Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing at the end of this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should read “Cautionary Note Regarding Forward-Looking Statements” and Item 1A. Risk Factors of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Company Overview

We are a clinical stage, drug platform company addressing neurodegeneration, such as Alzheimer’s disease (“AD”) and Parkinson’s disease (“PD”). We are developing our lead product candidate, Buntanetap, which is designed to address AD, PD and potentially other chronic neurodegenerative diseases. Buntanetap is a synthetically produced small molecule, orally administered, brain penetrant compound. In several studies, Buntanetap was observed to inhibit the synthesis of neurotoxic proteins—APP/Aβ

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(“APP”), tau/phospho-tau (“tau”) and α-Synuclein (“αSYN”)—that are one of the main causes of neurodegeneration. High levels of neurotoxic proteins lead to impaired axonal transport, which is responsible for the communication between and within nerve cells. When that communication is impaired, the immune system is activated and attacks the nerve cells, eventually killing them. We have observed in our clinical studies in early AD and early PD patients and pre-clinical studies in mice and rats that Buntanetap lowered neurotoxic protein levels leading to improved axonal transport, reduced inflammation, lower nerve cell death and improved affected function.

In 2021, we completed two Phase 1/2 clinical studies: one in 14 early AD patients, and one in 54 early PD patients (together, the “AD/PD Trials”). In collaboration with the Alzheimer’s Disease Cooperative Study (“ADCS”), we also conducted a trial in 16 early AD patients (the “ADCS Trial”). All three clinical trials were double-blind, placebo-controlled studies. We designed the studies by applying our understanding of the underlying neurodegenerative disease states, and measured both target and pathway validation in the spinal fluid of patients to determine whether patients improved following treatment. In addition to meeting their primary endpoints of safety and tolerability and secondary endpoint of pharmacokinetics of Buntanetap, our AD/PD Trials met exploratory endpoints of measures of biomarkers and improvements in cognition in AD patients, and in function in PD patients. Following completion of the AD/PD Trials, we submitted our data to the U.S. Food and Drug Administration (“FDA”) and requested direction to further pursue the development of Buntanetap in early PD patients. With the FDA’s guidance, we initiated a Phase 3 study in early PD patients in August 2022 (our “Phase 3 PD Study”). We also submitted a proposed protocol for the treatment of moderate AD to the FDA, and after receiving permission to proceed, we initiated a Phase 2/3 study in mild to moderate AD patients in February 2023 (our “Phase 2/3 AD Study”). At the completion of the ADCS Trial, the data showed that Buntanetap is a translational inhibitor in humans just like in animals, and we further observed that there was statistical improvement in cognition in early AD patients, just like in the AD/PD Trials. Our Phase 3 PD Study and Phase 2/3 AD Study each have built in interim analyses, which were both promising.

Based on the results of the interim analysis, we proceeded with the Phase 3 PD and with the Phase 2/3 AD Study as planned in accordance with the previously established protocol. Both studies have been completed and presently we are organizing and cleaning the data, while we are still blinded to all data. We plan to consult with the FDA following completion of the full analyses of the two studies, to obtain feedback on our planned AD and PD studies, including conducting disease-modifying studies and open label extensions. By the end of 2026, our goal is to have conducted the required pivotal studies for Buntanetap to be able to file two new drug applications (“NDAs”) with the FDA.

We believe that we are the only company developing a drug for AD and PD that is designed to inhibit more than one neurotoxic protein and has a mechanism of action designed to restore nerve cell axonal and synaptic activity. By improving brain function, our goal is to treat memory loss and dementia associated with AD as well as body and brain function associated with PD. Based on pre-clinical and clinical data collected to date, we believe that Buntanetap has the potential to be the first drug to interfere with the underlying mechanism of neurodegeneration, potentially enabling Buntanetap to be the only drug to improve cognition in AD and motor function in PD. The industry has encountered challenges in specifically targeting one neurotoxic protein, be it APP, tau or αSYN, indicating that doing so does not change the course of neurodegeneration. Our goal is to develop a disease modifying drug (“DMD”) for patients with neurodegeneration by leveraging our clinical and pre-clinical data to inhibit the three most relevant neurotoxic proteins. Studies have found that AD and PD are the most common neurodegenerative diseases in the U.S., and accordingly these diseases present two unmet needs of the aging population and two potentially large U.S. markets if a DMD is developed and approved.

We have never been profitable and have incurred net losses since inception. Our accumulated deficit at December 31, 2023 was $110,259,087. We expect to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when we will be able to achieve or maintain profitability, if at all.

Financial Operations Overview

The following discussion sets forth certain components of our statements of operations as well as factors that impact those items.

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Research and Development Expenses

Our research and development (“R&D”) expenses consist of expenses incurred in development and clinical studies relating to our product candidates, including:

● expenses associated with clinical development;

Research and development costs are either expensed as incurred or recorded separately as a prepaid asset, and the expense recognized when the service is performed. Clinical development expenses for our product candidates are a significant component of our current research and development expenses. Product candidates in later stage clinical development generally have higher research and development expenses than those in earlier stages of development, primarily due to increased size and duration of the clinical trials. We track and record information regarding external research and development expenses for each study or trial that we conduct. From time to time, we use third-party CROs, contractor laboratories and independent contractors in clinical studies. We recognize the expenses associated with third parties performing these services for us in our clinical studies based on the percentage of each study completed at the end of each reporting period.

Our research and development expenses in 2023 were primarily related to our Phase 3 study in early PD patients and our Phase 2/3 study in AD patients. Our research and development expenses in 2022 were primarily related to our Phase 3 study in early PD patients. We expect that our research and development expenses in 2024 and for the next several years will continue to remain elevated as a result of costs associated with completing our Phase 3 trial for PD, our Phase 2/3 trial for AD and subsequent planned activities leading up to an NDA filing with the FDA. These expenditures are subject to numerous uncertainties regarding timing and cost to achieve completion. Completion of our clinical development and clinical trials may take several years or more and the length of time generally varies according to the type, complexity, novelty and intended use of our product candidates. The cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development.

Due to the stage of our research and development, we are unable to accurately determine the duration or completion costs of our development of Buntanetap. As a result of the difficulties of forecasting research and development costs of Buntanetap as well as the other uncertainties discussed above, we are unable to determine when and to what extent we will generate revenues from the commercialization and sale of approved product candidates.

General and Administrative Expenses

General and administrative (“G&A”) expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our executive, finance, accounting, and administrative functions. Our general and administrative expenses also include professional fees for legal services, including patent-related expenses, consulting, tax and accounting services, insurance, rent and general corporate expenses. We expect that our general and administrative expenses will increase with the continued development and potential commercialization of our product candidates. We expect that our general and administrative expenses in 2024 and for the next several years will be significantly higher than in 2023 as we increase our employee count.

Income Taxes

As of December 31, 2023, the Company had U.S. federal net operating loss (“NOL”) carryforwards of $38,085,386 which may be available to offset future income tax liabilities. Federal NOL carryforwards generated in 2017 and prior of $2,764,240 will expire beginning 2032. The remaining federal NOL carryforwards generated beginning in 2018, do not expire. NOL carryforwards generated beginning in 2018 are permitted to offset 80% of taxable income in future years. As of December 31, 2023, the Company also had U. S. state NOL carryforwards of $40,632,269 which may be available to offset future income tax liabilities and will expire beginning in 2028.

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NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service (the “IRS”) and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code. This could substantially limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on our value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. We have not yet conducted a comprehensive study to assess whether a change of ownership as defined by Section 382 has occurred since our inception.

Results of Operations

Years ended December 31, 2023 and 2022

Operating expenses and other income were comprised of the following:

Year Ended

December 31,

(in thousands)

Operating expenses:

Other income (expense):

Change in fair value of warrants $ (11,837.2) $ —

Research and Development Expenses

Research and development expenses increased by $22,275.1 thousand for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily the result of an increase of $23,707.8 thousand in expenses related to our clinical trial and CMC costs, due to the fact that our primary CROs and other outsource partners were fully operational and conducting Phase 2 and Phase 3 studies for all of 2023. This increase is partially offset by a decrease of $1,160.9 thousand for R&D stock-based compensation expense, driven by lower fair values being amortized in 2023 as compared to 2022 as a result of lower stock price and a decrease of $452.2 thousand for lower employee cost allocations to R&D.

General and Administrative Expenses

General and administrative expenses decreased by $2,751.3 thousand for the year ended December 31, 2023, compared to the year ended December 31, 2022. The decrease was primarily the result of decreases of $3,363.3 thousand in stock-based compensation expense, driven by lower fair values being amortized in 2023 as compared to 2022 as a result of lower stock price, decreases of $237.9 thousand employee in related costs related to lower cash bonuses accrued in 2023, as well as a decrease in corporate insurance expense of $204.6 thousand given lower renewal premiums year over year. These decreases were partially offset by increases of $942.3 thousand for professional fees relating primarily to increased accounting, audit and legal costs incurred as a result of the material weakness identified in 2023 and associated remediation efforts.

Change in Fair Value of Warrants

Change in fair value of warrants decreased by $11,837.2 thousand for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was attributable to the loss on the change in fair value of our liability-classified Canaccord Warrants from the date of issuance in the fourth quarter of 2023 to December 31, 2023. The change in fair value was primarily driven by the change in our stock price during the fourth quarter of 2023.

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Interest Income

Interest income increased $487.8 thousand for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily the result of higher interest rates compared to the prior year being earned on our cash and cash equivalents.

Liquidity and Capital Resources

Since our inception in 2008, we have devoted most of our cash resources to research and development and general and administrative activities. We have financed our operations primarily with the proceeds from the sale of common stock, convertible preferred stock and convertible promissory notes. To date, we have not generated any revenues from the sale of products, and we do not anticipate generating any revenues from the sales of products for the foreseeable future. We have incurred losses and generated negative cash flows from operations since inception. As of December 31, 2023, our principal source of liquidity was our cash and cash equivalents, which totaled $5,754.7 thousand.

Equity Financings

On March 31, 2023, the Company, entered into an ATM Equity Offering Sales Agreement SM (the “Sales Agreement”) with BofA Securities, Inc. (“BofA”) and ThinkEquity LLC (“ThinkEquity” and, together with BofA, the “Sales Agents”), as sales agents, pursuant to which the Company may offer and sell, from time to time through the Sales Agents, shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $50.0 million.

On April 4, 2023, the Company delivered written notice to BofA and ThinkEquity to terminate the Sales Agreement, effective April 9, 2023, pursuant to Section 9(a) of the Sales Agreement. The Company is not subject to any termination penalties related to the termination of the Sales Agreement.

Prior to termination of the Sales Agreement, the Company sold 704,000 shares of Common Stock pursuant to the Sales Agreement at a price of $10.88 per share, for gross proceeds of $7.60 million before commissions. As a result of the termination of the Sales Agreement, the Company will not offer or sell any additional shares of Common Stock under the Sales Agreement.

On April 7, 2023, the Company sold 84,453 shares of its common stock in a private placement to individual members of its Board of Directors and management at a price of $12.61 per share, for aggregate proceeds of $1.06 million.

On October 31, 2023, the Company, entered into an Underwriting Agreement (the “Underwriting Agreement”) with Canaccord Genuity LLC relating to the sale of 1,250,000 units consisting of (i) one share of its common stock and (ii) an accompanying warrant (the “Canaccord Warrants”; each warrant was to purchase one share of common stock). The public offering price was $6.00 per unit. Each common stock warrant sold with the shares of common stock represents the right to purchase one share of our common stock at an exercise price of $9.00 per share, and redeemable at the Company’s option, in whole or in part, at a redemption price equal to $0.001 per warrant upon 30 days’ prior written notice, at any time after (i) the Company’s public announcement of Positive Topline Data (as defined in the Warrant Agreement) from its Phase 3 pivotal study in patients with Parkinson’s Disease and (ii) the date on which (a) the closing price of the Company’s common stock on the principal exchange or trading facility on which it is then traded has equaled or exceeded $14.25 and (b) the average daily trading value (ADTV) of the Company’s common stock is equal to or exceeds $2.0 million for two consecutive Trading Days. The Canaccord Warrants are exercisable immediately and will expire on November 2, 2028, five years from the date of issuance. The net proceeds from the offering were approximately $6.83 million, after deducting underwriting discounts, commissions and offering expenses and excluding the exercise of any warrants.

On November 27, 2023, the Company sold 207,660 shares of its common stock in a private placement to individual members of its Board of Directors and management at a price of $6.10 per share, for aggregate proceeds of $1.27 million.

On December 28, 2023, the Company received exercise notices for 50,000 of its Canaccord Warrants at an exercise price of $9.00 per share. These exercises resulted in aggregate proceeds of $0.42 million, net of underwriter commissions.

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Future Capital Requirements

We do not have sufficient capital on hand to fund our operations for the next 12 months and will need to raise additional capital to meet our obligations as they become due. We believe that our current cash and cash equivalents and funding from existing grants will be sufficient to fund our operating expenses and capital expenditure requirements until the second quarter of 2024, including our ongoing Phase 2/3 AD Trial and our ongoing Phase 3 PD Trial. We will need to raise substantial additional capital to complete the development and commercialization of our product candidates through public or private equity offerings, debt financings, collaboration and licensing arrangements or other financing alternatives. However, there can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to us. We have no committed external sources of funds. If we are unable to raise sufficient additional capital or defer sufficient operating expenses, we may be compelled to reduce the scope of our operations. Accordingly, we have concluded that substantial doubt exists with respect to our ability to continue as a going concern within one year after the date that these financial statements are issued.

We expect to incur significant operating losses for the foreseeable future, and for these losses to further increase, as we ramp up our clinical development programs and begin activities for commercial launch readiness. We may also encounter unforeseen expenses, difficulties, complications, delays and other currently unknown factors that could adversely affect our business.

Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

● the effects of competing technological and market developments;

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A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

Adequate funding may not be available to us on acceptable terms or at all. Our potential inability to raise capital when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to raise additional funds as required, we may need to delay, reduce, or terminate some or all development programs and clinical trials. We may also be required to sell or license our rights to product candidates in certain territories or indications that we would otherwise prefer to develop and commercialize ourselves. If we are required to enter into collaborations and other arrangements to address our liquidity needs, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially and adversely affect our business and financial prospects. See the section of this Annual Report on Form 10-K titled “Risk Factors” for additional risks associated with our substantial capital requirements.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities.

Year Ended

December 31,

(in thousands)

Statement of Cash Flows Data:

Total net cash used in:

Net decrease in cash and cash equivalents $ (22,623.0) $ (17,308.3)

Operating Activities

For the year ended December 31, 2023, cash used in operations was $39,967.3 thousand compared to $17,312.9 thousand for the year ended December 31, 2022. The increase in cash used in operations was primarily the result of the costs associated with our AD/PD Trials and higher personnel expenses.

We expect cash used in operating activities to increase in 2024 as compared to 2023 due to an expected increase in our operating losses associated with continued development of our product candidates and planned increases in our personnel count.

Financing Activities

Cash provided by financing activities was $17,344.3 thousand during the year ended December 31, 2023, which was primarily attributable to proceeds from issuance of common stock and warrants for capital raises, as well as proceeds from exercises of our Canaccord Warrants.

Cash provided by financing activities was $4.6 thousand during the year ended December 31, 2022, attributable to attributable to proceeds from the exercise of stock options.

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Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements during the periods presented, and we do not currently have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Use of Estimates

We have based our management’s discussion and analysis of financial condition and results of operations on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to clinical development expenses and stock-based compensation. The clinical development cost to advance any of our product candidates to marketing approval is substantial and involves numerous risks and uncertainties associated with pharmaceutical product development. As a result, we are unable to accurately predict the timing or amount of increased expenses and, as a result, clinical development expense could be materially different as the costs are incurred. We measure and record compensation expense using the applicable accounting guidance for share-based payments using the Black-Scholes option pricing model to value option awards which requires the use of subjective assumptions, including the expected life of the option and expected share price volatility. These assumptions used in calculating the fair value of stock-based awards represent our best estimates and involve inherent uncertainties and the application of judgment. As a result, if factors change and we used different assumptions, stock-based compensation expense could be materially different for stock-based awards.

While our significant accounting policies are more fully discussed in Note 2 to our audited financial statements appearing at the end of this Annual Report on Form 10-K, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements.

Research and Development Expenses and Clinical Trial Accruals

As part of the process of preparing the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we are required to estimate and record expenses, for which a large portion are research and development expenses. Research and development expenses include, among other categories, development, clinical trials, patent costs, and regulatory compliance costs incurred with research organizations, contract manufacturers, and other third-party vendors. We rely on third-parties to conduct our clinical studies and to provide many of these services, including data management, statistical analysis and electronic compilation. At the end of each reporting period, the estimation process involves identifying services that have been performed on our behalf by third-parties, estimating and accruing expenses in our consolidated financial statements based on the evaluation of the progress to completion of specific tasks and the facts and circumstances known to us at the time of the estimate, and assessing the accuracy of these estimates going forward to determine if adjustments are required. We periodically collaborate with our third-party vendors to assist in determining our estimates. Payments for these activities performed by our third-party vendors are based on the terms of the individual arrangements with our third-party vendors, which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid or accrued research and development expense, as applicable. We believe our estimates and assumptions are reasonable under the current conditions; however, actual results may differ from these estimates. Any changes to estimates will be recorded in the period in which a circumstance causing a change in estimate becomes known and the impact of any change in estimate could be material.

Stock-Based Compensation

We account for our stock-based compensation awards in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation—Stock Compensation (“ASC 718”). We have issued stock-based compensation awards that are stock options, in accordance with ASC 718. ASC 718 requires all stock-based payments, including grants of stock options, to be recognized in the consolidated statements of operations based on their grant date fair values. We use the Black-Scholes option-pricing model to determine the fair value of options granted. We recognize forfeitures as they occur. Expense related to stock-based compensation awards are recorded to research and development expense or general and administrative expense based on the underlying function of the individual that was granted the stock-based compensation award. Estimating the fair value of stock options requires the input of subjective assumptions, including the expected term of the stock option,

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stock price volatility, the risk-free interest rate, and expected dividends. The assumptions used in our Black-Scholes option-pricing model represent our best estimates and involve a number of variables, uncertainties, assumptions, and the application of our judgment, as they are inherently subjective.

The assumptions used in our Black-Scholes option-pricing model for stock options are as follows:

Expected Term. As we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term, the expected term of employee options is determined using the “simplified” method, as prescribed in SEC’s Staff Accounting Bulletin No. 107, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option.

Expected Volatility. The expected volatility is based on our historical volatilities and that of similar entities within our industry for periods commensurate with the assumed expected term.

Risk-Free Interest Rate. The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected term.

Expected Dividends. The expected dividend yield is 0% because we have not historically paid, and do not expect for the foreseeable future to pay, a dividend on our common stock.

Stock-based compensation expense was $4.6 million and $9.2 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had $2.2 million of unrecognized stock-based compensation expense, which is expected to be recognized over a remaining weighted-average period of 0.92 years.

Valuation of Common Stock Warrant Liabilities

The fair value of Common Stock Warrant Liabilities is determined using a Monte Carlo valuation model. Determining the appropriate fair value model and calculating the fair value of Common Stock Warrants requires considerable judgment. Any change in the estimates used may cause the value to be higher or lower than that reported. The Common Stock Warrants are not traded in an active market and the fair value is determined using valuation techniques. The estimates may be significantly different from those recorded in the financial statements because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market. All changes in the fair value are recorded in the statement of operations each reporting period.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (ASC 326), which changes how entities account for credit losses on financial assets and other instruments that are not measured at fair value through net income, including available-for-sale debt securities. The Company implemented the guidance as of January 1, 2023 and there was not a material impact on its results of operations or financial position.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves income tax disclosures by requiring: (1) consistent categories and greater disaggregation of information in the rate reconciliation, and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The ASU indicates that all entities will apply the guidance prospectively with an option for retroactive application to each period presented in the financial statements. The Company has not determined the impact ASU 2023-09 may have on the Company’s financial statement disclosures.

JOBS Act

Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an

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“emerging growth company” can delay the adoption of new or revised accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

This item is not required for smaller reporting companies.

Item 8. Financial Statements and Supplementary Data.

Our financial statements, accompanying notes and Report of Independent Registered Public Accounting Firm are included in this Annual Report on Form 10-K beginning on page F-1, which are incorporated in this Item 8 by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15I and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as our principal financial and accounting officer, to allow timely decisions regarding required disclosures.

Remediation of Previously Identified Material Weakness

In connection with the audit of our financial statements as of December 31, 2022 and 2021 and for the years ended December 31, 2022 and 2021, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness related to the proper classification of research and development expenses, which impacted our previously issued condensed financial statements as of and for the three months ended March 31, 2022, three and six months ended June 30, 2022 and three and nine months ended September 30, 2022.

Due to the actions taken by the Company to enhance existing controls and procedures, management has concluded that this material weakness has been remediated as of December 31, 2023. The remediation steps to address the material weakness and to improve our internal control over financial reporting included:

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Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management utilized the criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to assess the effectiveness of our internal control over financial reporting as of December 31, 2023. Based on the assessment, management has concluded that, as of December 31, 2023, our internal control over financial reporting was effective.

As an emerging growth company, management’s assessment of internal control over financial reporting was not subject to attestation by our independent registered public accounting firm.

Changes in Internal Control Over Financial Reporting

In our Annual Report on Form 10-K for the period ended December 31, 2022, we disclosed a material weakness in the Company's operation of effective internal control over financial reporting related to material amounts inappropriately classified as research and development expense which should have been classified as prepaid assets and other assets. Immediately after identification of the material weakness, management undertook remediation action items as described above. We believe these and other enhancements have increased Management’s ability to operate effectively and improved our internal controls over financial reporting. Based on our assessment of these enhancements, management has concluded that the material weakness has been remediated as of the end of the period covered by this Annual Report on Form 10-K.

Item 9B. Other Information.

On March 15, 2024, Annovis Bio, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an institutional investor (the “Buyer”). Pursuant to the terms of the Purchase Agreement, the Company has agreed to issue and sell to Investors an aggregate of 114,911 shares of Common Stock, 0.0001 par value per share (the “Common Shares”) at $8.92 per share for aggregate gross proceeds of $1,025,000.

On March 21, 2024, Annovis Bio, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an institutional investor (the “Buyer”). Pursuant to the terms of the Purchase Agreement, the Company agreed to issue and sell to Investors an aggregate of 316,455 shares of Common Stock, 0.0001 par value per share (the “Common Shares”) at $9.48 per share for aggregate gross proceeds of $3,000,000.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not Applicable.

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PART III

Item 10. Directors and Executive Officers and Corporate Governance.

We incorporate the information required by this Item 10 by reference to the definitive proxy statement for our 2024 annual meeting of shareholders, to be filed with the SEC.

The following is a list of our executive officers as of the date of this Annual Report.

Name Position

Maria Maccecchini President and Chief Executive Officer

Henry Hagopian Chief Financial Officer

Item 11. Executive Compensation.

We incorporate the information required by this Item 11 by reference to the definitive proxy statement for our 2024 annual meeting of shareholders, to be filed with the SEC.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

We incorporate the information required by this Item 12 by reference to the definitive proxy statement for our 2024 annual meeting of shareholders, to be filed with the SEC.

Equity Compensation Plan Information

Number of

securities to be issued Number of securities remaining

upon exercise of Weighted-average available for future issuance under

(a) (b) (c)

Equity compensation plans not approved by security holders 1,202,400 $ 9.00 —

Item 13. Certain Relationships and Related Transactions and Director Independence.

We incorporate the information required by this Item 13 by reference to the definitive proxy statement for our 2024 annual meeting of shareholders, to be filed with the SEC.

Item 14. Principal Accountants Fees and Services.

We incorporate the information required by this Item 14 by reference to the definitive proxy statement for our 2024 annual meeting of shareholders, to be filed with the SEC.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) Documents filed as part of this report:

3. Exhibits. See (b) below.

(b) Exhibits

ExhibitNumber Description of Exhibit

4.4 Description of Registrant’s Securities.

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ExhibitNumber Description of Exhibit

23.1 Consent of WithumSmith+Brown, PC.

23.2 Consent of Ernst & Young LLP

31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97.1 Clawback Policy

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Labels Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

+ Indicates management contract or compensatory plan.

None.

Item 16. Form 10-K Summary.

None.

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ANNOVIS BIO, INC.

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Page(s)

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42) F-2

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 100) F-3

Statements of Operations for the Years ended December 31, 2023 and 2022 F-5

Statements of Cash Flows for the Years ended December 31, 2023 and 2022 F-7

Notes to Financial Statements F-8

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Annovis Bio, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Annovis Bio, Inc. (the Company) as of December 31, 2023, the related statements of operations, changes in stockholders’ (deficit) equity and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

The Company's Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2023.

Philadelphia, Pennsylvania

March 29, 2024

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Annovis Bio, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Annovis Bio, Inc. (the “Company”), as of December 31, 2022 and the related statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2022 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt Regarding Going Concern

The accompanying financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note 1 to the financial statements, the entity has a history of recurring losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ WithumSmith+Brown, PC

We have served as the Company’s auditor from 2019 to 2023.

East Brunswick, New Jersey

March 31, 2023

PCAOB ID Number 100

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ANNOVIS BIO, INC.

Balance Sheets

As of December 31,

Assets

Current assets:

Liabilities and Stockholders’ Equity

Current liabilities:

Commitments and contingencies (Note 6)

Stockholders’ (deficit) equity:

See accompanying notes to financial statements.

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ANNOVIS BIO, INC.

Statements of Operations

Year Ended December 31,

Operating expenses:

Other income (expense):

Change in fair value of warrants (11,837,200) —

Income tax expense (benefit) — —

Basic and diluted loss per common share $ (6.23) $ (3.1)

See accompanying notes to financial statements.

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ANNOVIS BIO, INC.

Statements of Changes in Stockholders’ (Deficit) Equity

Stockholders’ (Deficit) Equity

Additional Total Total

Common Stock Paid-In Accumulated Stockholders’ (Deficit)

Shares Amount Capital Deficit Equity

See accompanying notes to financial statements.

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ANNOVIS BIO, INC.

Statements of Cash Flows

Year Ended December 31,

Cash flows from operating activities:

Change in fair value of warrants 11,837,200 —

Changes in operating assets and liabilities:

Cash flows from financing activities:

Proceeds from issuance of common stock and warrants, net 16,885,946 —

Proceeds from exercise of stock options 8,385 4,613

Proceeds from exercise of warrants 450,000 —

Net cash provided by financing activities 17,344,331 4,613

See accompanying notes to financial statements.

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Annovis Bio, Inc.

Notes to Financial Statements

December 31, 2023 and 2022

(1) Nature of Business and Management’s Plans

Annovis Bio, Inc. (the “Company” or “Annovis”) was incorporated on April 29, 2008, under the laws of the State of Delaware. Annovis is a clinical-stage drug platform company addressing neurodegeneration such as Alzheimer’s disease (“AD”) and Parkinson’s disease (“PD”). The toxic cascade in neurodegeneration begins with high levels of neurotoxic proteins which lead to impaired axonal transport, inflammation, death of nerve cells and loss of cognition and motor function. The Company’s lead product candidate, Buntanetap, is a small molecule administered orally that is designed to attack neurodegeneration by entering the brain and inhibiting the translation of multiple neurotoxic proteins thereby impeding the toxic cascade.

Going Concern

Since its founding, the Company has been engaged in organizational activities, including raising capital, and research and development activities. The Company has not generated substantial revenues and has not yet achieved profitable operations, nor has it ever generated positive cash flows from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. The Company is subject to those risks associated with any clinical stage pharmaceutical company that has substantial expenditures for research and development. There can be no assurance that the Company’s research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants. Further, the Company’s future operations are dependent on the success of the Company’s efforts to raise additional capital.

The Company has a history of incurring net losses and anticipates incurring additional losses until such time, if ever, that it can generate significant revenue from its product candidates currently in development. The Company’s primary source of capital has been the issuance of common stock and warrants to purchase common stock.

Since the Company’s inception, the Company has incurred losses and negative cash flows from operations. At December 31, 2023, the Company had cash and cash equivalents of $5.8 million and an accumulated deficit of $110.3 million. The Company’s net loss was $56.2 million and $25.3 million for the years ended December 31, 2023 and 2022, respectively. The Company follows the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 205-40, Presentation of Financial Statements-Going Concern, or ASC 205-40, which requires management to assess the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. The Company expects that its existing balance of cash and cash equivalents as of December 31, 2023, combined with cash raised in connection with its March 2024 financings, is not sufficient to fund operations for the period through one year after the date of this filing and therefore management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s plans to mitigate this risk include raising additional capital through equity financings, debt or other potential alternatives. Management’s plans may also include the deferral of certain operating expenses unless and until additional capital is received. However, there can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company, or that the Company will be successful in deferring certain operating expenses. As such, management concluded that such plans do not alleviate the substantial doubt. If the Company is unable to raise sufficient additional capital or defer sufficient operating expenses, the Company may be compelled to reduce the scope of its operations.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business, and do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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(2) Summary of Significant Accounting Policies

(a) Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

(b) Use of Estimates

In preparing the consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions include those used in the accounting for research and development contracts, including clinical trial accruals, common stock warrant liabilities, and the accounting and fair value measurement of equity instruments.

Basic net loss per share is determined using the weighted average number of shares of common stock outstanding during each period. Diluted net loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as stock options and warrants, which would result in the issuance of incremental shares of common stock. The computation of diluted net loss per shares does not include the conversion of securities that would have an anti-dilutive effect.

(d) Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents may include bank demand deposits and money market funds that invest primarily in certificates of deposit, commercial paper, and U.S. government agency securities and treasuries. The Company records interest income received on cash and cash equivalents to other income (expense), net in the consolidated statements of operations. The Company has significant cash balances at financial institutions which throughout the year regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse effect on the Company’s financial condition, results of operations, and cash flow.

(e) Issuance Costs Associated with Equity Issuances

Issuance costs incurred in connection with the Company’s equity issuances, which primarily consisted of direct incremental legal, printing, listing and accounting fees, are offset against proceeds received in the issuances and charged to additional paid-in capital in the period the equity issuance is completed.

(f) Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, “Fair Value Measurements,” equals or approximates the carrying amounts represented in the consolidated balance sheets, primarily due to their short-term nature, except for the derivative warrant liabilities (see Note 3).

(g) Common Stock Warrants

On October 31, 2023, the Company completed a registered direct offering with a single institutional investor whereby the Company sold (i) 1,250,000 shares of common stock and (ii) warrants to purchase an aggregate of 1,250,000 shares of common stock at an exercise price of $9.00 per share (“Canaccord Warrants”). The warrants are liability classified as they contain certain cash settlement adjustment features that are outside of the Company’s control or not deemed to be indexed to the Company’s stock. The

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warrant liabilities are recorded at fair value regardless of the timing of the redemption feature or the redemption price or the likelihood of redemption. These warrants are subject to re-measurement at each balance sheet date and any change in fair value is recognized as a component of change in fair value of warrant liability in the statements of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants. The warrants are classified as Level 3 liabilities.

(h) Research and Development

Research and development costs are either expensed as incurred or recorded separately as a prepaid asset, and the expense recognized when the service is performed and are primarily comprised of personnel-related expenses and external research and development expenses incurred under arrangements with third parties, such as contract research organizations and consultants. At the end of each reporting period, the Company compares the payments made to each service provider to the estimated progress towards completion of the related project. Factors that the Company considers in preparing these estimates include the number of patients enrolled in studies, milestones achieved, and other criteria related to the efforts of its vendors. These estimates will be subject to change as additional information becomes available. Depending on the timing of payments to vendors and estimated services provided, the Company will record net prepaid or accrued expenses related to these costs. Prepaid clinical expenses represent valid future economic benefits based on our contracts with our vendors and are realized in the ordinary course of business.

(i) Stock-Based Compensation

The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). The Company has issued stock-based compensation awards including stock options. ASC 718 requires all stock-based payments, including grants of stock options, to be recognized in the financial statements based on their grant date fair values. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options granted. The Company recognizes forfeitures as they occur.

Expense related to stock-based compensation awards granted with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term. Stock options have a contractual term of 10 years. Expense for stock-based compensation awards with performance-based vesting conditions is only recognized when the performance-based vesting condition is deemed probable to occur. Expense related to stock-based compensation awards are recorded to research and development expense or general and administrative expense based on the underlying function of the individual that was granted the stock-based compensation award.

Estimating the fair value of stock options requires the input of subjective assumptions, including the expected term of the stock option, stock price volatility, the risk-free interest rate, and expected dividends. The assumptions used in the Company’s Black-Scholes option-pricing model represent management’s best estimates and involve a number of variables, uncertainties, assumptions, and the application of management’s judgment, as they are inherently subjective. If any assumptions change, the Company’s stock-based compensation expense could be materially different in the future.

The assumptions used in the Company’s Black-Scholes option-pricing model for stock options are as follows:

Expected Term. As Annovis does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term, the expected term of employee stock options subject to service-based vesting conditions is determined using the “simplified” method, as prescribed in SEC’s Staff Accounting Bulletin No. 107, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the stock option.

Expected Volatility. The expected volatility is based on historical volatilities of Annovis and similar entities within the Company’s industry for periods commensurate with the assumed expected term.

Expected Dividends. The expected dividend yield is 0% because Annovis has not historically paid, and does not expect for the foreseeable future to pay, a dividend on its common stock.

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(j) Income Taxes

The Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2023 and 2022, the Company had a full valuation allowance against its deferred tax assets.

The Company is subject to the provisions of ASC 740, Income Taxes, which prescribes a more likely-than-not threshold for the financial statement recognition of uncertain tax positions. ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. There are currently no open federal or state tax audits. The Company has not recorded any liability for uncertain tax positions at December 31, 2023 or 2022.

(k) Recent Accounting Pronouncements

(3) Fair Value Measurements

The Company measures certain assets and liabilities at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date. The guidance in ASC 820 outlines a valuation framework and creates a fair value hierarchy that serves to increase the consistency and comparability of fair value measurements and the related disclosures. In determining fair value, the Company maximizes the use of quoted prices and observable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities.

Level 3—Valuations based on unobservable inputs and models that are supported by little or no market activity.

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The following tables provides the carrying value and fair value of certain financial assets and liabilities of the Company measured at fair value on a recurring basis as of December 31, 2023 and 2022:

Fair Value Measurement at

Carrying Value Level 1 Level 2 Level 3

Assets:

Liabilities:

Fair Value Measurement at

Carrying Value Level 1 Level 2 Level 3

Assets:

Liabilities:

Warrant Liability $ — $ — $ — $ —

Total liabilities measured and recorded at fair value $ — $ — $ — $ —

The Company did not transfer any financial instruments into or out of Level 3 classification, during the year ended December 31, 2023 and 2022. There were no Level 3 financial instruments outstanding as of and for the year ended December 31, 2022.

The common stock warrants issued in connection with the Company’s equity raise in November 2023 (Canaccord Warrants) were classified as liabilities at the time of issuance due to certain cash settlement adjustment features that are outside of the Company’s control or not deemed to be indexed to the Company’s stock. The warrant liability is remeasured each reporting period with the change in fair value recorded to other income (expense) in the statement of operations until the warrants are exercised, expired, reclassified, or otherwise settled. The fair value of the warrant liability was estimated using a Monte Carlo simulation model.

The estimated fair value of the Canaccord Warrants is determined using Level 3 inputs. Inherent in a Monte Carlo simulation model with the volatility calculated by back solving in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and other inputs. The Company estimates the volatility of its warrants based on implied volatility from the Company’s traded warrants. The risk-free interest rate is based on the market yield of U.S. Treasuries over a tenor commensurate with the remaining term to expiration. Any changes in these assumptions can change the valuation significantly.

The following table provides quantitative information regarding Level 3 fair value measurements inputs as their measurement dates:

Exercise Price $ 9.00 $ 9.00

Closing Stock Price $ 18.70 $ 6.16

Phase III data probability of success 60 % 60 %

Volatility 55 % 55 %

Term (time to expiration in years) 4.84 5.00

Redemption Hurdle Price 14.25 $ 14.25

Risk-Free Rate 3.9 % 4.7 %

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The Canaccord Warrants were exercisable immediately at an exercise price of $9.00 per unit, and redeemable at the Company’s option, in whole or in part, at a redemption price equal to $0.001 per Warrant upon 30 days’ prior written notice, at any time after:

The common stock warrants are exercisable immediately and will expire on November 2, 2028, five years from the date of issuance.

(4) Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

As of December 31,

(5) Accrued Expenses

Accrued expenses consisted of the following:

As of December 31,

(6) Commitments and Contingencies

(a) Research & Development

The Company has entered contracts with contract research organizations (CROs) and contract manufacturers (CMOs) related the Company’s clinical trials. The contracts require upfront payments, milestone payments, and pass through cost reimbursement, to be made. While the contracts are cancellable with (written) notice, the Company is obligated for payments for services rendered through the termination date of the project with the CRO/CMO.

(b) Leases

In November 2023, the Company entered into a short-term lease for office space, with an initial term of less than 12 months. Prior to entering into this lease, the Company was leasing its office facilities under a month-to-month short-term lease. Total rental expense, inclusive of both leases was $70,674 and $66,802 for the years ended December 31, 2023 and 2022, respectively.

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The Company has agreements with its executive officers that provide for severance payments to the employee upon termination of the agreement by the Company for any reason other than for cause, death or disability or by the employee for good reason. The maximum aggregate severance payments under the agreements were estimated to be $1,340,162 at December 31, 2023.

(d) Litigation

The Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows.

For both the years ended December 31, 2023 and December 31, 2022 the Company did not have any pending legal actions.

(7) Stockholders’ (Deficit) Equity

(a) Common Stock

1. Dividends

Subject to the rights of holders of all classes of Company stock outstanding having rights that are senior to or equivalent to holders of common stock, the holders of the common stock are entitled to receive dividends when and as declared by the Board of Directors (“Board”).

2. Liquidation

Subject to the rights of holders of all classes of stock outstanding having rights that are senior to or equivalent to holders of common stock as to liquidation, upon the liquidation, dissolution or winding up of the Company, the assets of the Company will be distributed to the holders of common stock.

3. Voting

The holders of common stock are entitled to one vote for each share of common stock held. There is no cumulative voting.

(b) Preferred Stock

Preferred stock may be issued from time to time by the Board in one or more series.

In conjunction with the Company’s Initial Public Offering (“IPO”), the Company granted the underwriters 100,000 warrants to purchase shares of Company common stock (“IPO Warrants”) at an exercise price of $7.50 per share, which is 125% of the initial public offering price. The warrants have a five-year term and were exercisable as of January 29, 2021. Warrants outstanding as of December 31, 2023 and 2022, were 2,400 and 2,400, respectively. The Company accounts for the warrants as a component of stockholders’ equity.

(d) March 2023 ATM

On March 31, 2023, the Company, entered into an At the Market (“ATM”) Equity Offering Sales Agreement SM (the “Sales Agreement” or “March 2023 ATM”) with BofA Securities, Inc. (“BofA”) and ThinkEquity LLC (“ThinkEquity” and, together with BofA, the “Sales Agents”), as sales agents, pursuant to which the Company may offer and sell, from time to time through the Sales Agents, shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $50.0 million.

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(e) April 2023 Private Placement

(f) November 2023 Equity Offering and Warrant Issuance

On October 31, 2023, the Company completed an underwritten offering with a Canaccord Genuity LLC whereby the Company sold (i) 1,250,000 shares of common stock and (ii) warrants (“Canaccord Warrants”) to purchase an aggregate of 1,250,000 shares of common stock at an exercise price of $9.00 per share. The warrants are exercisable immediately on the date of issuance and will expire five years after the date of issuance. The Company received $6.83 million in net cash proceeds after deducting underwriter discount and fees, as well as other third-party costs. The warrants are liability classified as they contain certain cash settlement adjustment features that are outside of the Company’s control or not deemed to be indexed to the Company’s stock, respectively.

The following is a roll forward of the Common Stock Warrant Liability from the date of issuance to December 31, 2023:

Issuance of Canaccord Warrants 2,449,001

Change in fair value of warrant liabilities 11,837,200

(g) Warrant Summary

As of December 31, 2023, the Company had the following common stock warrants outstanding:

Outstanding Outstanding Exercise

December 31, Exercised or December 31, price per Expiration

Classification 2022 Granted Expired 2023 share date

(h) November 2023 Private Placement

(8) Stock-Based Compensation

Effective upon the closing of the Company’s IPO on January 31, 2020, the Company’s 2019 Equity Incentive Plan (the “2019 Plan”) became effective, succeeding the Company’s previous equity incentive plan. No new options may be issued under the previous plan, although shares subject to grants which are cancelled or forfeited will again be available under the 2019 Plan. Effective June 1, 2021, the 2019 Plan was amended to increase the number of shares authorized to be issued from 1,000,000 to 2,000,000. As of December 31, 2023, 35,545 shares were available for future grants.

The 2019 Plan provides for grants to employees, members of the Board, consultants and advisors to the Company, in the form of stock options, stock awards and other equity-based awards. The amount and terms of grants are determined by the Board,

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except when they are below previously approved thresholds allowing the Company’s CEO to grant awards on a discretionary basis. Stock options generally have a maximum term of 10 years after date of grant and are exercisable in cash or as otherwise determined by the Board.

Stock-based compensation expense in the statements of operations, including the fair value of stock awards to consultants and advisors for services rendered, for the years ended December 31, 2023 and 2022 was as follows:

Year Ended

December 31,

Stock option activity for the years ended December 31, 2023, and 2022, was as follows:

Weighted

Average

Remaining

Weighted Contractual Aggregate

Number of Average Term Intrinsic

Shares Exercise Price (Years) Value

The aggregate intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was $1,111,688 and $803,357, respectively. As of December 31, 2023, there was $2,177,110 unrecognized compensation expense related to unvested options. That cost is expected to be recognized over a weighted-average period of 0.92 years.

During the years ended December 31, 2023 and 2022, the Company issued 367,329 and 348,294 options, respectively. Under the grant agreements for the 2023 stock option grants, 94,624 of the options vested immediately and 272,705 of the options vest in substantially equal quarterly installments over two years from the date of grant. Under the grant agreements for the 2022 stock option grants, 10,000 of the options vested immediately, 9,947 of the options vested on March 29, 2022, 9,947 of the options vest on March 31, 2023, 43,333 of the options vest on August 29, 2023, and 255,067 of the options vest in substantially equal quarterly installments over two years from the date of grant. 20,000 of the options have performance-based vesting conditions. As of December 31, 2022, it was not considered probable that the performance conditions would be achieved, and no compensation expense was recognized during the period related to these options. All of the options have a 10-year term prior to expiration.

The weighted average grant date fair value of options issued during the years ended December 31, 2023 and 2022 was $7.39 per share and $13.24 per share, respectively. The fair value was estimated using the Black Sholes option pricing model. The expected life of options was estimated using the simplified method, as the Company has limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment. The risk-free rate was based on the interest rate payable on U.S. Treasury securities at the time of grant for a period that is commensurate with the expected term of the option. Given the lack of a public market for the Company’s common stock prior to the IPO, the expected stock price volatility was based on a weighted approach that incorporates the historic daily volatility of the Company’s common stock since the IPO and the historic daily volatility of similar companies that have been publicly traded for a period commensurate with the expected term of the option. The expected

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dividend yield is 0% because the Company has not historically paid and does not expect for the foreseeable future to pay a dividend on its common stock. The weighted average assumptions used in the valuation of options granted were as follows:

Year Ended Year Ended

Risk-free interest rate 4.17 % 2.24 %

Expected life 5.5 5.9

Expected volatility 120 % 112 %

Expected dividend yield — —

Related Party Transaction

During the year ended December 31, 2023, the Company issued 4,068 non-qualified stock options to a member of its Board of Directors in consideration for the member’s agreement to serve as a consultant of the Company. The options were issued in two separate tranches, at grant prices of $9.56 per share and $7.39 per share, respectively.

(9) Net Loss Per Share

The Company has reported a net loss for the years ended December 31, 2023 and 2022, and the basic and diluted net loss per share attributable to common stockholders are the same for both years because all warrants and stock options have been excluded from the computation of diluted weighted-average shares outstanding because such securities would have an antidilutive impact.

The following table sets forth the computation of basic and diluted net loss per share:

Year Ended

December 31,

Numerator

Denominator

Net loss per share, basic and diluted $ (6.23) $ (3.10)

Potential common shares that are excluded from the computation of diluted weighted-average shares outstanding are as follows:

December 31,

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(10) Income Taxes

The federal and state provision (benefit) for income taxes was $0 for the years ended December 31, 2023 and 2022.

A reconciliation of income tax provision (benefit) computed at the statutory federal income tax rate to income taxes as reflected in the financial statements for the years ended December 31, 2023 and 2022 is as follows:

Year Ended

December 31,

Federal income tax benefit at statutory rate 21.0 % 21.0 %

State and local tax, net of federal benefit 3.1 % 5.7 %

State and local tax, change in rates (3.5) % 0.0 %

Permanent differences (0.4) % (1.5) %

Research and development credit 4.5 % 3.8 %

Stock-based compensation 0.4 % 0.8 %

Change in fair value of warrants (4.4) % 0.0 %

Change in valuation allowance (20.7) % (29.8) %

Effective income tax rate 0.0 % 0.0 %

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets are comprised of the following:

As of December 31,

Net deferred taxes $ — $ —

As of December 31, 2023, the Company had U.S. federal net operating loss (“NOL”) carryforwards of $38,085,386 which may be available to offset future income tax liabilities. Federal NOL carryforwards generated in 2017 and prior of $2,764,240 will expire beginning in 2032. The remaining federal NOL carryforwards generated in 2018 and later do not expire. As of December 31, 2023, the Company also had U.S. state NOL carryforwards of $40,632,269 which may be available to offset future income tax liabilities and will expire beginning in 2028.

The Company has recorded a full valuation allowance against its net deferred tax assets as of December 31, 2023 and 2022 because the Company has determined that is it more likely than not that these assets will not be fully realized due to historic net operating losses incurred. The Company recorded a net change in valuation allowance of $11,651,327 and $7,554,381 in the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, the Company had federal research and development tax credit carryforwards of $4,132,475 available to reduce future tax liabilities, which expire beginning in 2028.

Under the provisions of the Internal Revenue Code, the NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of

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the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed financings since its inception which may have resulted in a change in control as defined by Sections 382 and 383 of the Internal Revenue Code, or could result in a change in control in the future.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The Company’s tax years from 2020 to the present remain open for review. All open years may be examined to the extent that tax credits or NOL carryforwards are used in future periods. To the extent the Company utilizes any tax attributes from a tax period that may otherwise be closed due to statute expiration, the tax authorities may adjust the tax attributes upon their examination of the future period in which the attribute was utilized. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2023, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations.

Effective for tax years beginning after December 31, 2021, taxpayers are required to capitalize any expenses incurred that are considered incidental to research and experimentation (R&E) activities under IRC Section 174. While taxpayers historically had the option of deducting these expenses under IRC Section 174, the December 2017 Tax Cuts and Jobs Act mandates capitalization and amortization of R&E expenses for tax years beginning after December 31, 2021. Expenses incurred in connection with R&E activities in the US must be amortized over a 5-year period if incurred, and R&E expenses incurred outside the US must be amortized over a 15-year period. R&E activities are broader in scope than qualified research activities considered under IRC Section 41 (relating to the research tax credit). For the year ended December 31, 2023, the Company performed an analysis based on available guidance and determined that it will continue to be in a loss position even after the required capitalization and amortization of its R&E expenses. The Company will continue to monitor this issue for future developments, but it does not expect R&E capitalization and amortization to require it to pay cash taxes now or in the near future.

ANVS US Equity

ANVS · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors and Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions and Director Independence.

Item 14. Principal Accountants Fees and Services.

Item 15. Exhibits and Financial Statement Schedules.

Item 16. Form 10-K Summary.

ANVS US Equity☆

ANVS · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors and Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions and Director Independence.

Item 14. Principal Accountants Fees and Services.

Item 15. Exhibits and Financial Statement Schedules.

Item 16. Form 10-K Summary.

ANVS US Equity