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”) and completed its initial public offering in 2017. 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 are intravenous tramadol ("IV tramadol") for the treatment of post-operative acute pain and ATX-04 for the treatment of Pompe disease, and previously, through April 2025, AJ201 for the treatment of spinal bulbar and muscular atrophy, and through November 2025, BAER-101 for the treatment of epilepsy and panic disorders.

AJ201 Termination

On  February 28, 2023, Avenue entered into a license agreement with AnnJi Pharmaceutical Co. Ltd. (“AnnJi”), whereby Avenue obtained an exclusive license (the “AnnJi License Agreement”) from AnnJi to the intellectual property rights pertaining to the molecule known as JM17, which activates Nrf1 and Nrf2, enhances androgen receptor degradation and underlies AJ201, a clinical product candidate currently in a Phase 1b/2a clinical trial in the U.S. for the treatment of spinal and bulbar muscular atrophy (“SBMA”, also known as Kennedy's Disease). Under the AnnJi License Agreement, in exchange for exclusive rights to the intellectual property underlying the AJ201 product candidates, Avenue paid $3.0 million, issued shares of Avenue stock in two tranches, and agreed to make additional payments including: reimbursement of payments up to $10.8 million in connection with the product’s Phase 1b/2a clinical trial, 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 to the low-double digits, which were subject to potential diminution in certain circumstances. On  March 3, 2025, Avenue received a notice of AnnJi’s intent to terminate the AnnJi License Agreement, in which AnnJi asserted several bases for its right to terminate the AnnJi License Agreement.

On  April 24, 2025 (the “Termination Effective Date”), Avenue and AnnJi entered into a License Termination and Program Transfer Agreement (the “Termination and Transfer Agreement”), pursuant to which: (i) the AnnJi License Agreement and related agreements were terminated with immediate effect; (ii) the parties dismissed all pending dispute resolution proceedings and provided mutual releases of claims; (iii) Avenue transferred to AnnJi all of its rights, title and interest to and under the assets arising under the AnnJi License Agreement and otherwise related to AJ201 and (iv) Avenue agreed not to, for 48 months following the date of the Termination and Transfer Agreement, develop, commercialize, manufacture or sell any product competing with AJ201 in the US, Canada, the European Union, Great Britain or Israel. Under the Termination and Transfer Agreement, Avenue repurchased all shares of common stock held by AnnJi for an aggregate payment of $1.00, and Avenue also made a payment of $0.2 million to AnnJi as consideration for legal expenses, which was accounted for as consideration payable to a customer and reduced the amount of revenue recognized under the agreement.

AnnJi made payments to Avenue of $1.6 million (which amount reflects the netting of a 20% tax withholding payment obligation), with $0.8 million having been collected in  May 2025 and $0.8 million collected in  July 2025. The $1.6 million, less the $0.2 million as consideration for legal expenses, was recognized as other revenue as the performance obligations related to rights transferred to AnnJi were satisfied during the quarter ended  June 30, 2025. Additionally, Avenue will be eligible to receive from AnnJi:

The Company is treating the payments related to future milestones and potential royalties as variable consideration that is constrained until the achievement of the specified milestones. The Termination and Transfer Agreement also contains customary representations and warranties related to confidentiality and indemnification.

Sale of Baergic

On May 11, 2022, the Company entered into a stock contribution agreement (the “Contribution Agreement”) with Fortress, pursuant to which Fortress agreed to transfer ownership of 100% of its shares (common and preferred) (the “Contributed Shares”) in Baergic Bio, Inc. ("Baergic") to the Company. Under the Contribution Agreement, Fortress also agreed to assign to Avenue certain intercompany agreements existing between Fortress and Baergic, including a Founders Agreement, by and between Fortress and Baergic, dated as of March 9, 2017, and Management Services Agreement, by and between Fortress and Baergic, dated as of March 9, 2017.

The transaction expanded Avenue’s development portfolio within neuroscience. Evaluation and negotiation of the Contribution Agreement was overseen, and execution of the Contribution Agreement was approved, by special committees at the Avenue and Fortress levels, both of which exclusively comprised independent and disinterested directors of the respective companies’ boards. See Note 4 below.

On November 5, 2025, Avenue Therapeutics, Inc. (the “Company” or “Avenue”) and its majority owned subsidiary, Baergic Bio, Inc., a Delaware corporation (“Baergic”), entered into a stock purchase agreement (the “Agreement”) with Axsome Therapeutics, Inc., a Delaware corporation (together with its affiliates, “Axsome”), and the holders of outstanding options, warrants and other similar rights with respect to shares of Baergic. Pursuant to the Agreement, Axsome: (i) purchased 100% of the equity interests in Baergic from Avenue and the other stockholders of Baergic for an upfront payment of $0.3 million (less transaction fees) and additional contingent consideration described below (the “Disposition”) and (ii) received worldwide commercial, development, and manufacturing rights to BAER-101 (now referred to as AXS-17), including all available nonclinical and clinical data.

Additionally, Avenue and the other former stockholders of Baergic will be eligible to receive from Axsome:

Avenue is eligible to receive approximately 74% of all future payments and royalties payable under the Agreement.

The Agreement also contains customary representations and warranties and provisions related to confidentiality, indemnification and intellectual property protection. 

The Company determined that Baergic did not meet the definition of a business as substantially all of the fair value of the gross assets was concentrated in a single identifiable intangible asset.  Accordingly, the transaction was accounted for as a sale of a nonfinancial asset under ASC 610-20.  The Company further concluded that the contingent consideration related to development and regulatory milestones is constrained and will be recognized when it is probable that a significant revenue reversal will not occur.  Avenue received $0.3 million up front, which included $0.1 million that Avenue was entitled to as reimbursement for transaction costs. Under the terms of the agreement, Avenue was entitled to $0.2 million of the upfront payment and the remaining $0.1 million went to the other shareholders of Baergic based on their ownership percentages. For the year ended  December 31, 2025, the Company recognized a gain of $0.2 million related to the deconsolidation upon the loss of control of Baergic, after accounting for transaction fees and expenses for shares issued related to the Agreement. 

Reverse Stock Split

On April 25, 2024, we filed 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 a 1-for-75 reverse stock split of our 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.

Nasdaq Delisting

On  March 17, 2025, the Nasdaq Stock Market LLC (“Nasdaq”) notified the Company that Nasdaq had determined to delist the Company’s common stock and that trading of the Company’s securities would be suspended at the open of trading on  March 19, 2025. On  July 18, 2025, Nasdaq filed a Form 25 with the United States Securities and Exchange Commission (the “SEC”) to remove the Company's common stock from listing and registration. As a result, the common stock of the Company ceased to be registered pursuant to Section 12(b) of the Securities Act and was immediately deemed registered pursuant to Section 12(g) of the Securities Act of 1933, as amended (the “Securities Act”). The Company does not intend to appeal the delisting determination. Since  March 19, 2025, the Company’s common stock has been quoted on the over-the-counter market (OTCID) under the symbol “ATXI”. The delisting  may negatively impact the liquidity and market price of the Company's common stock and could make it more difficult for shareholders to dispose of their holdings.

Stock Purchase and Merger Agreement

In July 2022 the Company entered into a share repurchase agreement with InvaGen Pharmaceuticals Inc. ("InvaGen"). Upon the closing of a public offering in October 2022, InvaGen gave up all rights set forth in the stockholders agreement to which it was previously party and the Company repurchased the 5,185 common shares of the Company held by InvaGen. Under the share repurchase agreement with InvaGen, the Company agreed to pay InvaGen seven and a half percent (7.5%) of the proceeds from future financings, up to $4 million, which the Company accounts for as a derivative. Due to the uncertainty related to future financings, the estimated fair value of the derivative is not material.  The Company recognizes changes in fair value within general and administrative expenses in the statement of operations. In connection with the closing of financings that occurred in 2025 and 2024, Avenue made payments totaling $0.2 million and $0.7 million to InvaGen, respectively. Approximately $1.4 million in aggregate has been paid to InvaGen under the Share Repurchase Agreement as of December 31, 2025.

Liquidity and Capital Resources

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  “January 2024 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  “January 2024 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 New Series A Warrants and New Series B Warrants meet the criteria for permanent equity classification.

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 consolidated statements of operations (see Note 8). The issuance of the  January 2024 Warrants was considered as part of the cost of the inducement and the  January 2024 Warrants were valued using the Black-Scholes Model with the fair value being allocated between the  January 2023 Warrants and  November 2023 Warrants on a weighted basis. The approximately $0.6 million of the  January 2024 Warrants fair value was allocated to the  January 2023 warrants and recorded as a loss on common stock warrant liabilities in the consolidated statements of operations with a corresponding offset to additional paid-in-capital. Approximately $4.3 million of the  January 2024 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 issuance date. The deemed dividend was included in net loss attributable to common stockholders in the calculation of net loss per share in the 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  January 2024 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  January 2024 Warrant Shares (the “Resale Registration Statement”) on  January 24, 2024, which was declared effective on  February 1, 2024.

See the May 2024 Warrant Inducement below for the January 2024 Warrants exercised in May 2024.

May 2024 Warrant Inducement and Private Placement

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  “May Inducement  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  May Inducement  November 2023 Investors, the  “May 2024 Holders”) that hold  January 2024 Warrants to purchase up to an aggregate of 441,076 shares of common stock. We refer to the exercised  January 2024 Warrants collectively with the  October 2022 Warrants and  November 2023 Warrants as the  "May 2024 Exercised 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  January 2024 Warrants had an exercise price of $22.545 per share. Pursuant to the  May 2024 Warrant Inducement, the  May 2024 Holders agreed to exercise for cash the  May 2024 Exercised 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  May 2024 Holders also agreed to pay the Company $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 May 2024 Warrants meet the requirement for equity classification under ASC 815.

The  October 2022 Warrants, which were liability classified, were revalued on  May 1, 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 consolidated statements of operations (see Note 8). The issuance of the  May 2024 Warrants was considered as part of the cost of the inducement and the  May 2024 Warrants were valued using the Black-Scholes Model with the fair value being allocated between the  October 2022 Warrants,  November 2023 Warrants and  January 2024 Warrants on a weighted basis. The approximately $0.2 million of the  May 2024 Warrants fair value was allocated to the  October 2022 warrants and recorded as a loss on common stock warrant liabilities in the consolidated statements of operations with a corresponding offset to additional paid-in-capital. Approximately $4.5 million of the  May 2024 Warrant fair value was allocated to the  November 2023 Warrants and  January 2024 Warrants and deemed to be a dividend and recorded to additional paid-in-capital because the Company had an accumulated deficit on the issuance date. The deemed dividend was included in net loss attributable to common stockholders in the calculation of net loss per share in the consolidated statements of operations (see Note 2).

The Company received net proceeds of approximately $3.7 million from the exercise of the  May 2024 Exercised Warrants by the  May 2024 Holders and the payment of the Additional Warrant Consideration, after deducting placement agent fees and other expenses payable by the Company.

The Company filed a registration statement on Form S-3 (File No. 333-279125) with the SEC providing for the resale of the  May 2024 New Warrant Shares (the  “May 2024 Resale Registration Statement”) on  May 6, 2024, which was declared effective on  May 10, 2024. Due to our delisting from a national securities exchange, we are no longer eligible to use a shelf registration statement on Form S-3.

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. The offer and sale of the shares will be made pursuant to a previously filed shelf registration statement on Form S-3 (File No. 333-261520), originally filed with the SEC on  December 7, 2021 and declared effective by the SEC on  December 10, 2021, 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 of 1933, as amended (the “Securities Act”).  The replacement registration statement was later withdrawn. As a result of the limitations of General Instruction I.B.6 of Form S-3, the Company  may sell up to a maximum of $3,850,000 of its shares pursuant to the ATM Agreement. On December 15, 2025, the Company filed a Post-Effective Amendment No. 1 for Form S-3 on Form S-1 (File No. 333-279125), which Post-Effective Amendment was declared effective on December 16, 2025.

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 year ended  December 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. Avenue is no longer able to utilize the Avenue ATM as a result of the delisting of its stock from trading on Nasdaq.

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 December 31, 2025, the Company had an accumulated deficit of $105.5 million. Due to uncertainties regarding future operations of the Company, including a potential Phase 3 safety study for IV tramadol, and pivotal study for ATX-04, the Company will need to secure additional funds through equity or debt offerings, or other potential sources, the timing of which is unknown at this time. The Company cannot be certain that additional funding will be available to it on acceptable terms, or at all. These factors individually and collectively causes 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.