Avenue Therapeutics, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Note 1 - Organization, Plan of Business Operations

Note 1 - Organization, Plan of Business Operations	12 Months Ended
Dec. 31, 2023
Notes to Financial Statements
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]	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 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. *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. Consummation of the transactions contemplated by the Contribution Agreement was subject to the satisfaction of certain conditions precedent, including, inter alia: (i) the closing of an equity financing by the Company resulting in gross proceeds of at least $7.5 million, (ii) the agreement by minority Avenue shareholder InvaGen Pharmaceuticals Inc. (“InvaGen”) to (A) have 100% of its shares in the Company repurchased by the Company and (B) terminate certain of the agreements to which it was party with the Company and/or Fortress in connection with InvaGen’s 2019 equity investment in the Company, which would eliminate certain negative consent rights of InvaGen over the Company and restore certain rights and privileges of Fortress in the Company; and (iii) the sustained listing of Avenue’s common stock on The Nasdaq Capital Market. 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. *AJ201* 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 to 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 SBMA. The study aims to evaluate the safety and clinical response of AJ201 in patients suffering from SBMA. AJ201 has been granted Orphan Drug Designation (“ODD”) by the U.S. Food and Drug Administration ("FDA") for the indications of SBMA, Huntington’s Disease and Spinocerebellar Ataxia. The purchase and progress of the clinical development of AJ201 to treat SBMA further expands Avenue's portfolio within neurologic diseases. *Reverse Stock Split* On September 23, 2022, the Company filed a Certificate of Amendment (the “Amendment”) to the Company’s Third Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware to effect (i) the 1-for-15 reverse stock split of the Company’s shares of common stock (“Reverse Stock Split”) and (ii) the reduction in number of the Company’s authorized shares of common stock from 50,000,000 to 20,000,000. As a result of the Reverse Stock Split, every 15 shares of Common Stock outstanding immediately prior to the effectiveness of the Reverse Stock Split were combined and converted into one share of New Common Stock without any change in the par value per share. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would otherwise be entitled to a fraction of one share of New Common Stock as a result of the Reverse Stock Split instead received cash equal to such fraction multiplied by the closing sale price of Common Stock on The Nasdaq Capital Market on September 22, 2022, as adjusted for the Reverse Stock Split. On February 2, 2023, following the approval of Avenue's Board of Directors and Avenue's stockholders at the Company’s 2022 annual meeting of stockholders, the Company filed an amendment to Avenue's Third Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 20,000,000 to 75,000,000 shares. 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. *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 388,888 common shares of the Company held by InvaGen. The excess of the consideration paid to InvaGen over the fair market value on the date of repurchase of $1.9 million was recognized in general and administrative expense for the year ended December 31, 2022 in the Consolidated Statement of Operations. 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. In connection with the closing of financings that occurred in 2023 and 2022, Avenue made payments totaling $0.5 million to InvaGen. *Liquidity and Capital Resources* October 2022 Public Offering In October 2022, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with Aegis Capital Corp., as underwriter (the “Underwriter”), related to the Company's underwritten public offering (the “October 2022 Offering”) of 2,652,065 units ( “October 2022 Units”) and 984,300 pre-funded units ( “October 2022 Pre-funded Units”). Each October 2022 Unit consisted of one share (a “October 2022 Share”) of Avenue's common stock, and one warrant to purchase one share of Avenue's common stock (each, a “October 2022 Warrant” and, collectively, the “October 2022 Warrants”), and each October 2022 Pre-funded Unit consisted of one pre-funded warrant to purchase one share of common stock (each, a “October 2022 Pre-funded Warrant” and collectively, the “October 2022 Pre-funded Warrants”) and one October 2022 Warrant. The October 2022 Units were sold at a price of $3.30 per unit, and the October 2022 Pre-Funded Units were sold at a price of $3.2999 ($3.30 less $0.0001, the exercise price of the October 2022 Pre-funded Warrants). The October 2022 Warrants became immediately exercisable upon issuance and are exercisable for a period of five years after the issuance date. The October 2022 Shares, the October 2022 Pre-funded Warrants and the October 2022 Warrants were immediately separable upon issuance and were issued separately. The Underwriter was granted a 45-day option to purchase up to an aggregate of (i) 545,454 additional October 2022 Shares and/or October 2022 Pre-funded Units, representing 15% of the October 2022 Shares and October 2022 Pre-funded Warrants sold in the October 2022 Offering, and/or (ii) October 2022 Warrants to purchase 545,454 additional October 2022 Shares, representing 15% of the October 2022 Warrants sold in the October 2022 Offering, which it initially exercised, in part, electing to purchase 545,454 October 2022 Warrants at a purchase price of $0.01 per October 2022 Warrant. The Company consummated the transactions contemplated by the Offering and the Underwriting Agreement on October 11, 2022. Prior to the closing date of the Offering, investors in certain of the October 2022 Pre-funded Warrants, pursuant to the terms thereof, elected to exercise 949,900 October 2022 Pre-funded Warrants. Accordingly, at the closing, the Company issued 949,900 fewer October 2022 Pre-funded Warrants and, in lieu thereof, the corresponding 949,900 shares of common stock. The Company received net proceeds from the October 2022 Offering of $10.3 million, after deducting underwriting discounts, commissions and offering expenses before giving effect to any warrant exercises. January 2023 Registered Direct Offering and Private Placement On January 27, 2023, the Company entered into a Securities Purchase Agreement (the “Registered Purchase Agreement”) with a single institutional accredited investor, pursuant to which the Company agreed to issue and sell (i) 448,000 shares (the “January 2023 Shares”) of Avenue's common stock at a price per January 2023 Share of $1.55, and (ii) pre-funded warrants (the “January 2023 Pre-funded Warrants”) to purchase 1,492,299 shares of common stock, at a price per January 2023 Pre-funded Warrant equal to the price per January 2023 Share, less $0.001 (the “January 2023 Registered Direct Offering”). The January 2023 Pre-funded Warrants had an exercise price of $0.001 per share, became exercisable upon issuance and have been fully exercised. As of December 31, 2023, the January 2023 Pre-Funded Warrants issued in the January 2023 Registered Direct Offering have been exercised. On January 27, 2023, the Company also entered into a Securities Purchase Agreement (the “January 2023 PIPE Purchase Agreement”) with the same institutional accredited investor for a private placement offering ( “January 2023 Private Placement”) of warrants (the “January 2023 Warrants”) to purchase 1,940,299 shares of common stock. Pursuant to the January 2023 PIPE Purchase Agreement, the Company agreed to issue and sell the January 2023 Warrants at an offering price of $0.125 per January 2023 Warrant to purchase one share of common stock. The January 2023 Warrants have an exercise price of $1.55 per share (subject to adjustment as set forth in the January 2023 Warrants), became exercisable immediately after issuance and will expire three years from the date on which the January 2023 Warrants become exercisable. The January 2023 Private Placement closed on January 31, 2023, concurrently with the January 2023 Registered Direct Offering. The Company received net proceeds from the January 2023 Registered Direct Offering and Private Placement of $2.8 million, after deducting underwriting discounts, commissions and offering expenses before giving effect to any warrant exercises. In connection with the January 2023 PIPE Purchase Agreement, the Company entered into a registration rights agreement (the “January 2023 Registration Rights Agreement”) with the investor. The Company filed such registration statement on Form S-1 in April 2023, and the registration statement was subsequently declared effective by the SEC in May 2023. As described in more detail in Note 10 to these audited consolidated financial statements, the Company entered into an inducement offer letter agreement with the same institutional accredited investor who agreed to exercise the January 2023 Warrants issued in the January 2023 Private Placement at a reduced exercise price of $0.3006 per share in January 2024. September 2023 Private Placement On September 8, 2023, the Company entered into an unwritten agreement with Fortress and Dr. Lindsay A. Rosenwald, a director on the board of directors of the Company (Dr. Rosenwald and Fortress, together, the “September 2023 Investors”), pursuant to which the Company agreed to issue and sell 767,085 shares (the “September 2023 Shares”) of Avenue's common stock, par value $0.0001 per share, for an aggregate purchase price of approximately $0.6 million in a private placement transaction (the “September 2023 Private Placement”) exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations of the SEC thereunder. The shares were purchased by the Private Placement Investors at a price of $0.717 per share, which was the “consolidated closing bid price” of the common stock on The Nasdaq Capital Market as of September 7, 2023, in compliance with Nasdaq Listing Rule 5365(c). The net proceeds to the Company from the September 2023 Private Placement, after deducting offering expenses, were approximately $0.6 million. The Company did not incur any underwriting or placement agent fees associated with the September 2023 Private Placement. In connection with the September 2023 Private Placement, the Company entered into a registration rights letter agreement (the “Registration Rights Letter Agreement”) with the Private Placement Investors. Pursuant to the Registration Rights Letter Agreement, the Company will be required to file, on or prior to September 8, 2024 (the “September 2023 Private Placement Filing Date”), a resale registration statement (the “September 2023 Private Placement Resale Registration Statement”) with the SEC to register the resale of the September 2023 Shares. November 2023 Public Offering On October 31, 2023, the Company entered into a Placement Agency Agreement (the “November 2023 Placement Agency Agreement”) with Maxim Group LLC and Lake Street Capital, LLC as placement agents (together, the “November 2023 Placement Agents”) related to the Company’s public offering (the “November 2023 Offering”) of 16,633,400 units (each consisting of either (A) one share of the Company’s common stock, par value $0.0001 per share ( “November 2023 Share”), a Series A warrant ( “November 2023 Series A Warrant”) to purchase one November 2023 Share and a Series B warrant ( “November 2023 Series B Warrant” and, collectively with the Series A Warrants, “November 2023 Warrants”) to purchase one November 2023 Share (such units, the “November 2023 Common Units”) or (B) one pre-funded warrant to purchase one November 2023 Share (the “November 2023 Pre-funded Warrants”), a November 2023 Series A Warrant and a November 2023 Series B Warrant (such units, the “November 2023 Pre-funded Units” and together with the November 2023 Shares, the November 2023 Warrants, the November 2023 Common Units and the November 2023 Pre-funded Warrants, the “November 2023 Securities”)). Under the terms of the November 2023 Placement Agency Agreement, the November 2023 Placement Agents acted as the Company’s exclusive placement agents to solicit offers to purchase the November 2023 Securities on a “best efforts” basis. The Company also entered into a securities purchase agreement, dated as of October 31, 2023 (the “November 2023 Securities Purchase Agreement”), with certain institutional investors buying November 2023 Securities in the November 2023 Offering. Pursuant to the November 2023 Offering, 3,853,400 November 2023 Common Units were sold at a price of $0.3006 per November 2023 Unit and the 12,780,000 November 2023 Pre-Funded Units were sold at a price of $0.3005. As of December 31, 2023, all of the November 2023 Pre-Funded Warrants issued in the November 2023 Offering have been exercised. The November 2023 Series A Warrants became immediately exercisable upon issuance and are exercisable at a price of $0.3006 per share for a period of five years after the issuance date. The November 2023 Series B Warrants became immediately exercisable upon issuance and exercisable at a price of $0.3006 per share for a period of 18 months after the issuance date. The November 2023 Pre-funded Warrants became immediately exercisable upon issuance and are exercisable at a price of $0.0001 per share until exercised in full. The November 2023 Shares, the November 2023 Pre-funded Warrants and the November 2023 Warrants were immediately separable upon issuance and were issued separately. The Company consummated the transactions contemplated by the November 2023 Offering and the November 2023 Placement Agency Agreement on November 2, 2023. Upon the closing of the November 2023 Offering, the Company paid the November 2023 Placement Agents a cash transaction fee equal to 8% of the aggregate gross cash proceeds and reimbursed the November 2023 Placement Agents for certain out-of-pocket expenses incurred in connection with this November 2023 Offering. The Company received net proceeds from the November 2023 Offering of approximately $3.8 million, after deducting the placement agent fees and offering expenses, and before giving effect to any exercises of the November 2023 Warrants. As described in more detail in Note 10, the Company entered into an inducement offer letter agreement with certain investors in the November 2023 Offering who agreed exercise certain outstanding November 2023 Warrants to purchase up to an aggregate of 14,600,000 shares of common stock at their exercise price of $0.3006 per share in January 2024. *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, 2023, the Company had an accumulated deficit of $90.9 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, 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 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 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.

Note 1 - Organization, Plan of Business Operations

12 Months Ended

Dec. 31, 2023

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

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 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.

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. Consummation of the transactions contemplated by the Contribution Agreement was subject to the satisfaction of certain conditions precedent, including, inter alia: (i) the closing of an equity financing by the Company resulting in gross proceeds of at least $7.5 million, (ii) the agreement by minority Avenue shareholder InvaGen Pharmaceuticals Inc. (“InvaGen”) to (A) have 100% of its shares in the Company repurchased by the Company and (B) terminate certain of the agreements to which it was party with the Company and/or Fortress in connection with InvaGen’s 2019 equity investment in the Company, which would eliminate certain negative consent rights of InvaGen over the Company and restore certain rights and privileges of Fortress in the Company; and (iii) the sustained listing of Avenue’s common stock on The Nasdaq Capital Market.

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.

AJ201

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 to 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 SBMA. The study aims to evaluate the safety and clinical response of AJ201 in patients suffering from SBMA. AJ201 has been granted Orphan Drug Designation (“ODD”) by the U.S. Food and Drug Administration ("FDA") for the indications of SBMA, Huntington’s Disease and Spinocerebellar Ataxia. The purchase and progress of the clinical development of AJ201 to treat SBMA further expands Avenue's portfolio within neurologic diseases.

Reverse Stock Split

On September 23, 2022, the Company filed a Certificate of Amendment (the “Amendment”) to the Company’s Third Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware to effect (i) the 1-for-15 reverse stock split of the Company’s shares of common stock (“Reverse Stock Split”) and (ii) the reduction in number of the Company’s authorized shares of common stock from 50,000,000 to 20,000,000. As a result of the Reverse Stock Split, every 15 shares of Common Stock outstanding immediately prior to the effectiveness of the Reverse Stock Split were combined and converted into one share of New Common Stock without any change in the par value per share. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would otherwise be entitled to a fraction of one share of New Common Stock as a result of the Reverse Stock Split instead received cash equal to such fraction multiplied by the closing sale price of Common Stock on The Nasdaq Capital Market on September 22, 2022, as adjusted for the Reverse Stock Split.

On February 2, 2023, following the approval of Avenue's Board of Directors and Avenue's stockholders at the Company’s 2022 annual meeting of stockholders, the Company filed an amendment to Avenue's Third Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 20,000,000 to 75,000,000 shares.

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.

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 388,888 common shares of the Company held by InvaGen. The excess of the consideration paid to InvaGen over the fair market value on the date of repurchase of $1.9 million was recognized in general and administrative expense for the year ended December 31, 2022 in the Consolidated Statement of Operations. 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. In connection with the closing of financings that occurred in 2023 and 2022, Avenue made payments totaling $0.5 million to InvaGen.

Liquidity and Capital Resources

October 2022 Public Offering

In October 2022, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with Aegis Capital Corp., as underwriter (the “Underwriter”), related to the Company's underwritten public offering (the “October 2022 Offering”) of 2,652,065 units ( “October 2022 Units”) and 984,300 pre-funded units ( “October 2022 Pre-funded Units”). Each October 2022 Unit consisted of one share (a “October 2022 Share”) of Avenue's common stock, and one warrant to purchase one share of Avenue's common stock (each, a “October 2022 Warrant” and, collectively, the “October 2022 Warrants”), and each October 2022 Pre-funded Unit consisted of one pre-funded warrant to purchase one share of common stock (each, a “October 2022 Pre-funded Warrant” and collectively, the “October 2022 Pre-funded Warrants”) and one October 2022 Warrant. The October 2022 Units were sold at a price of $3.30 per unit, and the October 2022 Pre-Funded Units were sold at a price of $3.2999 ($3.30 less $0.0001, the exercise price of the October 2022 Pre-funded Warrants).

The October 2022 Warrants became immediately exercisable upon issuance and are exercisable for a period of five years after the issuance date. The October 2022 Shares, the October 2022 Pre-funded Warrants and the October 2022 Warrants were immediately separable upon issuance and were issued separately. The Underwriter was granted a 45-day option to purchase up to an aggregate of (i) 545,454 additional October 2022 Shares and/or October 2022 Pre-funded Units, representing 15% of the October 2022 Shares and October 2022 Pre-funded Warrants sold in the October 2022 Offering, and/or (ii) October 2022 Warrants to purchase 545,454 additional October 2022 Shares, representing 15% of the October 2022 Warrants sold in the October 2022 Offering, which it initially exercised, in part, electing to purchase 545,454 October 2022 Warrants at a purchase price of $0.01 per October 2022 Warrant. The Company consummated the transactions contemplated by the Offering and the Underwriting Agreement on October 11, 2022. Prior to the closing date of the Offering, investors in certain of the October 2022 Pre-funded Warrants, pursuant to the terms thereof, elected to exercise 949,900 October 2022 Pre-funded Warrants. Accordingly, at the closing, the Company issued 949,900 fewer October 2022 Pre-funded Warrants and, in lieu thereof, the corresponding 949,900 shares of common stock.

The Company received net proceeds from the October 2022 Offering of $10.3 million, after deducting underwriting discounts, commissions and offering expenses before giving effect to any warrant exercises.

January 2023 Registered Direct Offering and Private Placement

On January 27, 2023, the Company entered into a Securities Purchase Agreement (the “Registered Purchase Agreement”) with a single institutional accredited investor, pursuant to which the Company agreed to issue and sell (i) 448,000 shares (the “January 2023 Shares”) of Avenue's common stock at a price per January 2023 Share of $1.55, and (ii) pre-funded warrants (the “January 2023 Pre-funded Warrants”) to purchase 1,492,299 shares of common stock, at a price per January 2023 Pre-funded Warrant equal to the price per January 2023 Share, less $0.001 (the “January 2023 Registered Direct Offering”). The January 2023 Pre-funded Warrants had an exercise price of $0.001 per share, became exercisable upon issuance and have been fully exercised. As of December 31, 2023, the January 2023 Pre-Funded Warrants issued in the January 2023 Registered Direct Offering have been exercised.

On January 27, 2023, the Company also entered into a Securities Purchase Agreement (the “January 2023 PIPE Purchase Agreement”) with the same institutional accredited investor for a private placement offering ( “January 2023 Private Placement”) of warrants (the “January 2023 Warrants”) to purchase 1,940,299 shares of common stock. Pursuant to the January 2023 PIPE Purchase Agreement, the Company agreed to issue and sell the January 2023 Warrants at an offering price of $0.125 per January 2023 Warrant to purchase one share of common stock. The January 2023 Warrants have an exercise price of $1.55 per share (subject to adjustment as set forth in the January 2023 Warrants), became exercisable immediately after issuance and will expire three years from the date on which the January 2023 Warrants become exercisable. The January 2023 Private Placement closed on January 31, 2023, concurrently with the January 2023 Registered Direct Offering.

The Company received net proceeds from the January 2023 Registered Direct Offering and Private Placement of $2.8 million, after deducting underwriting discounts, commissions and offering expenses before giving effect to any warrant exercises.

In connection with the January 2023 PIPE Purchase Agreement, the Company entered into a registration rights agreement (the “January 2023 Registration Rights Agreement”) with the investor. The Company filed such registration statement on Form S-1 in April 2023, and the registration statement was subsequently declared effective by the SEC in May 2023. As described in more detail in Note 10 to these audited consolidated financial statements, the Company entered into an inducement offer letter agreement with the same institutional accredited investor who agreed to exercise the January 2023 Warrants issued in the January 2023 Private Placement at a reduced exercise price of $0.3006 per share in January 2024.

September 2023 Private Placement

On September 8, 2023, the Company entered into an unwritten agreement with Fortress and Dr. Lindsay A. Rosenwald, a director on the board of directors of the Company (Dr. Rosenwald and Fortress, together, the “September 2023 Investors”), pursuant to which the Company agreed to issue and sell 767,085 shares (the “September 2023 Shares”) of Avenue's common stock, par value $0.0001 per share, for an aggregate purchase price of approximately $0.6 million in a private placement transaction (the “September 2023 Private Placement”) exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations of the SEC thereunder. The shares were purchased by the Private Placement Investors at a price of $0.717 per share, which was the “consolidated closing bid price” of the common stock on The Nasdaq Capital Market as of September 7, 2023, in compliance with Nasdaq Listing Rule 5365(c). The net proceeds to the Company from the September 2023 Private Placement, after deducting offering expenses, were approximately $0.6 million. The Company did not incur any underwriting or placement agent fees associated with the September 2023 Private Placement.

In connection with the September 2023 Private Placement, the Company entered into a registration rights letter agreement (the “Registration Rights Letter Agreement”) with the Private Placement Investors. Pursuant to the Registration Rights Letter Agreement, the Company will be required to file, on or prior to September 8, 2024 (the “September 2023 Private Placement Filing Date”), a resale registration statement (the “September 2023 Private Placement Resale Registration Statement”) with the SEC to register the resale of the September 2023 Shares.

November 2023 Public Offering

On October 31, 2023, the Company entered into a Placement Agency Agreement (the “November 2023 Placement Agency Agreement”) with Maxim Group LLC and Lake Street Capital, LLC as placement agents (together, the “November 2023 Placement Agents”) related to the Company’s public offering (the “November 2023 Offering”) of 16,633,400 units (each consisting of either (A) one share of the Company’s common stock, par value $0.0001 per share ( “November 2023 Share”), a Series A warrant ( “November 2023 Series A Warrant”) to purchase one November 2023 Share and a Series B warrant ( “November 2023 Series B Warrant” and, collectively with the Series A Warrants, “November 2023 Warrants”) to purchase one November 2023 Share (such units, the “November 2023 Common Units”) or (B) one pre-funded warrant to purchase one November 2023 Share (the “November 2023 Pre-funded Warrants”), a November 2023 Series A Warrant and a November 2023 Series B Warrant (such units, the “November 2023 Pre-funded Units” and together with the November 2023 Shares, the November 2023 Warrants, the November 2023 Common Units and the November 2023 Pre-funded Warrants, the “November 2023 Securities”)). Under the terms of the November 2023 Placement Agency Agreement, the November 2023 Placement Agents acted as the Company’s exclusive placement agents to solicit offers to purchase the November 2023 Securities on a “best efforts” basis. The Company also entered into a securities purchase agreement, dated as of October 31, 2023 (the “November 2023 Securities Purchase Agreement”), with certain institutional investors buying November 2023 Securities in the November 2023 Offering. Pursuant to the November 2023 Offering, 3,853,400 November 2023 Common Units were sold at a price of $0.3006 per November 2023 Unit and the 12,780,000 November 2023 Pre-Funded Units were sold at a price of $0.3005. As of December 31, 2023, all of the November 2023 Pre-Funded Warrants issued in the November 2023 Offering have been exercised.

The November 2023 Series A Warrants became immediately exercisable upon issuance and are exercisable at a price of $0.3006 per share for a period of five years after the issuance date. The November 2023 Series B Warrants became immediately exercisable upon issuance and exercisable at a price of $0.3006 per share for a period of 18 months after the issuance date. The November 2023 Pre-funded Warrants became immediately exercisable upon issuance and are exercisable at a price of $0.0001 per share until exercised in full. The November 2023 Shares, the November 2023 Pre-funded Warrants and the November 2023 Warrants were immediately separable upon issuance and were issued separately. The Company consummated the transactions contemplated by the November 2023 Offering and the November 2023 Placement Agency Agreement on November 2, 2023. Upon the closing of the November 2023 Offering, the Company paid the November 2023 Placement Agents a cash transaction fee equal to 8% of the aggregate gross cash proceeds and reimbursed the November 2023 Placement Agents for certain out-of-pocket expenses incurred in connection with this November 2023 Offering.

The Company received net proceeds from the November 2023 Offering of approximately $3.8 million, after deducting the placement agent fees and offering expenses, and before giving effect to any exercises of the November 2023 Warrants. As described in more detail in Note 10, the Company entered into an inducement offer letter agreement with certain investors in the November 2023 Offering who agreed exercise certain outstanding November 2023 Warrants to purchase up to an aggregate of 14,600,000 shares of common stock at their exercise price of $0.3006 per share in January 2024.

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, 2023, the Company had an accumulated deficit of $90.9 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, 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 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 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.