Filed Pursuant to Rule 424(b)(4)
Registration Statement No. 333-274562
Prospectus
3,853,400 Units, Each Consisting of
(A) One Share of Common Stock, (B) One Series A Warrant to Purchase One Share of Common Stock and (C) One Series B
Warrant to Purchase One Share of Common Stock
12,780,000 Pre-Funded Units, Each
Consisting of (A) One Pre-funded Warrant to Purchase One Share of Common Stock, (B) One Series A Warrant to Purchase One
Share of Common Stock and (C) One Series B Warrant to Purchase One Share of Common Stock
16,633,400 Shares of Common Stock Underlying
the Series A Warrants
16,633,400 Shares of Common Stock Underlying
the Series B Warrants
12,780,000 Shares of Common Stock Underlying
the Pre-funded Warrants
We are offering on a best efforts basis 16,633,400 units, each consisting
of (A) one share of our common stock, par value $0.0001 per share (“Common Stock”), (B) one Series A warrant to purchase one
share of our Common Stock (the “Series A warrants”) and (C) one Series B warrant to purchase one share of our Common Stock
(the “Series B warrants” and, together with the Series A warrants, “warrants”). Each warrant will have an exercise
price of $0.3006 (100% of the public offering price per unit) per share of Common Stock and will be exercisable immediately. The Series
A warrants will expire five years from the date of issuance, and the Series B warrants will expire 18 months from the date of issuance.
We are also offering to those purchasers, if any, whose purchase of
units in this offering would otherwise result in such purchaser, together with its affiliates and certain related parties, beneficially
owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding shares of Common Stock immediately following
the consummation of this offering, the opportunity to purchase, if any such purchaser so chooses, pre-funded units in lieu of units that
would otherwise result in such purchaser’s beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%) of
our outstanding shares of Common Stock. Each pre-funded unit consists of (A) one pre-funded warrant to purchase one share of Common
Stock, (B) one Series A warrant to purchase one share of our Common Stock and (C) one Series B warrant to purchase
one share of our Common Stock. The purchase price of each pre-funded unit will be equal to the price per unit being sold to the public
in this offering, minus $0.0001, and the exercise price of each pre-funded warrant included in the pre-funded units will be $0.0001 per
share. The pre-funded warrants included in the pre-funded units will be immediately exercisable (subject to the beneficial ownership
cap) and may be exercised at any time until all of the pre-funded warrants are exercised in full. The Series A warrant included
in the pre-funded unit is in the same form as the Series A warrant included in the unit, and the Series B warrant included
in the pre-funded unit is in the same form as the Series B warrant included in the unit.
The units and the pre-funded units will not be issued
or certificated. The shares of Common Stock or pre-funded warrants and the accompanying warrants can only be purchased together in this
offering, but the securities contained in the units or pre-funded units will be immediately separable upon issuance and will be issued
separately. The shares of Common Stock issuable from time to time upon exercise of the warrants and the pre-funded warrants are also
being offered by this prospectus.
The units will be offered at a fixed price and are expected to be issued
in a single closing. We expect this offering to be completed on or about November 2, 2023, and we will deliver all securities to be issued
in connection with this offering delivery versus payment/ receipt versus payment upon receipt by us of investor funds. Accordingly, neither
we nor the placement agents (as defined below) have made any arrangements to place investor funds in an escrow account or trust account
since the placement agents will not receive investor funds in connection with the sale of the securities offered hereunder.
We have engaged Maxim Group LLC and Lake Street Capital Markets, LLC
(the “placement agents”) to act as our placement agents in connection with this offering. The placement agents have agreed
to use their reasonable best efforts to arrange for the sale of the securities offered by this prospectus. The placement agents are not
purchasing or selling any of the securities we are offering, and the placement agents are not required to arrange the purchase or sale
of any specific number or dollar amount of securities. We have agreed to pay to the placement agents the placement agent fees set forth
in the table below, which assumes that we sell all of the securities offered by this prospectus. We will bear all costs associated with
the offering. See “Plan of Distribution” beginning on page 36 of this prospectus for more information regarding
these arrangements.
Our Common Stock is quoted for trading under the symbol “ATXI”
on The Nasdaq Capital Market. On October 30, 2023, the closing price of our Common Stock was $0.35 per share. There is no established
public trading market for the warrants or the pre-funded warrants, and we do not expect such a market to develop. In addition, we do not
intend to apply for a listing of the warrants or the pre-funded warrants on any national securities exchange or other nationally recognized
trading system.
Investing in our securities involves risks. You should review carefully
the risks and uncertainties described under the heading “Risk Factors” contained in this prospectus and under similar
headings in the other documents that are incorporated by reference into this prospectus, as described on page 42 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued under this prospectus or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
|
|
Per Unit |
|
|
Per Pre-
Funded Unit |
|
|
Total |
|
Public Offering Price |
|
$ |
0.3006 |
|
|
$ |
0.3005 |
|
|
$ |
4,998,722.04 |
|
Placement agent fees(1) |
|
$ |
0.02405 |
|
|
$ |
0.02404 |
|
|
$ |
399,905.47 |
|
Proceeds, before expenses, to us |
|
$ |
0.27655 |
|
|
$ |
0.27646 |
|
|
$ |
4,598,816.57 |
|
| (1) | See “Plan of Distribution” for additional
disclosure regarding compensation payable to the placement agents. |
We expect that delivery of the securities against payment therefor
will be made on or about November 2, 2023.
Placement Agents
Maxim Group
LLC |
Lake Street |
The date of this prospectus is
October 31, 2023
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is part of the registration statement that we filed
with the Securities and Exchange Commission, or the “SEC,” pursuant to which we may, from time to time, offer and sell or
otherwise dispose of the securities covered by this prospectus. As permitted by the rules and regulations of the SEC, the registration
statement filed by us includes additional information not contained in this prospectus.
This prospectus and the documents incorporated by reference into this
prospectus include important information about us, the securities being offered and other information you should know before investing
in our securities. You should not assume that the information contained in this prospectus is accurate on any date subsequent to the
date set forth on the front cover of this prospectus or that any information we have incorporated by reference is correct on any date
subsequent to the date of the document incorporated by reference, even though this prospectus is delivered or securities are sold or
otherwise disposed of on a later date. It is important for you to read and consider all information contained in this prospectus, including
the documents incorporated by reference therein, in making your investment decision. You should also read and consider the information
in the documents to which we have referred you under “Where You Can Find More Information” and “Incorporation
of Certain Information by Reference” in this prospectus.
You should rely only on this prospectus and the information incorporated
or deemed to be incorporated by reference in this prospectus. We have not authorized anyone to give any information or to make any representation
to you other than those contained or incorporated by reference in this prospectus. If anyone provides you with different or inconsistent
information, you should not rely on it. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy securities
in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.
Unless otherwise indicated, information contained or incorporated
by reference in this prospectus concerning our industry, including our general expectations and market opportunity, is based on information
from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted
by third parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions
based on such information and knowledge, which we believe to be reasonable. In addition, assumptions and estimates of our and our industry’s
future performance are necessarily uncertain due to a variety of factors, including those described in section of this prospectus titled
“Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions
and estimates.
We take no responsibility for, and can provide no assurance as to
the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby
and only under circumstances and in jurisdictions where it is lawful to do so. No dealer, salesperson or other person is authorized to
give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any free writing
prospectuses prepared by or on behalf of us or to which we have referred you or are incorporated by reference. This prospectus is not
an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not
permitted.
For investors outside the United States: we have not done anything
that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is
required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform
themselves about, and observe any restrictions relating to, the offering of our securities and the distribution of this prospectus outside
the United States.
This prospectus contains summaries of certain provisions contained
in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries
are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be
filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may
obtain copies of those documents as described in this prospectus under “Where You Can Find More Information.”
This prospectus contains references to trademarks, trade names
and service marks belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this
prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable
licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend
our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or
sponsorship of us by, any other entities.
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus
and does not contain all of the information that may be important to you in making an investment decision. This summary is qualified
in its entirety by the more detailed information included elsewhere in this prospectus and/or incorporated by reference herein. Before
making your investment decision with respect to our securities, you should carefully read this entire prospectus, including the information
in our filings with the SEC incorporated by reference into this prospectus.
References in this prospectus to the “Company,” “we,”
“us,” “our” and similar words refer to Avenue Therapeutics, Inc.
Our Business
Overview and Product Candidate Development
We are a specialty pharmaceutical company focused on the development
and commercialization of therapies for the treatment of neurologic diseases. Our product candidates include AJ201 for the treatment of
spinal and bulbar muscular atrophy (“SBMA”), intravenous tramadol (“IV tramadol”) for the treatment of post-operative
acute pain, and BAER-101 for the treatment of epilepsy and panic disorders.
In November 2022, we completed the transactions contemplated
under a Share Contribution Agreement, dated May 11, 2022 (“Contribution Agreement”), with Fortress Biotech, Inc.
(“Fortress”) to acquire shares in Baergic Bio, Inc. (“Baergic”), which is developing BAER-101, a novel α2/3–subtype-selective
gammaaminobutyric acid (“GABA”) A positive allosteric modulator (“PAM”). As a result, Baergic is a majority-controlled
and owned subsidiary company of the Company.
In February 2023, we entered into a license agreement with AnnJi
Pharmaceuticals Co. Ltd. (“AnnJi”) whereby the Company obtained an exclusive license 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 United States (“U.S.”) for the treatment
of SBMA, also known as Kennedy’s Disease.
AJ201
In February 2023, the Company licensed intellectual property
rights pertaining to the molecule known as JM17, which actives Nrf1 and Nrf2, enhances androgen receptor degradation and underlies AJ201
from AnnJi. AJ201 is currently in a Phase 1b/2a clinical trial in the U.S. for the treatment of SMBA. SBMA is a rare, inherited, X-linked
genetic neuromuscular disease primarily affecting men. The condition is caused by a polyglutamine expansion in the androgen receptor
(“AR”) which leads to production of an abnormal AR protein that forms aggregates responsible for muscle atrophy focused in
the spinal-bulbar region of the body. The weakening of the bulbar muscles affects chewing, speech and swallowing, with patients prone
to choking or inhaling foods or liquids, resulting in airway infection. SBMA also affects muscles in the limbs, leading to difficulty
walking and injury caused by falling. Currently, there is no effective treatment for SBMA.
AJ201 was designed to modify SBMA through multiple mechanisms including
degradation of the abnormal AR protein and by stimulating Nrf1 and Nrf2, which are involved in protecting cells from oxidative stress
which can lead to cell death. AJ201 completed a Phase 1 clinical trial in 2021, which demonstrated the safety of the molecule. It is
currently being studied in a Phase 1b/2a multicenter, randomized, double-blind clinical trial in six clinical sites across the U.S.,
and screening of patients with SBMA has begun. This study aims to evaluate the safety and clinical response of AJ201 in patients suffering
from SBMA. AJ201 has been granted Orphan Drug Designation by the U.S. Food and Drug Administration (“FDA”) for the indications
of SBMA, Huntington’s Disease and Spinocerebellar Ataxia.
In July 2023, we announced the first patient was dosed in the
Phase 1b/2a trial of AJ201 for the treatment of SBMA, and in September 2023, we announced the eighth patient was dosed. The 12-week,
multicenter, randomized, double-blind trial is expected to enroll approximately 24 patients, randomly assigned to AJ201 (600mg/day) or
placebo. The primary endpoint of the study is to assess safety and tolerability of AJ201 in subjects with clinically and genetically
defined SBMA. Secondary endpoints include pharmacodynamic data measuring change from baseline in mutant androgen receptor protein levels
in skeletal muscle and changes in the fat and muscle composition as seen on MRI scans. Further details on the study can be found using
the ClinicalTrials.gov identifier NCT05517603. Information on clinicaltrials.gov does not constitute part of this prospectus.
IV tramadol
In February 2022, we had our Advisory Committee meeting with
the FDA regarding IV tramadol. In the final part of the public meeting, the Advisory Committee voted yes or no on the following question:
“Has the Applicant submitted adequate information to support the position that the benefits of their product outweigh the risks
for the management of acute pain severe enough to require an opioid analgesic in an inpatient setting?” The results were 8 yes
votes and 14 no votes. In March 2022, we received an Appeal Denied Letter from the OND in response to the FDRR. In August 2022,
the Company participated in a Type A Meeting with the FDA Division of Anesthesia, Analgesia, and Addiction Products (“DAAAP”)
regarding a briefing document submitted that presented a study design the Company believed would have the potential to address the comments
and deficiencies noted in the Letter. The meeting on August 9, 2022 was a collaborative discussion on the study design and potential
path forward. We incorporated the FDA’s suggestions from the meeting minutes and submitted a detailed study protocol.
The Company participated in a Type C meeting with the FDA in March 2023
to discuss a proposed study protocol to assess the risk of respiratory depression related to opioid stacking on IV tramadol relative
to an approved opioid analgesic. We announced in April 2023 that the Company has received official meeting minutes from the Type
C meeting with the FDA. The Type C meeting minutes indicate that the FDA and the Company are in agreement with a majority of the proposed
protocol items and are in active discussion about remaining open items. The minutes indicate that the FDA also agrees that a successful
study will support the submission of a complete response to the second Complete Response Letter for IV tramadol pending final agreement
on a statistical analysis plan and a full review of the submitted data in the complete response as well as concurrence from the DAAAP.
In July 2023, the Company announced alignment with the FDA on
key elements of the Phase 3 safety study, including the primary endpoint and statistical analysis approach. The non-inferiority study
is designed to assess the theoretical risk of opioid-induced respiratory depression related to opioid stacking on IV tramadol compared
to IV morphine.
The study will randomize post bunionectomy patients to IV tramadol
or IV morphine for pain relief administered during a 48-hour post-operative period. Patients will have access to IV hydromorphone,
a Schedule II opioid, for rescue of breakthrough pain. The primary endpoint is a composite of elements indicative of respiratory depression.
We submitted the revised protocol to the FDA including the statistical
plan, which reflects the study design previously discussed, for final review.
BAER-101 (novel α2/3–subtype-selective
GABA A PAM)
Baergic is a clinical-stage pharmaceutical company founded in December 2019
that focuses on the development of pharmaceutical products for the treatment of neurologic disorders. Baergic was acquired by the Company
pursuant to the Contribution Agreement with Fortress, in order to strategically align with Avenue’s goals of building a rare and
neurologic pipeline. Baergic’s pipeline currently consists of a single compound, BAER-101, a novel α2/3–subtype-selective
GABA A positive allosteric modulator. BAER-101 (formally known as AZD7325) was originally developed by AstraZeneca and has an established
safety profile in early clinical trials including over 700 patients.
In August 2023, we reported preclinical data for BAER-101 from
an in vivo evaluation in SynapCell’s Genetic Absence Epilepsy Rate from Strasbourg (“GAERS”) model of absence epilepsy.
The GAERS model mimics behavioral, electrophysiological and pharmacological features of human absence seizures and has shown to be an
early informative indicator of efficacy in anti-seizure drug development. In the model, BAER-101 demonstrated full suppression of seizure
activity with a minimal effective dose of 0.3 mg/kg administered orally.
Relationship with Fortress
We were incorporated in Delaware on February 9, 2015, as a wholly
owned subsidiary of Fortress, to develop and market pharmaceutical products for the acute care setting in the United States. In 2017,
we completed an initial public offering of shares of our Common Stock. Fortress continues to control a voting majority of our capital
stock pursuant to its ownership of a class of preferred stock. We anticipate remaining a majority controlled subsidiary of Fortress after
the completion of this offering.
Corporate Information
We are a majority-controlled subsidiary of Fortress. Baergic is our
sole subsidiary. Avenue Therapeutics, Inc. was incorporated in Delaware on February 9, 2015. Our executive offices are located
at 1111 Kane Concourse, Suite 301, Bay Harbor Islands, Florida 33154. Our telephone number is (781) 652-4500, and our email address
is info@avenuetx.com. Information on our website, or any other website, is not incorporated by reference in this prospectus. We have
included our website address in this prospectus solely as an inactive textual reference.
THE OFFERING
Units Offered by Us |
16,633,400 units on a “reasonable
best efforts” basis, each unit consisting of (A) one share of Common Stock, (B) one Series A
warrant exercisable for one share of Common Stock and (C) one Series B warrant exercisable for one
share of Common Stock. The shares of Common Stock and warrants that are part of the units are immediately
separable and will be issued separately in this offering. The warrants included within the units are exercisable
immediately and have an exercise price equal to $0.3006 (100%
of the public offering price per unit). The Series A warrants will expire five years after the date of
issuance, and the Series B warrants will expire 18 months after the date of issuance. This prospectus
also relates to the offering of the shares of Common Stock issuable upon exercise of the warrants. For more
information regarding the warrants, you should carefully read the section titled “Description of
Securities to be Registered” in this prospectus.
|
Pre-Funded Units Offered by Us |
We are also offering to those purchasers, if any, whose purchase
of units in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties,
beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding shares of Common Stock immediately
following the consummation of this offering, the opportunity to purchase, if such purchasers so choose, pre-funded units (each
pre-funded unit consisting of (A) one pre-funded warrant to purchase one share of Common Stock, (B) one Series A
warrant to purchase one share of Common Stock and (C) one Series B warrant to purchase one share of Common Stock),
in lieu of units that would otherwise result in any such purchaser’s beneficial ownership exceeding 4.99% (or, at the election
of the purchaser, 9.99%) of our outstanding shares of Common Stock.
The purchase price of each pre-funded unit will be equal to the
price per unit being sold to the public in this offering, minus $0.0001, and the exercise price of each pre-funded warrant included
in the pre-funded units will be $0.0001 per share. The pre-funded warrants included in the pre-funded units will be immediately exercisable
and may be exercised at any time, and from time to time, until all of the pre-funded warrants are exercised in full.
This prospectus also relates to the offering of the shares of Common Stock issuable upon
exercise of the pre-funded warrants. For more information regarding the pre-funded warrants, you should carefully read the section
titled “Description of Securities to be Registered” in this prospectus.
|
Reasonable Best Efforts Offering
|
We have agreed to issue and sell the securities offered hereby
to the purchasers through the placement agents. The placement agents are not required to buy or sell any specific number or dollar
amount of the securities offered hereby, but will use their reasonable best efforts to solicit offers to purchase the securities
offered by this prospectus. See “Plan of Distribution” beginning on page 36 of this prospectus.
|
Shares of Common Stock Outstanding Prior to this Offering
|
8,964,222 shares of Common Stock as of September 30, 2023. |
Shares of Common Stock Outstanding Following
this Offering(1)
|
25,597,622 shares of Common Stock (assuming exercise of all the pre-funded
warrants being offered herein and that none of the holders of other warrants issued in the offering exercise their warrants).
|
Nasdaq Capital Market Ticker Symbol of our Common Stock
|
ATXI |
Use of Proceeds |
We estimate that we will receive approximately
$4.1 million in net proceeds from this offering, after deducting the estimated placement agent fees and estimated offering expenses and
assuming exercise of all the pre-funded warrants being offered herein. However, this is a reasonable best efforts offering with no minimum
number of securities or amount of proceeds as a condition to closing, and we may not sell all or any of the securities offered pursuant
to this prospectus; as a result, we may receive significantly less in net proceeds.
The net proceeds from this offering will be used for general corporate
purposes and working capital requirements, which may include, among other things, the advancement of our product candidates to obtain
regulatory approval from the FDA. However, we will have broad discretion to allocate the net proceeds of this offering. See “Use
of Proceeds” for additional information.
|
Lock-up |
We, all of our directors, officers and the holders of 10%
or more of our outstanding shares of Common Stock have agreed with the placement agents, subject to certain exceptions, not to
sell, transfer or dispose of, directly or indirectly, any of our Common Stock or securities convertible into or exercisable or
exchangeable for our Common Stock for a period of 180 days after the date of the final closing of this offering. See “Plan
of Distribution” for more information.
|
Risk Factors |
Any investment in the Common Stock offered hereby is speculative
and involves a high degree of risk. You should carefully consider the information set forth under “Risk Factors”
in this prospectus and under similar headings in the other documents that are incorporated by reference into this prospectus.
|
| (1) | The number of shares of Common Stock to be outstanding after this
offering is based on 8,964,222 shares of our Common Stock outstanding as of September 30,
2023, and excludes: |
| · | 6,078,132
shares of Common Stock issuable upon exercise of outstanding warrants having a weighted-average
exercise price of $1.55 per share; |
| · | 85,000
shares of Common Stock issuable upon the vesting and settlement of outstanding restricted
stock award/units; |
| · | 3,352,489
shares of Common Stock reserved for issuance and available for future grant under our 2015
Incentive Plan; |
| · | 1,685,000
shares of Common Stock issuable upon the exercise of stock options with a weighted-average
exercise price of $1.14 per share; |
| · | 16,666
shares of Common Stock issuable upon conversion of the Class A Preferred Stock, at the
holders’ election; |
| · | 16,633,400 shares of Common Stock issuable upon exercise of the Series A warrants
included in the units and the pre-funded units; |
| · | 16,633,400 shares of Common Stock issuable upon exercise of the Series B warrants
included in the units and the pre-funded units; and |
| · | 415,728 shares of Common Stock (issuable to Fortress pursuant to the
Amended and Restated Founders Agreement between Fortress and the Company (the “Founders Agreement”) following the closing
of this offering. |
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus contains predictive or “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of
current or historical fact contained in this prospectus, 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,” “project,”
“will,” “should,” “would” and similar expressions, as they relate to us, are 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:
| · | the
fact that we currently have no drug products for sale and that our success is dependent on
our product candidates receiving regulatory approval and being successfully commercialized; |
| · | the
possibility that serious adverse or unacceptable side effects are identified during the development
of our current or future product candidates, such that we would need to abandon or limit
development of some of our product candidates; |
| · | our
ability to successfully integrate Baergic Bio, Inc. or develop BAER-101 or AJ201; |
| · | the
substantial doubt raised about our ability to continue as a going concern, which may hinder
our ability to obtain future financing; |
| · | the
significant losses we have incurred since inception and our expectation that we will continue
to incur losses for the foreseeable future; |
| · | our
need for substantial additional funding, which may not be available to us on acceptable terms,
or at all, which unavailability could force us to delay, reduce or eliminate our product
development programs or commercialization efforts; |
| · | our
reliance on third parties for several aspects of our operations; |
| · | our
reliance on clinical data and results obtained by third parties that could ultimately prove
to be inaccurate or unreliable; |
| · | the
possibility that we may not receive regulatory approval for any or all of our product candidates,
or that such approval may be significantly delayed due to scientific or regulatory reasons; |
| · | the
fact that even if one or more of our product candidates receives regulatory approval, they
will remain subject to substantial regulatory scrutiny; |
| · | the
effects of current and future laws and regulations relating to fraud and abuse, false claims,
transparency, health information privacy and security and other healthcare laws and regulations; |
| · | the
effects of competition for our product candidates and the potential for new products to emerge
that provide different or better therapeutic alternatives for our targeted indications; |
| · | the
possibility that the government or third-party payors fail to provide adequate coverage and
payment rates for our product candidates or any future products; |
| · | our
ability to establish sales and marketing capabilities or to enter into agreements with third
parties to market and sell our product candidates; |
| · | our
exposure to potential product liability claims; |
| · | our
ability to secure adequate protection of our intellectual property and our potential inability
to maintain sufficient patent protection for our technology and products; |
| · | our
ability to maintain compliance with the obligations under our intellectual property licenses
and funding arrangements with third parties, without which licenses and arrangements we could
lose rights that are important to our business; |
| · | the
fact that Fortress controls a voting majority of our Common Stock and has rights to receive
significant share grants annually; |
| · | our
ability to comply with the applicable listing standards and maintain our current listing
for our Common Stock on The Nasdaq Capital Market; and |
| · | those
risks discussed or referred to in “Risk Factors” elsewhere in this prospectus,
as well as those described in any other filings which we make with the SEC. |
Any forward-looking statements speak only
as of the date on which they are made, and we undertake no obligation to publicly update or revise any forward-looking statements to
reflect events or circumstances that may arise after the date of this prospectus, except as required by applicable law. Investors should
evaluate any statements made by us in light of these important factors.
MARKET AND INDUSTRY DATA
AND FORECASTS
We obtained the industry and market data used throughout this prospectus
and in the other documents incorporated by reference into this prospectus from our own internal estimates and research, as well as from
independent market research, industry and general publications and surveys, governmental agencies, publicly available information and
research, surveys and studies conducted by third parties. Internal estimates are derived from publicly available information released
by industry analysts and third-party sources, our internal research and our industry experience, and are based on assumptions made by
us based on such data and our knowledge of our industry and market, which we believe to be reasonable. In some cases, we do not expressly
refer to the sources from which this data is derived. In addition, while we believe the industry and market data included in this prospectus
is reliable and based on reasonable assumptions, such data involve material risks and other uncertainties and are subject to change based
on various factors, including those discussed in this prospectus in the section titled “Risk Factors,” as well as
those described in the documents incorporated by reference into this prospectus. These and other factors could cause results to differ
materially from those expressed in the estimates made by the independent parties or by us.
RISK FACTORS
Our business, results of operations and financial condition and
the industry in which we operate are subject to various risks. Accordingly, investing in our securities involves a high degree of risk.
This prospectus does not describe all of those risks. You should consider the risk factors described in this prospectus below, as well
as those described under the caption “Risk Factors” in the documents incorporated by reference herein, including our Annual
Report on Form 10-K for the fiscal year ended December 31, 2022, together with the other information contained or incorporated
by reference in this prospectus.
We have described below and in the documents incorporated by reference
herein the most significant risk factors applicable to us, but they do not constitute all of the risks that may be applicable to us.
New risks may emerge from time to time, and it is not possible for us to predict all potential risks or to assess the likely impact of
all risks. Before making an investment decision, you should carefully consider these risks as well as other information we include or
incorporate by reference in this prospectus and any prospectus supplement. This prospectus also contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements
as a result of a number of factors, including the risks described below. See the section titled “Cautionary Note Regarding Forward-Looking
Statements.”
Risks Related to this Offering
This is a reasonable best efforts offering, with no minimum
amount of securities required to be sold, and we may sell fewer than all of the securities offered hereby.
The placement agents have agreed to use their reasonable best efforts
to solicit offers to purchase the securities in this offering. The placement agents have no obligation to buy any of the securities from
us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. There is no required minimum number
of securities that must be sold as a condition to completion of this offering, and there can be no assurance that the offering contemplated
hereby will ultimately be consummated. Even if we sell securities offered hereby, because there is no minimum offering amount required
as a condition to closing of this offering, the actual offering amount is not presently determinable and may be substantially less than
the maximum amount set forth on the cover page of this prospectus. We may sell fewer than all of the securities offered hereby,
which may significantly reduce the amount of proceeds received by us. Thus, we may not raise the amount of capital we believe is required
for our operations in the short-term and may need to raise additional funds, which may not be available or available on terms acceptable
to us.
If the price of our Common Stock fluctuates significantly, your
investment could lose value.
Although our Common Stock is listed on Nasdaq, we cannot assure you
that an active public market will continue for our Common Stock. If an active public market for our Common Stock does not continue, the
trading price and liquidity of our Common Stock will be materially and adversely affected. If there is a thin trading market or “float”
for our stock, the market price for our Common Stock may fluctuate significantly more than the stock market as a whole. Without a large
float, our Common Stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading
prices of our Common Stock may be more volatile. In addition, in the absence of an active public trading market, investors may be unable
to liquidate their investment in us. Furthermore, the stock market is subject to significant price and volume fluctuations, and the price
of our Common Stock could fluctuate widely in response to several factors, including:
| · | our
quarterly or annual operating results; |
| · | changes
in our earnings estimates; |
| · | investment
recommendations by securities analysts following our business or our industry; |
| · | additions
or departures of key personnel; |
| · | our
failure to achieve operating results consistent with securities analysts’ projections;
and |
| · | changes
in industry, general market or economic conditions. |
The stock market has experienced extreme price and volume fluctuations
in recent years that have significantly affected the quoted prices of the securities of many companies, including companies in our industry.
The changes often appear to occur without regard to specific operating performance. The price of our Common Stock could fluctuate based
upon factors that have little or nothing to do with our company and these fluctuations could materially reduce our stock price.
We will have broad discretion in the use of proceeds of this
offering designated for working capital and general corporate purposes.
Our management will have broad discretion over the use and investment
of the net proceeds of this offering. Accordingly, investors in this offering have only limited information concerning our management’s
specific intentions and will need to rely upon the judgment of our management with respect to the use of proceeds. The
failure by our management to apply these funds effectively could result in financial losses that could have a material adverse
effect on our business and cause the price of our securities to decline. Pending the application of these funds, we may invest the net
proceeds from this offering in a manner that does not produce income or that loses value.
We do not intend to pay dividends on our Common Stock, so any
returns will be limited to increases, if any, in our stock’s value. Your ability to achieve a return on your investment will depend
on appreciation, if any, in the price of our Common Stock.
We currently anticipate that we will retain future earnings for the
development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable
future. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on, among
other factors, our financial condition, operating results, capital requirements, general business conditions and other factors that our
board of directors may deem relevant. Any return to stockholders will therefore be limited to the appreciation in the value of their
stock, if any.
The warrants are speculative in nature.
The warrants included in the units and pre-funded units offered hereby
do not confer any rights of Common Stock ownership on their holders, such as voting rights or the right to receive dividends, but rather
merely represent the right to acquire shares of our Common Stock at a fixed price. Specifically, commencing on the date of issuance, holders
of the warrants may exercise their right to acquire the shares of our Common Stock and pay an exercise price of $0.3006. Moreover, following
this offering, the market value of the warrants is uncertain and there can be no assurance that the market value of the warrants will
equal or exceed their exercise price. Furthermore, each Series A warrant will expire five years from the original issuance date, and each
Series B warrant will expire 18 months from the original issue date. In the event the price of our Common Stock does not exceed the exercise
price of the warrants during the period when the warrants are exercisable, the warrants may not have any value. There is no established
public trading market for warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend
to apply to list the warrants on any securities exchange or nationally recognized trading system, including Nasdaq. Without an active
market, the liquidity of the warrants will be limited.
Holders of the warrants or pre-funded warrants will have no
rights as a common stockholder until they acquire shares of our Common Stock.
Until you acquire shares of our Common Stock upon exercise of your
warrants or pre-funded warrants, you will have no rights with respect to shares of Common Stock issuable upon exercise of such warrants.
Upon exercise of your warrants or pre-funded warrants, you will be entitled to exercise the rights of a holder of our Common Stock as
to the security exercised only as to matters for which the record date occurs after the exercise.
Provisions of the warrants and pre-funded warrants offered by
this prospectus could discourage an acquisition of us by a third party.
In addition to the provisions of our amended and restated certificate
of incorporation and bylaws discussed elsewhere in this prospectus, certain provisions of the warrants and pre-funded warrants offered
by this prospectus could make it more difficult or expensive for a third party to acquire us. The warrants and pre-funded warrants prohibit
us from engaging in certain transactions constituting “fundamental transactions” unless, among other things, the surviving
entity assumes our obligations under the warrants. These and other provisions of the warrants and pre-funded warrants offered by this
prospectus could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.
If you purchase shares of our Common Stock included as part
of the units in this offering, you will incur immediate and substantial dilution in the book value of your shares.
Investors purchasing shares of our Common Stock included as part of
the units in this offering will pay a price per unit that substantially exceeds the pro forma as adjusted net tangible book value per
share. As a result, investors purchasing shares of our Common Stock included as part of the units in this offering will incur immediate
dilution of $0.38 per share, representing the difference between the public offering price of $0.3006 per common unit, or $0.3005
per pre-funded unit and our pro forma as adjusted net tangible book value per share as of June 30, 2023. To the extent outstanding options
or warrants to purchase our Common Stock are exercised and to the extent that we issue to Fortress the shares of Common Stock issuable
pursuant to the Founders Agreement following the closing of this offering, new investors may incur further dilution. For more information
on the dilution you may experience as a result of investing in this offering, see the section of this prospectus entitled “Dilution.”
If we sell Common Stock or preferred stock in future financings,
stockholders may experience immediate dilution and, as a result, our stock price may decline.
We may from time to time issue additional shares of Common Stock or
preferred stock at a discount from the current trading price of our Common Stock. As a result, our stockholders would experience immediate
dilution upon the purchase of any shares sold at such discount. In addition, as opportunities present themselves, we may enter into financing
or similar arrangements in the future, including the issuance of debt securities, Common Stock or preferred stock. If we issue Common
Stock or securities convertible into Common Stock, the holders of our Common Stock would experience additional dilution and, as a result,
our stock price may decline.
There is substantial doubt about our ability
to continue as a going concern, which may hinder our ability to obtain future financing.
We are not yet generating revenue, have incurred substantial operating
losses since our inception and expect to continue to incur significant operating losses for the foreseeable future as we execute on our
product development plan and may never become profitable. As of December 31, 2022, we had cash and cash equivalents of $6.7 million
and an accumulated deficit of $80.6 million, and, as of June 30, 2023, we had cash and cash equivalents of $1.6 million and an accumulated
deficit of $92.1 million. We do not believe that our cash is sufficient for the next twelve months. As a result, there is substantial
doubt about our ability to continue as a going concern. Our ability to continue as a going concern will depend on our ability to obtain
additional funding, as to which no assurances can be given. This offering is being conducted on a best efforts basis and we may sell
fewer than all of the securities offered hereby and may receive significantly less in net proceeds from this offering than the maximum
amount set forth on the cover page of this prospectus. Furthermore, even if we sell all of the securities offered hereby and raise
the maximum amount of proceeds, we may need to raise additional capital to fund our operations and continue to support our planned development
and commercialization activities. If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail
our current development programs, cut operating costs, forgo future development and other opportunities or even terminate our operations.
If we fail to satisfy applicable listing standards of The Nasdaq
Capital Market, our Common Stock could be delisted from The Nasdaq Capital Market.
On May 19, 2023, we received a deficiency letter (the “Nasdaq
Stockholders’ Equity Letter”) from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market
LLC, notifying us that we are not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires us to maintain a minimum of
$2,500,000 in stockholders’ equity for continued listing on The Nasdaq Capital Market (the “Stockholders’ Equity Requirement”),
nor in compliance with either of the alternative listing standards, market value of listed securities of at least $35 million or net
income of $500,000 from continuing operations in the most recently completed fiscal year, or in two of the three most recently completed
fiscal years. Our failure to comply with the Stockholders’ Equity Requirement was based on the filing of our Quarterly Report on
Form 10-Q for the quarter ended March 31, 2023, reporting the stockholders’ equity of negative $2,157,000. Pursuant to
the Nasdaq Stockholders’ Equity Letter, we had 45 calendar days from the date of the Nasdaq Stockholders’ Equity Letter to
submit a plan to regain compliance. On July 3, 2023, we submitted a compliance plan (the “Compliance Plan”). On
July 17, 2023, the Staff granted the Company’s request for an extension of the deadline to regain compliance with the
Rule to November 15, 2023.
Additionally, on September 27,
2023, we received a deficiency letter (the “Nasdaq Minimum-Bid Price Letter”) from the Staff of the Nasdaq Capital Market
LLC, stating that the bid price of our Common Stock had closed below $1.00 per share for 30 consecutive business days and that, therefore,
we are not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum-Bid Price Requirement”). We have a 180-calendar
day grace period, through March 25, 2024, to regain compliance with the Minimum-Bid Price Requirement. Compliance can be achieved
by evidencing a closing bid price of at least $1.00 per share for a minimum of ten (10) consecutive business days, although the
Staff may, in its discretion, require compliance for a longer period of time (generally no more than 20 consecutive business days) during
the 180-calendar day grace period. If we do not regain compliance with the Minimum-Bid Price Requirement by March 25, 2024, we may
be eligible for an additional 180-day compliance period so long as we satisfy the criteria for initial listing on The Nasdaq Stock
Market, other than the market value of publicly held shares requirement, and the continued listing requirement for market value of publicly
held shares and we provide written notice of our intention to cure the deficiency during the second compliance period by effecting a
reverse stock split, if necessary. In the event we are not eligible for the second grace period, the Staff will provide written notice
that our Common Stock is subject to delisting; however, we may request a hearing before the Nasdaq Hearings Panel (the “Panel”),
which request, if timely made, would stay any further suspension or delisting action by the Staff pending the conclusion of the hearing
process and expiration of any extension that may be granted by the Panel. We intend to closely monitor the closing bid price of the Common
Stock and consider all available options to remedy the bid price deficiency, but no decision regarding any action has yet been made.
We intend to take all reasonable measures available to regain compliance
under the Nasdaq Listing Rules and remain listed on The Nasdaq Capital Market. However, there can be no assurance that The Nasdaq
Stock Market LLC will approve the Compliance Plan or that we will ultimately regain compliance with all applicable requirements for continued
listing. If our Common Stock were delisted from The Nasdaq Stock Market, it could severely limit the liquidity of our Common Stock and
your ability to sell our securities on the secondary market. Delisting from The Nasdaq Capital Market could adversely affect our ability
to raise additional financing through the public or private sale of equity securities, would significantly affect the ability of investors
to trade our securities and would negatively affect the value and liquidity of our Common Stock. Delisting could also have other negative
results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development
opportunities. If our Common Stock is delisted from The Nasdaq Capital Market, the price of our Common Stock may decline and our Common
Stock may be eligible to trade on the OTC Bulletin Board, another over-the-counter quotation system, or on the pink sheets where an investor
may find it more difficult to dispose of their Common Stock or obtain accurate quotations as to the market value of our Common Stock.
Further, if we are delisted, we would incur additional costs under requirements of state “blue sky” laws in connection with
any sales of our securities. These requirements could severely limit the market liquidity of our Common Stock and the ability of our
stockholders to sell our Common Stock in the secondary market.
Purchasers who purchase our securities
in this offering pursuant to a securities purchase agreement may have rights not available to purchasers that purchase without the benefit
of a securities purchase agreement.
In addition to rights and remedies available to all purchasers in
this offering under federal securities and state law, the purchasers that enter into a securities purchase agreement will also be able
to bring claims for breach of contract against us. The ability to pursue a claim for breach of contract provides those investors with
the means to enforce the covenants uniquely available to them under the securities purchase agreement including timely delivery of shares
and indemnification for breach of contract.
CAPITALIZATION
The following table sets forth our cash and capitalization as of June 30,
2023, as follows:
| · | on
an as adjusted basis to reflect the issuance and sale by us of 3,853,400 common units in this offering at a public offering price of
$0.3006 per unit and 12,780,000 pre-funded units in this offering at a public offering price of $0.3005 per unit, after deducting the
estimated offering expenses payable by us and assuming exercise of all the pre-funded warrants being offered herein, but before applying
any of the net proceeds as described below under “Use of Proceeds,” including any amounts payable to InvaGen Pharmaceuticals
Inc. (“InvaGen”). |
You should read this information in conjunction with our financial statements and the “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” section in our Quarterly
Report on Form 10-Q for the period ended June 30, 2023, which is incorporated by reference in this prospectus.
| |
June 30, 2023 | |
| |
(unaudited) | |
($ in thousands) | |
Actual | | |
As Adjusted | |
Cash and cash equivalents | |
$ | 1,571 | | |
$ | 5,705 | |
| |
| | | |
| | |
Stockholders’ Equity (Deficit) | |
| | | |
| | |
Preferred Stock ($0.0001 par value), 2,000,000 shares
authorized | |
| | | |
| | |
Class A Preferred Stock – 250,000 shares issued
and outstanding | |
| — | | |
| — | |
Common Stock ($0.0001 par value), 75,000,000 shares
authorized | |
| | | |
| | |
Common stock – 7,920,485 issued and outstanding actual;
25,597,622 issued and outstanding as adjusted | |
| 1 | | |
| 3 | |
Additional paid-in capital | |
| 86,757 | | |
| 90,889 | |
Accumulated deficit | |
| (92,094 | ) | |
| (92,094 | ) |
Total stockholders’ equity (deficit) attributed to the
Company | |
| (5,336 | ) | |
| (1,202 | ) |
Non-controlling interests | |
| (810 | ) | |
| (810 | ) |
Total Capitalization | |
$ | (6,146 | ) | |
$ | (2,012 | ) |
The number of shares of Common Stock to be outstanding after this
offering is based on 7,920,485 shares of our Common Stock outstanding as of June 30, 2023, and:
| · | excludes
767,085 shares of Common Stock issued and sold on September 8, 2023 in a private placement
transaction; |
| · | excludes
276,652 shares of Common Stock issued to AnnJi on September 26, 2023, pursuant to the
Company’s license agreement with AnnJi, upon the enrollment of the eighth (8th)
participant in the first Phase 1b/2a Clinical Trial in the United States; |
| · | excludes
6,078,132 shares of Common Stock issuable upon exercise of outstanding warrants having a
weighted-average exercise price of $1.55 per share; |
| · | excludes
85,000 shares of Common Stock issuable upon the vesting and settlement of outstanding restricted
stock award/units; |
| · | excludes
3,352,489 shares of Common Stock reserved for issuance and available for future grant under
our 2015 Incentive Plan; |
| · | excludes
1,685,000 shares of Common Stock issuable upon the exercise of stock options with a weighted-average
exercise price of $1.14 per share; |
| · | excludes
16,666 shares of Common Stock issuable upon conversion of the Class A Preferred Stock,
at the holders’ election; |
| · | excludes 16,633,400 shares of Common Stock issuable upon exercise of the Series A warrants
included in the units; |
| · | excludes 16,633,400 shares of Common Stock issuable upon exercise of the Series B warrants included in the units; and |
| · | excludes
415,728 shares of Common Stock issuable to Fortress, pursuant to the Founders Agreement, following the closing
of this offering. |
USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of
approximately $4.1 million, after deducting the estimated placement agent fees and estimated offering expenses payable by us, assuming
exercise of all the pre-funded warrants being offered herein and assuming no exercise of the other warrants included in the units or pre-funded
units. We will only receive additional proceeds from the exercise of the warrants included in the units and pre-funded units we are selling
in this offering if the warrants are exercised for cash.
We intend to use the net proceeds from this offering for general corporate
purposes and working capital requirements, which may include, among other things, the advancement of our product candidates to obtain
regulatory approval from the FDA. Additionally, under the agreement with InvaGen under which we repurchased all of InvaGen’s shares
in the Company, until we have paid an aggregate of $4 million to InvaGen, we are contractually bound to pay 7.5% of the net proceeds,
before expenses, of any public or private financing to InvaGen. Accordingly, we estimate we will pay InvaGen approximately $0.3 million
of the net proceeds. We have not determined the amounts we plan to spend on the areas listed above or the timing of these expenditures,
and we have no current plans with respect to acquisitions as of the date of this prospectus. The timing and amounts of our actual expenditures
will depend on several factors. As a result, our management will have broad discretion to allocate the net proceeds of this offering.
Pending their ultimate use, we intend to invest the net proceeds in a variety of securities, including commercial paper, government and
non-government debt securities and/or money market funds that invest in such securities.
DILUTION
Purchasers of the securities offered by this prospectus will suffer
immediate and substantial dilution in the net tangible book value per share of the Common Stock included in the units they purchase.
Net tangible book value per share represents the amount of total tangible assets less total liabilities, divided by the number of shares
of our Common Stock outstanding as of June 30, 2023. Our net tangible book value as of June 30, 2023 was approximately $(6.1)
million, or $(0.78) per share of our Common Stock.
Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers in this offering and the net tangible book value per share of our Common Stock immediately
after this offering. After giving effect to the sale of the 3,853,400 common units in this offering at a public offering price of $0.3006
per unit and 12,780,000 pre-funded units in this offering at a public offering price of $0.3005 per unit, and after deducting the estimated
placement agent fees and the estimated expenses payable by us and assuming exercise of all the pre-funded warrants being offered herein
and excluding the issuance of shares of Common Stock issuable to Fortress pursuant to the Founders Agreement, following the closing of
this offering, our net tangible book value as of June 30, 2023 would have been approximately $(2.0) million, or $(0.08) per
share of Common Stock. This represents an immediate increase in net book value of $0.70 per share to our existing stockholders and an
immediate dilution in net tangible book value of $0.38 per share to new investors participating in this offering.
The following table illustrates this calculation on a per share basis:
Offering price per share | |
| | | |
$ | 0.3006 | |
Net tangible book value per share as of June 30, 2023 | |
$ | (0.78 | ) | |
| | |
Increase per share attributable to the offering | |
$ | 0.70 | | |
| | |
As-adjusted net tangible book value per share after giving effect to the offering | |
| | | |
$ | (0.08 | ) |
Dilution in net tangible book value per share to new investors | |
| | | |
$ | 0.38 | |
The number of shares of Common Stock to be outstanding after this
offering is based on 7,920,485 shares of our Common Stock outstanding as of June 30, 2023, and:
| · | excludes
767,085 shares of Common Stock issued and sold on September 8, 2023 in a private placement
transaction; |
| · | excludes
276,652 shares of Common Stock issued to AnnJi on September 26, 2023, pursuant to the
Company’s license agreement with AnnJi, upon the enrollment of the eighth (8th)
participant in the first Phase 1b/2a Clinical Trial in the United States; |
| · | excludes
6,078,132 shares of Common Stock issuable upon exercise of outstanding warrants having a
weighted-average exercise price of $1.55 per share; |
| · | excludes
85,000 shares of Common Stock issuable upon the vesting and settlement of outstanding restricted
stock award/units; |
| · | excludes
3,352,489 shares of Common Stock reserved for issuance and available for future grant under
our 2015 Incentive Plan; |
| · | excludes
1,685,000 shares of Common Stock issuable upon the exercise of stock options with a weighted-average
exercise price of $1.14 per share; |
| · | excludes
16,666 shares of Common Stock issuable upon conversion of the Class A Preferred Stock,
at the holders’ election; |
| · | excludes 16,633,400 shares of Common Stock issuable upon exercise of the Series A warrants
included in the units; |
| · | excludes 16,633,400 shares of Common Stock issuable upon exercise of the Series B warrants
included in the units; and |
| · | excludes 415,728 shares of Common Stock issuable to Fortress, pursuant
to the Founders Agreement, following the closing of this offering. |
DIVIDEND POLICY
We currently intend to retain all available funds and any future earnings
to fund the growth and development of our business. We have never declared or paid any cash dividends on our capital stock. We do not
intend to pay cash dividends on our Common Stock in the foreseeable future. Investors should not purchase our common stock with the expectation
of receiving cash dividends.
Any future determination to declare dividends will be made at the
discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business
conditions, and other factors that our board of directors may deem relevant.
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined consolidated
financial information is presented to illustrate the effects of the acquisition of Baergic Bio, Inc. by Avenue Therapeutics, Inc.
based on the historical financial position and results of operations of Avenue Therapeutics, Inc. and Baergic Bio, Inc. The
unaudited pro forma condensed combined statements of operations for the periods presented give effect to the acquisition of Baergic as
if it took place on January 1, 2021.
The unaudited pro forma condensed combined consolidated statement
of operations for the years ended December 31, 2022, and 2021 were prepared based on (i) the historical audited consolidated
statement of operations of the Company for the years ended December 31, 2022, and 2021 and (ii) the historical audited statement
of operations of Baergic for the year ended December 31, 2021 and the historical unaudited statement of operations of Baergic for
the six months ended June 30, 2022.
Our historical consolidated financial information has been derived
from the consolidated audited and unaudited financial statements of the Company and accompanying notes to the financial statements incorporated
by reference into this prospectus. The historical consolidated financial information of Baergic has been derived from the consolidated
audited and unaudited financial statements of Baergic and accompanying notes to the financial statements incorporated by reference into
this prospectus.
The unaudited pro forma condensed combined consolidated financial
information was prepared in accordance with Article 11 of SEC Regulation S-X.
See the accompanying notes to the Unaudited Pro Forma Consolidated
Financial Information for a discussion of assumptions made.
The unaudited pro forma condensed combined financial information has
been presented for informational purposes only and is not necessarily indicative of what the combined company’s financial position
or results of operations actually would have been had the Company and Baergic been a combined company as of the date indicated. In addition,
the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating
results of the combined company. The historical consolidated financial information has been adjusted in the accompanying unaudited pro
forma condensed combined consolidated financial information to give effect to unaudited pro forma events.
UNAUDITED PRO FORMA CONDENSED
COMBINED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022
| |
Year Ended | | |
January 1, 2022 through | | |
| | |
| | |
Year Ended | |
| |
December 31,
2022 | | |
November 7,
2022 | | |
Transaction | | |
| | |
December 31,
2022 | |
| |
Avenue | | |
Baergic | | |
Accounting | | |
| | |
Pro Forma | |
| |
(Historical) | | |
(Historical) | | |
Adjustments | | |
Notes | | |
Combined | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
| | |
Research and development | |
$ | 2,698 | | |
$ | 290 | | |
| (208 | ) | |
6(a) | | |
$ | 2,780 | |
General and administrative | |
| 5,345 | | |
| 609 | | |
| (208 | ) | |
6(a) | | |
| 5,746 | |
Loss from operations | |
| (8,043 | ) | |
| (899 | ) | |
| 416 | | |
| | |
| (8,526 | ) |
| |
| | | |
| | | |
| | | |
| | |
| | |
Interest income | |
| (20 | ) | |
| - | | |
| | | |
| | |
| (20 | ) |
Interest expense | |
| - | | |
| 282 | | |
| | | |
| | |
| 282 | |
Financing costs - warrant liabilities | |
| 1,160 | | |
| - | | |
| | | |
| | |
| 1,160 | |
Change in fair value of warrant liabilities | |
| (5,580 | ) | |
| - | | |
| | | |
| | |
| (5,580 | ) |
Net loss | |
$ | (3,603 | ) | |
$ | (1,181 | ) | |
$ | 416 | | |
| | |
$ | (4,368 | ) |
| |
| | | |
| | | |
| | | |
| | |
| | |
Net loss attributable to non-controlling interests | |
| 51 | | |
| - | | |
| | | |
| | |
| 51 | |
Net loss attributable to common stockholders | |
$ | (3,552 | ) | |
$ | (1,181 | ) | |
$ | 416 | | |
| | |
$ | (4,317 | ) |
| |
| | | |
| | | |
| | | |
| | |
| | |
Net loss per common share attributable to common stockholders, basic
and diluted | |
$ | (1.63 | ) | |
| | | |
| | | |
| | |
$ | (2.29 | ) |
| |
| | | |
| | | |
| | | |
| | |
| | |
Weighted average number of common shares outstanding, basic and diluted | |
| 2,185,159 | | |
| | | |
| | | |
| | |
| 1,883,638 | |
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2021
| |
Year Ended | | |
Year Ended | | |
| | |
|
| |
Year Ended | |
| |
December 31,
2021 | | |
December 31,
2021 | | |
Transaction | | |
|
| |
December 31,
2021 | |
| |
Avenue | | |
Baergic | | |
Accounting | | |
|
| |
Pro Forma | |
| |
(Historical) | | |
(Historical) | | |
Adjustments | | |
Notes |
| |
Combined | |
Operating expenses: | |
| | | |
| | | |
| | | |
|
| |
| | |
Research and development | |
$ | 1,254 | | |
$ | 342 | | |
| (250 | ) | |
6(a) |
| |
$ | 1,346 | |
General and administrative | |
| 2,484 | | |
| 363 | | |
| (250 | ) | |
6(a) |
| |
| 2,597 | |
Loss from operations | |
| (3,738 | ) | |
| (705 | ) | |
| 500 | | |
|
| |
| (3,943 | ) |
| |
| | | |
| | | |
| | | |
|
| |
| | |
Interest income | |
| (7 | ) | |
| - | | |
| | | |
|
| |
| (7 | ) |
Interest expense | |
| - | | |
| 307 | | |
| | | |
|
| |
| 307 | |
Financing costs – warrant liabilities | |
| - | | |
| - | | |
| | | |
|
| |
| - | |
Change in fair value of warrant liabilities | |
| - | | |
| - | | |
| | | |
|
| |
| - | |
Net loss | |
$ | (3,731 | ) | |
$ | (1,012 | ) | |
$ | 500 | | |
|
| |
$ | (4,243 | ) |
| |
| | | |
| | | |
| | | |
|
| |
| | |
Net loss attributable to non-controlling interests | |
| - | | |
| - | | |
| | | |
|
| |
| - | |
Net loss attributable to common stockholders | |
$ | (3,731 | ) | |
$ | (1,012 | ) | |
$ | 500 | | |
|
| |
$ | (4,243 | ) |
| |
| | | |
| | | |
| | | |
|
| |
| | |
Net loss per common share attributable to common stockholders, basic and diluted | |
$ | (3.29 | ) | |
| | | |
| | | |
|
| |
$ | (5.71 | ) |
| |
| | | |
| | | |
| | | |
|
| |
| | |
Weighted average number of common shares outstanding, basic and diluted | |
| 1,133,170 | | |
| | | |
| | | |
|
| |
| 743,242 | |
NOTES TO UNAUDITED PRO
FORMA CONDENSED COMBINED FINANCIAL INFORMATION
| 1. | Description of the Merger |
On May 11, 2022, Avenue entered into a stock contribution agreement
(the “Contribution Agreement”) with Fortress, pursuant to which Fortress agreed to transfer its ownership of a majority of
the outstanding shares (common and preferred) in a private subsidiary company of Fortress, Baergic Bio, Inc. (“Baergic Bio”),
to Avenue. Under the Contribution Agreement, Fortress also agreed to assign to Avenue certain intercompany agreements existing between
Fortress and Baergic, including a Founders Agreement and Management Services Agreement. Consummation of the transactions contemplated
by the Contribution Agreement were subject to the satisfaction of certain conditions precedent, including: (i) the closing of an
equity financing by Avenue resulting in gross proceeds of no less than $7.5 million, (ii) the agreement by InvaGen to (A) have
100% of its shares in Avenue repurchased by Avenue and (B) terminate certain of the agreements into which it entered with Avenue
and/or Fortress in connection with InvaGen’s 2019 equity investment in Avenue, which will eliminate certain negative consent rights
of InvaGen over Avenue and restore certain rights and privileges of Fortress in Avenue, and (iii) the sustained listing of Avenue’s
Common Stock on Nasdaq. On October 11, 2022, Avenue consummated the transactions contemplated by the Share Repurchase Agreement
with InvaGen, pursuant to which Avenue repurchased 100% of the shares in Avenue held by InvaGen for a purchase price of $3 million. In
connection with the closing of the Share Repurchase Agreement, which occurred on October 31, 2022, all of the rights retained by
InvaGen pursuant to the Stockholders Agreement entered into by and among the Company, InvaGen and Fortress on November 12,
2018, were terminated. The acquisition was completed on November 8, 2022, at which time Baergic Bio became a consolidated subsidiary
of Avenue.
2. Reverse Stock Split
On September 22, 2022, Avenue filed a Certificate of Amendment
to its Third Amended and Restated Certificate of Incorporation (the “Amendment”) with the Secretary of State of the State
of Delaware to (i) effect a one-for-fifteen reverse stock split (the “Reverse Stock Split”) of the Company’s shares
of common stock, $0.0001 par value (the “Common Stock”), and (ii) effect a related reduction in the number of the Company’s
authorized shares from 50,000,000 to 20,000,000 (the “Authorized Share Reduction”). 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.
As a result of the Reverse Stock Split, every fifteen shares of the
Company’s pre-reverse split Common Stock were combined and reclassified as one share of Common Stock. Proportionate voting rights
and other rights of common stockholders were not affected by the reverse split, other than as a result of the payment for fractional
shares. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would otherwise hold a fractional
share of Common Stock received (upon surrender to the exchange agent of certificates representing such shares), a cash payment in lieu
thereof, without interest or deduction, rounded to the nearest cent, in an amount equal to the product obtained by multiplying (a) the
closing price per share of our common stock as reported on the Nasdaq Stock Market as of September 22, 2022, the effective date
of the Reverse Stock Split, by (b) the fraction of one share owned by the stockholder. The total amount paid in consideration for
the fractional shares was approximately $10,000.
Proportionate adjustments were made to the per share exercise price
and/or the number of shares issuable upon the exercise or vesting of all restricted stock award/units and warrants outstanding at September 22,
2022, which resulted in a proportional decrease in the number of shares of the Company’s common stock reserved for issuance upon
exercise or vesting of such restricted stock award/units and warrants, and, in the case of warrants, a proportional increase in the exercise
price of all such stock options and warrants.
3. Basis of Presentation
The unaudited pro forma condensed combined financial information is
prepared in accordance with Article 11 of SEC Regulation S-X. The historical financial information has been adjusted in the accompanying
unaudited pro forma condensed combined financial information to give effect to unaudited pro forma events that are:
| · | directly
attributable to the transaction; |
| · | factually
supportable; and |
| · | with
respect to the unaudited pro forma condensed combined consolidated statement of operations,
expected to have a continuing impact on the results of operations of the combined company. |
The transaction was accounted as a transaction between entities under
common control such that Avenue recognized the assets and liabilities of Baergic Bio received in the transaction at their historical
carrying amounts, as reflected in the historical consolidated financial statements of Baergic Bio. No Goodwill or intangibles were recognized.
The unaudited pro forma condensed combined financial information is
presented solely for informational purposes and is not necessarily indicative of the combined results of operations that might have been
achieved for the periods or dates indicated, nor is it necessarily indicative of the future results of the combined company. The unaudited
pro forma condensed combined financial information has not been adjusted to give effect to certain expected financial benefits of the
merger, such as tax savings, cost synergies or revenue synergies, or the anticipated costs to achieve these benefits, including the cost
of integration activities. The unaudited pro forma condensed combined financial information does not reflect possible adjustments related
to restructuring or integration activities that have yet to be determined or transaction or other costs following the combination that
are not expected to have a continuing impact on the business of the combined company.
4. Accounting Policies
The unaudited pro forma condensed combined consolidated financial
information has been compiled in a manner consistent with the accounting policies of Avenue. Following the acquisition, the combined
company conducted a review of accounting policies of Baergic Bio in an effort to determine if differences in accounting policies required
further reclassification of results of operations or reclassification of assets or liabilities to conform to Avenue’s accounting
policies and classifications. As a result of that review, no significant differences were identified among the accounting policies of
the companies that, when conformed, had a material impact on the unaudited pro forma condensed combined consolidated financial information.
5. Loss per Share
Represents the net loss per share calculated using the historical
weighted average shares outstanding, adjusted for the shares repurchased by Avenue pursuant to the Share Repurchase Agreement, which
occurred on October 31, 2022. The pro forma net loss per share calculation assumes the shares had been repurchased on January 1,
2021, the beginning of the earliest period presented.
6. Transaction Accounting Adjustments
The following provides explanations of the various adjustments to
the unaudited pro forma condensed combined balance sheet:
| (a) | Represents eliminations through consolidation of operating
expenses from assignment of Master Services Agreement from Fortress to Avenue for Baergic. |
DESCRIPTION OF SECURITIES
TO BE REGISTERED
Avenue Therapeutics has one class of securities registered under
Section 12 of the Securities Act of 1934, as amended: our Common Stock. The following description of our Common Stock is a summary
and is qualified in its entirety by reference to our Third Amended and Restated Certificate of Incorporation, as amended, and our Amended
and Restated By-Laws (the “By-Laws”), which are included as exhibits to the registration statement on Form S-1 of which
this prospectus forms a part. We encourage you to read the Certificate of Incorporation and By-Laws as well as the applicable provisions
of the General Corporation Law of the State of Delaware, as amended (the “DGCL”), for more information.
Authorized Capital Stock
Our authorized capital stock consists of 75,000,000 shares of Common
Stock, with $0.0001 par value, and 2,000,000 shares of Preferred Stock, with $0.0001 par value, of which 250,000 have been designated
as Class A Preferred Stock and the remainder of which are undesignated Preferred Stock.
As of October 27, 2023, there were 8,964,222 shares of our Common
Stock outstanding held by 31 record stockholders.
Common Stock
Voting Rights
Holders of our 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 our stockholders
shall be 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 our board of directors, subject to any preferential dividend
rights of outstanding preferred stock.
Liquidation and Other Rights
In the event of our 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 we may designate and issue in the future.
Listing
Our Common Stock is traded on The Nasdaq Capital Market under the
symbol “ATXI.” The transfer agent and registrar for our Common Stock is VStock Transfer, LLC.
Dividends
Holders of Common Stock are entitled to receive
proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of outstanding
preferred stock. Pursuant to the certificate of designation relating to the Class A Preferred Stock, we are prohibited from paying
dividends on our Common Stock until all dividends required to be paid to the holders of our Class A Preferred Stock have been paid
or declared and set apart for payment.
Anti-Takeover Effects of Various Provisions
of Delaware Law and Avenue Therapeutics’ Certificate of Incorporation and By-Laws
Provisions of the DGCL and our Certificate
of Incorporation and By-Laws could make it more difficult to acquire Avenue Therapeutics by means of a tender offer, a proxy contest
or otherwise, or to remove incumbent officers and directors. These provisions, including those summarized below, may encourage certain
types of coercive takeover practices and takeover bids.
Delaware Anti-Takeover Statute. In general, Section 203
of the DGCL prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested
stockholder” for a period of three years following the time the person became an interested stockholder, unless the business combination
or the acquisition of shares that resulted in a stockholder becoming an interested stockholder is approved in a prescribed manner. Generally,
a “business combination” includes a merger, asset or stock sale or other transaction resulting in a financial benefit to
the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates,
owns (or within three years prior to the determination of interested stockholder status did own) 15% or more of a corporation’s
voting stock. However, our Certificate of Incorporation provides that we are not subject to the anti-takeover provisions of Section 203
of the DGCL.
Removal. Subject to the rights of any holders of any outstanding
series of our Preferred Stock, stockholders may remove our directors with or without cause. Removal will require the affirmative vote
of holders of a majority of our voting stock.
Size of Board and Vacancies. Our By-Laws provide that
the number of directors be fixed exclusively by the board of directors. Any vacancies created on its board of directors resulting from
any increase in the authorized number of directors or the death, resignation, retirement, disqualification, removal from office or other
cause will be filled by a majority of the board of directors then in office, even if less than a quorum is present, or by a sole remaining
director. Any director appointed to fill a vacancy on our board of directors will hold office until the next annual meeting and until
his or her successor has been elected and qualified.
Requirements for Advance Notification of Stockholder Nominations
and Proposals. Our By-Laws establish advance notice procedures with respect to stockholder proposals and nomination
of candidates for election as directors other than nominations made by or at the direction of its board of directors or a committee of
our board of directors.
Undesignated Preferred Stock. Our board of directors
is authorized to issue up to 2,000,000 shares of preferred stock without additional stockholder approval, which preferred stock could
have voting rights or conversion rights that, if exercised, could adversely affect the voting power of the holders of Common Stock. The
issuance of shares of preferred stock may have the effect of delaying, deferring or preventing a change in control of the Company without
any action by the Company’s stockholders.
Limitation on Liability of Directors and Indemnification of Directors
and Officers
Elimination of Liability of Directors. The DGCL authorizes
corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for
breaches of directors’ fiduciary duties as directors, and our Certificate of Incorporation includes such an exculpation provision.
Our Certificate of Incorporation provides that, to the fullest extent permitted by the DGCL, no director will be personally liable to
us or to our stockholders for monetary damages for breach of fiduciary duty as a director. While our Certificate of Incorporation provides
directors with protection from awards for monetary damages for breaches of their duty of care, it does not eliminate this duty. Accordingly,
our Certificate of Incorporation has no effect on the availability of equitable remedies such as an injunction or rescission based on
a director’s breach of his or her duty of care. The provisions apply to an officer of Avenue Therapeutics only if he or she is
a director of Avenue Therapeutics and is acting in his or her capacity as director, and do not apply to officers of Avenue Therapeutics
who are not directors. Additionally, our Certificate of Incorporation provides that, to the fullest extent permitted by law, we renounce
any interest or expectancy in a transaction or matter that may be a corporate opportunity for us if it was presented to, or acquired,
created or developed by, or which otherwise comes into the possession of, (i) any director on our board of directors who is not
an employee of the Company or any of its subsidiaries, or (ii) any holder of our Class A Preferred Stock or any affiliate or
other related person of any such holder, other than someone who is an employee of the Company or any of its subsidiaries, and no person
shall have any duty to present such corporate opportunity to us and will not be liable to us for pursuing or acquiring such opportunity,
or referring such opportunity to a third party.
Indemnification of Directors, Officers and Employees.
Our By-Laws require us to indemnify any person who was or is a party or is threatened to be made a party to, or was otherwise involved
in, a legal proceeding by reason of the fact that he or she is or was a director, officer or employee of Avenue Therapeutics or, while
a director, officer or employee of Avenue Therapeutics, is or was serving at our request in a fiduciary capacity with another enterprise
(including any corporation, partnership, limited liability company, joint venture, trust, association or other unincorporated organization
or other entity and any employee benefit plan, to the fullest extent authorized by the DGCL, as it exists or may be amended, against
all expense, liability and loss (including attorneys’ fees, judgments, fines, U.S. Employee Retirement Income Security Act of 1974,
as amended, excise taxes or penalties and amounts paid in settlement by or on behalf of such person) actually and reasonably incurred
in connection with such service. We are authorized under our By-Laws to carry directors’ and officers’ insurance protecting
us, any director, officer or employee of ours or, against any expense, liability or loss, whether or not we have the power to indemnify
the person under the DGCL. We may, to the extent authorized from time to time, indemnify any of our agents to the fullest extent permitted
with respect to directors, officers and employees in our By-Laws.
The limitation of liability and indemnification
provisions in our Certificate of Incorporation and By-Laws may discourage stockholders from bringing a lawsuit against our directors
for breach of fiduciary duty. These provisions also may reduce the likelihood of derivative litigation against our directors and officers,
even though such an action, if successful, might otherwise benefit us and our stockholders. By its terms, the indemnification provided
for in our By-Laws is not exclusive of any other rights that the indemnified party may be or become entitled to under any law, agreement,
vote of stockholders or directors, provisions of our Certificate of Incorporation or By-Laws or otherwise. Any amendment, alteration
or repeal of our By-Laws’ indemnification provisions is, by the terms of our By-Laws, prospective only and will not adversely affect
the rights of any indemnity in effect at the time of any act or omission occurring prior to such amendment, alteration or repeal.
Warrants to be Issued in this Offering
The following summary of certain terms and
provisions of the warrants included in the units offered hereby is not complete and is subject to, and qualified in its entirety by the
provisions of the form of warrant, which is filed as an exhibit to the registration statement of which this prospectus is a part. Prospective
investors should carefully review the terms and provisions set forth in the form of warrant.
Exercisability. The warrants are exercisable
immediately and at any time up to the date that is (A) for the Series A warrants, five years after their original issuance,
and (B) for the Series B warrants, 18 months after their original issuance. The warrants will be exercisable, at the option
of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering
the offer and sale of the shares of Common Stock underlying the warrants under the Securities Act is effective and available for the
issuance of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by
payment in full in immediately available funds for the number of shares of Common Stock purchased upon such exercise. If a registration
statement registering the offer and sale of the shares of Common Stock underlying the warrants under the Securities Act is not effective
or available and an exemption from registration under the Securities Act is not available for the issuance of such shares, the holder
may elect to exercise the warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number
of shares of Common Stock determined according to the formula set forth in the warrant. No fractional shares of Common Stock will be
issued in connection with the exercise of a warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to
the fractional amount multiplied by the exercise price.
Exercise Limitation. A holder will
not have the right to exercise any portion of the warrant if the holder (together with its affiliates and certain related parties) would
beneficially own in excess of 4.99% of the number of shares of our Common Stock outstanding immediately after giving effect to the exercise,
as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease
such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective
until 61 days following notice from the holder to us.
Exercise Price. The exercise price per whole share of Common Stock
purchasable upon exercise of the warrants is equal to $0.3006 (100% of the public offering price per common unit). The exercise price
is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications
or similar events affecting our Common Stock and also upon any distributions of assets, including cash, stock or other property to our
stockholders.
Transferability. Subject to applicable
laws, the warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange Listing. We do not intend
to list the warrants on any securities exchange or nationally recognized trading system.
Warrant Agent. The warrants will be
issued in registered form under a warrant agency agreement between VStock Transfer, LLC, as warrant agent, and us. The warrants will
initially be represented only by one or more global warrants deposited with the warrant agent, as custodian on behalf of The Depository
Trust Company (DTC) and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
Fundamental Transactions. In the event
of a fundamental transaction, as described in the warrants and generally including any reorganization, recapitalization or reclassification
of our Common Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation
or merger with or into another person, or any person or group, other than Fortress, becoming the beneficial owner of 50% of the voting
power represented by our outstanding capital stock, the holders of the warrants will be entitled to receive upon exercise of the warrants
the kind and amount of securities, cash or other property that the holders would have received had they exercised the warrants immediately
prior to such fundamental transaction.
Rights as a Stockholder. Except as
otherwise provided in the warrants or by virtue of such holder’s ownership of shares of our Common Stock, the holder of a warrant
does not have the rights or privileges of a holder of our Common Stock, including any voting rights, until the holder exercises the warrant.
Governing Law. The warrants and the
warrant agency agreement are governed by New York law.
Pre-funded Warrants to be Issued in this
Offering
The following summary of certain terms and
provisions of the pre-funded warrants included in the pre-funded units offered hereby is not complete and is subject to, and qualified
in its entirety by the provisions of the form of pre-funded warrant, which is filed as an exhibit to the registration statement of which
this prospectus is a part. Prospective investors should carefully review the terms and provisions set forth in the form of pre-funded
warrant.
Exercisability. The pre-funded warrants
are exercisable immediately and may be exercised at any time, and from time to time, until the
pre-funded warrants are exercised in full. The pre-funded warrants will be exercisable, at the option of each holder, in whole
or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the offer and sale
of the shares of Common Stock underlying the pre-funded warrants under the Securities Act is effective and available for the issuance
of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in
full in immediately available funds for the number of shares of Common Stock purchased upon such exercise. If a registration statement
registering the offer and sale of the shares of Common Stock underlying the pre-funded warrants under the Securities Act is not effective
or available and an exemption from registration under the Securities Act is not available for the issuance of such shares, the holder
may elect to exercise the pre-funded warrants through a cashless exercise, in which case the holder would receive upon such exercise
the net number of shares of Common Stock determined according to the formula set forth in the warrant. No fractional shares of Common
Stock will be issued in connection with the exercise of a pre-funded warrants. In lieu of fractional shares, we will pay the holder an
amount in cash equal to the fractional amount multiplied by the exercise price.
Exercise Limitation. A holder will
not have the right to exercise any portion of the pre-funded warrant if the holder (together with its affiliates and certain related
parties) would beneficially own in excess of 4.99% of the number of shares of our Common Stock outstanding immediately after giving effect
to the exercise, as such percentage ownership is determined in accordance with the terms of the pre-funded warrants. However, any holder
may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage
shall not be effective until 61 days following notice from the holder to us.
Exercise Price. The exercise price
per whole share of Common Stock purchasable upon exercise of the pre-funded warrants is $0.0001. The exercise price is subject to appropriate
adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar
events affecting our Common Stock and also upon any distributions of assets, including cash, stock or other property to our stockholders.
Transferability. Subject to applicable
laws, the pre-funded warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange Listing. We do not intend
to list the pre-funded warrants on any securities exchange or nationally recognized trading system.
Warrant Agent. The pre-funded warrants
will be issued in registered form under a warrant agency agreement between VStock Transfer, LLC, as warrant agent, and us. The pre-funded
warrants will initially be represented only by one or more global warrants deposited with the warrant agent, as custodian on behalf of
The Depository Trust Company (DTC) and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
Fundamental Transactions. In the event
of a fundamental transaction, as described in the pre-funded warrants and generally including any reorganization, recapitalization or
reclassification of our Common Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets,
our consolidation or merger with or into another person, or any person or group, other than Fortress, becoming the beneficial owner of
50% of the voting power represented by our outstanding capital stock, the holders of the pre-funded warrants will be entitled to receive
upon exercise of the pre-funded warrants the kind and amount of securities, cash or other property that the holders would have received
had they exercised the pre-funded warrants immediately prior to such fundamental transaction.
Rights as a Stockholder. Except as
otherwise provided in the pre-funded warrants or by virtue of such holder’s ownership of shares of our Common Stock, the holder
of a pre-funded warrant does not have the rights or privileges of a holder of our Common Stock, including any voting rights, until the
holder exercises the pre-funded warrant.
Governing Law. The pre-funded warrants
and the warrant agency agreement are governed by New York law.
MATERIAL UNITED STATES
FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain material U.S. federal income
tax consequences of the acquisition, ownership and disposition of our shares of common units (each consisting of (A) one share of
our Common Stock, (B) one Series A warrant to purchase one share of our Common Stock and (C) one Series B warrant
to purchase one share of our Common Stock) and our pre-funded units (each consisting of (A) one pre-funded warrant to purchase one
share of our Common Stock, (B) one Series A warrant to purchase one share of our Common Stock and (C) one Series B
warrant to purchase one share of our Common Stock), which we refer to as our securities, that are purchased in this offering by U.S.
Holders (as defined below) and Non-U.S. Holders (as defined below). Because the components of a common unit and a pre-funded unit are
generally separable at the option of the holder, the holder of a common unit or pre-funded unit generally should be treated, for U.S.
federal income tax purposes, as the owner of the underlying share of our common stock, one Series A warrant to purchase one share
of our Common Stock and one Series B warrant to purchase one share of our Common Stock, in the case of a common unit, and one pre-funded
warrant, one Series A warrant to purchase one share of our Common Stock and one Series B warrant to purchase one share of our
Common Stock, in the case of a pre-funded unit. As a result, the discussion below with respect to holders of shares of our Common Stock,
pre-funded warrants and warrants should also apply to holders of common units or pre-funded units (as the deemed owners of the underlying
Common Stock, pre-funded warrants and warrants that constitute the units).
This discussion applies only to securities that are held as capital
assets for U.S. federal income tax purposes and is applicable only to initial holders who are receiving our securities in this offering.
This discussion is a summary only and does not describe all of the
tax consequences that may be relevant to you in light of your particular circumstances, including but not limited to the alternative
minimum tax, the Medicare tax on certain investment income and the different consequences that may apply if you are subject to special
rules that apply to certain types of investors (such as the effects of Section 451 of the federal income tax code (the “Code”),
including but not limited to:
| · | bank
and other financial institutions or financial services entities; |
| · | retirement
plans, individual retirement accounts or other tax-deferred accounts; |
| · | governments
or agencies or instrumentalities thereof; |
| · | regulated
investment companies; |
| · | “controlled
foreign corporations,” “passive foreign investment companies,” “qualified
foreign pension funds,” and corporations that accumulate earnings to avoid U.S. federal
income tax; |
| · | real
estate investment trusts; |
| · | expatriates
or former long-term residents of the United States; |
| · | persons
that actually or constructively own five percent or more of our voting shares; |
| · | taxpayers
subject to a mark-to-market method of accounting rules; |
| · | persons
holding the securities as part of a “straddle,” constructive sale, hedge, conversion
or other integrated or similar transaction; |
| · | U.S.
holders (as defined below) whose functional currency is not the U.S. dollar; |
| · | persons
subject to alternative minimum tax; |
| · | partnerships
or other pass-through entities for U.S. federal income tax purposes and any beneficial owners
of such entities; |
| · | tax-exempt
entities; and |
| · | persons
that acquired our securities pursuant to an exercise of employee share options, in connection
with employee share incentive plans or otherwise as compensation or in connection with services. |
This discussion is based on the Code, and administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury regulations as of the date hereof, which are subject to change, possibly
on a retroactive basis, and changes to any of which subsequent to the date of this prospectus may affect the tax consequences described
herein. This discussion does not address any aspect of state, local or non-U.S. taxation, or any U.S. federal taxes (e.g., gift and estate
taxes) other than income taxes.
We have not sought, and will not seek, a ruling from the IRS as to
any U.S. federal income tax consequence described herein. The IRS may disagree with the discussion herein, and its determination may
be upheld by a court. Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions
will not adversely affect the accuracy of the statements in this discussion. You are urged to consult your tax advisor with respect to
the application of U.S. federal tax laws to your particular situation, as well as any tax consequences arising under the laws of any
state, local or foreign jurisdiction.
This discussion does not consider the tax treatment of partnerships
or other pass-through entities or persons who hold our securities through such entities. If a partnership (or other entity or arrangement
classified as a partnership or other pass-through entity for United States federal income tax purposes) is the beneficial owner of our
securities, the United States federal income tax treatment of a partner or member in the partnership or other pass-through entity generally
will depend on the status of the partner or member and the activities of the partnership or other pass-through entity. If you are a partner
or member of a partnership or other pass-through entity holding our securities, we urge you to consult your own tax advisor.
THIS DISCUSSION IS ONLY A SUMMARY OF CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS ASSOCIATED WITH THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR SECURITIES. EACH PROSPECTIVE INVESTOR IN
OUR SECURITIES IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION,
OWNERSHIP AND DISPOSITION OF OUR SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY UNITED STATES FEDERAL NON-INCOME, STATE,
LOCAL, AND NON-U.S. TAX LAWS.
Allocation of Purchase Price and Characterization of a Unit
No statutory, administrative or judicial authority directly addresses
the treatment of a unit or instruments similar to a unit for U.S. federal income tax purposes, and therefore, that treatment is not entirely
clear. The acquisition of a common unit or pre-funded unit should be treated for U.S. federal income tax purposes as the acquisition
of one share of our Common Stock, one Series A warrant and one Series B warrant, in the case of a common unit, and one pre-funded
warrant, one Series A warrant and one Series B warrant, in the case of a pre-funded unit, and we intend to treat the acquisition
of a unit in this manner. For U.S. federal income tax purposes, each holder of a unit must allocate the purchase price paid by such holder
for such unit among the underlying securities based on the relative fair market value of each at the time of issuance. Under U.S. federal
income tax law, each investor must make its own determination of such value based on all the relevant facts and circumstances. Therefore,
we strongly urge each investor to consult its tax advisor regarding the determination of value for these purposes. The price allocated
to each share of our Common Stock, warrants and/or pre-funded warrants should constitute the holder’s initial tax basis in such
share, warrant and/or pre-funded warrant, respectively. Any disposition of a unit should be treated for U.S. federal income tax purposes
as a disposition of the share of our Common Stock and warrant or pre-funded warrant and warrant comprising the Unit, and the amount realized
on the disposition should be allocated among the underlying securities based on their respective relative fair market values at the time
of disposition.
The foregoing treatment of the securities and a holder’s purchase
price allocation are not binding on the IRS or the courts. Because there are no authorities that directly address instruments that are
similar to the units, no assurance can be given that the IRS or the courts will agree with the characterization described above or the
discussion below. Accordingly, each prospective investor is urged to consult its tax advisor regarding the tax consequences of an investment
in a unit (including alternative characterizations of a unit). The balance of this discussion assumes that the characterization of the
units described above is respected for U.S. federal income tax purposes.
U.S. Holders
This section applies to you if you are a “U.S. holder.”
A U.S. holder is a beneficial owner of our shares of Common Stock who or that is, for U.S. federal income tax purposes:
| · | an
individual who is a citizen or resident of the United States; |
| · | a
corporation (or other entity taxable as a corporation) that is created or organized (or treated
as created or organized) in or under the laws of the United States, any state thereof or
the District of Columbia; or |
| · | an
estate the income of which is subject to U.S. federal income tax regardless of its source;
or |
| · | a
trust, if (i) a court within the United States is able to exercise primary supervision
over the administration of the trust and one or more U.S. persons (as defined in the Code)
have authority to control all substantial decisions of the trust or (ii) it has a valid
election in effect under Treasury Regulations to be treated as a U.S. person. |
Taxation of Distributions. If we pay distributions in cash
or other property (other than certain distributions of our stock or rights to acquire our stock) to U.S. holders of shares of our Common
Stock, such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current
or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated
earnings and profits will constitute a return of capital that will first be applied against and reduce (but not below zero) the U.S.
holder’s adjusted tax basis in our Common Stock. Any remaining excess will be treated as gain realized on the sale or other disposition
of the Common Stock and will be treated as described under “U.S. Holders — Gain or Loss on Sale, Taxable Exchange or Other
Taxable Disposition of Common Stock” below.
Dividends we pay to a U.S. holder that is a taxable corporation generally
will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions (including, but
not limited to, dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain
holding period requirements are met, dividends we pay to a non-corporate U.S. holder may constitute “qualified dividends”
that will be subject to tax at the maximum tax rate accorded to long-term capital gains. If the holding period requirements are not satisfied,
then a corporation may not be able to qualify for the dividends received deduction and would have taxable income equal to the entire
dividend amount, and non-corporate holders may be subject to tax on such dividend at regular ordinary income tax rates instead of the
preferential rate that applies to qualified dividend income.
Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition
of our Securities. Upon a sale or other taxable disposition of our shares of Common Stock, warrants or pre-funded warrants, a U.S.
holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. holder’s
adjusted tax basis in such shares of Common Stock, warrants or pre-funded warrants. Any such capital gain or loss generally will be long-term
capital gain or loss if the U.S. holder’s holding period for the Common Stock, warrants or pre-funded warrants so disposed of exceeds
one year. If the holding period requirements are not satisfied, any gain on a sale or taxable disposition of our securities would be
subject to short-term capital gain treatment and would be taxed at regular ordinary income tax rates. Long-term capital gains recognized
by non-corporate U.S. holders will be eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations.
Generally, the amount of gain or loss recognized by a U.S. holder
is an amount equal to the difference between (i) the sum of the amount of cash and the fair market value of any property received
in such disposition and (ii) the U.S. holder’s adjusted tax basis in its shares of Common Stock, warrants or pre-funded warrants
disposed. A U.S. holder’s adjusted tax basis in its shares of Common Stock, warrants or pre-funded warrants generally will equal
the U.S. holder’s acquisition cost (that is, the portion of the purchase price of a unit allocated to a share of our common stock,
warrant or pre-funded warrant, as described above under “—Allocation of Purchase Price and Characterization of a Unit”)
reduced, in the case of a share of Common Stock, by any prior distributions treated as a return of capital.
Information Reporting and Backup Withholding. In general, information
reporting requirements may apply to dividends paid to a U.S. holder and to the proceeds of the sale or other disposition of our securities,
unless the U.S. holder is an exempt recipient. Backup withholding may apply to such payments if the U.S. holder fails to provide a taxpayer
identification number, a certification of exempt status or has been notified by the IRS that it is subject to backup withholding (and
such notification has not been withdrawn).
Any amounts withheld under the backup withholding rules generally
should be allowed as a refund or a credit against a U.S. holder’s U.S. federal income tax liability provided the required information
is timely furnished to the IRS.
Non-U.S. Holders
This section applies to you if you are a “Non-U.S. holder.”
As used herein, the term “Non-U.S. holder” means a beneficial owner of our common units or pre-funded units who is not a
U.S. Holder or any other person that is for U.S. federal income tax purposes:
| · | a
non-resident alien individual (other than certain former citizens and residents of the U.S.
subject to U.S. tax as expatriates), |
| · | a
foreign corporation, or |
| · | an
estate or trust that is not a U.S. holder. |
The term “Non-U.S. Holder” generally does not include
a U.S. Holder or a partnership or other entity classified as a partnership for U.S. federal income tax purposes and does not include
an individual who is present in the United States for 183 days or more in the taxable year of disposition of the securities. If you are
such an individual, you should consult your tax advisor regarding the U.S. federal income tax consequences of the acquisition, ownership
or sale or other disposition of our securities.
Taxation of Distributions. In general, any distributions we
make to a Non-U.S. holder of shares of our Common Stock, to the extent paid out of our current or accumulated earnings and profits (as
determined under U.S. federal income tax principles), will constitute dividends for U.S. federal income tax purposes and, provided such
dividends are not effectively connected with the Non-U.S. holder’s conduct of a trade or business within the United States, we
will be required to withhold tax from the gross amount of the dividend at a rate of 30%, unless such Non-U.S. holder is eligible for
a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such
reduced rate (usually on an IRS Form W-8BEN or W-8BEN-E). Any distribution not constituting a dividend will be treated first as
reducing (but not below zero) the Non-U.S. holder’s adjusted tax basis in its shares of our Common Stock and, to the extent such
distribution exceeds the Non-U.S. holder’s adjusted tax basis, as gain realized from the sale or other disposition of the Common
Stock, which will be treated as described under “Non-U.S. Holders—Gain on Sale, Taxable Exchange or Other Taxable Disposition
of Our Securities” below. If we are unable to determine, at a time reasonably close to the date of payment of a distribution on
our Common Stock, what portion, if any, of the distribution will constitute a dividend, then we may withhold U.S. federal income tax
on the basis of assuming that the full amount of the distribution will be a dividend. If we or another withholding agent apply over-withholding,
a non-U.S. holder may be entitled to a refund or credit of any excess tax withheld by timely filing an appropriate claim with the IRS.
In addition, if we determine that we are or are likely to be classified as a “United States real property holding corporation”
(see “Non-U.S. Holders—Gain on Sale, Taxable Exchange or Other Taxable Disposition of Our Securities” below), we will
withhold 15% of any distribution that exceeds our current and accumulated earnings and profits, including a distribution in redemption
of shares of our Common Stock.
The withholding tax does not apply to dividends paid to a Non-U.S.
holder who provides a Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. holder’s conduct
of a trade or business within the United States. Instead, the effectively connected dividends will be subject to regular U.S. income
tax as if the Non-U.S. holder were a U.S. resident, subject to an applicable income tax treaty providing otherwise. A Non-U.S. corporation
receiving effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of
30% (or a lower treaty rate).
Any documentation provided to an applicable withholding agent may
need to be updated in certain circumstances. The certification requirements described above also may require a non-U.S. holder to provide
its U.S. taxpayer identification number.
Gain on Sale, Taxable Exchange or Other Taxable Disposition of
Common Stock. A Non-U.S. holder generally will not be subject to U.S. federal income or withholding tax in respect of gain recognized
on a sale, taxable exchange or other taxable disposition of our Common Stock, warrants or pre-funded warrants, in each case without regard
to whether such securities were held as part of a unit, unless:
| · | the
gain is effectively connected with the conduct of a trade or business by the Non-U.S. holder
within the United States (and, under certain income tax treaties, is attributable to a United
States permanent establishment or fixed base maintained by the Non-U.S. holder); |
| · | the
non-U.S. holder is a nonresident alien individual who is present in the United States for
a period or periods aggregating 183 days or more in the taxable year of the disposition and
certain other conditions are met, in which case the non-U.S. holder will be subject to a
30% tax (or such lower rate as may be specified by an applicable income tax treaty) on the
amount by which the non-U.S. holder’s capital gains allocable to U.S. sources exceed
capital losses allocable to U.S. sources during the taxable year of the disposition (without
taking into account any capital loss carryovers); or |
| · | we
are or have been a “U.S. real property holding corporation” for U.S. federal
income tax purposes at any time during the shorter of the five-year period ending on the
date of disposition or the period that the Non-U.S. holder held our Common Stock, and, in
the case where shares of our Common Stock are regularly traded on an established securities
market, the Non-U.S. holder has owned, directly or constructively, more than 5% of our Common
Stock at any time within the shorter of the five-year period preceding the disposition or
such Non-U.S. holder’s holding period for the shares of our Common Stock. There can
be no assurance that our Common Stock will be treated as regularly traded on an established
securities market for this purpose. Generally, a corporation is a U.S. real property holding
corporation if the fair market value of its U.S. real property interests, as defined in the
Code and applicable U.S. Treasury Regulations, equals or exceeds 50% of the sum of the fair
market value of its worldwide real property interests plus its other assets used or held
for use in a trade or business. Although there can be no assurance, we do not believe that
we are, or have been, a U.S. real property holding corporation for U.S. federal income tax
purposes, or that we are likely to become one in the future. These rules may be modified
for Non-U.S. Holders of warrants or pre-funded warrants. If we are or have been a “United
States real property holding corporation” and you own warrants or pre-funded warrants,
you are urged to consult your own tax advisor regarding the application of these rules. |
Unless an applicable treaty provides otherwise, gain described in
the first bullet point above will be subject to tax at generally applicable U.S. federal income tax rates as if the Non-U.S. holder were
a U.S. resident. Any gains described in the first bullet point above of a Non-U.S. holder that is a foreign corporation may also be subject
to an additional “branch profits tax” at a 30% rate (or lower treaty rate).
If the third bullet point above applies to a Non-U.S. holder, gain
recognized by such holder on the sale, exchange or other disposition of our Common Stock, warrants or pre-funded warrants, will generally
be subject to tax at applicable U.S. federal income tax rates as if the Non-U.S. Holder were a U.S. resident. In addition, a buyer of
our Common Stock, warrants or pre-funded warrants from any such holder may be required to withhold U.S. income tax at a rate of 15% of
the amount realized upon such disposition if our Common Stock is not treated as regularly traded on an established securities market.
We cannot determine whether we will be a United States real property holding corporation in the future. In general, we would be classified
as a United States real property holding corporation if the fair market value of our “United States real property interests”
equals or exceeds 50% of the sum of the fair market value of our worldwide real property interests plus our other assets used or held
for use in a trade or business, as determined for U.S. federal income tax purposes.
Information Reporting and Backup Withholding. Information returns
will be filed with the IRS in connection with payments of dividends and the proceeds from a sale or other disposition of our shares of
Common Stock, warrants or pre-funded warrants. A Non-U.S. holder may have to comply with certification procedures to establish that it
is not a United States person in order to avoid information reporting and backup withholding requirements. The certification procedures
required to claim a reduced rate of withholding under a treaty will satisfy the certification requirements necessary to avoid the backup
withholding as well. The amount of any backup withholding from a payment to a Non-U.S. holder will be allowed as a credit against such
holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely
furnished to the IRS.
FATCA Withholding Taxes. Provisions commonly referred to as
“FATCA” impose withholding of 30% on payments of dividends (including constructive dividends) on our Common Stock to “foreign
financial institutions” (which is broadly defined for this purpose and in general includes investment vehicles) and certain other
Non-U.S. entities unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons
of interests in or accounts with those entities) have been satisfied by, or an exemption applies to, the payee (typically certified as
to by the delivery of a properly completed IRS Form W-8BEN-E). If FATCA withholding is imposed, a beneficial owner that is not a
foreign financial institution will be entitled to a refund of any amounts withheld by filing a U.S. federal income tax return (which
may entail significant administrative burden). Foreign financial institutions located in jurisdictions that have an intergovernmental
agreement with the United States governing FATCA may be subject to different rules. Under certain circumstances, a Non-U.S. holder might
be eligible for refunds or credits of such withholding taxes, and a Non-U.S. holder might be required to file a U.S. federal income tax
return to claim such refunds or credits. Prospective investors should consult their tax advisers regarding the effects of FATCA on their
investment in our securities.
The preceding discussion of material U.S. federal tax considerations
is for general information only. It is not tax advice. You should consult your own tax advisors regarding the particular U.S. federal,
state, local and non-U.S. tax consequences of purchasing, holding and disposing of our Common Stock, including the consequences of any
proposed changes in applicable laws.
PLAN OF DISTRIBUTION
We are offering 16,633,400 units, each consisting
of (A) one share of Common Stock (or one Pre-Funded Warrant), (B) one Series A warrant to purchase one share of Common Stock and (C) one
Series B warrant to purchase one share of Common Stock, for gross proceeds of up to approximately $5.0 million before deduction of placement
agent commissions and offering expenses, in a best-efforts offering. There is no minimum amount of proceeds that is a condition to closing
of this offering.
Pursuant to a placement agency agreement,
dated as of October 31, 2023, we have engaged Maxim Group LLC and Lake Street Capital Markets, LLC to act as our exclusive placement agents
to solicit offers to purchase the securities offered by this prospectus. The placement agents are not purchasing or selling any securities,
nor are they required to arrange for the purchase and sale of any specific number or dollar amount of securities, other than to use their
“reasonable best efforts” to arrange for the sale of the securities by us. Therefore, we may not sell the entire amount of
securities being offered. We entered into a securities purchase agreement directly with certain of the institutional investors, at the
investor’s option, who purchased our securities in this offering. Investors who did not enter into a securities purchase agreement
shall rely solely on this prospectus in connection with the purchase of our securities in this offering. The placement agents may engage
one or more subagents or selected dealers in connection with this offering.
The placement agency agreement provides that
the placement agents’ obligations are subject to conditions contained in the placement agency agreement.
We will deliver the securities being issued
to the investors upon receipt of investor funds for the purchase of the securities offered pursuant to this prospectus. We expect to deliver
the securities being offered pursuant to this prospectus on November 2, 2023.
Placement Agent Fees, Commissions and
Expenses
Upon the closing of this offering, we will
pay the placement agents a cash transaction fee equal to 8% of the aggregate gross cash proceeds to us from the sale of the securities
in the offering (reduced to 4% of aggregate gross cash proceeds received from our affiliates). In addition, we will reimburse the placement
agents for their out-of-pocket expenses incurred in connection with this offering, including the fees and expenses of the counsel for
the placement agents, up to $100,000.
The following table shows the public offering
price, placement agent fees and proceeds, before expenses, to us, assuming the purchase of all the securities we are offering.
|
|
Per Unit |
|
|
Per Pre-
Funded Unit |
|
|
Total |
|
Public Offering Price |
|
$ |
0.3006 |
|
|
$ |
0.3005 |
|
|
$ |
4,998,722.04 |
|
Placement agent fees |
|
$ |
0.02405 |
|
|
$ |
0.02404 |
|
|
$ |
399,905.47 |
|
Proceeds, before expenses, to us |
|
$ |
0.27655 |
|
|
$ |
0.27646 |
|
|
$ |
4,598,816.57 |
|
We estimate that the total expenses of the
offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding placement agent
fees, will be approximately $390,000, all of which are payable by us. This figure includes the placement agents’ accountable expenses,
including, but not limited to, legal fees for placement agents’ legal counsel, that we have agreed to pay at the closing of the
offering up to an aggregate expense reimbursement of $100,000.
The Financial Industry Regulatory Authority, Inc.
has reviewed the proposed terms and arrangements of the compensation to be paid to the placement agents in connection with this offering.
Lock-Up Agreements
We, each of our officers and directors and
any other holders of 10% or more of our outstanding shares of Common Stock as of the date of this prospectus have agreed, subject to
certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any
of our shares or other securities convertible into or exercisable or exchangeable for our shares of Common Stock for a period of 90
days after this offering is completed without the prior written consent of the placement agents.
The placement agents may in their sole discretion
and at any time without notice release some or all of the shares subject to lock-up agreements prior to the expiration of the lock-up
period. When determining whether or not to release shares from the lock-up agreements, the placement agents will consider, among other
factors, the security holder’s reasons for requesting the release, the number of shares for which the release is being requested
and market conditions at the time.
Indemnification
We have agreed to indemnify the placement
agents against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the placement
agents may be required to make for these liabilities.
Determination of
Offering Price and Exercise Price
The actual public offering price of the securities
we are offering, and the exercise price of the warrants and pre-funded warrants included in the units and the pre-funded units that we
are offering, were negotiated between us and the investors in the offering based on the trading of our Common Stock prior to the offering,
among other things. Other factors considered in determining the public offering price of the securities we are offering, as well as the
exercise price of the warrants included in the units and pre-funded warrants that we are offering include our history and prospects,
the stage of development of our business, our business plans for the future and the extent to which they have been implemented, an assessment
of our management, the general conditions of the securities markets at the time of the offering and such other factors as were deemed
relevant.
Regulation M
The placement agents each may be deemed to
be an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit
realized on the resale of the securities sold by it while acting as principal might be deemed to be underwriting discounts or commissions
under the Securities Act. As an underwriter, each placement agent would be required to comply with the requirements of the Securities
Act and the Exchange Act, including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and
regulations may limit the timing of purchases and sales of our securities by the placement agents acting as principal. Under these rules and
regulations, the placement agents (i) may not engage in any stabilization activity in connection with our securities and (ii) may
not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted
under the Exchange Act, until it has completed its participation in the distribution.
Electronic Distribution
A prospectus in electronic format may be
made available on a website maintained by the placement agents. In connection with the offering, the placement agents or selected dealers
may distribute prospectuses electronically. No forms of electronic prospectus other than prospectuses that are printable as Adobe®
PDF will be used in connection with this offering.
Other than the prospectus in electronic format,
the information on each of the placement agents’ websites and any information contained in any other website maintained by the
placement agents is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved
and/or endorsed by us or either placement agent in its capacity as placement agent and should not be relied upon by investors.
Certain Relationships
Each placement agent and its affiliates have
and may in the future provide, from time to time, investment banking and financial advisory services to us in the ordinary course of
business, for which they may receive customary fees and commissions.
Selling Restrictions
Canada. The securities may be sold
in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National
Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted
clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.
Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements
of applicable securities laws.
Securities legislation in certain provinces or territories of Canada
may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment thereto) contains
a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed
by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions
of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal
advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting
Conflicts (NI 33-105), the placement agents are not required to comply with the disclosure requirements of NI 33-105 regarding
placement agents conflicts of interest in connection with this offering.
European Economic Area. In
relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member
State”) an offer to the public of any securities may not be made in that Relevant Member State, except that an offer to the public
in that Relevant Member State of any securities may be made at any time under the following exemptions under the Prospectus Directive,
if they have been implemented in that Relevant Member State:
| · | to
any legal entity which is a qualified investor as defined in the Prospectus Directive; |
| · | to
fewer than 100 or, if the Relevant Member State has implemented the relevant provision of
the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors
as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject
to obtaining the prior consent of the representatives for any such offer; or |
| · | in
any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of securities shall result in a requirement for the publication
by us or any placement agents of a prospectus pursuant to Article 3 of the Prospectus
Directive. |
For the purposes of this provision, the expression an “offer
to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means
of sufficient information on the terms of the offer and any securities to be offered so as to enable an investor to decide to purchase
any securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State,
the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending
Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member
State, and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
Israel. This document does not constitute
a prospectus under the Israeli Securities Law, 5728-1968, or the Securities Law, and has not been filed with or approved by the Israel
Securities Authority. In the State of Israel, this document is being distributed only to, and is directed only at, and any offer of the
shares is directed only at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily
of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of
the Tel Aviv Stock Exchange, placement agents, venture capital funds, entities with equity in excess of NIS 50 million and “qualified
individuals”, each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors
(in each case purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors
listed in the Addendum). Qualified investors will be required to submit written confirmation that they fall within the scope of the Addendum,
are aware of the meaning of same and agree to it.
United Kingdom.
Each placement agent has represented and agreed that:
| · | it
has only communicated or caused to be communicated and will only communicate or cause to
be communicated an invitation or inducement to engage in investment activity (within the
meaning of Section 21 of the Financial Services and Markets Act 2000 (the FSMA) received
by it in connection with the issue or sale of the securities in circumstances in which Section 21(1) of
the FSMA does not apply to us; and |
| · | it
has complied and will comply with all applicable provisions of the FSMA with respect to anything
done by it in relation to the securities in, from or otherwise involving the United Kingdom. |
Switzerland. The securities may
not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (the SIX) or on any other stock exchange or regulated
trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses
under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff.
of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither
this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or
otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material
relating to the offering, or the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular,
this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority
FINMA, and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes
(CISA). Accordingly, no public distribution, offering or advertising, as defined in CISA, its implementing ordinances and notices, and
no distribution to any non-qualified investor, as defined in CISA, its implementing ordinances and notices, shall be undertaken in or
from Switzerland, and the investor protection afforded to acquirers of interests in collective investment schemes under CISA does not
extend to acquirers of securities.
Australia. No placement document,
prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments
Commission (ASIC), in relation to the offering.
This prospectus does not constitute a prospectus, product disclosure
statement or other disclosure document under the Corporations Act 2001 (the Corporations Act) and does not purport to include the information
required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the securities may only be made to persons
(the Exempt Investors) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act),
“professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or
more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to investors
under Chapter 6D of the Corporations Act.
The securities applied for by Exempt Investors in Australia must not
be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where
disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of
the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations
Act. Any person acquiring securities must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take
account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities
recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information
in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Notice to Prospective Investors in the Cayman
Islands. No invitation, whether directly or indirectly, may be made to the public in the Cayman Islands to subscribe for our
securities.
Taiwan. The securities have not
been and will not be registered with the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations
and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which constitutes an offer within
the meaning of the Securities and Exchange Act of Taiwan that requires a registration or approval of the Financial Supervisory Commission
of Taiwan. No person or entity in Taiwan has been authorized to offer, sell, give advice regarding or otherwise intermediate the offering
and sale of the securities in Taiwan.
Notice to Prospective Investors in Hong
Kong. The contents of this prospectus have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise
caution in relation to the offer. If you are in any doubt about any of the contents of this prospectus, you should obtain independent
professional advice. Please note that (i) our shares may not be offered or sold in Hong Kong, by means of this prospectus or any
document other than to “professional investors” within the meaning of Part I of Schedule 1 of the Securities and Futures
Ordinance (Cap.571, Laws of Hong Kong) (SFO) and any rules made thereunder, or in other circumstances which do not result in the
document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong) (CO) or which do
not constitute an offer or invitation to the public for the purpose of the CO or the SFO, and (ii) no advertisement, invitation
or document relating to our shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether
in Hong Kong or elsewhere) which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong
(except if permitted to do so under the securities laws of Hong Kong) other than with respect to the shares which are or are intended
to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the SFO and
any rules made thereunder.
Notice to Prospective Investors in the People’s
Republic of China. This prospectus may not be circulated or distributed in the PRC and the shares may not be offered or
sold, and will not offer or sell to any person for re-offering or resale directly or indirectly to any resident of the PRC except pursuant
to applicable laws, rules and regulations of the PRC. For the purpose of this paragraph only, the PRC does not include Taiwan and
the special administrative regions of Hong Kong and Macau.
LEGAL MATTERS
McGuireWoods LLP, Charlotte, North Carolina, will pass upon the validity
of the securities we are offering by this prospectus. The placement agents are being represented in connection with this offering by
Ellenoff Grossman & Schole LLP.
EXPERTS
The consolidated financial statements of Avenue Therapeutics, Inc.
as of December 31, 2022 and for the year ended December 31, 2022, have been incorporated by reference herein and in the registration
statement in reliance on the report of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and
upon the authority of said firm as experts in auditing and accounting. The audit report covering the December 31, 2022 consolidated
financial statements contains an explanatory paragraph that states the Company has incurred substantial operating losses since its inception
and expects to continue to incur significant operating losses for the foreseeable future that raise substantial doubt about the Company’s
ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the
outcome of that uncertainty.
The financial statements of Avenue Therapeutics, Inc. as of December 31,
2021 and for the year ended December 31, 2021 incorporated by reference in this prospectus and in the registration statement have
been so incorporated in reliance on the report of BDO USA, LLP (n/k/a BDO USA, P.C.), an independent registered public accounting firm,
incorporated herein by reference, given on the authority of said firm as experts in auditing and accounting. The report on the financial
statements contains an explanatory paragraph regarding the Company's ability to continue as a going concern.
The financial statements of Baergic Bio, Inc. as of December 31,
2021 and 2020 and for each of the years in the two-year period ended December 31, 2021, have been incorporated by reference herein
and in the registration statement in reliance on the report of KPMG LLP, independent registered public accounting firm, incorporated
by reference herein, and upon the authority of said firm as experts in auditing and accounting. The audit report covering the December 31,
2021 financial statements contains an emphasis of matter paragraph that states that the Company’s recurring losses from operations
raise substantial doubt about the entity’s ability to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of that uncertainty.
WHERE YOU CAN FIND MORE
INFORMATION
We file reports and proxy statements with the SEC. These filings include
our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and proxy statements on Schedule
14A, as well as any amendments to those reports and proxy statements, which are available free of charge through our website as soon
as reasonably practicable after we file them with, or furnish them to, the SEC. Our Internet website address is www.avenuetx.com. Our
website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference
in, and are not considered part of, this prospectus. You should not rely on any such information in making your decision whether to purchase
our securities. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements and other information
regarding us and other issuers that file electronically with the SEC.
We have filed with the SEC a registration statement on Form S-1
under the Securities Act relating to the securities being offered by this prospectus. This prospectus, which constitutes part of that
registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules
which are part of the registration statement. For further information about us and the securities offered, see the registration statement
and the exhibits and schedules thereto. Statements contained in this prospectus regarding the contents of any contract or any other document
to which reference is made are not necessarily complete, and, in each instance where a copy of a contract or other document has been
filed as an exhibit to the registration statement, reference is made to the copy so filed, each of those statements being qualified in
all respects by the reference.
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” into this
prospectus the information we file with the SEC in other documents, which means that we can disclose important information to you by
referring you to those documents instead of having to repeat the information in this prospectus. The information incorporated by reference
is considered to be part of this prospectus, and later information that we file with the SEC will automatically update and supersede
such information. We incorporate by reference the documents listed below and any future information filed (rather than furnished) with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this prospectus and the date all securities
to which this prospectus relates have been sold or the offering is otherwise terminated and also between the date of the initial registration
statement and prior to effectiveness of the registration statement, provided, however, that we are not incorporating any information
furnished under Item 2.02 or Item 7.01 of any Current Report on Form 8-K:
| · | our
Quarterly Reports on Form 10-Q for the quarter ended March 31, 2023, filed with
the SEC on May 12,
2023 and for the quarter ended June 30, 2022, filed with the SEC on August 11,
2023; and |
| · | our
Current Reports on Form 8-K and Form 8-K/A filed with the SEC on January 25,
2023, February 1,
2023, February 3,
2023, February 10,
2023, March 2,
2023, March 8,
2023, March 30,
2023, April 17,
2023, May 12,
2023, May 22,
2023, June 26,
2023, July 5,
2023, July 21,
2023, August 10,
2023, September 8,
2023, September 27,
2023 and September 28,
2023. |
We will furnish without charge to you a copy of any or all of the
documents incorporated by reference, including exhibits to these documents, upon written or oral request. Direct your written request
to: Corporate Secretary, Avenue Therapeutics, Inc., 1111 Kane Concourse, Suite 301, Bay Harbor Islands, Florida 33154, or (781) 652-4500.
A statement contained in a document incorporated by reference into
this prospectus shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained
in this prospectus, any prospectus supplement or in any other subsequently filed document which is also incorporated in this prospectus
modifies or replaces such statement. Any statements so modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
3,853,400 Units, Each Consisting of
(A) One Share of Common Stock, (B) One Series A Warrant to Purchase One Share of Common Stock and (C) One Series B
Warrant to Purchase One Share of Common Stock
12,780,000
Pre-Funded Units, Each Consisting of (A) One Pre-funded Warrant to Purchase One Share of Common Stock, (B) One Series A
Warrant to Purchase One Share of Common Stock and (C) One Series B Warrant to Purchase One Share of Common Stock
16,633,400 Shares of Common Stock Underlying
the Series A Warrants
16,633,400 Shares of Common Stock Underlying
the Series B Warrants
12,780,000 Shares of Common Stock Underlying
the Pre-funded Warrants
PROSPECTUS
October 31, 2023
Placement Agents
Maxim Group
LLC |
Lake Street |
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