Incentive Plan authorizes grants to issue up to 5,070,223 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 4,575,701 shares at March 31, 2025.

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, 2025:

At March 31, 2025, the Company had unrecognized stock-based compensation expense related to restricted stock units and restricted stock awards of $0.2 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.1 years. This amount does not include, as of March 31, 2025, 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.

The Company offers certain executives and key employees the opportunity to defer settlement of vested restricted stock units as part of our nonqualified deferred compensation plan. As of March 31, 2025, the Company had 235,000 outstanding deferred restricted stock units.

Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2025:

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, 2025, the total compensation cost related to non-vested options awards not yet recognized is approximately $0.5 million with a weighted average remaining vesting period of 1.2 years.

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

Stock Warrants

The following table summarizes the warrant activity for the three months ended March 31, 2025:

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 common share sales pursuant to the ATM Agreement, the Company made payments totaling approximately $0.2 million to InvaGen during the three months ended March 31, 2025. Approximately $1.4 million in aggregate has been paid to InvaGen under the Share Repurchase Agreement through the three months ended March, 31, 2025. Payments to InvaGen are recorded in general and administrative expense on the condensed consolidated statements of operations.