ACER THERAPEUTICS INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

March 27, 2023 at 04:15 pm EDT

The following discussion of our financial condition and results of operations
should be read in conjunction with the accompanying financial statements and the
related footnotes thereto.

Overview

We are a pharmaceutical company focused on the acquisition, development, and
commercialization of therapies for serious rare and life-threatening diseases
with significant unmet medical needs. We identify and develop treatments where
science can be applied in new ways for use in diseases with high unmet need.

In the U.S., OLPRUVA™ (sodium phenylbutyrate) for oral suspension is approved
for the treatment of urea cycle disorders ("UCDs") involving deficiencies of
carbamylphosphate synthetase ("CPS"), ornithine transcarbamylase ("OTC"), or
argininosuccinic acid synthetase ("AS").1 We are also advancing a pipeline of
investigational product candidates, including EDSIVO™ (celiprolol) for the
treatment of vascular Ehlers-Danlos syndrome ("vEDS") patients with a confirmed
type III collagen (COL3A1) mutation, and ACER-801 (osanetant) for the treatment
of vasomotor symptoms ("VMS"), post-traumatic stress disorder ("PTSD"), and
prostate cancer. We also intend to explore additional lifecycle opportunities
for OLPRUVA™ (sodium phenylbutyrate) in various disorders where proof of concept
data exists, subject to additional capital.

Going Concern



The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the U.S. ("GAAP"), which contemplate
our continuation as a going concern. We have suffered recurring losses from
operations, negative cash flows from operations, have a net working capital
deficiency, have a net capital deficiency, and have minimum unencumbered liquid
assets requirements under our SWK Credit Agreement. While we have received
approval for OLPRUVATM, we have yet to launch the product and establish a source
of commercial product revenues and, as such, have been dependent on funding
operations through the sale of equity securities, through a collaboration
agreement, and through debt instruments. Since inception, we have experienced
significant losses and incurred negative cash flows from operations. We have an
accumulated deficit of $140.7 million as of December 31, 2022 and expect to
incur further losses over the foreseeable future as we develop our business. We
have spent, and expect to continue to spend, a substantial amount of funds in
connection with implementing our business strategy, including our planned
product development efforts and potential precommercial activities.

As of December 31, 2022, we had cash and cash equivalents of $2.3 million and
current liabilities of $19.0 million, which include $8.4 million associated with
deferred collaboration funding. Our cash and cash equivalents available at
December 31, 2022, together with the proceeds from the Second Term Loan (defined
below) of $7.0 million which funded on January 31, 2023, net proceeds from our
ATM (defined below) facility subsequent to December 31, 2022, totaling $4.0
million from the sale of 1,462,254 shares for gross aggregate proceeds of $4.1
million and an average per share price of $2.81 less offering costs of $0.1
million, and $2.7 million of gross proceeds from a sale of securities (including
2,335,000 shares of common stock and pre-funded warrants to purchase up to
585,306 shares of common stock pursuant to a registered direct offering as well
as warrants to purchase up to 2,920,306 shares of common stock in a concurrent
private placement) which closed on March 24, 2023 (see Note 12 to our financial
statements) (the "March 2023 Offering"), are expected to be sufficient to fund
our anticipated operating and capital requirements into the middle of the second
quarter of 2023.

We will need to raise additional capital to fund continued operations beyond the
middle of the second quarter of 2023. We may not be successful in our efforts to
raise additional funds or achieve profitable operations. We continue to explore
potential opportunities and alternatives to obtain the additional resources that
will be necessary to support our ongoing operations beyond the middle of the
second quarter of 2023, including raising additional capital through either
private or public equity or debt financing, or additional program collaborations
or non-dilutive funding, as well as using our ATM facility which has $29.4
million available as of March 24, 2022, although we suspended our ATM facility
in connection with the March 2023 Offering and entered into a related
restriction prohibiting us from entering into any agreement to issue or
announcing the issuance or proposed issuance of any

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shares of our common stock or securities convertible or exercisable into our
common stock, subject to certain exceptions, until April 24, 2023. (See At-the
Market Facility and Common Stock Purchase Agreement in Note 9 as well as Note 12
to our financial statements.) Moreover, due to the SEC's "baby shelf rules,"
which prohibit companies with a public float of less than $75 million from
issuing securities under a shelf registration statement in excess of one-third
of such company's public float, we are only able to issue a limited number of
shares under our ATM facility. From May 19, 2020 through March 24, 2023, we have
raised gross proceeds of $20.6 million from the ATM facility and gross proceeds
of $4.0 million from an equity line purchase agreement with Lincoln Park
(defined below), which equity line facility was completed on December 30, 2022.

On March 4, 2022, we entered into a Credit Agreement (the "SWK Credit
Agreement") with the lenders party thereto and SWK Funding LLC ("SWK"), as the
agent, sole lead arranger and sole bookrunner, which provided for a senior
secured term loan facility in an aggregate amount of $6.5 million in a single
borrowing (the "Original Term Loan"). The Original Term Loan funding closed on
March 14, 2022. The proceeds of the Original Term Loan were used to pay fees,
costs and expenses related to the SWK Credit Agreement, the Marathon Convertible
Note Purchase Agreement (as defined and described below) and the Marathon Credit
Agreement (as defined and described below) and for other working capital and
general corporate purposes. On August 19, 2022, we entered into an amendment
(the "First Amendment") to the SWK Credit Agreement, which extended the date
through which we have the option to capitalize interest on the SWK Credit
Agreement and which revised our minimum cash requirement under the Original Term
Loan. On January 30, 2023, we entered into a Second Amendment (the "Second
Amendment") to the SWK Credit Agreement. In addition to other provisions, the
Second Amendment provides for an additional senior secured term loan to be made
to us in an aggregate amount of $7.0 million in a single borrowing which funded
on January 31, 2023 (the "Second Term Loan", and together with the Original Term
Loan, the "SWK Loans").

The SWK Loans made under the SWK Credit Agreement, as amended by the Second
Amendment (the "Current SWK Credit Agreement") bear interest at an annual rate
of the sum of (i) 3-month SOFR, subject to a 1% floor, plus (ii) a margin of
11%, with such interest payable quarterly in arrears. In the event of default,
the interest rate will increase by 3% per annum over the contract rate effective
at the time of default but shall not be higher than the maximum rate permitted
to be charged by applicable laws. We have the option to capitalize such interest
commencing on the date on which the Original Term Loan was funded and continuing
until May 15, 2023. Due to topline results announced in March 2023 from our
Phase 2a proof of concept clinical trial to evaluate ACER-801 as a potential
treatment for moderate to severe VMS associated with menopause, which showed
that ACER-801 was safe and well-tolerated but did not achieve statistical
significance when evaluating ACER-801's ability to decrease the frequency or
severity of hot flashes in postmenopausal women, the principal amount of the SWK
Loans amortizes at a monthly rate of $0.6 million starting April 15, 2023, until
we have issued additional equity or subordinated debt resulting in net cash
proceeds of not less than $7.7 million (i.e., the sum of $10.0 million less the
net proceeds from the March 2023 Offering), at which point the SWK Loans would
revert to amortizing at a rate of $1.3 million payable quarterly. The final
maturity date of the SWK Loans is March 4, 2024. We have the option to prepay
the SWK Loans in whole or in part. Upon the repayment of the Original Term Loan
(whether voluntary or at scheduled maturity), we must pay an exit fee so that
SWK receives an aggregate amount (inclusive of all principal, interest and
origination and other fees paid to SWK under the SWK Credit Agreement on or
prior to the prepayment date) equal to 1.5 times the outstanding principal
amount of the Original Term Loan, plus any and all payment-in-kind interest
amounts. Upon the repayment of the Second Term Loan (whether voluntary or at
scheduled maturity), we must pay an exit fee so that SWK receives an aggregate
amount (inclusive of all principal, interest and origination and other fees paid
in cash to SWK under the SWK Credit Agreement with respect to the Second Term
Loan) equal to the outstanding principal amount of the Second Term Loan
(inclusive of payment-in-kind interest amounts) multiplied by: (i) if the
repayment occurs on or before April 15, 2023, 1.18, (ii) if the repayment occurs
on or after April 16, 2023 but prior to May 16, 2023, 1.28667, (iii) if the
repayment occurs on or after May 16, 2023 but prior to June 16, 2023, 1.39334,
and (iv) if the repayment occurs on or after July 16, 2023, 1.5. Due to topline
results announced in March 2023 from our Phase 2a proof of concept clinical
trial to evaluate ACER-801 as a potential treatment for moderate to severe VMS
associated with menopause, we are required to maintain for purposes of the SWK
Loans unencumbered liquid assets of not less than the lesser of (x) the
outstanding principal amount of the SWK Loans or (y) $3.0 million (as opposed to
$1.5 million for clause (y) prior to the announcement of such topline results).

The SWK Loans are secured by a first priority lien on all of our assets and any of our future subsidiaries pursuant to a Guarantee and Collateral Agreement entered into on March 4, 2022, between us and SWK, as agent


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(the "SWK Security Agreement"). The SWK Credit Agreement contains customary
representations and warranties and affirmative and negative covenants. We paid
to SWK $0.1 million in origination fees on the date on which the Original Term
Loan was funded.

In connection with the execution of the SWK Credit Agreement, we issued a
warrant (the "First SWK Warrant") to purchase 150,000 shares of our common stock
at an exercise price of $2.46 per share. In connection with the execution of the
First Amendment, we issued to SWK an additional warrant to purchase 100,000
shares of our common stock at an exercise price of $1.51 per share (such
warrant, the "Second SWK Warrant"). In connection with the execution of the
Second Amendment, we issued to SWK an additional warrant to purchase 250,000
shares of our common stock at an exercise price of $2.39 per share (such
warrant, the "Third SWK Warrant" and, together with the First SWK Warrant and
Second SWK Warrant, the "SWK Warrants"). SWK may exercise the SWK Warrants in
accordance with the terms thereof for all or any part of such shares of common
stock from the date on which the Original Term Loan was funded or such SWK
Warrant was issued, as applicable, until and including March 4, 2029.

On March 4, 2022, we also entered into a Secured Convertible Note Purchase
Agreement with MAM Aardvark, LLC ("Marathon") and Marathon Healthcare Finance
Fund, L.P. ("Marathon Fund" and together with "Marathon" each a "Holder" and
collectively the "Holders") (the "Marathon Convertible Note Purchase Agreement")
pursuant to which we issued and sold to the Holders secured convertible notes
(the "Marathon Convertible Notes") in an aggregate amount of up to $6.0 million
(the "Convertible Note Financing"). The Convertible Note Financing closed on
March 14, 2022. The proceeds of the Convertible Note Financing were used to pay
fees, costs and expenses related to the SWK Credit Agreement, the Marathon
Convertible Note Purchase Agreement and the Marathon Credit Agreement and for
other working capital and general corporate purposes. On January 30, 2023, we
entered into an Amendment Agreement (the "Marathon Amendment Agreement") with
Marathon and Marathon Fund with respect to the Marathon Convertible Notes.

The Marathon Convertible Notes bear interest at an annual rate of 6.5%, with
such interest payable quarterly; provided, however, that each of the Holders
have agreed to defer payment by us of accrued and unpaid interest on their
respective Marathon Convertible Note existing on the date of the Marathon
Amendment Agreement through March 31, 2023, with such deferred interest,
together with any accrued and unpaid interest on each Marathon Convertible Note
incurred after March 31, 2023, to be due and payable in cash by us on April 15,
2023. Subject to the restrictions set forth in a subordination agreement among
each of the Holders and SWK, as agent and lender, we are required to repurchase
each Marathon Convertible Note, on or before the fifth (5th) business day (but
with five (5) business days' notice) following the earlier of June 15, 2023 or
our receipt of gross proceeds of at least $40.0 million from the issuance or
sale of equity, debt and/or hybrid securities, loans or other financing on a
cumulative basis since January 1, 2023 (excluding the Second Term Loan), at a
price equal to 200% (the "Buy-Out Percentage") of the outstanding principal
amount of such Marathon Convertible Note, together with any accrued but unpaid
interest thereon to the date of such repurchase; provided, that if we are
prohibited from effectuating such repurchases pursuant to the subordination
agreement with SWK, we are required to cause the repurchase to occur on or
before the fifth (5th) business day following the earlier of such prohibition
being no longer applicable or the payment in full of all senior indebtedness
described in such subordination agreement, but with five (5) business days'
notice; and provided, further, that if such repurchase has not occurred by April
15, 2023, the Buy-Out Percentage shall be increased by 2500 basis points for
each 90-day period after April 15, 2023, pro-rated for the actual number of days
elapsed in the 90-day period before repurchase actually occurs (for example, if
the repurchase occurs on May 30, 2023, the Buy-Out Percentage shall be increased
to 212.5%). Each of the Holders also has the right to convert all or any portion
of the outstanding principal amount plus any accrued but unpaid interest under
the Marathon Convertible Note held by such Holder into shares of common stock at
a conversion price of $2.50 per share, subject to adjustment. Each Holder has
certain rights with respect to the registration by us for resale of the shares
of common stock issuable upon conversion of the Marathon Convertible Note held
by such Holder which are forth in the Marathon Convertible Note Purchase
Agreement. Any outstanding principal, together with all accrued and unpaid
interest, will be payable on the earlier of the third anniversary of the date of
issuance, or upon a change of control of us.

Pursuant to the Marathon Convertible Note Purchase Agreement, the Marathon Convertible Notes are secured by a lien on collateral representing substantially all of our assets, although such security interest is subordinated to our obligations under the SWK Credit Agreement.


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On March 4, 2022, we also entered into a Credit Agreement (the "Marathon Credit
Agreement") with the lenders party thereto and Marathon, as the agent, sole lead
arranger and sole bookrunner, which provided for a senior secured term loan
facility in an aggregate amount of up to $42.5 million in a single borrowing
(the "Term Loan"). The Term Loan was available to be borrowed only following
full FDA approval for marketing of ACER-001 and until December 31, 2022. We
received approval for our NDA for ACER-001 on December 22, 2022, and we and
Marathon agreed to an Extension Agreement with respect to the Term Loan on
December 30, 2022, which extended the commitment date for funding the Term Loan
to January 16, 2023. We elected to terminate the Marathon Credit Agreement by
entering into a Termination Agreement on January 30, 2023, which terminated the
Credit Agreement and an associated Royalty Agreement.

On March 19, 2021, we entered into the Collaboration Agreement with Relief
providing for the development and commercialization of OLPRUVATM for the
treatment of various inborn errors of metabolism, including for the treatment of
UCDs and MSUD. The Collaboration Agreement is the culmination of the option
agreement (the "Option Agreement," together the "Agreements") previously entered
into between us and Relief on January 25, 2021. Pursuant to the Agreements, we
received from Relief an upfront non-refundable payment of $1.0 million and a
reimbursement payment of $14.0 million. Under the terms of the Collaboration
Agreement, Relief committed to pay us Development Payments (the "Development
Payments") of up to an additional $20.0 million for U.S. development and
commercial launch costs for the UCDs and MSUD indications. During the three
months ended June 30, 2021, we received from Relief the $10.0 million First
Development Payment. We were contractually entitled to receive from Relief an
additional $10.0 million Second Development Payment conditioned upon the FDA's
acceptance of an NDA for OLPRUVATM in a UCD for filing and review. This
acceptance was received on October 4, 2021. On October 6, 2021, we entered into
a Waiver and Agreement with Relief to amend the timing for the Second
Development Payment. We received the Second Development Payment in two $5.0
million tranches on each of October 12, 2021 and January 14, 2022. We could also
receive a total of $6.0 million in milestone payments based on the first
European marketing approvals of OLPRUVATM for a UCD and MSUD. The terms of the
Agreements are further described in Critical Accounting Estimates later in this
section and in the Revenue Recognition and Accounting for Collaboration
Agreements section of Note 2 to our financial statements.

If we are unable to obtain additional funding to support our current or proposed
activities and operations, we may not be able to continue our operations as
proposed, which may require us to suspend or terminate any ongoing development
activities, modify our business plan, curtail various aspects of our operations,
cease operations, or seek relief under applicable bankruptcy laws. In such
event, our stockholders may lose a substantial portion or even all of their
investment.

These factors individually and collectively raise substantial doubt about our
ability to continue as a going concern for at least 12 months from the date
these financial statements are available, or March 27, 2023. Our financial
statements do not include any adjustments or classifications that may result
from our possible inability to continue as a going concern.

Revenue



We have not generated any revenue from product sales. While we received approval
for OLPRUVATM on December 22, 2022, we do not expect to generate any revenue
from product sales unless and until we commercialize OLPRUVATM and/or any of our
product candidates.

Our revenue and collaboration funding to date consist of activities in
connection with a collaboration agreement, including a license of intellectual
property. We expect that any revenue or collaboration funding we generate will
fluctuate from quarter to quarter as a result of the timing of achievement of
contractually specified milestones, if any, the timing and amount of payments
relating to such milestones, and the extent to which any products are approved
and successfully commercialized.

If our product candidates are not developed in a timely manner, if regulatory approval is not obtained for them, or if such product candidates are not commercialized, our ability to generate future revenue, and our results of operations and financial position, would be adversely affected.

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Activities Associated with Collaboration Agreement



From time to time, we will recognize collaboration funding as a reduction to
research and development expenses and general and administrative expenses
amounts attributed to providing services to our collaboration partner for which
we have been reimbursed.

Research and Development Expenses

Research and development expenses consist of costs associated with the development of our product candidates. Our research and development expenses include:

•

employee-related expenses, including salaries, benefits, and stock-based compensation

•

external research and development expenses incurred under arrangements with third parties, such as contract research organizations ("CROs"), contract manufacturing organizations, consultants, and our scientific advisors

•

license fees and other direct costs of acquiring intellectual property



We expense research and development costs as incurred. We account for
nonrefundable advance payments for goods and services that will be used in
future research and development activities as expenses as the service has been
performed or as the goods have been received. From time to time, in connection
with the Collaboration Agreement with Relief, we may recognize "contra-expense"
for the research and development activities which were funded by the
Collaboration Agreement. These contra-expense amounts are disclosed
parenthetically on the face of the financial statements.

At any time, we are working on multiple programs. Our internal resources, employees, and infrastructure are not directly tied to any one research or drug discovery project and are typically deployed across multiple projects.



Since our inception in December 2013, we have spent a total of $86.5 million in
research and development expenses through December 31, 2022. Of that amount,
$37.2 million was directly related to EDSIVOTM; $29.5 million was directly
related to OLPRUVATM, offset by $13.9 million of collaboration funding; $11.7
million was directly related to ACER-801; $5.4 million was directly related to
ACER-2820; and $2.7 million was related to other development activities.

We expect our research and development expenses to be substantial for the
foreseeable future as we continue to conduct our ongoing regulatory activities,
initiate new preclinical and clinical trials, and build upon our pipeline. The
process of conducting clinical trials and preclinical studies necessary to
obtain regulatory approval, preparing to seek regulatory approval, and preparing
for commercialization in the event of regulatory approval, is costly and
time-consuming. While we received approval for OLPRUVATM on December 22, 2022
for oral suspension in the U.S. for the treatment of certain patients with UCDs
involving deficiencies of CPS, OTC, or AS, we may never succeed in achieving
marketing approval for any of our other product candidates.

Successful development of product candidates is highly uncertain and may not
result in approved products. Completion dates and completion costs can vary
significantly for each product candidate and are difficult to predict. We
anticipate we will make determinations as to which programs to pursue and how
much funding to direct to each program on an ongoing basis in response to our
ability to enter into new strategic alliances with respect to each program or
potential product candidate, the scientific and clinical success of each product
candidate, the timing and ability to obtain regulatory approval for our product
candidates (if any), and ongoing assessments as to each product candidate's
commercial potential. We will need to raise additional capital and may seek to
do so through public or private equity or debt financings, government or other
third-party funding, marketing and distribution arrangements and other
collaborations, strategic alliances and licensing arrangements or a combination
of these approaches. However, we may be unable to raise additional funds or
enter into such other arrangements when needed on favorable terms or at all. Our
failure to raise capital or enter into such other arrangements as and when
needed would have a negative impact on our financial condition and our ability
to develop our product candidates, pursue regulatory approvals, and operate our
business as planned.

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General and Administrative Expenses



General and administrative expenses consist primarily of employee-related
expenses, including salaries, benefits, and stock-based compensation; external
precommercial costs; and professional fees for legal, business consulting,
auditing, and tax services. We expect that general and administrative expenses
will be substantial in the future. From time to time, in connection with the
Collaboration Agreement with Relief, we may recognize "contra-expense" for the
general and administrative activities which were funded by the Collaboration
Agreement. These contra-expense amounts are disclosed parenthetically on the
face of the financial statements.

Other Income (Expense), Net



Other income (expense), net consists primarily of changes in the value of
liabilities measured at fair value, interest income and of gains and losses
resulting from the revaluation of assets and liabilities denominated in foreign
currencies. We earn interest income from interest-bearing accounts and money
market funds, which we classify as cash and cash equivalents. We incur interest
expense from loans and notes payable. We record as part of other income
(expense), net, transaction gains and losses on foreign currency denominated
assets and liabilities when they are revalued each period due to changes in
underlying exchange rates. We also record gain on extinguishment of debt as part
of other income (expense), net.

Critical Accounting Estimates



This management's discussion and analysis of financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with GAAP. The preparation of these financial statements requires our
management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue, and expenses. On an ongoing basis, we evaluate
these estimates and judgments. We base our estimates on historical experience
and on various assumptions that we believe to be reasonable under the
circumstances. These estimates and assumptions form the basis for making
judgments about the carrying values of assets and liabilities and the recording
of revenue and expenses that are not readily apparent from other sources. Actual
results may differ materially from these estimates. Additionally, we refer to
our significant accounting policies which are included in Note 2 to our
financial statements. We believe that the accounting policies discussed below
are critical to understanding our historical and future performance, as these
policies relate to the more significant areas involving our judgments and
estimates. During the year ended December 31, 2022, we have updated our critical
accounting policies to include debt and convertible debt.

Revenue Recognition and Accounting for Collaboration Agreements



Our revenue and collaboration funding are generated from a single collaboration
agreement which included the sale of a license of intellectual property. We
analyze our collaboration agreements to assess whether they are within the scope
of ASC Topic 808, Collaborative Arrangements ("ASC 808") to determine whether
such arrangements involve joint operating activities performed by parties that
are both active participants in the activities and exposed to significant risks
and rewards that are dependent on the commercial success of such activities. To
the extent the arrangement is within the scope of ASC 808, we assess whether
aspects of the arrangement between us and the collaboration partner are within
the scope of other accounting literature. If we conclude that some or all
aspects of the arrangement represent a transaction with a customer, we account
for those aspects of the arrangement within the scope of ASC Topic 606, Revenue
from Contracts with Customers ("ASC 606"). If we conclude that some or all
aspects of the arrangement are within the scope of ASC 808 and do not represent
a transaction with a customer, we recognize our share of the allocation of the
shared costs incurred with respect to the jointly conducted activities as a
component of the related expense in the period incurred. Pursuant to ASC 606, a
customer is a party that has contracted with an entity to obtain goods or
services that are an output of the entity's ordinary activities in exchange for
consideration. Under ASC 606, an entity recognizes revenue when its customer
obtains control of promised goods or services, in an amount that reflects the
consideration which the entity expects to receive in exchange for those goods or
services. If we conclude a counterparty to a transaction is not a customer or
otherwise not within the scope of ASC 606 or ASC 808, we consider the guidance
in other accounting literature as applicable or by analogy to account for such
transaction.

We determine the units of account within the Collaboration Agreement utilizing the guidance in ASC 606 to


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determine which promised goods or services are distinct. In order for a promised
good or service to be considered "distinct" under ASC 606, the customer can
benefit from the good or service either on its own or together with other
resources that are readily available to the customer (i.e., the good or service
is capable of being distinct), and the entity's promise to transfer the good or
service to the customer is separately identifiable from other promises in the
contract (i.e., the promise to transfer the good or service is distinct within
the context of the contract).

For any units of account that fall within the scope of ASC 606, where the other
party is a customer, we evaluate the separate performance obligation(s) under
each contract, determine the transaction price, allocate the transaction price
to each performance obligation considering the estimated stand-alone selling
prices of the services and recognize revenue upon the satisfaction of such
obligations at a point in time or over time dependent on the satisfaction of one
of the following criteria: (1) the customer simultaneously receives and consumes
the economic benefits provided by the vendor's performance; (2) the vendor
creates or enhances an asset controlled by the customer; and (3) the vendor's
performance does not create an asset for which the vendor has an alternative use
and the vendor has an enforceable right to payment for performance completed to
date.

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.



Revenue for a sales-based or usage-based royalty promised in exchange for a
license of intellectual property is recognized only when (or as) the later of
the following events occurs: (i) the subsequent sale or usage occurs, or (ii)
the performance obligation to which some or all of the sales-based or
usage-based royalty has been allocated has been satisfied (or partially
satisfied).

On January 25, 2021, we entered into the Option Agreement with Relief pursuant
to which we granted Relief an exclusive option (the "Exclusivity Option") to
pursue a potential collaboration and license arrangement with us for the
development, regulatory approval and commercialization of OLPRUVATM for the
treatment of various inborn errors of metabolism, including UCDs and MSUD. The
Option Agreement provided a period of time up to June 30, 2021 for the parties
to perform additional due diligence and to work toward negotiation and execution
of a definitive agreement with respect to the potential collaboration for
ACER001. In consideration for the grant of the Exclusivity Option, (i) we
received from Relief an upfront nonrefundable payment of $1.0 million, (ii)
Relief provided to us a 12-month secured loan in the principal amount of $4.0
million, as evidenced by a Promissory Note (the "Note") issued by Acer to
Relief, and (iii) we granted to Relief a security interest in all of its assets
to secure performance of the Note, as evidenced by a Security Agreement (the
"Security Agreement"). The Note was repayable in one lump sum within 12 months
from issuance and bore interest at a rate equal to 6% per annum.

On March 19, 2021, we entered into the Collaboration Agreement with Relief
providing for the development and commercialization of OLPRUVATM for the
treatment of various inborn errors of metabolism, including for the treatment of
UCDs and MSUD. We received a $10.0 million cash payment from Relief (i.e., a
$14.0 million "Reimbursement Payment" offset by repayment of the $4.0 million
outstanding balance of the Note, plus interest earned through the date of the
Collaboration Agreement). Under the terms of the Collaboration Agreement, Relief
committed to pay us up to an additional $20.0 million for U.S. development and
commercial launch costs for the UCDs and MSUD indications. During the three
months ended June 30, 2021, we received from Relief the $10.0 million First
Development Payment. We were contractually entitled to receive from Relief an
additional $10.0 million Second Development Payment conditioned upon the FDA's
acceptance of an NDA for OLPRUVATM in a UCD for filing and review. This
acceptance was received on October 4, 2021. On October 6, 2021, we entered into
a Waiver and Agreement with Relief to amend the timing for the Second
Development Payment. We received the Second Development Payment in two $5.0
million tranches on each of October 12, 2021 and January 14, 2022. Further, we
retained development and commercialization rights in the U.S., Canada, Brazil,
Turkey and Japan ("Acer Territory"). The companies will split net profits from
the Acer Territory 60%:40% in favor of Relief. Relief licensed the rights for
the rest of the world ("Relief Territory"), where we will receive from Relief a
15% royalty on all net sales received in the Relief Territory. We could also
receive a total of $6.0 million in milestone payments based on the first
European (EU) marketing approvals of OLPRUVATM for a UCD and MSUD.

We assessed these agreements in accordance with the authoritative literature and
concluded that they meet the definition of a collaborative arrangement per ASC
808. For certain parts of the Collaboration Agreement, we

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concluded that Relief represented a customer while for other parts of the
Collaboration Agreement Relief did not represent a customer. The units of
account of the Collaboration Agreement where Relief does not represent a
customer are outside of the scope of ASC 606. We also determined that the
development and commercialization services and Relief's right to 60% profit in
Acer Territory is within the scope of ASC 730, Research and Development ("ASC
730"), with regard to funded research and development arrangements.

We concluded the promised goods and services contained in the Collaboration
Agreement represented two distinct units of account consisting of a license in
Relief Territory, and a combined promise for the development and
commercialization of OLPRUVATM in Acer Territory and the payment of 60% net
profit from that territory (together, the "Services"). The stand-alone selling
price was estimated for each distinct unit of account.

We determined that the transaction price at the outset of the Collaboration
Agreement would amount to $25.0 million, including the Option Fee of $1.0
million, the Reimbursement Payment of $14.0 million, and the First Development
Payment of $10.0 million. We concluded that, consistent with the evaluation of
variable consideration, using the most likely amount approach, the Second
Development Payment as well as the milestone payments for EU marketing approvals
should be fully constrained until the contingency associated with each payment
has been resolved and our NDA is accepted for review by the FDA, and Relief
receives EU marketing approval, respectively. The contingency associated with
the Second Development Payment was resolved in the fourth quarter of 2021.

Since ASC 808 does not provide recognition and measurement guidance for
collaborative arrangements, we applied the principles of ASC 606 for those units
of account where Relief is a customer and ASC 730-20 for the funded research and
development activities. The license revenue was recognized at the point where we
determined control was transferred to the customer. The combined unit of account
for the Services will be recognized over the service period through the
anticipated date of first commercial sale of the OLPRUVATM approved product in
the U.S. We also determined that the Services would be satisfied over time as
measured using actual costs incurred by us toward the identified development and
commercialization services agreed to between the parties up to the point of
first commercial sale of the OLPRUVATM product. Research and development
expenses and general and administrative expenses, as they relate to activities
governed by the Collaboration Agreement, incurred in satisfying the Services
unit-of-account will be recognized as contra-expense within their respective
categories, consistent with the presentation guidance in ASC 730.

We recognize as a receivable under the Collaboration Agreement consideration,
which is deemed unconditional, or when only the passage of time is required
before payment of that consideration is due. Amounts receivable under the
Collaboration Agreement plus payments received from Relief, net of the amount
recorded as license revenue and as offsets to research and development expenses
and to general and administrative expenses, are reported as deferred
collaboration funding.

At December 31, 2022, the amount of deferred collaboration funding associated
with unsatisfied promises under the Collaboration Agreement amounted to $8.4
million. We have recorded this amount as a current liability, which equates to
our estimate of remaining spending under the Collaboration Agreement which we
estimate will be recognized within the next 12 months up to the point of the
first commercial sale of OLPRUVATM. The non-current liability reported as of
December 31, 2021 represented the then current estimated amount that would have
been taken against future net profit payments made to Relief should they have
occurred. We expect to recognize this deferred collaboration funding as we incur
expenses associated with performing the Services up to the date of first
commercial sale in Acer Territory and through the end of the effective date of
the Collaboration Agreement. At December 31, 2022, deferred collaboration
funding was composed of $35.0 million received from Relief, offset by $1.3
million recognized as license revenue during the year ended December 31, 2021
and by $13.9 million recorded as an offset to research and development expenses,
and $11.4 million recorded as an offset to general and administrative expenses
subsequent to signing the Collaboration Agreement and through the date of this
report.

Goodwill

Goodwill represents the excess of the purchase price (consideration paid plus
net liabilities assumed) of an acquired business over the fair value of the
underlying net tangible and intangible assets. We evaluate the recoverability of
goodwill according to ASC Topic 350, Intangibles - Goodwill and Other annually,
or more

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frequently if events or changes in circumstances indicate that the carrying
value of goodwill might be impaired. Factors that may be considered a change in
circumstances indicating that the carrying value of our goodwill might be
impaired include declines in our stock price, market capitalization, or cash
flows. We may opt to perform a qualitative assessment or a quantitative
impairment test to determine whether goodwill is impaired. Our goodwill is
allocated to a single reporting unit. If we were to determine based on a
qualitative assessment that it was more likely than not that the fair value of
the reporting unit was less than its carrying value, a quantitative impairment
test would then be performed. The quantitative impairment test compares the fair
value of the reporting unit with its carrying amount, including goodwill. If the
estimated fair value of the reporting unit is less than its carrying amount, a
goodwill impairment would be recognized for the difference.

Fair Value of Financial Instruments



ASC Topic 820, Fair Value Measurement ("ASC 820"), establishes a fair value
hierarchy for instruments measured at fair value that distinguishes between
assumptions based on market data (observable inputs) and our own assumptions
(unobservable inputs). Observable inputs are inputs that market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of us. Unobservable inputs are inputs that reflect
assumptions about the inputs that market participants would use in pricing the
asset or liability and are developed based on the best information available in
the circumstances.

ASC 820 identifies fair value as the exchange price, or exit price, representing
the amount that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants. As a basis for
considering market participant assumptions in fair value measurements, ASC 820
establishes a three-tier fair value hierarchy that distinguishes among the
following.

•

Level 1-Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access.

•


Level 2-Valuations based on quoted prices for similar assets or liabilities in
active markets, quoted prices for identical or similar assets or liabilities in
markets that are not active and models for which all significant inputs are
observable, either directly or indirectly.

•

Level 3-Valuations based on inputs that are unobservable and significant to the overall fair value measurement.



To the extent that the valuation is based on models or inputs that are less
observable or unobservable in the market, the determination of fair value
requires more judgment. Accordingly, the degree of judgment exercised by us in
determining fair value is greatest for instruments categorized in Level 3. A
financial instrument's level within the fair value hierarchy is based on the
lowest level of any input that is significant to the fair value measurement.

Financial instruments consist of cash equivalents, collaboration receivable,
accounts payable, accrued expenses, and debt instruments. These financial
instruments are stated at their respective historical carrying amounts, which
approximate fair value due to their short-term nature, except for cash
equivalents and debt instruments, which were marked to market at the end of each
reporting period. See Note 7 to our financial statements for additional
information on the fair value of the debt liabilities.

We elected the fair value option for both our Original Term Loan and our
Marathon Convertible Notes dated March 14, 2022 (see Note 7 to our financial
statements). We adjust both the Original Term Loan and the Marathon Convertible
Notes to fair value through the change in fair value of debt in the accompanying
statements of operations. Subsequent unrealized gains and losses on items for
which the fair value option is elected are reported in earnings.

Debt



Convertible notes are regarded as compound instruments, consisting of a
liability component and an equity component. We determined that we are eligible
for the fair value option election in connection with the Original Term Loan and
the Marathon Convertible Notes as each instrument met the definition of a
"recognized financial liability" which is an acceptable financial instrument
eligible for the fair value option under ASC 825-10-15-4 and do not meet the
definition of any of the financial instruments found within ASC 825-10-15-5 that
are not eligible for

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the fair value option. At the date of issuance, the fair value for each instrument is derived from the instrument's implied discount rate at inception.

Research and Development



Research and development costs are expensed as incurred and include compensation
and related benefits, license fees and outside contracted research and
manufacturing consultants. We sometimes make nonrefundable advance payments for
goods and services that will be used in future research and development
activities. These payments are capitalized and recorded as an expense in the
period that we receive the goods or as the services are performed.

Clinical Trial and Preclinical Study Expenses



We make estimates of prepaid and/or accrued expenses as of each balance sheet
date in our financial statements based on certain facts and circumstances at
that time. Our accrued expenses for preclinical studies and clinical trials are
based on estimates of costs incurred for services provided by CROs,
manufacturing organizations, and for other trial- and study-related activities.
Payments under our agreements with external service providers depend on a number
of factors such as site initiation, patient screening, enrollment, delivery of
reports, and other events. In accruing for these activities, we obtain
information from various sources and estimate the level of effort or expense
allocated to each period. Adjustments to our research and development expenses
may be necessary in future periods as our estimates change. As these activities
are generally material to our overall financial statements, subsequent changes
in estimates may result in a material change in our accruals. No material
changes in estimates were recognized in the years ended December 31, 2022 and
2021. Our accounts payable and accrued expenses include costs associated with
preclinical or clinical studies of $0.9 million and $0.2 million at December 31,
2022 and 2021, respectively.

Results of Operations

Comparison of the years ended December 31, 2022 and 2021

The following table summarizes our results of operations for the years ended December 31, 2022 and 2021:



                             Years Ended December 31,
                              2022              2021            $ Change           % Change
Revenue                   $           -     $   1,260,000     $  (1,260,000 )              N/A
Operating expenses:
Research and
development (net of
collaboration funding
of $7,825,263 and
$6,055,295 in the years
ended December 2022
and 2021, respectively)      11,924,837         6,508,055         5,416,782                 83 %
General and
administrative (net of
collaboration funding
of $8,248,813 and
$3,197,659 in the years
ended December 2022
and 2021, respectively)      12,689,422        10,700,334         1,989,088                 19 %
Loss from operations        (24,614,259 )     (15,948,389 )      (8,665,870 )               54 %
Total other income
(expense), net               (1,623,056 )         574,396        (2,197,452 )             (383 )%
Net loss                  $ (26,237,315 )   $ (15,373,993 )   $ (10,863,322 )               71 %




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Revenue



We recognized revenue of $1.3 million during the year ended December 31, 2021
related to the license of intellectual property as part of the Collaboration
Agreement with Relief.

Research and Development Expenses



Research and development expenses were $11.9 million, net of collaboration
funding of $7.8 million, for the year ended December 31, 2022, as compared to
$6.5 million, net of collaboration funding of $6.1 million, for the year ended
December 31, 2021. This increase of $5.4 million was primarily due to increases
in employee-related expenses including a bonus accrual and expenses related to
clinical studies, partially offset by the increase in recognition of
contra-expense from the collaboration funding from the Collaboration Agreement
with Relief. Research and development expenses for the year ended December 31,
2022 were comprised of $8.2 million related to OLPRUVATM, offset by $7.8 million
of collaboration funding; $5.9 million related to ACER-801; $4.0 million related
to EDSIVOTM; $0.2 million related to ACER-2820; and $1.4 million related to
other development activities.

General and Administrative Expenses



General and administrative expenses were $12.7 million, net of collaboration
funding of $8.2 million, for the year ended December 31, 2022, as compared to
$10.7 million, net of collaboration funding of $3.2 million, for the year ended
December 31, 2021. This increase of $2.0 million was primarily due to increases
in precommercial activities, employee-related expenses including a bonus
accrual, professional services, and information technology, partially offset by
the increase in the recognition of contra-expense from the collaboration funding
from the Collaboration Agreement with Relief.

Other Income (Expense), Net



Other expense, net of $1.6 million during the year ended December 31, 2022 was
primarily attributable to debt issuance cost, partially offset by changes in the
fair value of debt instruments. Other income, net of $0.6 million during the
year ended December 31, 2021 was primarily attributable to a gain on
extinguishment of debt related to forgiveness of a PPP loan and to foreign
currency gain.

Liquidity and Capital Resources



We have never been profitable and have incurred operating losses in each year
since inception. From inception to December 31, 2022, we have raised net cash
proceeds of $115.5 million, primarily from common stock offerings, private
placements of convertible preferred stock, debt instruments, and convertible
debt instruments. In addition, from inception to December 31, 2022, we have
raised cash proceeds of $35.0 million from collaboration agreements. As of
December 31, 2022, we had $2.3 million in cash and cash equivalents and current
liabilities aggregating to $19.0 million, which include $8.4 million associated
with deferred collaboration funding. Our net loss for the years ended December
31, 2022 and 2021, was $26.2 million and $15.4 million, respectively. As of
December 31, 2022, we had an accumulated deficit of $140.7 million.
Substantially all of our operating losses resulted from expenses incurred in
connection with our research and development programs and from general and
administrative costs associated with our operations.

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The following table summarizes our cash flows for the years ended December 31,
2022 and 2021:

                                                          Years Ended December 31,
                                                           2022              2021
Net cash (used in) provided by:
Operating activities                                   $ (30,251,898 )   $   (134,909 )
Investing activities                                        (171,170 )        (54,944 )
Financing activities                                      20,041,524        7,139,047
Net (decrease) increase in cash and cash equivalents   $ (10,381,544 )   $  6,949,194
Cash and cash equivalents, beginning of the year          12,710,762        5,761,568
Cash and cash equivalents, end of the year             $   2,329,218     $ 12,710,762




Operating Activities

Net cash used in operating activities was $30.3 million for the year ended
December 31, 2022, as compared to $0.1 million for the year ended December 31,
2021. The increase in cash used in operations of $30.2 million was primarily the
result of an increase in net loss after adjusting for non-cash changes in the
fair value of debt and reductions in collaboration funding related to cash
received from Relief pursuant to the Agreements net of amounts recognized as
contra-expense. Additionally, these increases were partially offset by a
decrease in accounts receivable and increases in accounts payable and accrued
expenses. During the year ended December 31, 2021, we recorded in other current
liabilities a $9.2 million liability related to the securities class action and
stockholder derivative actions settlements and legal costs, for which we also
recorded in other current assets an asset of an equal amount representing the
expected recovery from our insurance carriers. During the year ended December
31, 2022, we reduced the value of this liability and this asset each by $9.2
million as settlement was made by our insurance carriers. The increase in the
net loss during 2022 was a result of increased precommercial spend associated
with the anticipated approval of OLPRUVATM, as well as increased clinical trial
related expenses for osanetant and EDSIVOTM.

Investing Activities

Cash used in investing activities during the years ended December 31, 2022 and 2021 was related to the purchase of property and equipment.

Financing Activities



Net cash provided by financing activities was $20.0 million for the year ended
December 31, 2022, as compared to $7.1 million for the year ended December 31,
2021. Net cash provided by financing activities during the year ended December
31, 2022 consisted primarily of $7.4 million net proceeds from the issuance of
common stock through our ATM and equity line agreements and $1.5 million
proceeds from the issuance of common stock through a private placement; $6.0
million net proceeds received from the Original Term Loan; $5.5 million net
proceeds received from the Marathon Convertible Notes and $0.3 million received
from the issuance of the First SWK Warrant, partially offset by issuance costs
of $0.7 million related to these debt and convertible debt instruments. Net cash
provided by financing activities during the year ended December 31, 2021
pertained to the $4.0 million received from the secured loan from Relief, which
was settled net against the Reimbursement Payment received from Relief in
connection with the Collaboration Agreement, as well as to $3.1 million proceeds
from the issuance of common stock, net of issuance costs, comprised of $2.6
million proceeds from our ATM facility and $0.5 million proceeds from our equity
line facility entered into with Lincoln Park.

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Future Capital Requirements



We have not generated any revenue from product sales. We do not expect to
generate any revenue from product sales unless and until we successfully
commercialize OLPRUVATM and/or unless and until we obtain regulatory approval
for and commercialize any of our other product candidates. At the same time, we
expect to continue to incur significant expenses in connection with our ongoing
development and manufacturing activities, particularly as we continue the
research, development, manufacture and clinical trials of, and seek regulatory
approval for, our product candidates. In addition, subject to obtaining
regulatory approval of any of our product candidates and thereafter successfully
commercializing any such product candidates, we anticipate that we will need
substantial additional funding in connection with our continuing operations.

As of December 31, 2022, we had $2.3 million in cash and cash equivalents and
current liabilities of $19.0 million, which include $8.4 million associated with
deferred collaboration funding. Our cash and cash equivalents available at
December 31, 2022, together with the proceeds from the Second Term Loan of $7.0
million which funded on January 31, 2023, net proceeds from our ATM facility
subsequent to December 31, 2022 totaling $4.0 million from the sale of 1,462,254
shares for gross aggregate proceeds of $4.1 million and an average per share
price of $2.81 less offering costs of $0.1 million, and $2.7 million of gross
proceeds from a sale of securities (including 2,335,000 shares of common stock
and pre-funded warrants to purchase up to 585,306 shares of common stock
pursuant to a registered direct offering as well as warrants to purchase up to
2,920,306 shares of common stock in a concurrent private placement) which closed
on March 24, 2023 (see Note 12 to our financial statements) (the "March 2023
Offering"), are expected to be sufficient to fund our anticipated operating and
capital requirements into the middle of the second quarter of 2023. There is
substantial doubt about our ability to continue as a going concern. Please refer
to the discussion above titled "Going Concern".

On November 29, 2022, we entered into a securities purchase agreement for the
sale and issuance of an aggregate of 1,229,508 shares of our common stock, for
an aggregate purchase price of $1.5 million, in a private placement transaction
with our President and Chief Executive Officer and a member of our Board of
Directors and with the Chairman of our Board of Directors at a price per share
of $1.22. The shares of common stock issued in the private placement constitute
"restricted securities" under the federal securities laws and are subject to a
minimum six-month holding period. The proceeds from the private placement will
be used by us for working capital and general corporate purposes.

On March 4, 2022, we entered into the SWK Credit Agreement with the lenders
party thereto and, as the agent, sole lead arranger and sole bookrunner, which
provided for a senior secured term loan facility in an aggregate amount of $6.5
million in a single borrowing (i.e., the Original Term Loan). The Original Term
Loan funding closed on March 14, 2022. The proceeds of the Original Term Loan
were used to pay fees, costs and expenses related to the SWK Credit Agreement,
the Marathon Convertible Note Purchase Agreement and the Marathon Credit
Agreement and for other working capital and general corporate purposes. On
August 19, 2022, we entered into the First Amendment which extended the date
through which we have the option to capitalize interest on the SWK Credit
Agreement and which revised our minimum cash requirement under the Original Term
Loan. On January 30, 2023, we entered into the Second Amendment. In addition to
other provisions, the Second Amendment provides for an additional senior secured
term loan to be made to us in an aggregate amount of $7.0 million in a single
borrowing which funded on January 31, 2023 (i.e., the Second Term Loan).

The SWK Loans bear interest at an annual rate of the sum of (i) 3-month SOFR,
subject to a 1% floor, plus (ii) a margin of 11%, with such interest payable
quarterly in arrears. In the event of default, the interest rate will increase
by 3% per annum over the contract rate effective at the time of default but
shall not be higher than the maximum rate permitted to be charged by applicable
laws. We have the option to capitalize such interest commencing on the date on
which the Original Term Loan was funded and continuing until May 15, 2023. Due
to topline results announced in March 2023 from our Phase 2a proof of concept
clinical trial to evaluate ACER-801 as a potential treatment for moderate to
severe VMS associated with menopause, which showed that ACER-801 was safe and
well-tolerated but did not achieve statistical significance when evaluating
ACER-801's ability to decrease the frequency or severity of hot flashes in
postmenopausal women, the principal amount of the SWK Loans amortizes at a
monthly rate of $0.6 million starting April 15, 2023, until we have issued
additional equity or subordinated debt resulting in net cash proceeds of not
less than $7.7 million (i.e., the sum of $10.0 million less the net proceeds
from the March 2023 Offering), at which point the SWK Loans would revert to
amortizing at a rate of $1.3 million

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payable quarterly. The final maturity date of the SWK Loans is March 4, 2024. We
have the option to prepay the SWK Loans in whole or in part. Upon the repayment
of the Original Term Loan (whether voluntary or at scheduled maturity), we must
pay an exit fee so that SWK receives an aggregate amount (inclusive of all
principal, interest and origination and other fees paid to SWK under the SWK
Credit Agreement on or prior to the prepayment date) equal to 1.5 times the
outstanding principal amount of the Original Term Loan, plus any and all
payment-in-kind interest amounts. Upon the repayment of the Second Term Loan
(whether voluntary or at scheduled maturity), we must pay an exit fee so that
SWK receives an aggregate amount (inclusive of all principal, interest and
origination and other fees paid in cash to SWK under the SWK Credit Agreement
with respect to the Second Term Loan) equal to the outstanding principal amount
of the Second Term Loan (inclusive of payment-in-kind interest amounts)
multiplied by: (i) if the repayment occurs on or before April 15, 2023, 1.18,
(ii) if the repayment occurs on or after April 16, 2023 but prior to May 16,
2023, 1.28667, (iii) if the repayment occurs on or after May 16, 2023 but prior
to June 16, 2023, 1.39334, and (iv) if the repayment occurs on or after July 16,
2023, 1.5. Due to topline results announced in March 2023 from our Phase 2a
proof of concept clinical trial to evaluate ACER-801 as a potential treatment
for moderate to severe VMS associated with menopause, we are required to
maintain for purposes of the SWK Loans unencumbered liquid assets of not less
than the lesser of (x) the outstanding principal amount of the SWK Loans or (y)
$3.0 million (as opposed to $1.5 million for clause (y) prior to the
announcement of such topline results).

The SWK Loans are secured by a first priority lien on all of our assets and any
of our future subsidiaries pursuant to the SWK Security Agreement which contains
customary representations and warranties and affirmative and negative covenants.
We paid to SWK $0.1 million in origination fees on the date on which the
Original Term Loan was funded.

In connection with the execution of the SWK Credit Agreement, we issued the
First SWK Warrant to purchase 150,000 shares of our common stock at an exercise
price of $2.46 per share. In connection with the execution of the First
Amendment, we issued to the Second SWK Warrant to purchase 100,000 shares of our
common stock at an exercise price of $1.51 per share. In connection with the
execution of the Second Amendment, we issued to SWK the Third SWK Warrant to
purchase 250,000 shares of our common stock at an exercise price of $2.39 per
share. SWK may exercise the SWK Warrants in accordance with the terms thereof
for all or any part of such shares of common stock from the date on which the
Original Term Loan was funded or such SWK Warrant was issued, as applicable,
until and including March 4, 2029.

On March 4, 2022, we also entered into the Marathon Convertible Note Purchase
Agreement with the Holders pursuant to which we issued and sold to the Holders
the Marathon Convertible Notes in an aggregate amount of $6.0 million. The
Convertible Note Financing closed on March 14, 2022. The proceeds of the
Convertible Note Financing were used to pay fees, costs and expenses related to
the SWK Credit Agreement, the Marathon Convertible Note Purchase Agreement and
the Marathon Credit Agreement and for other working capital and general
corporate purposes. On January 30, 2023, we entered into the Marathon Amendment
Agreement with Marathon and Marathon Fund with respect to the Marathon
Convertible Notes.

The Marathon Convertible Notes bear interest at an annual rate of 6.5%, with
such interest payable quarterly; provided, however, that each of the Holders
have agreed to defer payment by us of accrued and unpaid interest on their
respective Marathon Convertible Note existing on the date of the Marathon
Amendment Agreement through March 31, 2023, with such deferred interest,
together with any accrued and unpaid interest on each Marathon Convertible Note
incurred after March 31, 2023, to be due and payable in cash by us on April 15,
2023. Subject to the restrictions set forth in a subordination agreement among
each of the Holders and SWK, as agent and lender, we are required to repurchase
each Marathon Convertible Note, on or before the fifth (5th) business day (but
with five (5) business days' notice) following the earlier of June 15, 2023 or
our receipt of gross proceeds of at least $40.0 million from the issuance or
sale of equity, debt and/or hybrid securities, loans or other financing on a
cumulative basis since January 1, 2023 (excluding the Second Term Loan), at a
price equal to 200% (i.e., the Buy-Out Percentage) of the outstanding principal
amount of such Marathon Convertible Note, together with any accrued but unpaid
interest thereon to the date of such repurchase; provided, that if we are
prohibited from effectuating such repurchases pursuant to the subordination
agreement with SWK, we are required to cause the repurchase to occur on or
before the fifth (5th) business day following the earlier of such prohibition
being no longer applicable or the payment in full of all senior indebtedness
described in such subordination agreement, but with five (5) business days'
notice; and provided, further, that if such repurchase has not occurred by April
15, 2023, the Buy-Out Percentage shall be increased by 2500 basis points for
each 90-day period after April 15, 2023, pro-rated for the

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actual number of days elapsed in the 90-day period before repurchase actually
occurs (for example, if the repurchase occurs on May 30, 2023, the Buy-Out
Percentage shall be increased to 212.5%). Each of the Holders also has the right
to convert all or any portion of the outstanding principal amount plus any
accrued but unpaid interest under the Marathon Convertible Note held by such
Holder into shares of common stock at a conversion price of $2.50 per share,
subject to adjustment. Each Holder has certain rights with respect to the
registration by us for resale of the shares of common stock issuable upon
conversion of the Marathon Convertible Note held by such Holder which are forth
in the Marathon Convertible Note Purchase Agreement. Any outstanding principal,
together with all accrued and unpaid interest, will be payable on the earlier of
the third anniversary of the date of issuance, or upon a change of control of
us.



On March 4, 2022, we also entered into the Marathon Credit Agreement with the
lenders party thereto and Marathon, as the agent, sole lead arranger and sole
bookrunner, which provided for a senior secured term loan facility in an
aggregate amount of up to $42.5 million in a single borrowing (i.e., the Term
Loan). The Term Loan was available to be borrowed only following full FDA
approval for marketing of ACER-001 and until December 31, 2022. We received
approval for our NDA for ACER-001 on December 22, 2022, and we and Marathon
agreed to an Extension Agreement with respect to the Term Loan on December 30,
2022, which extended the commitment date for funding the Term Loan to January
16, 2023. We elected to terminate the Marathon Credit Agreement by entering into
a Termination Agreement on January 30, 2023, which terminated the Credit
Agreement and an associated Royalty Agreement.

On March 19, 2021, we entered into the Collaboration Agreement with Relief
providing for the development and commercialization of OLPRUVATM for the
treatment of various inborn errors of metabolism, including for the treatment of
UCDs and MSUD. We received a $10.0 million cash payment from Relief (i.e., a
$14.0 million "Reimbursement Payment," offset by repayment of the $4.0 million
outstanding balance of the Note plus interest earned through the date of the
Collaboration Agreement). Under the terms of the Collaboration Agreement, Relief
committed to pay us up to an additional $20.0 million for U.S. development and
commercial launch costs for the UCDs and MSUD indications. During the three
months ended June 30, 2021, we received from Relief the $10.0 million First
Development Payment. We were contractually entitled to receive from Relief an
additional $10.0 million Second Development Payment conditioned upon the FDA's
acceptance of an NDA for OLPRUVATM in a UCD for filing and review. This
acceptance was received on October 4, 2021. On October 6, 2021, we entered into
a Waiver and Agreement with Relief to amend the timing for the Second
Development Payment. We received the Second Development Payment in two $5.0
million tranches on each of October 12, 2021 and January 14, 2022. Further, we
retained development and commercialization rights in the U.S., Canada, Brazil,
Turkey and Japan ("Acer Territory"). The companies will split net profits from
the Acer Territory 60%:40% in favor of Relief. Relief licensed the rights for
the rest of the world ("Relief Territory"), where we will receive from Relief a
15% royalty on all net sales received in the Relief Territory. We could also
receive a total of $6.0 million in milestone payments based on the first
European marketing approvals of OLPRUVATM for a UCD and MSUD. In connection with
the cancellation of the $4.0 million promissory note (the "Note") executed by us
in favor of Relief on January 25, 2021, Relief released its security interest in
all of our assets pursuant to the Note.

On April 30, 2020, we entered into a $15.0 million equity line purchase
agreement and registration rights agreement with Lincoln Park Capital Fund, LLC
("Lincoln Park") pursuant to which we had the right to sell to Lincoln Park an
aggregate of up to $15.0 million in shares of our common stock, subject to
certain conditions and limitations. Under the terms and subject to the
conditions of the purchase agreement, Lincoln Park was obligated to purchase up
to an aggregate of $15.0 million in shares of common stock (subject to certain
limitations) from time to time over a 36-month period commencing on June 8,
2020. We were able to direct Lincoln Park, at our sole discretion and subject to
certain conditions, to purchase up to 50,000 shares of common stock in regular
purchases, increasing to amounts of up to 100,000 shares depending upon the
closing sale price of our common stock. In addition, we were able to direct
Lincoln Park to purchase additional amounts as accelerated purchases or as
additional accelerated purchases. The purchase price of shares of common stock
was based upon the market price of our common stock preceding the time of sale
as computed under purchase agreement. However, there could be no assurance that
we would have been able to receive the entire obligation amount from Lincoln
Park because the

                                       96
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purchase agreement contains limitations, restrictions, requirements, events of
default and other provisions that could limit our ability to cause Lincoln Park
to buy common stock from us. During the year ended December 31, 2021, we sold
200,000 shares of common stock under our purchase agreement with Lincoln Park at
a weighted average gross sale price of $2.47 per share, resulting in proceeds of
$0.5 million. During the year ended December 31, 2022, we sold an additional
772,057 shares of common stock under the purchase agreement at a weighted
average sale price of $1.42 per share, resulting in additional proceeds of $1.1
million. The Lincoln Park facility was completed on December 30, 2022.

On March 18, 2020, we entered into an amended and restated sales agreement with
JonesTrading Institutional Services LLC ("JonesTrading") and Roth Capital
Partners, LLC ("Roth Capital"). This agreement provides a facility for the offer
and sale of shares of common stock from time to time depending upon market
demand, in transactions deemed to be an "at-the-market" ("ATM") offering. We
will need to keep current our shelf registration statement and the offering
prospectus relating to the ATM facility, in addition to providing certain
periodic deliverables under the sales agreement, in order to use such facility.
Due to the SEC's "baby shelf rules," which prohibit companies with a public
float of less than $75 million from issuing securities under a shelf
registration statement in excess of one-third of such company's public float in
a 12-month period, we are currently only able to issue a limited number of
shares which aggregate no more than one-third of our public float using our
shelf registration statement. From May 19, 2020 through December 31, 2021, we
sold an aggregate of 2,716,064 shares of common stock at an average gross sale
price of $3.6794 per share, for gross proceeds of $10.0 million. Proceeds, net
of $0.5 million of fees and offering costs were $9.5 million. During the year
ended December 31, 2022, we sold 3,312,471 additional shares of common stock
through our ATM facility at an average gross sale price of $1.9749 per share,
for gross proceeds of $6.5 million. Proceeds, net of $0.2 million in fees and
offering costs, were $6.3 million. As of December 31, 2022, we had no
commitments for any additional financing, except for the ATM facility and the
Marathon Credit Agreement for the Term Loan (defined below), which was
subsequently terminated on January 30, 2023. In connection with the March 2023
Offering, we suspended our ATM facility and entered into a related restriction
prohibiting us from entering into any agreement to issue or announcing the
issuance or proposed issuance of any shares of our common stock or securities
convertible or exercisable into our common stock, subject to certain exceptions,
until April 24, 2023.

Our future capital requirements are difficult to forecast and will depend on many factors, including but not limited to:

•

any continued development and potential commercialization of OLPRUVATM

•

any continued development of EDSIVOTM, including pursuant to the DiSCOVER pivotal clinical trial

•

any continued development of ACER-801, including the initiation of one or more clinical trials

•

our ability to obtain adequate levels of financing to meet our operating plan

•

the costs associated with filing, outcome, and timing of regulatory approvals

•

the terms and timing of any strategic alliance, licensing and other arrangements that we may establish

•

the cost and timing of hiring any new employees to support our business operations

•

the costs and timing of having clinical supplies of our product candidates manufactured

•

the initiation and progress of ongoing preclinical studies and clinical trials for our product candidates

•

the costs involved in patent filing, prosecution, and enforcement

•

the number of programs we pursue

•

any development of ACER-2820 we may choose to pursue (although any such development will depend upon the availability of non-dilutive financing)



We will continue to require substantial additional capital to continue our
clinical development and pursuit of regulatory approval activities. Accordingly,
we will need to raise substantial additional capital to continue to fund our
operations. The amount and timing of our future funding requirements will depend
on many factors, including the pace and results of our development, regulatory
conditions and requirements, and commercialization efforts. Failure to raise
capital as and when needed, on favorable terms or at all, would have a negative
impact on our

                                       97

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financial condition and our ability to develop our product candidates, pursue regulatory approvals, potentially commercialize (if approved) our product candidates, and operate our business as planned.



We expect to incur significant expenses and operating losses for at least the
foreseeable future as we initiate and continue the clinical development of, seek
regulatory approval for, and potentially commercialize (if approved) our product
candidates. In addition, operating as a publicly-traded company involves
upgrading financial information systems and incurring costs associated with
operating as a public company. We expect that our operating losses will
fluctuate significantly from quarter-to-quarter and year-to-year due to the
timing of clinical development programs, efforts to achieve regulatory approval,
and planning for potential commercialization (if approved) of our product
candidates.

Until we can generate a sufficient amount of product sales revenue to finance
our cash requirements, which would require us to obtain regulatory approval for
and successfully commercialize one or more of our product candidates, we expect
to finance our future cash needs primarily through the issuance of additional
equity and potentially through borrowing, non-dilutive funding, and strategic
alliances. As of December 31, 2022, we did not maintain any lines of credit or
have any sources of debt or equity capital committed for funding other than our
ATM facility and the Marathon Credit Agreement for the Term Loan (defined
below), which was subsequently terminated on January 30, 2023.

We continue to explore potential opportunities and alternatives to obtain the
additional resources that will be necessary to support our ongoing operations
beyond the second quarter of 2023, including raising additional capital through
either private or public equity or debt financing, or additional program
collaborations or non-dilutive funding, as well as using our ATM facility and/or
our equity line facility, although we suspended our ATM facility in connection
with the March 2023 Offering and entered into a related restriction prohibiting
us from entering into any agreement to issue or announcing the issuance or
proposed issuance of any shares of our common stock or securities convertible or
exercisable into our common stock, subject to certain exceptions, until April
24, 2023. To the extent that we raise additional capital through the issuance of
additional equity or convertible debt securities, the ownership interest of our
stockholders will be diluted, and the terms of these securities may include
liquidation or other preferences that adversely affect the rights of existing
stockholders. Debt financing, if available, may involve agreements that include
covenants limiting or restricting our ability to take specific actions, such as
incurring additional debt, making capital expenditures or declaring dividends.
If we raise additional funds through marketing and distribution arrangements or
other collaborations, strategic alliances or licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies, future
revenue streams, research programs or product candidates or grant licenses on
terms that may not be favorable to us.

The Nasdaq Capital Market's continued listing standards for our common stock
require, among other things, that we maintain either (i) stockholders' equity of
$2.5 million, (ii) market value of listed securities of $35 million or (iii) net
income from continuing operations of $500,000 in the most recently completed
fiscal year or in two of the last three most recently completed fiscal years. On
May 31, 2022, we received a letter from the listing qualifications department
staff of Nasdaq indicating that for the last 30 consecutive business days our
minimum Market Value of Listed Securities ("MVLS") was below the $35 million
required for continued listing on the Nasdaq Capital Market pursuant to Nasdaq
listing rule 5550(b)(2). Our stockholder's equity and net income from continuing
operations were also below the alternate listing standards levels at that time.
In accordance with Nasdaq listing rules, we had 180 calendar days, or until
November 28, 2022, to regain compliance. On December 29, 2022, the Nasdaq Stock
Market LLC formally notified us that we had regained compliance for continued
listing on the Nasdaq Capital Market. In addition, pursuant to Nasdaq Listing
Rules, we are required to maintain a minimum bid price of $1.00 per share for
continued listing on Nasdaq. Following the announcement of topline results in
March 2023 from our Phase 2a proof of concept clinical trial to evaluate
ACER-801 as a potential treatment for moderate to severe VMS associated with
menopause, which showed that ACER-801 was safe and well-tolerated but did not
achieve statistical significance when evaluating ACER-801's ability to decrease
the frequency or severity of hot flashes in postmenopausal women, our stock has
traded below the required minimum bid price for continued listing on Nasdaq.
There can be no assurance that we will be able to maintain compliance with
Nasdaq listing standards. Our failure to meet or to continue to meet these
requirements could result in the Company's common stock being delisted from the
Nasdaq Capital Market. If our common stock were delisted from the Nasdaq Capital
Market, among other things, this could result in a number of negative
implications, including reduced market price and liquidity of our common stock
as a result of the loss of market efficiencies associated with the Nasdaq, the
loss of federal preemption of state securities laws, as well as the potential
loss of confidence by suppliers, partners,

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employees and institutional investor interest, fewer business development opportunities, greater difficulty in obtaining financing and breaches of or events of default under certain contractual obligations (including an event of default under the loan agreement for the Marathon Convertible Notes).



If we are unable to raise additional funds through public or private equity or
debt financings or other sources, such as non-dilutive funding or strategic
collaborations, when needed, we may be required to delay, limit, reduce or
terminate our product development or pursuit of regulatory approval efforts or
provide rights to develop and market product candidates to third parties that we
would otherwise prefer to develop and, if applicable, market ourselves. Further,
if we are unable to obtain additional funding to support our current or proposed
activities and operations, we may not be able to continue our operations as
currently anticipated, which may require us to suspend or terminate any ongoing
development activities, modify our business plan, curtail various aspects of our
operations, cease operations, or seek relief under applicable bankruptcy laws.
In such event, our stockholders may lose a substantial portion or even all of
their investment.

Contractual Commitments

License Agreements

In April 2014, we obtained exclusive rights to patents and certain other
intellectual property relating to OLPRUVATM for the treatment of inborn errors
of branched-chain amino acid metabolism, including MSUD, and preclinical and
clinical data, through an exclusive license agreement with Baylor College of
Medicine ("BCM"). Under the terms of the agreement, as amended, we have
worldwide exclusive rights to develop, manufacture, use, sell and import
products incorporating the licensed intellectual property. The license agreement
requires us to make upfront and annual payments to BCM, reimburse certain of
BCM's legal costs, make payments upon achievement of defined milestones, and pay
low single-digit percent royalties on net sales of any developed product over
the royalty term.

In June 2016, we entered into an agreement with Aventis Pharma SA (now Sanofi)
granting us the exclusive access and exclusive right to use the data included in
the marketing authorization application dossier filed with and approved by the
MHRA in 1986 for the treatment of mild to moderate hypertension pursuant to the
UK regulatory approval procedure, for the sole purpose of allowing us to further
develop, manufacture, register and commercialize celiprolol in the U.S. and
Brazil for the treatment of EDS, Marfan syndrome and Loeys-Dietz syndrome. We
have paid in full for the exclusive access and right to use the data.
Subsequently we amended our agreement with Sanofi to provide the same rights to
data access and use for potential marketing approval in all of North and South
America.

In August 2016, we entered into an agreement with AP-HP granting us the
exclusive worldwide rights to access and use data from a multicenter,
prospective, randomized, open trial related to the use of celiprolol for the
treatment of vEDS. We utilized this clinical data to support an NDA filing for
EDSIVOTM for the treatment of vEDS. The agreement requires us to make certain
upfront payments to AP-HP, reimburse certain of AP-HP's costs, make payments
upon achievement of defined milestones and pay low single-digit percent
royalties on net sales of celiprolol over the royalty term.

In September 2018, we entered into an additional agreement with AP-HP to acquire
the exclusive worldwide intellectual property rights to three European patent
applications relating to certain uses of celiprolol including (i) the optimal
dose of celiprolol in treating vascular Ehlers-Danlos syndrome ("vEDS")
patients, (ii) the use of celiprolol during pregnancy, and (iii) the use of
celiprolol to treat kyphoscoliotic Ehlers-Danlos syndrome (type VI). Pursuant to
the agreement, we will reimburse AP-HP for certain costs and will pay annual
maintenance fee payments. Subject to a minimum royalty amount, we will also pay
royalty payments on annual net sales of celiprolol during the royalty term in
the low single digit percent range, depending upon whether there is a valid
claim of a licensed patent. Under the agreement, we will control and pay the
costs of ongoing patent prosecution and maintenance for the licensed
applications. We subsequently filed three U.S. patent applications on this
subject matter in October 2018. We may choose to limit our pursuit of patent
applications to specific territories, in which case AP-HP would have the right
to revise our territorial license rights accordingly.

In December 2018, we entered into an exclusive license agreement with Sanofi granting us worldwide rights to ACER-801, a clinical-stage, selective, non-peptide tachykinin NK3 receptor antagonist. The agreement requires

--------------------------------------------------------------------------------

us to make certain upfront payments to Sanofi, make payments upon achievement of defined development and sales milestones and pay royalties on net sales of ACER-801 over the royalty term. We plan to initially pursue development of ACER-801 as a potential treatment for iVMS.

Collaboration Agreement



On March 19, 2021, we entered into the Collaboration Agreement with Relief
providing for the development and commercialization of OLPRUVATM for the
treatment of various inborn errors of metabolism, including for the treatment of
UCDs and MSUD. The Collaboration Agreement is the culmination of the Option
Agreement previously entered into between us and Relief on January 25, 2021,
which provided Relief with an exclusive period of time up to June 30, 2021 for
the parties to enter into a mutually acceptable definitive agreement with
respect to the potential collaboration and license arrangements. In
consideration for the grant of the exclusivity option, (i) we received from
Relief an upfront non-refundable payment of $1.0 million, (ii) Relief provided
to us a 12-month secured loan in the principal amount of $4.0 million with
interest at a rate equal to 6% per annum, as evidenced by a promissory note we
issued to Relief, and (iii) we granted Relief a security interest in all of our
assets to secure performance of the promissory note, as evidenced by a security
agreement. Upon signing the Collaboration Agreement, we received a $10.0 million
cash payment from Relief (i.e., a $14.0 million "Reimbursement Payment," offset
by repayment of the $4.0 million outstanding balance of the Note plus interest
earned through the date of the Collaboration Agreement). Under the terms of the
Collaboration Agreement, Relief committed to pay us Development Payments of up
to an additional $20.0 million for U.S. development and commercial launch costs
for the UCDs and MSUD indications. During the three months ended June 30, 2021,
we received from Relief the $10.0 million First Development Payment. We were
contractually entitled to receive from Relief an additional $10.0 million Second
Development Payment conditioned upon the FDA's acceptance of an NDA for
OLPRUVATM in a UCD for filing and review. This acceptance was received on
October 4, 2021. On October 6, 2021, we entered into a Waiver and Agreement with
Relief to amend the timing for the Second Development Payment. We received the
Second Development Payment in two $5.0 million tranches on each of October 12,
2021 and January 14, 2022. Further, we retained development and
commercialization rights in the U.S., Canada, Brazil, Turkey and Japan ("Acer
Territory"). The companies will split net profits from the Acer Territory
60%:40% in favor of Relief. Relief licensed the rights for the rest of the world
("Relief Territory"), where we will receive from Relief a 15% royalty on all net
sales received in the Relief Territory. We could also receive a total of $6.0
million in milestone payments based on the first European marketing approvals of
OLPRUVATM for a UCD and MSUD. In connection with cancellation of the $4.0
million promissory note executed by us in favor of Relief on January 25, 2021,
Relief released its security interest in all of our assets pursuant to the
Promissory Note.

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

Not applicable.

Item 8. Financial Statements and Supplementary Data.

Index to Financial Statements

Page

Report of Independent Registered Public Accounting Firm (BDO USA LLP: Boston, Massachusetts; PCAOB 243)

102


  Balance Sheets as of December 31, 2022 and 2021

104

Statements of Operations for the Years Ended December 31, 2022 and 2021

105

Statements of Changes in Stockholders' (Deficit) Equity for the Years Ended December 31, 2022 and 2021

106

Statements of Cash Flows for the Years Ended December 31, 2022 and 2021

107


  Notes to Financial Statements                                              108




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Report of Independent Registered Public Accounting Firm



Shareholders and Board of Directors
Acer Therapeutics Inc.
Newton, Massachusetts

Opinion on the Financial Statements



We have audited the accompanying balance sheets of Acer Therapeutics Inc. (the
"Company") as of December 31, 2022 and 2021, the related statements of
operations, changes in stockholders' (deficit) equity, and cash flows for each
of the years 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, 2022 and 2021, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.

Going Concern Uncertainty



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,
negative cash flows from operations, has a net working capital deficiency, has a
net capital deficiency, and has minimum unencumbered liquid assets balance
requirements under their existing SWK Credit Agreement, that raises 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.

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 audits 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 audits 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 audits 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 audits 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 audits provide a reasonable basis for our opinion.

Critical Audit Matter



The critical audit matter communicated below is a matter arising from the
current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating
the critical audit matter below, providing separate opinions on the critical
audit matter or on the accounts or disclosures to which it relates.

                                      102

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Accounting for Complex Financial Instruments



As described in Notes 1, 2, 6 and 7 to the financial statements, in March 2022
the Company entered into the SWK Credit Agreement, which provided for a senior
secured term loan facility in an aggregate amount of $6.5 million in a single
borrowing (the "Original Term Loan"). In connection with the execution of the
SWK Credit Agreement, the Company issued a warrant (the "First SWK Warrant") to
purchase 150,000 shares of the Company's common stock at an exercise price of
$2.46 per share. In March 2022 the Company also entered into the Marathon
Convertible Note Purchase Agreement with two parties pursuant to which the
Company issued and sold convertible notes in an aggregate amount of $6.0 million
(the "Marathon Convertible Notes").

We identified the evaluation of accounting for the Original Term Loan, the First
SWK Warrant and the Marathon Convertible Notes as a critical audit matter. The
principal considerations for our determination were: (i) the evaluation as to
whether the Original Term Loan and the Marathon Convertible Notes were within
the scope of ASC 480, Distinguishing Liabilities from Equity, or not, and if
they were eligible for the election of the fair value option under ASC 825,
Financial Instruments, and (ii) the evaluation of financial statement
classification related to the First SWK Warrant. Auditing these elements
involved especially complex auditor judgment due to the terms of the applicable
agreements and the audit effort required to address these matters, including the
extent of specialized skills and knowledge needed.

The primary procedures we performed to address this critical audit matter included:

•

Reviewing and analyzing: (i) the terms of the agreements associated with each arrangement, (ii) the completeness and accuracy of the Company's technical accounting analysis, and (iii) the application of the relevant accounting literature.

•

Utilizing personnel with specialized knowledge and skills in technical accounting to assist in: (i) evaluating relevant terms of each arrangement in relation to the appropriate accounting literature, and (ii) assessing the appropriateness of conclusions reached by the Company.



/s/ BDO USA, LLP
We have served as the Company's auditor since 2019.
Boston, Massachusetts
March 27, 2023

                                      103


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                             ACER THERAPEUTICS INC.
                                 BALANCE SHEETS
                        AS OF DECEMBER 31, 2022 AND 2021

                                                          2022               2021

Assets
Current assets:
Cash and cash equivalents                            $    2,329,218     $   12,710,762
Collaboration receivable                                          -          5,000,000
Prepaid expenses                                            759,292          1,094,229
Deferred financing costs                                    408,000                  -
Other current assets                                         20,188          9,283,625
Total current assets                                      3,516,698         28,088,616
Property and equipment, net                                 214,578            114,112
Other assets:
Goodwill                                                  7,647,267          7,647,267
Other non-current assets                                    245,683            406,956
Total assets                                         $   11,624,226     $   36,256,951
Liabilities and Stockholders' (Deficit) Equity
Current liabilities:
Accounts payable                                     $    3,813,280     $    1,405,734
Accrued expenses                                          3,657,394          2,428,193
Deferred collaboration funding, current                   8,412,971

15,825,938


Other current liabilities                                   741,425

9,450,085

Original Term Loan payable, current, at fair value 2,326,630


Total current liabilities                                18,951,700

29,109,950


Deferred collaboration funding, non-current                       -

8,661,109


Original Term Loan payable, non-current, at fair
value                                                     3,240,601


Convertible note payable, at fair value                   6,047,532


Other non-current liabilities                               145,665

209,497


Total liabilities                                        28,385,498

37,980,556


Commitments and Contingencies (Note 8)
Stockholders' (deficit) equity:
Preferred stock, $0.0001 par value; authorized
10,000,000 shares;
  none issued and outstanding                                     -


Common stock, $0.0001 par value; authorized
150,000,000 shares;
  19,624,280 and 14,310,244 shares issued and
outstanding at
  December 31, 2022 and 2021, respectively                    1,962              1,431
Additional paid-in capital                              123,984,035        112,784,918
Accumulated deficit                                    (140,747,269 )     (114,509,954 )
Total stockholders' deficit                             (16,761,272 )

(1,723,605 ) Total liabilities and stockholders' deficit $ 11,624,226 $ 36,256,951

The accompanying notes are an integral part of these financial statements.


                                      104

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                             ACER THERAPEUTICS INC.
                            STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021


                                                            2022              2021
Revenue                                                 $           -     $   1,260,000
Operating expenses:
Research and development (net of collaboration
funding
of $7,825,263 and $6,055,295 in the years ended
December 2022
and 2021, respectively)                                    11,924,837

6,508,055


General and administrative (net of collaboration
funding
of $8,248,813 and $3,197,659 in the years ended
December 2022
and 2021, respectively)                                    12,689,422        10,700,334
Total operating expenses                                   24,614,259        17,208,389
Loss from operations                                      (24,614,259 )     (15,948,389 )
Other income (expense), net:
Costs of debt issuance                                     (1,720,094 )

Changes in fair value of debt instruments gain (loss) 245,138


Interest and other income (expense), net                     (101,432 )

519,639


Foreign currency transaction (loss) gain                      (46,668 )

54,757


Total other income (expense), net                          (1,623,056 )         574,396
Net loss                                                $ (26,237,315 )   $ (15,373,993 )
Net loss per share - basic                              $       (1.66 )   $       (1.08 )
Weighted average common shares outstanding - basic         15,767,152

14,268,245


Net loss per share - diluted                            $       (1.66 )   $       (1.08 )
Weighted average common shares outstanding - diluted       15,767,152

14,268,245

The accompanying notes are an integral part of these financial statements.




                                      105

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ACER THERAPEUTICS INC.
                            STATEMENTS OF CHANGES IN
                         STOCKHOLDERS' (DEFICIT) EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

Stockholders'(Deficit) Equity


                                                                                                     Total
                                                             Additional                          Stockholders'
                                                               Paid-in         Accumulated         (Deficit)
                                    Common stock               Capital           Deficit             Equity
                                Shares         Amount
Balance as of December 31,
2020                           13,233,137     $   1,324     $ 107,358,971     $  (99,135,961 )   $    8,224,334
Issuance of common stock,
net of issuance costs           1,077,107           107         3,138,940                  -          3,139,047
Stock-based compensation                -             -         2,287,007                  -          2,287,007
Net loss                                -             -                 -        (15,373,993 )      (15,373,993 )
Balance as of December 31,
2021                           14,310,244     $   1,431     $ 112,784,918     $ (114,509,954 )   $   (1,723,605 )
Issuance of common stock,
net of issuance costs           5,314,036           531         8,909,187                  -          8,909,718
Proceeds allocated to
First SWK Warrant                       -             -           327,031                  -            327,031
Value of Second SWK
Warrant                                 -             -           122,400                  -            122,400
Stock-based compensation                -             -         1,840,499                  -          1,840,499
Net loss                                -             -                 -        (26,237,315 )      (26,237,315 )
Balance as of December 31,
2022                           19,624,280     $   1,962     $ 123,984,035     $ (140,747,269 )   $  (16,761,272 )

The accompanying notes are an integral part of these financial statements.


                                      106

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                             ACER THERAPEUTICS INC.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

                                                          2022              2021
Cash flows from operating activities:
Net loss                                              $ (26,237,315 )   $ (15,373,993 )
Adjustments to reconcile net loss to net cash used
in operating activities:
Stock-based compensation                                  1,840,499         2,287,007
Depreciation                                                 66,035            70,913
Gain on extinguishment of debt                                    -          (568,909 )
Non-cash changes in fair value of debt, (gain) loss        (245,138 )


Debt issuance costs recognized as expense                 1,720,094


Loss on disposal of property and equipment, net               4,669


Changes in operating assets and liabilities
Collaboration receivable                                  5,000,000        (5,000,000 )
Prepaid expenses                                            334,937          (414,767 )
Other current assets                                      9,280,463        (9,265,745 )
Accounts payable                                          2,407,546          (266,375 )
Accrued expenses                                            916,133        (1,352,908 )
Deferred collaboration funding                          (16,074,076 )

20,487,047


Other current liabilities                                (9,265,745 )

9,262,821


Net cash used in operating activities                   (30,251,898 )        (134,909 )
Cash flows from investing activities:
Purchase of property and equipment                         (171,170 )         (54,944 )
Net cash used in investing activities                      (171,170 )         (54,944 )
Cash flows from financing activities:
Proceeds from issuance of common stock, net of
issuance costs                                            8,909,718

3,139,047


Receipt of funds from Relief secured loan                         -

4,000,000


Proceeds from Original Term Loan, net of warrant
allocation and lender fees                                6,013,148


Proceeds from Marathon Convertible Notes, net of
lender fees                                               5,516,556


Proceeds allocated to First SWK Warrant based on
valuation                                                   327,031

Payment of debt and convertible debt issuance costs (724,929 )


Net cash provided by financing activities                20,041,524

7,139,047


Net (decrease) increase in cash and cash
equivalents                                             (10,381,544 )

6,949,194

Cash and cash equivalents, beginning of the year 12,710,762 5,761,568 Cash and cash equivalents, end of the year

$   2,329,218     $

12,710,762



Supplemental cash flow information:
Cash paid for interest                                $     136,500     $



Non-cash financing activities:
Non-cash repayment of secured loan                    $           -     $

4,000,000


Extinguishment of debt                                $           -     $

568,909


Issuance of Second SWK Warrant                        $     122,400     $

The accompanying notes are an integral part of these financial statements.


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ACER THERAPEUTICS INC.
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

1.

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Business

Acer Therapeutics Inc., a Delaware corporation (the "Company"), is a
pharmaceutical company focused on the acquisition, development, and
commercialization of therapies for serious rare and life-threatening diseases
with significant unmet medical needs. The Company identifies and develops
treatments where science can be applied in new ways for use in diseases with
high unmet need.

In the U.S., OLPRUVA™ (sodium phenylbutyrate) for oral suspension is approved
for the treatment of urea cycle disorders ("UCDs") involving deficiencies of
carbamylphosphate synthetase ("CPS"), ornithine transcarbamylase ("OTC"), or
argininosuccinic acid synthetase ("AS"). The Company is also advancing a
pipeline of investigational product candidates, including EDSIVO™ (celiprolol)
for the treatment of vascular Ehlers-Danlos syndrome ("vEDS") in patients with a
confirmed type III collagen (COL3A1) mutation, and ACER-801 (osanetant) for the
treatment of vasomotor symptoms ("VMS"), post-traumatic stress disorder
("PTSD"), and prostate cancer. We also intend to explore additional lifecycle
opportunities for OLPRUVA™ (sodium phenylbutyrate) in various disorders where
proof of concept data exists, subject to additional capital.

Since its inception, the Company has devoted substantially all of its efforts to
business planning, research and development, recruiting management and technical
staff, acquiring operating assets, and raising capital. The Company has received
revenue and collaboration funding related to the collaboration and license
agreement (the "Collaboration Agreement") with Relief Therapeutics Holding AG
("Relief") as described below but has not generated any product revenue from
sales to date and may never generate any product revenue from sales in the
future.

Liquidity



The Company had an accumulated deficit of $140.7 million and cash and cash
equivalents of $2.3 million as of December 31, 2022. Net cash used in operating
activities was $30.3 million and $0.1 million for the years ended December 31,
2022 and 2021, respectively.

On November 9, 2018, the Company entered into a sales agreement with Roth
Capital Partners, LLC, and on March 18, 2020, an amended and restated sales
agreement was entered into with JonesTrading Institutional Services LLC and Roth
Capital Partners, LLC. The agreement provides a facility for the offer and sale
of shares of common stock from time to time having an aggregate offering price
of up to $50.0 million depending upon market demand, in transactions deemed to
be an at-the-market ("ATM") offering. The Company has no obligation to sell any
shares of common stock pursuant to the agreement and may at any time suspend
sales pursuant to the agreement. Each party may terminate the agreement at any
time without liability. During the year ended December 31, 2022, the Company
sold 3,312,471 shares of common stock through its ATM facility at a gross sale
price of $1.9749 per share, for proceeds of $6.5 million. Proceeds, net of $0.2
million of fees and offering costs, were $6.3 million. As of December 31, 2022,
$33.5 million remained available under the Company's ATM facility, subject to
various limitations. Subsequent to December 31, 2022, the Company sold an
aggregate of 1,462,254 shares of common stock under its ATM facility at an
average gross sale price of $2.81 per share, resulting in gross proceeds of $4.1
million. Proceeds, net of $0.1 million of offering costs, were $4.0 million. In
connection with the March 2023 Offering (defined below), the Company suspended
the ATM facility and entered into a related restriction prohibiting the Company
from entering into any agreement to issue or announcing the issuance or proposed
issuance of any shares of common stock or securities convertible or exercisable
into common stock, subject to certain exceptions, until April 24, 2023.

On April 30, 2020, the Company entered into an equity line purchase agreement
and registration rights agreement pursuant to which Lincoln Park committed to
purchase up to $15.0 million of the Company's common

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stock. Under the terms and subject to the conditions of the purchase agreement,
the Company had the right, but not the obligation, to sell to Lincoln Park, and
Lincoln Park was obligated to purchase up to $15.0 million of the Company's
common stock, subject to various limitations. Such sales of common stock by the
Company were subject to certain limitations, and occurred from time to time, at
the Company's sole discretion, over the 36-month period commencing on June 8,
2020. The number of shares the Company was able to sell to Lincoln Park on any
single business day in a regular purchase was 50,000, but that amount was able
to be increased up to 100,000 shares, depending upon the market price of the
Company's common stock at the time of sale and subject to a maximum limit of
$1.0 million per regular purchase. The purchase price per share for each such
regular purchase was based on prevailing market prices of the Company's common
stock immediately preceding the time of sale as computed under the purchase
agreement. In addition to regular purchases, the Company was also able to direct
Lincoln Park to purchase other amounts as accelerated purchases or as additional
accelerated purchases if the closing sale price of the common stock exceeded
certain threshold prices as set forth in the purchase agreement. During the year
ended December 31, 2021, the Company sold 200,000 shares of common stock under
its purchase agreement with Lincoln Park at a weighted average gross sale price
of $2.47 per share, resulting in gross proceeds of $0.5 million. During the year
ended December 31, 2022, the Company sold 772,057 shares of common stock under
its purchase agreement with Lincoln Park at a weighted average gross sale price
of $1.42 per share, resulting in proceeds of $1.1 million. The Lincoln Park
facility was completed on December 30, 2022.

On January 25, 2021, the Company entered into an option agreement (the "Option
Agreement") with Relief, pursuant to which the Company granted Relief an
exclusive option (the "Exclusivity Option") to pursue a potential collaboration
and license arrangement with the Company for the development, regulatory
approval and commercialization of OLPRUVATM for the treatment of various inborn
errors of metabolism, including UCDs and MSUD. The Option Agreement provided a
period of time up to June 30, 2021, for the parties to perform additional due
diligence and to work toward negotiation and execution of a definitive agreement
with respect to the potential collaboration for ACER001. In consideration for
the grant of the Exclusivity Option, (i) the Company received from Relief an
upfront nonrefundable payment of $1.0 million, (ii) Relief provided to the
Company a 12-month secured loan in the principal amount of $4.0 million, as
evidenced by a Promissory Note (the "Note") the Company issued to Relief, and
(iii) the Company granted Relief a security interest in all of its assets to
secure performance of the Note, as evidenced by a Security Agreement (the
"Security Agreement"). The Note was repayable in one lump sum within 12 months
from issuance and bore interest at a rate equal to 6% per annum.

On March 19, 2021, the Company entered into the Collaboration Agreement with
Relief providing for the development and commercialization of OLPRUVATM for the
treatment of various inborn errors of metabolism, including for the treatment of
UCDs and MSUD. The Company received a $10.0 million cash payment from Relief
(consisting of a $14.0 million "Reimbursement Payment" from Relief to the
Company offset by payment of the $4.0 million outstanding balance of the Note
plus interest earned through the date of the Collaboration Agreement) and Relief
released its security interest in all of the Company's assets, pursuant to the
Promissory Note. Under the terms of the Collaboration Agreement, Relief
committed to pay the Company up to an additional $20.0 million for U.S.
development and commercial launch costs for the UCDs and MSUD indications (the
"Development Payments"). During the three months ended June 30, 2021, the
Company received from Relief the $10.0 million First Development Payment. The
Company was contractually entitled to receive from Relief an additional $10.0
million Second Development Payment conditioned upon the FDA's acceptance of a
New Drug Application ("NDA") for OLPRUVATM in a UCD for filing and review. This
acceptance was received on October 4, 2021. On October 6, 2021, the Company
entered into a Waiver and Agreement with Relief to amend the timing for the
Second Development Payment. The Company received the Second Development Payment
in two $5.0 million tranches on each of October 12, 2021 and January 14, 2022.
Further, the Company retained development and commercialization rights in the
U.S., Canada, Brazil, Turkey, and Japan ("Acer Territory"). The companies will
split net profits from the Acer Territory 60%:40% in favor of Relief. Relief
licensed the rights for the rest of the world ("Relief Territory"), where the
Company will receive from Relief a 15% royalty on all net sales received in the
Relief Territory. The Company could also receive a total of $6.0 million in
milestone payments based on the first European marketing approvals of OLPRUVATM
for a UCD and MSUD. The terms of the Collaboration Agreement and Option
Agreement are further described below in the Revenue Recognition and Accounting
for Collaboration Agreements section of Note 2, Significant Accounting Policies.

On March 4, 2022, the Company entered into a Credit Agreement (the "SWK Credit
Agreement") with the lenders party thereto and SWK Funding LLC ("SWK"), as the
agent, sole lead arranger and sole bookrunner, which

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provided for a senior secured term loan facility in an aggregate amount of $6.5
million in a single borrowing (the "Original Term Loan"). The Original Term Loan
funding closed on March 14, 2022. The proceeds of the Original Term Loan were
used to pay fees, costs and expenses related to the SWK Credit Agreement, the
Marathon Convertible Note Purchase Agreement (as defined and described below)
and the Marathon Credit Agreement (as defined and described below) and for other
working capital and general corporate purposes. On August 19, 2022, the Company
entered into an amendment (the "First Amendment") to the SWK Credit Agreement,
which extended the date through which the Company has the option to capitalize
interest on the SWK Credit Agreement and which revised the Company's minimum
cash requirement under the Original Term Loan. On January 30, 2023, the Company
entered into a Second Amendment (the "Second Amendment") to the SWK Credit
Agreement. In addition to other provisions, the Second Amendment provides for an
additional senior secured term loan to be made to the Company in an aggregate
amount of $7.0 million in a single borrowing which funded on January 31, 2023
(the "Second Term Loan", and together with the Original Term Loan, the "SWK
Loans").

The SWK Loans made under the SWK Credit Agreement as amended by the Second
Amendment (the "Current SWK Credit Agreement") bear interest at an annual rate
of the sum of (i) 3-month SOFR, subject to a 1% floor, plus (ii) a margin of
11%, with such interest payable quarterly in arrears. In the event of default,
the interest rate will increase by 3% per annum over the contract rate effective
at the time of default but shall not be higher than the maximum rate permitted
to be charged by applicable laws. The Company has the option to capitalize such
interest commencing on the date on which the Original Term Loan was funded and
continuing until May 15, 2023. Due to topline results announced in March 2023
from the Company's Phase 2a proof of concept clinical trial to evaluate ACER-801
as a potential treatment for moderate to severe VMS associated with menopause,
which showed that ACER-801 was safe and well-tolerated but did not achieve
statistical significance when evaluating ACER-801's ability to decrease the
frequency or severity of hot flashes in postmenopausal women, the principal
amount of the SWK Loans amortizes at a monthly rate of $0.6 million starting
April 15, 2023, until the Company has issued additional equity or subordinated
debt resulting in net cash proceeds of not less than $7.7 million (i.e., the sum
of $10.0 million less the net proceeds from the March 2023 Offering), at which
point the SWK Loans would revert to amortizing at a rate of $1.3 million payable
quarterly. The final maturity date of the SWK Loans is March 4, 2024. The
Company has the option to prepay the SWK Loans in whole or in part. Upon the
repayment of the Original Term Loan (whether voluntary or at scheduled
maturity), the Company must pay an exit fee so that SWK receives an aggregate
amount (inclusive of all principal, interest and origination and other fees paid
to SWK under the SWK Credit Agreement on or prior to the prepayment date) equal
to 1.5 times the outstanding principal amount of the Original Term Loan, plus
any and all payment-in-kind interest amounts. Upon the repayment of the Second
Term Loan (whether voluntary or at scheduled maturity), the Company must pay an
exit fee so that SWK receives an aggregate amount (inclusive of all principal,
interest and origination and other fees paid in cash to SWK under the SWK Credit
Agreement with respect to the Second Term Loan) equal to the outstanding
principal amount of the Second Term Loan (inclusive of payment-in-kind interest
amounts) multiplied by: (i) if the repayment occurs on or before April 15, 2023,
1.18, (ii) if the repayment occurs on or after April 16, 2023 but prior to May
16, 2023, 1.28667, (iii) if the repayment occurs on or after May 16, 2023 but
prior to June 16, 2023, 1.39334, and (iv) if the repayment occurs on or after
July 16, 2023, 1.5. Due to topline results announced in March 2023 from the
Company's Phase 2a proof of concept clinical trial to evaluate ACER-801 as a
potential treatment for moderate to severe VMS associated with menopause, the
Company is are required to maintain for purposes of the SWK Loans unencumbered
liquid assets of not less than the lesser of (x) the outstanding principal
amount of the SWK Loans or (y) $3.0 million (as opposed to $1.5 million for
clause (y) prior to the announcement of such topline results).

The SWK Loans are secured by a first priority lien on all assets of the Company
and any of its future subsidiaries pursuant to a Guarantee and Collateral
Agreement entered into on March 4, 2022, between the Company and SWK, as agent
(the "SWK Security Agreement"). The SWK Credit Agreement contains customary
representations and warranties and affirmative and negative covenants. The
Company paid to SWK $0.1 million in origination fees on the date on which the
Original Term Loan was funded.

In connection with the execution of the SWK Credit Agreement, the Company issued
a warrant (the "First SWK Warrant") to purchase 150,000 shares of the Company's
common stock at an exercise price of $2.46 per share. In connection with the
execution of the First Amendment, the Company issued to SWK an additional
warrant to purchase 100,000 shares of the Company's common stock at an exercise
price of $1.51 per share (such warrant, the "Second SWK Warrant"). In connection
with the execution of the Second Amendment, the Company issued to SWK an
additional warrant to purchase 250,000 shares of the Company's common stock at
an exercise price of $2.39 per

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share (such warrant, the "Third SWK Warrant" and, together with the First SWK
Warrant and Second SWK Warrant, the "SWK Warrants"). SWK may exercise the SWK
Warrants in accordance with the terms thereof for all or any part of such shares
of common stock from the date on which the Original Term Loan was funded or such
SWK Warrant was issued, as applicable, until and including March 4, 2029.

On March 4, 2022, the Company also entered into a Marathon Convertible Note
Purchase Agreement with MAM Aardvark, LLC ("Marathon") and Marathon Healthcare
Finance Fund, L.P. ("Marathon Fund" and together with "Marathon" each a "Holder"
and collectively the "Holders") (the "Marathon Convertible Note Purchase
Agreement") pursuant to which the Company issued and sold to the Holders secured
convertible notes (the "Marathon Convertible Notes") in an aggregate amount of
up to $6.0 million (the "Convertible Note Financing"). The Convertible Note
Financing closed on March 14, 2022. The proceeds of the Convertible Note
Financing are being used to pay fees, costs and expenses related to the SWK
Credit Agreement, the Marathon Convertible Note Purchase Agreement and the
Marathon Credit Agreement and for other working capital and general corporate
purposes. On January 30, 2023, the Company entered into an Amendment Agreement
(the "Marathon Amendment Agreement") with Marathon and Marathon Fund with
respect to the Marathon Convertible Notes.

The Marathon Convertible Notes bear interest at an annual rate of 6.5%, with
such interest payable quarterly; provided, however, that each of the Holders
have agreed to defer payment by the Company of accrued and unpaid interest on
their respective Marathon Convertible Note existing on the date of the Marathon
Amendment Agreement through March 31, 2023, with such deferred interest,
together with any accrued and unpaid interest on each Marathon Convertible Note
incurred after March 31, 2023, to be due and payable in cash by the Company on
April 15, 2023. Subject to the restrictions set forth in a subordination
agreement among each of the Holders and SWK, as agent and lender, the Company is
required to repurchase each Marathon Convertible Note, on or before the fifth
(5th) business day (but with five (5) business days' notice) following the
earlier of June 15, 2023 or the Company's receipt of gross proceeds of at least
$40.0 million from the issuance or sale of equity, debt and/or hybrid
securities, loans or other financing on a cumulative basis since January 1, 2023
(excluding the Second Term Loan), at a price equal to 200% (the "Buy-Out
Percentage") of the outstanding principal amount of such Marathon Convertible
Note, together with any accrued but unpaid interest thereon to the date of such
repurchase; provided, that if the Company is prohibited from effectuating such
repurchases pursuant to a subordination agreement with SWK, the Company shall
cause the repurchase to occur on or before the fifth (5th) business day
following the earlier of such prohibition being no longer applicable or the
payment in full of all senior indebtedness described in such subordination
agreement, but with five (5) business days' notice; and provided, further, that
if such repurchase has not occurred by April 15, 2023, the Buy-Out Percentage
shall be increased by 2500 basis points for each 90-day period after April 15,
2023, pro-rated for the actual number of days elapsed in the 90-day period
before repurchase actually occurs (for example, if the repurchase occurs on May
30, 2023, the Buy-Out Percentage shall be increased to 212.5%). Each of the
Holders also has the right to convert all or any portion of the outstanding
principal amount plus any accrued but unpaid interest under the Marathon
Convertible Note held by such Holder into shares of common stock at a conversion
price of $2.50 per share, subject to adjustment. Each Holder has certain rights
with respect to the registration by the Company for resale of the shares of
common stock issuable upon conversion of the Marathon Convertible Note held by
such Holder which are forth in the Marathon Convertible Note Purchase Agreement.
Any outstanding principal, together with all accrued and unpaid interest, will
be payable on the earlier of the third anniversary of the date of issuance, or
upon a change of control of the Company.

Pursuant to the Marathon Convertible Note Purchase Agreement, the Marathon
Convertible Notes are secured by a lien on collateral representing substantially
all assets of the Company, although such security interest is subordinated to
the Company's obligations under the SWK Credit Agreement.

On March 4, 2022, the Company also entered into a Credit Agreement (the
"Marathon Credit Agreement") with the lenders party thereto and Marathon, as the
agent, sole lead arranger and sole bookrunner, which provided for a senior
secured term loan facility in an aggregate amount of up to $42.5 million in a
single borrowing (the "Term Loan"). The Term Loan was available to be borrowed
only following full FDA approval for marketing of OLPRUVATM and until December
31, 2022. The Company received approval for its NDA for OLPRUVATM on December
22, 2022, and the Company and Marathon agreed to an Extension Agreement with
respect to the Term Loan on December 30, 2022, which extended the commitment
date for funding the Term Loan to January 16, 2023.

The Company, subsequent to December 31, 2022, elected to terminate the Marathon Credit Agreement by



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entering into a Termination Agreement on January 30, 2023, which terminated the
Credit Agreement and the associated Royalty Agreement. See Note 12, Subsequent
Events for further discussion of the status of the Marathon Convertible Notes,
and the Marathon Credit Agreement.

The Nasdaq Capital Market's continued listing standards for the Company's common
stock require, among other things, that the Company maintain either (i)
stockholders' equity of $2.5 million, (ii) market value of listed securities of
$35 million or (iii) net income from continuing operations of $500,000 in the
most recently completed fiscal year or in two of the last three most recently
completed fiscal years. On May 31, 2022, the Company received a letter from the
listing qualifications department staff of Nasdaq indicating that for the last
30 consecutive business days the Company's minimum Market Value of Listed
Securities ("MVLS") was below the $35 million required for continued listing on
the Nasdaq Capital Market pursuant to Nasdaq listing rule 5550(b)(2). The
Company's stockholder's equity and net income from continuing operations were
also below the alternate listing standards levels at that time. In accordance
with Nasdaq listing rules, the Company had 180 calendar days, or until November
28, 2022, to regain compliance. On December 29, 2022 the Nasdaq Stock Market LLC
formally notified the Company that the Company had regained compliance for
continued listing on the Nasdaq Capital Market. In addition, pursuant to Nasdaq
Listing Rules, the Company is required to maintain a minimum bid price of $1.00
per share for continued listing on Nasdaq. Following the announcement of topline
results in March 2023 from the Company's Phase 2a proof of concept clinical
trial to evaluate ACER-801 as a potential treatment for moderate to severe VMS
associated with menopause, which showed that ACER-801 was safe and
well-tolerated but did not achieve statistical significance when evaluating
ACER-801's ability to decrease the frequency or severity of hot flashes in
postmenopausal women, the Company's stock has traded below the required minimum
bid price for continued listing on Nasdaq. There can be no assurance that the
Company will be able to maintain compliance with Nasdaq listing standards. The
Company's failure to meet or to continue to meet these requirements could result
in the Company's common stock being delisted from the Nasdaq Capital Market. If
the Company's common stock were delisted from the Nasdaq Capital Market, among
other things, this could result in a number of negative implications, including
reduced market price and liquidity of the Company's common stock as a result of
the loss of market efficiencies associated with the Nasdaq, the loss of federal
preemption of state securities laws, as well as the potential loss of confidence
by suppliers, partners, employees and institutional investor interest, fewer
business development opportunities, greater difficulty in obtaining financing
and breaches of or events of default under certain contractual obligations
(including an event of default under the loan agreement for the Marathon
Convertible Notes).

Management expects to continue to finance operations through the issuance of
additional equity or debt securities, non-dilutive funding, and/or through
strategic collaborations. Any transactions which occur may contain covenants
that restrict the ability of management to operate the business and any
securities issued may have rights, preferences, or privileges senior to the
Company's common stock and may dilute the ownership of current stockholders of
the Company. The Company's cash and cash equivalents available at December 31,
2022, together with the proceeds from the Second Term Loan of $7.0 million which
funded on January 31, 2023, net proceeds from its ATM facility subsequent to
December 31, 2022, totaling $4.0 million from the sale of 1,462,254 shares for
gross aggregate proceeds of $4.1 million and an average per share price of $2.81
less offering costs of $0.1 million, and $2.7 million of gross proceeds from a
sale of securities (including 2,335,000 shares of common stock and pre-funded
warrants to purchase up to 585,306 shares of common stock pursuant to a
registered direct offering as well as warrants to purchase up to 2,920,306
shares of common stock in a concurrent private placement) which closed on March
24, 2023 (the "March 2023 Offering"), are expected to be sufficient to fund its
anticipated operating and capital requirements into the middle of the second
quarter of 2023.

Going Concern

The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the U.S. ("GAAP"), which contemplate
continuation of the Company as a going concern. The Company has suffered
recurring losses from operations, negative cash flows from operations, has a net
working capital deficiency, has a net capital deficiency, and has minimum
unencumbered liquid assets requirements under its SWK Credit Agreement. While
the Company has received approval for its OLPRUVATM product, it has yet to
launch the product and establish a source of commercial product revenues and, as
such, has been dependent on funding operations through the sale of equity
securities, through a collaboration agreement, and through debt instruments.
Since inception, the Company has experienced significant losses and incurred
negative cash flows from

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operations. The Company has spent, and expects to continue to spend, a substantial amount of funds in connection with implementing its business strategy, including its planned product development efforts and potential precommercial activities.



As of December 31, 2022, the Company had cash and cash equivalents of $2.3
million and current liabilities of $19.0 million, which include $8.4 million
associated with deferred collaboration funding (see Revenue Recognition and
Accounting for Collaboration Agreements below in Note 2, Significant Accounting
Policies). The Company's cash and cash equivalents available at December 31,
2022, together with the proceeds from the Second Term Loan of $7.0 million which
funded on January 31, 2023, net proceeds from its ATM facility subsequent to
December 31, 2022, totaling $4.0 million from the sale of 1,462,254 shares for
gross aggregate proceeds of $4.1 million and an average per share price of $2.81
less offering costs of $0.1 million, and $2.7 million of gross proceeds from the
registered direct offering closed on March 24, 2023, are expected to be
sufficient to fund the Company's anticipated operating and capital requirements
into the middle of the second quarter of 2023.

The Company will need to raise additional capital to fund continued operations
beyond the middle of the second quarter of 2023. The Company may not be
successful in its efforts to raise additional funds or achieve profitable
operations. The Company continues to explore potential opportunities and
alternatives to obtain the additional resources that will be necessary to
support its ongoing operations beyond the middle of the second quarter of 2023,
including raising additional capital through either private or public equity or
debt financing, or additional program collaborations or non-dilutive funding, as
well as using its ATM facility which has $29.4 million available as of March 24,
2023, although the Company suspended its ATM facility in connection with the
March 2023 Offering and entered into a related restriction prohibiting the
Company from entering into any agreement to issue or announcing the issuance or
proposed issuance of any shares of common stock or securities convertible or
exercisable into our common stock, subject to certain exceptions, until April
24, 2023. (See At-the-Market Facility and Common Stock Purchase Agreement in
Note 9 as well as Note 12.) Due to the SEC's "baby shelf rules," which prohibit
companies with a public float of less than $75 million from issuing securities
under a shelf registration statement in excess of one-third of such company's
public float in a 12-month period, the Company is only able to issue a limited
number of shares under its ATM facility. From May 19, 2020 through March 24,
2023, the Company has raised gross proceeds of $20.6 million from the ATM
facility and gross proceeds of $4.0 million from the agreement with Lincoln
Park, which equity line facility was completed on December 30, 2022.

If the Company is unable to obtain additional funding to support its current or
proposed activities and operations, it may not be able to continue its
operations as currently anticipated, which may require it to suspend or
terminate any ongoing development activities, modify its business plan, curtail
various aspects of its operations, cease operations, or seek relief under
applicable bankruptcy laws. In such event, the Company's stockholders may lose a
substantial portion or even all of their investment.

These factors individually and collectively raise substantial doubt about the
Company's ability to continue as a going concern for at least 12 months from the
date these financial statements are available, or March 27, 2023. The
accompanying financial statements do not include any adjustments or
classifications that may result from the possible inability of the Company to
continue as a going concern.

Basis of Presentation

Any reference in these notes to applicable guidance is meant to refer to the
authoritative accounting principles generally accepted in the U.S., as found in
the Accounting Standards Codification ("ASC") and Accounting Standards Update
("ASU") of the Financial Accounting Standards Board ("FASB").

SIGNIFICANT ACCOUNTING POLICIES

The preparation of these financial statements and related disclosures is in conformity with GAAP. A summary of the significant accounting policies followed by the Company in the preparation of the accompanying financial statements follows:

--------------------------------------------------------------------------------

Use of Estimates



The Company's accounting principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. From time
to time, estimates having relatively higher significance include determination
of stand-alone selling price and variable consideration estimates for purposes
of measuring collaboration funding, revenue recognition, deferred collaboration
funding, stock-based compensation, inputs to fair value for debt, contract
manufacturing and clinical trial accruals, and income taxes. Actual results
could differ from those estimates and changes in estimates may occur.

Revenue Recognition and Accounting for Collaboration Agreements



The Company's revenue and collaboration funding are generated from a single
collaboration agreement which included the sale of a license of intellectual
property. The Company analyzes its collaboration agreements to assess whether
they are within the scope of ASC Topic 808, Collaborative Arrangements, ("ASC
808") to determine whether such arrangements involve joint operating activities
performed by parties that are both active participants in the activities and
exposed to significant risks and rewards that are dependent on the commercial
success of such activities. To the extent the arrangement is within the scope of
ASC 808, the Company assesses whether aspects of the arrangement between the
Company and the collaboration partner are within the scope of other accounting
literature. If the Company concludes that some or all aspects of the arrangement
represent a transaction with a customer, the Company accounts for those aspects
of the arrangement within the scope of ASC Topic 606, Revenue from Contracts
with Customers ("ASC 606"). If the Company concludes that some or all aspects of
the arrangement are within the scope of ASC 808 and do not represent a
transaction with a customer, the Company recognizes the Company's share of the
allocation of the shared costs incurred with respect to the jointly conducted
activities as a component of the related expense in the period incurred.
Pursuant to ASC 606, a customer is a party that has contracted with an entity to
obtain goods or services that are an output of the entity's ordinary activities
in exchange for consideration. Under ASC 606, an entity recognizes revenue when
its customer obtains control of promised goods or services, in an amount that
reflects the consideration which the entity expects to receive in exchange for
those goods or services. If the Company concludes a counter-party to a
transaction is not a customer or otherwise not within the scope of ASC 606 or
ASC 808, the Company considers the guidance in other accounting literature as
applicable or by analogy to account for such transaction.

The Company determines the units of account within the collaborative arrangement
utilizing the guidance in ASC 606 to determine which promised goods or services
are distinct. In order for a promised good or service to be considered
"distinct" under ASC 606, the customer can benefit from the good or service
either on its own or together with other resources that are readily available to
the customer (i.e., the good or service is capable of being distinct), and the
entity's promise to transfer the good or service to the customer is separately
identifiable from other promises in the contract (i.e., the promise to transfer
the good or service is distinct within the context of the contract).

For any units of account that fall within the scope of ASC 606, where the other
party is a customer, the Company evaluates the separate performance
obligation(s) under each contract, determines the transaction price, allocates
the transaction price to each performance obligation considering the estimated
stand-alone selling prices of the services and recognizes revenue upon the
satisfaction of such obligations at a point in time or over time dependent on
the satisfaction of one of the following criteria: (1) the customer
simultaneously receives and consumes the economic benefits provided by the
vendor's performance; (2) the vendor creates or enhances an asset controlled by
the customer; and (3) the vendor's performance does not create an asset for
which the vendor has an alternative use and the vendor has an enforceable right
to payment for performance completed to date.

Revenue for a sales-based or usage-based royalty promised in exchange for a license of intellectual property is recognized only when (or as) the later of the following events occurs: (i) the subsequent sale or usage occurs; or (ii)

--------------------------------------------------------------------------------

the performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied (or partially satisfied).



On January 25, 2021, the Company entered into the Option Agreement with Relief
pursuant to which the Company granted Relief the Exclusivity Option to pursue a
potential collaboration and license arrangement with the Company for the
development, regulatory approval and commercialization of OLPRUVATM for the
treatment of various inborn errors of metabolism, including UCDs and MSUD. The
Option Agreement provided a period of time up to June 30, 2021 for the parties
to perform additional due diligence and to work toward negotiation and execution
of a definitive agreement with respect to the potential collaboration for
ACER001. In consideration for the grant of the Exclusivity Option, (i) the
Company received from Relief an upfront nonrefundable payment of $1.0 million,
(ii) Relief provided to the Company a 12-month secured loan in the principal
amount of $4.0 million, as evidenced by the Note issued by the Company to
Relief, and (iii) the Company granted to Relief a security interest in all of
its assets to secure performance of the Note, as evidenced by the Security
Agreement. The Note was repayable in one lump sum within 12 months from issuance
and bore interest at a rate equal to 6% per annum.

On March 19, 2021, the Company entered into the Collaboration Agreement with
Relief providing for the development and commercialization of OLPRUVATM for the
treatment of various inborn errors of metabolism, including for the treatment of
UCDs and MSUD. The Company received a $10.0 million cash payment from Relief
(consisting of a $14.0 million "Reimbursement Payment" from Relief to the
Company, offset by repayment of the $4.0 million outstanding balance of the
Note, plus interest earned through the date of the Collaboration Agreement), and
Relief released its security interest in all of the Company's assets pursuant to
the Promissory Note. Under the terms of the Collaboration Agreement, Relief
committed to pay the Company up to an additional $20.0 million for U.S.
development and commercial launch costs for the UCDs and MSUD indications.
During the three months ended June 30, 2021, the Company received from Relief
the $10.0 million First Development Payment. The Company was contractually
entitled to receive from Relief an additional $10.0 million Second Development
Payment conditioned upon the FDA's acceptance of an NDA for OLPRUVATM in a UCD
for filing and review. This acceptance was received on October 4, 2021. On
October 6, 2021, the Company entered into a Waiver and Agreement with Relief to
amend the timing for the Second Development Payment. The Company received the
Second Development Payment in two $5.0 million tranches on each of October 12,
2021 and January 14, 2022. Further, the Company retained development and
commercialization rights in the U.S., Canada, Brazil, Turkey and Japan ("Acer
Territory"). The companies will split net profits from the Acer Territory
60%:40% in favor of Relief. Relief licensed the rights for the rest of the world
("Relief Territory"), where the Company will receive from Relief a 15% royalty
on all net sales received in the Relief Territory. The Company could also
receive a total of $6.0 million in milestone payments based on the first
European (EU) marketing approvals for a UCD and MSUD.

The Company assessed these agreements in accordance with the authoritative
literature and concluded that they meet the definition of a collaborative
arrangement per ASC 808. For certain parts of the Collaboration Agreement, the
Company concluded that Relief represented a customer while, for other parts of
the Collaboration Agreement, Relief did not represent a customer. The units of
account of the Collaboration Agreement where Relief does not represent a
customer are outside of the scope of ASC 606. The Company also determined that
the development and commercialization services and Relief's right to 60% profit
in the Acer Territory is within the scope of ASC Topic 730, Research and
Development ("ASC 730"), with regard to funded research and development
arrangements.

The Company concluded the promised goods and services contained in the
Collaboration Agreement, represented two distinct units of account consisting of
a license in the Relief Territory, and a combined promise for the development
and commercialization of OLPRUVATM in the Acer Territory and the payment of 60%
net profit from that territory (together, the "Services"). The stand-alone
selling price was estimated for each distinct unit of account utilizing an
estimate of discounted cashflows associated with each.

The Company determined that the transaction price at the outset of the
Collaboration Agreement was $25.0 million, including the Option Fee of $1.0
million, the Reimbursement Payment of $14.0 million, and the First Development
Payment of $10.0 million. The Company concluded that consistent with the
evaluation of variable consideration, using the most likely amount approach, the
Second Development Payment as well as the milestone payments for EU marketing
approvals, should be fully constrained until the contingency associated with
each payment has been resolved and the Company's NDA is accepted for review by
the FDA, and Relief receives EU

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marketing approval, respectively. The contingency associated with the Second Development Payment was resolved in the fourth quarter of 2021.



Since ASC 808 does not provide recognition and measurement guidance for
collaborative arrangements, the Company applied the principles of ASC 606 for
those units of account where Relief is a customer and ASC 730-20 for the funded
research and development activities. The license revenue was recognized at the
point where the Company determined control was transferred to the customer. The
combined unit of account for the Services associated with the allocation of the
initial transaction price will be recognized over the service period through the
anticipated date of first commercial sale of the OLPRUVATM approved product in
the U.S. The Company also determined that the Services associated with the
allocation of the initial transaction price would be satisfied over time as
measured using actual costs as incurred by the Company toward the identified
development and commercialization services agreed to between the parties up to
the point of first commercial sale of the OLPRUVATM product. Research and
development expenses and general and administrative expenses, as they relate to
activities governed by the Collaboration Agreement, incurred in satisfying the
Services unit-of-account will be recognized as contra-expense within their
respective categories, consistent with the presentation guidance in ASC Topic
730.

The Company recognizes a receivable under the Collaboration Agreement when the
consideration to be received is deemed unconditional, or when only the passage
of time is required before payment of that consideration is due. Amounts
receivable under the Collaboration Agreement plus payments received from Relief,
net of the amounts recorded as license revenue and as offsets to research and
development expenses and to general and administrative expenses, are reported as
deferred collaboration funding.

At December 31, 2022, the amount of deferred collaboration funding associated
with unsatisfied promises under the Collaboration Agreement amounted to $8.4
million. The Company has recorded $8.4 million as a current liability, which
equates to the Company's estimate of remaining spending under the Collaboration
Agreement and which the Company estimates will be recognized within the next 12
months up to the point of the first commercial sale of OLPRUVATM. The
non-current liability reported as of December 31, 2021 represented the then
current estimated amount that would have been taken against future net profit
payments made to Relief should they have occurred. The Company expects to
recognize this deferred collaboration funding as it incurs expenses associated
with performing the Services up to the date of first commercial sale in the Acer
Territory and through the end of the effective date of the Collaboration
Agreement. At December 31, 2022, deferred collaboration funding was composed of
$35.0 million received from Relief, offset by $1.3 million recognized as license
revenue during the year ended December 31, 2021 and $13.9 million recorded as an
offset to research and development expenses and $11.4 million recorded as an
offset to general and administrative expenses subsequent to signing the
Collaboration Agreement and through the date of this report.

Cash and Cash Equivalents



The Company considers all highly liquid investments with original maturities of
three months or less at the date of purchase to be cash equivalents. Financial
instruments that potentially subject the Company to concentration of credit risk
consist principally of cash deposits. Accounts at each institution are insured
by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. At
December 31, 2022 and 2021, the Company had $2.1 million and $12.5 million,
respectively, in excess of the FDIC insured limit.

Under the Original Term Loan as amended, the Company's minimum cash requirement
was such that its unencumbered liquid assets must not be less than the lesser of
(a) the outstanding principal amount of the Original Term Loan, or (b) $1.5
million; provided, however, that due to topline results announced in March 2023
from the Company's Phase 2a proof of concept clinical trial to evaluate ACER-801
as a potential treatment for moderate to severe VMS associated with menopause,
required amount pursuant to the foregoing clause (b) is increased to $3.0
million.

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The Company recognized a $4.0 million non-cash reduction in a secured loan from
Relief during the year ended December 31, 2021, since the Reimbursement Payment
from Relief was received net of the amount of principal and interest due in
connection with the secured loan.

Fair Value of Financial Instruments



ASC Topic 820, Fair Value Measurement ("ASC 820"), establishes a fair value
hierarchy for instruments measured at fair value that distinguishes between
assumptions based on market data (observable inputs) and the Company's own
assumptions (unobservable inputs). Observable inputs are inputs that market
participants would use in pricing the asset or liability based on market data
obtained from sources independent of the Company. Unobservable inputs are inputs
that reflect assumptions about the inputs that market participants would use in
pricing the asset or liability and are developed based on the best information
available in the circumstances.

ASC 820 identifies fair value as the exchange price, or exit price, representing
the amount that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants. As a basis for
considering market participant assumptions in fair value measurements, ASC 820
establishes a three-tier fair value hierarchy that distinguishes among the
following:

· Level 1-Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.



· Level 2-Valuations based on quoted prices for similar assets or liabilities in
active markets, quoted prices for identical or similar assets or liabilities in
markets that are not active and models for which all significant inputs are
observable, either directly or indirectly.

· Level 3-Valuations based on inputs that are unobservable and significant to the overall fair value measurement.



To the extent that the valuation is based on models or inputs that are less
observable or unobservable in the market, the determination of fair value
requires more judgment. Accordingly, the degree of judgment exercised by the
Company in determining fair value is greatest for instruments categorized in
Level 3. A financial instrument's level within the fair value hierarchy is based
on the lowest level of any input that is significant to the fair value
measurement.

Financial instruments consist of cash equivalents, collaboration receivable,
accounts payable, accrued expenses, and debt instruments. These financial
instruments are stated at their respective historical carrying amounts, which
approximate fair value due to their short-term nature, except for cash
equivalents and debt instruments, which were marked to market at the end of each
reporting period. See Note 7 for additional information on the fair value of the
debt liabilities.

The Company elected the fair value option for both its Original Term Loan and
its Marathon Convertible Notes dated March 14, 2022 (see Note 7). The Company
adjusts both the Original Term Loan and the Marathon Convertible Notes to fair
value through the change in fair value of debt in the accompanying statements of
operations. Subsequent unrealized gains and losses on items for which the fair
value option is elected are reported in the accompanying statements of
operations.

Debt



Convertible notes are regarded as compound instruments, consisting of a
liability component and an equity component. The Company determined that it is
eligible for the fair value option election in connection with the Original Term
Loan and the Marathon Convertible Notes. Each instrument met the definition of a
"recognized financial liability" which is an acceptable financial instrument
eligible for the fair value option under ASC 825-10-15-4 and do not meet the
definition of any of the financial instruments found within ASC 825-10-15-5 that
are not eligible for the fair value option. At the date of issuance, the fair
value for each instrument is derived from the instrument's implied discount rate
at inception.

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Research and Development Expenses



Research and development costs are expensed as incurred and include compensation
and related benefits, license fees, and third-party contracted research and
manufacturing consultants. The Company sometimes makes nonrefundable advance
payments for goods and services that will be used in future research and
development activities. These payments are capitalized and recorded as an
expense in the period that the goods are received or that the services are
performed. From time to time, in connection with the Collaboration Agreement
with Relief, the Company may recognize "contra-expense" for the research and
development activities which were funded by the Collaboration Agreement. These
contra-expense amounts are disclosed parenthetically on the face of the
financial statements.

General and Administrative Expenses



General and administrative expenses consist primarily of employee-related
expenses, including salaries, benefits, and stock-based compensation;
precommercial costs; and professional fees for legal, business consulting,
auditing, and tax services. The Company expects that general and administrative
expenses will be substantial in the future. From time to time, in connection
with the Collaboration Agreement with Relief, the Company may recognize
"contra-expense" for the general and administrative activities which were funded
by the Collaboration Agreement. These contra-expense amounts are disclosed
parenthetically on the face of the financial statements.

Clinical Trial and Preclinical Study Expenses



The Company makes estimates of prepaid and/or accrued expenses as of each
balance sheet date in its financial statements based on certain facts and
circumstances at that time. The Company's accrued expenses for preclinical
studies and clinical trials are based on estimates of costs incurred for
services provided by contract research organizations ("CROs"), manufacturing
organizations, and for other trial- and study-related activities. Payments under
the Company's agreements with external service providers depend on a number of
factors such as site initiation, patient screening, enrollment, delivery of
reports, and other events. In accruing for these activities, the Company obtains
information from various sources and estimates the level of effort or expense
allocated to each period. Adjustments to research and development expenses may
be necessary in future periods as the Company's estimates change. As these
activities are generally material to the Company's financial statements,
subsequent changes in estimates may result in a material change in the Company's
accruals. No material changes in estimates were recognized in either of the
years ended December 31, 2022 and 2021. Accounts payable and accrued expenses
include costs associated with preclinical or clinical studies of $0.9 million
and $0.2 million at December 31, 2022 and 2021, respectively.

Stock-Based Compensation



The Company records stock-based payments at fair value. The measurement date for
compensation expense related to awards is generally the date of the grant. The
fair value of awards is recognized as an expense in the statement of operations
over the requisite service period, which is generally the vesting period. The
Company utilizes the simplified method to estimate the expected term of options
until such time that it has adequate option granting and exercise history to
refine this estimate. The fair value of options is calculated using the
Black-Scholes option pricing model. This option valuation model requires the use
of assumptions including, among others, the volatility of stock price, the
expected term of the option, and the risk-free interest rate. A limited number
of option grants are periodically made to non-employee contractors.

The following assumptions were used to estimate the fair value of stock options granted during the years ended December 31, 2022 and 2021 using the Black-Scholes option pricing model:



                               2022             2021
Risk-free interest rate    1.18% - 2.95%    0.37% - 0.84%
Expected life (years)          6.25             6.25
Expected volatility       112.0% - 115.0%       92.4%
Dividend rate                   0%               0%




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Due to its limited operating history and a limited trading history of its common
stock in relation to the life of its standard option grants, the Company
estimates the volatility of its stock in consideration of a number of factors
including the Company's available stock price history and the stock price
volatility of comparable public companies. The expected term of a stock option
granted to employees and directors (including non-employee directors) is based
on the average of the contractual term (generally ten years) and the vesting
period. The assumed dividend yield is based upon the Company's expectation of
not paying dividends in the foreseeable future. The Company recognizes
forfeitures related to employee stock-based awards as they occur. The risk-free
rate for periods within the expected life of the option is based upon the U.S.
Treasury yield curve in effect at the time of grant. Option awards are granted
at an exercise price equal to the closing market price of the Company's common
stock on the Nasdaq Capital Market on the date of grant.

Goodwill

Goodwill represents the excess of the purchase price (consideration paid plus
net liabilities assumed) of an acquired business over the fair value of the
underlying net tangible and intangible assets. The Company's goodwill is
allocated to the Company's single reporting unit. The Company evaluates the
recoverability of goodwill according to ASC Topic 350, Intangibles - Goodwill
and Other annually, or more frequently if events or changes in circumstances
indicate that the carrying value of goodwill might be impaired. The Company may
opt to perform a qualitative assessment or a quantitative impairment test to
determine whether goodwill is impaired. If the Company were to determine based
on a qualitative assessment that it was more likely than not that the fair value
of the reporting unit was less than its carrying value, a quantitative
impairment test would then be performed. The quantitative impairment test
compares the fair value of the reporting unit with its carrying amount,
including goodwill. If the estimated fair value of the reporting unit is less
than its carrying amount, a goodwill impairment would be recognized for the
difference. The Company performed a qualitative analysis of goodwill as of June
21, 2022 as it considered the Complete Response Letter received from the FDA in
June 2022 with respect to the Company's NDA in respect of OLPRUVATM (sodium
phenylbutyrate) for oral suspension for the treatment of patients with UCDs to
be a triggering event requiring it to perform that analysis. Management
concluded that it was more likely than not that the fair value of the reporting
unit was greater than its carrying amount. The Company performed a qualitative
analysis of goodwill as of December 31, 2022 and 2021, in which management
concluded that it was more likely than not that the fair value of the reporting
unit is greater than its carrying amount.

Foreign Currency Transaction Gain/(Loss)

Gains and losses arising from transactions and revaluation of balances denominated in currencies other than U.S. dollars are recorded in foreign currency transaction gain/(loss) on the statements of operations.

Income Taxes



The Company recorded no income tax expense or benefit during the years ended
December 31, 2022 and 2021, due to a full valuation allowance recognized against
its net deferred tax assets. The Company is primarily subject to U.S. federal
and Massachusetts state income taxes. The Company's tax returns for years 2016
through present are open to tax examinations by U.S. federal and state tax
authorities; however, carryforward attributes that were generated prior to
January 1, 2016 remain subject to adjustment upon examination if they either
have been utilized or will be utilized in a future period. For federal and state
income taxes, deferred tax assets and liabilities are recognized based upon
temporary differences between the financial statement and the tax basis of
assets and liabilities. Deferred income taxes are based upon prescribed rates
and enacted laws applicable to periods in which differences are expected to
reverse. A valuation allowance is recorded when it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
Accordingly, the Company provides a valuation allowance, if necessary, to reduce
deferred tax assets to amounts that are realizable. Utilization of net operating
losses may be subject to substantial annual limitations due to the "change in
ownership" provisions of the Internal Revenue Code of 1986, and similar state
provisions. The annual limitations may result in the expiration of net operating
losses before utilization.

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The tax positions taken or expected to be taken in the course of preparing the
Company's tax returns are required to be evaluated to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet a more-likely-than-not threshold
would be recorded as a tax expense in the current year. There were no uncertain
tax positions that require accrual or disclosure in the financial statements as
of December 31, 2022 and 2021. The Company's policy is to recognize interest and
penalties related to income tax, if any, in income tax expense. As of December
31, 2022 and 2021, the Company had no accruals for interest or penalties related
to income tax matters.

The Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was
enacted in the U.S. on March 27, 2020. The CARES Act, among other things,
includes provisions relating to refundable payroll tax credits, deferment of
employer side social security payments, net operating loss carryback periods,
alternative minimum tax credit refunds, modifications to the net interest
deduction limitations, increased limitations on qualified charitable
contributions, and technical corrections to tax depreciation methods for
qualified improvement property. The Company is required to recognize the effects
of tax law changes in the period of enactment. The enactment of the CARES Act
did not result in material adjustments for the income tax provision for the year
ended December 31, 2022 or to the Company's assessment of the realizability of
deferred tax assets as the carry back of net operating losses was used as a
source of income. There were no other effects to the Company's tax provision as
a result of the CARES Act as of December 31, 2022.

Basic and Diluted Net Loss per Common Share



Basic and diluted net loss per common share is computed using the weighted
average number of common shares outstanding during the period. Diluted net loss
per share is computed using the sum of the weighted average number of common
shares outstanding during the period and, in those instances where it would be
dilutive, the weighted average number of potential shares of common stock
including the assumed exercise of stock options and warrants, the impact of
unvested restricted stock, and the potential shares assuming conversion of
convertible debt. Basic and diluted shares outstanding are the same for each
period presented when all common stock equivalents, including potential shares
from convertible debt and warrants, would be antidilutive due to the net losses
incurred, except in certain instances as noted below.

The two-class method is an earnings allocation formula that treats a
participating security, such as a warrant, as having rights to earnings that
otherwise would have been available to common stockholders. However, the
two-class method does not impact the net loss per share of common stock as the
Company has been in a net loss position and while our warrants are considered a
participating security, the terms of the warrant agreement does not obligate
them to participate in losses. Diluted net income per share is computed using
the more dilutive of (a) the two-class method or (b) the if-converted method or
treasury stock method, as applicable, to the potentially dilutive instruments. A
contract that may be settled in shares and is reported as an asset or liability
for accounting purposes may require an adjustment to the numerator for any
changes in income or loss that would result if the contract had been reported as
an equity instrument for accounting purposes during the period, and doing so is
dilutive to the net loss per share calculation (including as a result of the
inclusion of underlying shares in the net loss per share calculation).

Segment Information



Operating segments are defined as components of an enterprise about which
separate discrete information is available for evaluation by the chief operating
decision maker, or decision-making group, in deciding how to allocate resources
and in assessing performance. The Company views its operations and manages its
business in one operating segment, which is the business of a pharmaceutical
company focused on the acquisition, development, and commercialization of
therapies for serious rare and life-threatening diseases with significant unmet
medical needs.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40), which


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simplifies the accounting for convertible instruments by removing, in certain
cases, the need for models that required separate accounting for embedded
conversion features and also amends the guidance for the derivatives scope
exceptions for contracts in an entity's own equity. This ASU also requires
expanded disclosures, including additional information related to the terms and
features of convertible instruments and information about events or conditions
that cause conversion contingencies to be met or conversion terms to be
significantly changed. The Company early adopted ASU No. 2020-06 in the first
quarter of 2021. See Note 6 regarding the Marathon Convertible Notes which were
recognized in the first quarter of 2022 consistent with the adoption of this
guidance.

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260),
Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock
Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or
Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of
the FASB Emerging Issues Task Force), which clarifies and reduces diversity in
issuers' accounting for modifications or exchanges of freestanding
equity-classified written call options that remain equity classified after
modification or exchange. The Company adopted ASU No. 2021-04 in the first
quarter of 2022. There was no impact on the Company's financial statements or
disclosures as a result of the adoption of this guidance.

In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic
832): Disclosures by Business Entities about Government Assistance, which
requires annual disclosures regarding transactions with a government that are
accounted for by applying a grant or contribution accounting model. The Company
adopted ASU No. 2021-10 in the fourth quarter of 2021. There was no impact on
the Company's financial statements or disclosures as a result of the adoption of
this guidance.

3.
PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2022 and 2021:



                                                      December 31, 2022       December 31, 2021
Computer hardware and software                       $           142,870     $           113,847
Leasehold improvements                                            52,887                  60,535
Furniture and fixtures                                           111,603                 145,487
Manufacturing equipment                                          135,330                       -
  Subtotal property and equipment, gross                         442,690                 319,869
Less accumulated depreciation                                   (228,112 )              (205,757 )
Property and equipment, net                          $           214,578     $           114,112



Property and equipment are stated on the basis of historical cost less
accumulated depreciation. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets. Major renewals and
improvements are capitalized, while minor replacements, maintenance and repairs
are charged to current operations. Impairment losses are recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. Computer hardware and software are depreciated over
an estimated useful life of 3 years, leasehold improvements are depreciated over
the shorter of the estimated useful life of the asset or the duration of the
current lease arrangement, furniture and fixtures are depreciated over an
estimated useful life of 7 years, and manufacturing equipment is depreciated
over the estimated useful life of the particular asset.

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ACCRUED EXPENSES

Accrued expenses consisted of the following at December 31, 2022 and 2021:

December 31,

December 31,

2021


Accrued employee bonus and vacation                      $  2,624,910     $    419,354
Accrued interest                                              313,068                -
Accrued precommercial costs                                   203,016          395,923
Accrued legal                                                 172,945          162,812
Accrued accounting, audit, and tax fees                        82,779

167,630


Accrued license fees                                           80,526

86,259


Accrued contract research and regulatory consulting            68,432

47,637


Accrued miscellaneous expenses                                 66,039

216,103


Accrued contract manufacturing                                 42,679          827,390
Accrued consulting                                              3,000          105,085
Total accrued expenses                                   $  3,657,394     $  2,428,193




5.
LEASES

On March 6, 2018, the Company entered into a lease agreement (the "Newton
Lease"), commencing on October 1, 2018, for certain premises, which consist of
2,760 square feet of office space located in Newton, Massachusetts. On March 5,
2019, the Company entered into a modified lease agreement (the "Additional
Newton Lease") to lease an additional 1,600 square feet of office space,
commencing on June 1, 2019, located in Newton, Massachusetts. The Newton Lease
expired on May 31, 2022. On October 15, 2021, the Company entered into a lease
amendment extending the Additional Newton Lease through December 31, 2022.
Effective with the expiration of the Newton Lease and the extension of the
Newton Additional Lease, the space leased by the Company in Newton was reduced
to 1,600 square feet as of June 1, 2022. The Additional Newton Lease expired on
December 31, 2022, and the Company is renting space on month-to-month basis for
this facility. The Company is required to share in certain taxes and operating
expenses associated with the Newton Lease and the Additional Newton Lease.

The Company entered into a triple net lease (the "Bend Lease") effective April
1, 2018 for certain premises consisting of 2,288 square feet of office space
located in Bend, Oregon. On April 23, 2019, the Company entered into a modified
lease agreement (the "Additional Bend Lease") to lease an additional 1,389
square feet of office space, commencing on May 1, 2019, located in Bend, Oregon.
On November 17, 2021, the Company entered into a lease agreement to extend the
term of the Bend Lease and the Additional Bend Lease to June 30, 2022 and to
further extend the term either (1) until June 30, 2027 if FDA approval of
OLPRUVATM was received in June 2022, or (2) until June 30, 2025 if FDA approval
of OLPRUVATM was not received in June 2022. As FDA approval of OLPRUVATM was not
received in June 2022, the Company entered into a lease amendment in June 2022
such that the renewal term for this office space was extended until June 30,
2025.

The leases for the Newton and Bend office space are classified as operating
leases. The leases contain immaterial provisions for rent holidays and rent
escalations over the term of the leases, which have been included in the
Company's right of use asset and lease liabilities. In the year ended December
31, 2021, the Company recorded a non-cash transaction to recognize an additional
$0.4 million right of use asset and lease liability in conjunction with the
modifications to the leases. The Company's lease liability as of December 31,
2022 and 2021 represents the net present value of future lease payments
utilizing discount rates of 8% to 10%, which correspond to the Company's
incremental borrowing rates as of the effective dates of the leases. As of
December 31, 2022, the weighted average remaining lease term was 2.8 years. For
the years ended December 31, 2022 and 2021, the Company recorded expense of $0.2
million and $0.3 million, respectively, related to the leases and made cash
payments of $0.2 million and $0.3 million, respectively, for amounts included in
the measurement of lease liabilities. The Company is therefore reporting a
right-of-use asset of $0.2 million in Other non-current assets and lease
liabilities totaling $0.2 million in Other current liabilities and Other
non-current liabilities as of December 31, 2022.

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The following table reconciles the undiscounted lease liabilities to the total lease liabilities recognized on the balance sheet as of December 31, 2022.

Undiscounted lease liabilities for years ending December 31,


  2023                                                         103,925
  2024                                                         107,290
  2025                                                          54,579
   Total undiscounted lease liabilities                      $ 265,794
Less effects of discounting                                    (16,204 )
  Total lease liabilities as of December 31, 2022            $ 249,590


The Company's lease liabilities are reported on the balance sheets as follows:

                                   December 31,
                                2022          2021

Other current liabilities $ 103,925 $ 184,340 Other non-current liabilities 145,665 209,497


  Total lease liabilities     $ 249,590     $ 393,837



6. DEBT

SWK Credit Agreement

On March 4, 2022, the Company entered into the SWK Credit Agreement with the
lenders party thereto and SWK, as the agent, sole lead arranger and sole
bookrunner, which provides for a senior secured term loan facility in an
aggregate amount of $6.5 million in a single borrowing (the "Original Term
Loan"). The Original Term Loan closed on March 14, 2022, after consummation of
the Convertible Note Financing (as defined and described below) as well as the
satisfaction of other closing conditions as set forth in the SWK Credit
Agreement. The proceeds of the Original Term Loan are being used to pay fees,
costs and expenses related to the SWK Credit Agreement, the Marathon Convertible
Note Purchase Agreement (as defined and described below) and the Marathon Credit
Agreement (as defined and described below) and for other working capital and
general corporate purposes. On August 19, 2022, the Company entered into an
amendment (the "First Amendment") to the SWK Credit Agreement, which extended
the date through which the Company has the option to capitalize interest on the
SWK Credit Agreement and which revised the Company's minimum cash requirement
under the Original Term Loan.

The Original Term Loan bears interest at an annual rate of the sum of (i)
3-month LIBOR (or such other rate as may be agreed by the Company and SWK
following the date on which 3-month LIBOR is no longer available), subject to a
1% floor, plus (ii) a margin of 11%, with such interest payable quarterly in
arrears. In the event of default, the interest rate will increase by 3% per
annum over the contract rate effective at the time of default but shall not be
higher than the maximum rate permitted to be charged by applicable laws. For the
period ended December 31, 2022, the current interest rate applicable to the
Original Term Loan is 15.8%. The Company has the option to capitalize such
interest commencing on the date on which the Original Term Loan was funded and
continuing until February 15, 2023. Commencing on February 15, 2023, the
principal amount of the Original Term Loan will amortize at a rate of $0.7
million payable quarterly. The final maturity date of the Original Term Loan is
March 4, 2024. The Company is required to pay $2.1 million of principal payments
in 2023, with the remainder payable in 2024. The Company has the option to
prepay the Original Term Loan in whole or in part. Upon the repayment of the
Original Term Loan (whether voluntary or at scheduled maturity), the Company
must pay an exit fee so that SWK receives an aggregate amount (inclusive of all
principal, interest and origination and other fees paid to SWK under the SWK
Credit Agreement on or prior to the prepayment date) equal to 1.5 times the
outstanding principal amount of the Original Term Loan, plus any and all
paid-in-kind interest amounts. The Original Term Loan contains a provision for
the establishment of an alternative rate of interest if LIBOR were to no longer
be available at any point while the Original Term Loan is outstanding. Under the
Original Term Loan as amended, the Company's minimum cash requirement is such
that its unencumbered liquid assets must not be less than the lesser of (a) the
outstanding principal amount of the Original Term Loan, or (b) $1.5 million;
provided, however, that such $1.5 million amount shall automatically be
increased to $3.0 million on the date that is 14 days following the date, if

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any, that the Company's Board of Directors determines that discontinuation of
the development program for the Company's product candidate known as ACER-801
(osanetant) for the treatment of vasomotor symptoms is warranted based upon a
serious adverse event or a lack of efficacy at any dose studied in the results
from a completed Phase 2a trial.

The Original Term Loan is secured by a first priority lien on all assets of the
Company and any of its future subsidiaries pursuant to the SWK Security
Agreement. The SWK Credit Agreement contains customary representations and
warranties and affirmative and negative covenants. The Company paid to SWK $0.1
million in origination fees on the date on which the Original Term Loan was
funded. The Original Term Loan contains certain provisions which could
accelerate the maturity date of the outstanding loan should the Company be out
of compliance with any of the stated covenants. At December 31, 2022, the
Company did not deem probable any events that would give rise to such an
acceleration. The Company classified the fair value of the interest and
principal amortization payments of $1.5 million due within twelve months from
the date of this report as current in the balance sheet as of December 31, 2022.

In connection with the execution of the SWK Credit Agreement, the Company issued
a warrant (the "First SWK Warrant") to purchase 150,000 shares of the Company's
common stock at an exercise price of $2.46 per share. In connection with the
execution of the First Amendment, the Company issued to SWK an additional
warrant to purchase 100,000 shares of the Company's common stock at an exercise
price of $1.51 per share (such warrant, the "SWK Amendment Warrant" and,
together with the First SWK Warrant, the "SWK Warrants"). SWK may exercise the
SWK Warrants in accordance with the terms thereof for all or any part of such
shares of common stock from the date on which the Original Term Loan was funded
or such SWK Warrant was issued, as applicable, until and including March 4,
2029.

The Company recognized the fair value of the First SWK Warrant for $0.3 million
as additional paid in capital as of the date of the closing of the transaction.
Additionally, the Company recognized the fair value of the SWK Amendment Warrant
in connection with the First Amendment, for $0.1 million as additional paid in
capital and as non-operating cost of debt issuance, as of the date of the First
Amendment.

The Company evaluated its compliance with all covenants with respect to the SWK Credit Agreement as amended and concluded that it was in compliance as of December 31, 2022.

See Note 12, Subsequent Events for further discussion of the status of the SWK Credit Agreement and related arrangements.

Marathon Convertible Notes



On March 4, 2022, the Company also entered into the Marathon Convertible Note
Purchase Agreement with MAM Aardvark, LLC ("Marathon") and Marathon Healthcare
Finance Fund, L.P. ("Marathon Fund" and together with "Marathon" each a "Holder"
and collectively the "Holders") pursuant to which the Company issued and sold to
the Holders the Marathon Convertible Notes in an aggregate amount of $6.0
million (the "Convertible Note Financing"). The Convertible Note Financing
closed on March 14, 2022 after satisfaction of closing conditions as set forth
in the Marathon Convertible Note Purchase Agreement. The proceeds of the
Convertible Note Financing are being used to pay fees, costs and expenses
related to the SWK Credit Agreement, the Marathon Convertible Note Purchase
Agreement and the Marathon Credit Agreement and for other working capital and
general corporate purposes.

The Marathon Convertible Notes bear interest at an annual rate of 6.5%, with
such interest payable quarterly; provided, however, that until the first to
occur of OLPRUVATM Approval and the repayment in full of the Original Term Loan,
interest will not be payable in cash, but will accrue and be payable in cash
upon the earlier of a) the repayment of all obligations under the Original Term
Loan and termination of such Original Term Loan or b) within three business days
of OLPRUVATM Approval. Subject to the restrictions set forth in an agreement
among each of the Holders and SWK, as agent and lender, and any other
intercreditor or subordination agreement entered into in connection with the
Term Loan (defined below), each of the Holders has the right, during the 30-day
periods beginning 12 months, 18 months and 24 months after the closing date of
the Convertible Note Financing, to require

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the Company to redeem the Convertible Secured Note held by such Holder at a
redemption price of the outstanding principal amount plus any accrued but unpaid
interest. In the event of default, interest on the Marathon Convertible Notes
will increase to the lower of 11.5% per annum or the highest rate permitted by
law. Each of the Holders also has the right to convert all or any portion of the
outstanding principal amount plus any accrued but unpaid interest under the
Marathon Convertible Note held by such Holder into shares of common stock at a
conversion price of $2.50 per share, subject to adjustment, for an aggregate of
2.4 million shares upon conversion of the original principal amount. The nature
of the adjustment to conversion price is limited to instances such as stock
splits and reverse stock splits.. Each Holder has certain rights with respect to
the registration by the Company for resale of the shares of common stock
issuable upon conversion of the Marathon Convertible Note held by such Holder
which are forth in the Marathon Convertible Note Purchase Agreement. Any
outstanding principal, together with all accrued and unpaid interest, will be
payable on the earlier of the third anniversary of the date of issuance, or upon
a change of control of the Company.

Pursuant to the Marathon Convertible Note Purchase Agreement, the Marathon
Convertible Notes are secured by a lien on collateral representing substantially
all assets of the Company, although such security interest is subordinated to
the Company's obligations under the SWK Credit Agreement and may also be
subordinated to the Company's obligations under the Marathon Credit Agreement.

The Company evaluated its compliance with all covenants with respect to the Marathon Convertible Note Purchase Agreement and concluded that it was in compliance as of December 31, 2022.

See Note 12, Subsequent Events for further discussion of the status of the Marathon Convertible Notes.

Marathon Credit Agreement



On March 4, 2022, the Company also entered into the Marathon Credit Agreement
with the lenders party thereto and Marathon, as the agent, sole lead arranger
and sole bookrunner, which provides for a senior secured term loan facility in
an aggregate amount of up to $42.5 million in a single borrowing (the "Term
Loan"). The Term Loan will be available to be borrowed only following OLPRUVATM
Approval and until December 31, 2022 (i.e., if OLPRUVATM Approval does not occur
on or before December 31, 2022, then the Term Loan will not be available unless
the Company is able to obtain an extension for the time period beyond December
31, 2022, to the actual PDUFA target action date), and funding of the Term Loan
is also subject to the satisfaction of conditions as set forth in the Marathon
Credit Agreement. Although the Company's resubmitted NDA in respect of OLPRUVATM
(sodium phenylbutyrate) for oral suspension for the treatment of patients with
UCDs has been accepted for substantive review by the FDA, the PDUFA target
action date is January 15, 2023. The Term Loan, if it becomes available, will be
used to refinance certain other indebtedness of the Company (including the
Original Term Loan), to pay fees, costs and expenses related to the Marathon
Credit Agreement and for other working capital and general corporate purposes.
Should the Term Loan become available, the Company will pay Marathon a
commitment fee equal to 1.5% of the term loan amount. The Marathon Credit
Agreement also includes an accordion feature pursuant to which the Company,
Marathon and the lenders under the Marathon Credit Agreement may agree to
increase the Term Loan commitments by up to an additional $50.0 million dollars
for a total commitment of $92.5 million; provided, however, that any such
increase is within the sole discretion of each party (i.e., the Company cannot
unilaterally trigger such an increase).

The Term Loan would bear interest at an annual rate of 13.5% and would be
payable quarterly in arrears. The Company would have the option to capitalize up
to 4% of such interest commencing on the Term Loan Funding Date and continuing
until the third anniversary of the Term Loan Funding Date. Commencing on the
third anniversary of the Term Loan Funding Date, the principal outstanding
amount of the Term Loan would amortize at a rate of 2.78%, payable monthly. The
final maturity date of the Term Loan would be the earlier of six years after the
Term Loan Funding Date or December 31, 2028. The Company would have the option
to prepay the Term Loan in whole or in part at any time, subject to a prepayment
fee equal to (a) if the prepayment is made prior to March 4, 2025, then the
greater of 5% or the amount of interest that would have accrued from the date of
prepayment until March 4, 2025, (b) if the prepayment is made on or after March
4, 2025, but prior to March 4, 2026, then 3%, (c) if the prepayment is made on
or after March 4, 2026, but prior to March 4, 2027, then 2%, or (d) if the
prepayment is made on or after March 4, 2027, then 1%.

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The Term Loan would be secured by a first priority lien on all assets of the
Company and any of its future subsidiaries pursuant to a Guarantee and
Collateral Agreement to be entered into on the Term Loan Funding Date between
the Company and Marathon, as agent (the "Marathon Security Agreement"). The
Marathon Credit Agreement contains customary representations and warranties and
affirmative and negative covenants. The Company paid $0.2 million in commitment
fees to Marathon in connection with obtaining the commitments in respect of the
Term Loan and will pay $0.6 million in additional commitment fees to Marathon
following OLPRUVATM Approval or any change of control of the Company or sale or
transfer of the OLPRUVATM product.

In connection with the Marathon Credit Agreement, on March 4, 2022, the Company,
Marathon and the Marathon Fund also entered into the Royalty Agreement pursuant
to which, in the event of the funding of the Term Loan, the Company will pay
Marathon and the Marathon Fund, on a quarterly basis, 2% of certain aggregate
commercial revenue from sales of OLPRUVATM during that quarter (i.e., 2% of the
net sales and of the amount of certain other payments), subject to a cap on the
aggregate amount of such payments of $15.0 million. Upon a change of control of
the Company or the sale of the OLPRUVATM business to a third party, the Company
would pay Marathon and the Marathon Fund the difference between $15.0 million
and the aggregate amount of the payments previously made by the Company to
Marathon and the Marathon Fund pursuant to the Royalty Agreement.

As of December 31, 2022, the Company had not requested funding of the Term Loan,
and as such had not triggered the associated Royalty Agreement. On December 30,
2022, the Company and Marathon entered into an Extension Agreement which
extended the Term Loan Commitment Date to January 16, 2023. See Note 12,
Subsequent Events for further discussion of the status of the Marathon
Convertible Notes and the Marathon Credit Agreement.

The Company engaged an exclusive financial advisor with respect to the
financings contemplated by the SWK Credit Agreement, the Marathon Convertible
Note Purchase Agreement and the Marathon Credit Agreement. In connection with
the funding of the Original Term Loan and the Convertible Note Financing, the
Company paid its financial advisor a fee of $0.5 million for its services.

The Company is eligible to elect the fair value option under ASC 815 and bypass
analysis of potential embedded derivatives and further analysis of bifurcation
of any such financial instruments and has elected such option. The Company
recognized the First SWK Warrant at fair value as of the date of the close of
the transaction and recorded it in equity. The Original Term Loan and Marathon
Convertible Notes met the definition of a "recognized financial liability" which
is an acceptable financial instrument eligible for the fair value option under
ASC 825-10-15-4 and do not meet the definition of any of the financial
instruments found within ASC 825-10-15-5 that are not eligible for the fair
value option. Therefore, both the Original Term Loan and Marathon Convertible
Notes are recorded at their fair value upon issuance and subsequently
re-measured at each reporting period until their maturity, prepayment or
conversion. Additionally, all issuance costs incurred in connection with a debt
instrument that is measured at fair value pursuant to the election of the fair
value option are expensed during the period the debt is acquired. The Original
Term Loan was recorded at fair value of $6.2 million after allocating the fair
value of the First SWK Warrant of $0.3 million.

The Company incurred $1.2 million of debt issuance costs, which were expensed as
incurred due to the election of the fair value option and were included in
interest expense in the accompanying statement of operations for the year ended
December 31, 2022. Debt issuance costs were comprised of $0.5 million that
related to the costs and expense paid directly to SWK and the Holders, $0.7
million of costs and expenses paid to the Company's financial advisor, and other
legal and accounting costs. The fee of $0.2 million paid in connection with
obtaining the commitments in respect of the Term Loan was paid to Marathon
through gross proceeds received from the Marathon Convertible Notes. The Company
recorded this fee as expense during the year ended December 31, 2022. As a
result of the approval of OLPRUVATM, the Company will pay $0.6 million for the
Term Loan commitment fee and has recognized a liability for $0.6 million and a
current asset for deferred financing costs of $0.4 million as of December 31,
2022, and has recognized expense during the period of $0.2 million for this fee.

See Note 12, Subsequent Events for further discussion of the status of the Term Loan and related arrangements.

--------------------------------------------------------------------------------

7. FAIR VALUE MEASUREMENTS



In instances where the determination of the fair value measurement is based on
inputs from different levels of the fair value hierarchy, the level in the fair
value hierarchy within which the entire fair value measurement falls is based on
the lowest level input that is significant to the fair value measurement in its
entirety. The Company's assessment of the significance of a particular input to
the fair value measurement in its entirety requires judgment and considers
factors specific to the asset or liability.

The financial instrument's level within the fair value hierarchy is based on the
lowest level of any input that is significant to the fair value measurement. At
each reporting period, the Company reviews the assets and liabilities that are
subject to ASC 815-40. At each reporting period, all assets and liabilities for
which the fair value measurement is based on significant unobservable inputs or
instruments which trade infrequently and therefore have little or no price
transparency are classified as Level 3. The valuation methodologies used for the
Company's financial instruments measured on a recurring basis at fair value,
including the general classification of such instruments pursuant to the
valuation hierarchy, is set forth in the tables below.

The following table presents the Company's assets and liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of December 31, 2022.



                                                                               Fair Value Measurements
                                  As of December 31, 2022                      As of December 31, 2022
                              Carrying Amount       Fair Value        Level 1         Level 2          Level 3
Assets:
Money Market Funds in Cash
Equivalents                  $       1,829,218     $  1,829,218     $ 1,829,218     $          -     $          -

Liabilities:
Debt:

Marathon Convertible Notes $ 6,360,600 $ 6,360,600 $


  -     $          -     $  6,360,600
Original Term Loan           $       5,567,231     $  5,567,231     $         -     $          -     $  5,567,231
                             $      11,927,831     $ 11,927,831     $         -     $          -     $ 11,927,831




A lattice-based model was used to estimate the fair value of the Marathon
Convertible Notes at December 31, 2022. The lattice model utilizes a "decision
tree," whereby future movement in the Company's common stock price is estimated
based on a volatility factor. Additionally, the Company included in its decision
tree, when relevant, a probability assessment of the approval of ACER-001 and
the resulting impact of such an event. The Company classified the fair value of
the Marathon Convertible Notes as a Level 3 measurement due to the lack of
observable market data. The lattice model requires the development and use of
assumptions, including the Company's stock price volatility returns, an
appropriate risk-free interest rate, default intensity rate, and expected
recovery rate given default.

The Company updated its estimate of fair value of the Original Term Loan based
on the probability-weighted net present value of future cash flows at December
31, 2022.

The significant unobservable inputs used in calculating the fair value of the
Marathon Convertible Notes and Original Term Loan represent management's best
estimates and involve inherent uncertainties and the application of management's
judgment. Any significant changes in the inputs described herein may result in
significantly higher or lower fair value measurements. The Company recognized a
decrease in the fair value of the Original Term Loan of $0.6 million during the
year ended December 31, 2022 through non-operating income in the statement of
operations as "Changes in fair value of debt instruments gain (loss)". During
the year ended December 31, 2022, the Company recognized an increase in the fair
value of the Marathon Convertible Notes of $0.4 million through non-operating
income in the statement of operations. The Company recognized $0.3 million of
accrued interest in connection with the Marathon Convertible Notes as of
December 31, 2022 for the interest accrued on the notes since the date of

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issuance and payable as of this date in cash, now that it is allowable under the subordination agreement with the receipt of approval of OLPRUVATM.

The following table describes changes in debt recorded at fair value in the Company's financial statements for the year ended December 31, 2022.



                                                                                   Accrued       Adjustment to
                                                                                  interest         Fair Value       December 31,
                      December 31, 2021       Loan Received       Payments         expense       Mark to Market         2022
Marathon
Convertible Notes
(1)                  $                 -     $     6,000,000     $         -     $   313,068     $       47,532     $   6,360,600
Original Term
Loan                                   -           6,172,969               -               -           (605,738 )       5,567,231
                     $                 -     $    12,172,969     $         -     $   313,068     $     (558,206 )   $  11,927,831

(1) Marathon Convertible Notes were recorded as $0.3 million in accrued interest expenses and $6.0 million in convertible note payable, at fair value in the Company's balance sheet at December 31, 2022.

8. COMMITMENTS AND CONTINGENCIES

License Agreements



In April 2014, the Company obtained exclusive rights to intellectual property
relating to OLPRUVATM for the treatment of inborn errors of branched-chain amino
acid metabolism, including MSUD, and preclinical and clinical data, through a
license agreement with Baylor College of Medicine ("BCM"). Under the terms of
the agreement, as amended, the Company has worldwide exclusive rights to
develop, manufacture, use, sell and import licensed products as defined in the
agreement. The license agreement requires the Company to make certain upfront
and annual payments to BCM, as well as reimburse certain legal costs, make
payments upon achievement of defined milestones, and pay royalties in the low
single-digit percent range on net sales of any developed product over the
royalty term.

In August 2016, the Company signed an agreement with Assistance
Publique-Hôpitaux de Paris, Hôpital Européen Georges Pompidou ("AP-HP") (via its
Department of Clinical Research and Development) granting the Company the
exclusive worldwide rights to access and use data from a randomized, controlled
clinical study of celiprolol. The Company used this pivotal clinical data to
support an NDA regulatory filing for EDSIVOTM for the treatment of vEDS. The
agreement requires the Company to make certain upfront payments to AP-HP, as
well as reimburse certain costs and make payment of royalties in the low
single-digit percent range on net sales of celiprolol over the royalty term.

In September 2018, the Company entered into a License Agreement for Development
and Exploitation with AP-HP to acquire the exclusive worldwide intellectual
property rights to three European patent applications relating to certain uses
of celiprolol including (i) the optimal dose of celiprolol in treating vEDS
patients, (ii) the use of celiprolol during pregnancy and (iii) the use of
celiprolol to treat kyphoscoliotic Ehlers-Danlos syndrome (type VI). Pursuant to
the agreement, the Company will reimburse AP-HP for certain costs and will pay
annual maintenance fee payments. Subject to a minimum royalty amount, the
Company will also pay royalty payments on annual net sales of celiprolol during
the royalty term in the low single digit percent range, depending upon whether
there is a valid claim of a licensed patent. Under the agreement, the Company
will control and pay the costs of ongoing patent prosecution and maintenance for
the licensed applications. The Company may terminate the agreement in its sole
discretion upon written notice to AP-HP, and AP-HP may terminate the agreement
in the event the Company fails to make the required payments after notice and
opportunity to cure. Additionally, the agreement will terminate if the Company
terminates clinical development, marketing approval is withdrawn by the health
or regulatory authorities in all countries, the Company ceases to do business or
there is a procedure of winding-up by court decision against the Company. The
Company subsequently filed three U.S. patent applications on this subject matter
in October 2018.

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In December 2018, the Company entered into an exclusive license agreement with
Sanofi granting the Company worldwide rights to ACER-801, a clinical-stage,
selective, non-peptide tachykinin NK3 receptor antagonist. The agreement
required the Company to make a certain upfront payment to Sanofi, make payments
upon achievement of defined development and sales milestones and pay royalties
on net sales of ACER-801 over the royalty term. The Company plans to initially
pursue development of ACER-801 as a potential treatment for iVMS.

In May 2021, the Company entered into an agreement with Emory University to
acquire the exclusive worldwide intellectual property rights to a family of
patents and patent applications related to the use of neurokinin receptor
antagonists in managing conditioned fear and treating anxiety disorders
including post-traumatic stress disorder. The Company has obtained issued claims
in both Europe and the United States and continues to pursue additional claim
scope in both jurisdictions. Pursuant to the agreement, the Company reimburses
Emory for certain patent prosecution costs and annual maintenance fees. Should
the Company obtain approval for a treatment method within the scope of a valid
claim of a licensed patent, the Company will be obligated to make royalty
payments on annual net sales of osanetant either in the low single digit percent
range, or alternatively, that meet an agreed minimum royalty.

Collaboration Agreement



On March 19, 2021, the Company entered into the Collaboration Agreement with
Relief providing for the development and commercialization of OLPRUVATM for the
treatment of various inborn errors of metabolism, including for the treatment of
UCDs and MSUD. The Collaboration Agreement is the culmination of the Option
Agreement previously entered into between the Company and Relief on January 25,
2021, which provided Relief with an exclusive period of time up to June 30, 2021
for the parties to enter into a mutually acceptable definitive agreement with
respect to the potential collaboration and license arrangements. In
consideration for the grant of the exclusivity option, (i) the Company received
from Relief an upfront non-refundable payment of $1.0 million, (ii) Relief
provided to the Company a 12-month secured loan in the principal amount of $4.0
million with interest at a rate equal to 6% per annum, as evidenced by a
promissory note the Company issued to Relief, and (iii) the Company granted
Relief a security interest in all of its assets to secure performance of the
promissory note, as evidenced by a security agreement. Upon signing the
Collaboration Agreement, the Company received a $10.0 million cash payment from
Relief (the $14.0 million ("Reimbursement Payment") from Relief to the Company,
offset by repayment of the $4.0 million outstanding balance of the prior loan,
plus interest), and Relief released its security interest in the Company's
assets pursuant to the Promissory Note. Under the terms of the Collaboration
Agreement, Relief committed to pay the Company Development Payments of up to an
additional $20.0 million for U.S. development and commercial launch costs for
the UCDs and MSUD indications. During the three months ended June 30, 2021, the
Company received from Relief the $10.0 million First Development Payment. The
Company was contractually entitled to receive from Relief an additional $10.0
million Second Development Payment conditioned upon the FDA's acceptance of an
NDA for OLPRUVATM in a UCD for filing and review. This acceptance was received
on October 4, 2021. On October 6, 2021, the Company entered into a Waiver and
Agreement with Relief to amend the timing for the Second Development Payment.
The Company received the Second Development Payment in two $5.0 million tranches
on each of October 12, 2021 and January 14, 2022. Further, the Company retained
development and commercialization rights in the U.S., Canada, Brazil, Turkey and
Japan ("Acer Territory"). The companies will split net profits from the Acer
Territory 60%:40% in favor of Relief. Relief licensed the rights for the rest of
the world ("Relief Territory"), where the Company will receive from Relief a 15%
royalty on all net sales received in the Relief Territory. The Company could
also receive a total of $6.0 million in milestone payments based on the first
European (EU) marketing approvals of OLPRUVATM for a UCD and MSUD.

Paycheck Protection Program ("PPP") Loan



On April 11, 2020, the Company was advised that its principal bank, JPMorgan
Chase Bank, N.A., had approved a $0.6 million loan under the PPP pursuant to the
CARES Act that was signed into law on March 27, 2020. As a U.S. small business,
the Company qualified for the PPP, which allows businesses and nonprofits with
fewer than 500 employees to obtain loans of up to $10 million to incent
companies to maintain their workers as they manage the business disruptions
caused by the COVID-19 pandemic.

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The loan, evidenced by a promissory note to JPMorgan Chase Bank, N.A. as lender,
had a term of two years, was unsecured, and was guaranteed by the Small Business
Administration. The loan bore interest at a fixed rate of one percent per annum,
with the first six months of interest and principal deferred. Some or all of a
loan may be forgiven if at least 75% of the loan proceeds are used by the
Company to cover payroll costs, including benefits, and if the Company maintains
its employment and compensation within certain parameters during the period
following the loan origination date and complies with other relevant conditions.
On June 5, 2020, the Payroll Protection Flexibility Act of 2020 was signed into
law, adjusting certain terms of the loans issued under the PPP, including
extending the initial deferral period from six to up to ten months, reducing
from 75% to 60% the portion of loan proceeds required to be used to cover
payroll costs, and allowing borrowers to elect a 24-week rather than an
eight-week period related to employment and compensation provisions.

The Company accounted for the loan according to ASC 470. The Company was advised
by JPMorgan Chase Bank, N.A. that the principal and interest associated with its
PPP loan were forgiven in full as of June 10, 2021.

Litigation



From time to time, the Company may become involved in litigation or proceedings
relating to claims arising out of its operations. To the extent that the Company
incurs legal costs associated with any potential loss contingency, those legal
costs are expensed as incurred.

The Securities Class Action and Stockholder Derivative Actions



On July 1, 2019, plaintiff Tyler Sell filed a putative class action lawsuit,
Sell v. Acer Therapeutics Inc. et al., No. 1:19-cv-06137GHW, against the
Company, Chris Schelling and Harry Palmin, in the U.S. District Court for the
Southern District of New York. The Complaint alleged that the Company violated
federal securities laws by allegedly making material false and misleading
statements regarding the likelihood of FDA approval for the EDSIVOTM NDA. With
the selection of a lead plaintiff, the case was later captioned Skiadas v. Acer
Therapeutics Inc. et al. The parties reached an agreement in principle to settle
this action for a payment of $8.4 million, which was approved by the Court on
January 7, 2022. As of December 31, 2021, the Company had recognized liabilities
of $8.4 million for the proposed settlement and of $0.9 million for costs
related to both the derivative and class action cases in other current
liabilities and had also recognized an asset of an equal amount in other current
assets representing the recovery from its insurance carriers of an equal amount.
Both the liabilities and the asset were derecognized during the year ending
December 31, 2022 as payment of the settlement was made by the Company's
insurance carriers.

On August 12, 2019, a stockholder derivative action, Gress v. Aselage et al.,
No. 1:19-cv-01505-MN, was filed in the U.S. District Court for the District of
Delaware against certain of the Company's present and former officers and
directors, asserting damages resulting from the alleged breach of their
fiduciary duties, based on the same facts at issue in the Skiadas case. On March
17, 2020, a second stockholder derivative action, Giroux v. Amello et al., No.
1:20-cv-10537-GAO, was filed in the U.S. District Court for the District of
Massachusetts against certain of the Company's present and former officers and
directors, asserting claims based on the same facts at issue in the Skiadas and
Gress cases. On June 23, 2020, a third stockholder derivative action, King v.
Schelling, et al., No. 1:20-cv-04779-GHW, was filed in the U.S. District Court
for the Southern District of New York against certain of the Company's present
and former officers and directors that arises from the same facts underlying the
Skiadas, Gress, and Giroux cases. On July 6, 2020, a fourth stockholder
derivative action, Diaz v. Amello et al., No. 1:20-cv-00909-MN, was filed in the
U.S. District Court for the District of Delaware. By Stipulation and Order dated
August 7, 2020, the Gress and Diaz cases were consolidated under the caption In
re Acer Therapeutics Inc. Derivative Litigation, Lead Case No. 1:19-cv-01505-MN.
As disclosed previously, the parties reached an agreement to settle all of the
derivative cases. At a hearing held on May 12, 2021 in the District Court of
Massachusetts, the Court administering the matter, the settlement was approved.
Payment of the settlement amount of $0.5 million, plus legal fees and costs in
excess of the retention (deductible) amount, has been made by the Company's
insurance carriers.

Commitments Under Clinical Trial Agreements



The Company has entered into agreements with two CROs in connection with the
conduct of two separate clinical trials for EDSIVOTM and ACER-801. As a part of
those agreements, the Company has agreed to pay any

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third-party costs or subcontracts associated with those agreements which are
unpaid by the CRO. Such reimbursement would apply only to costs approved in
advance by the Company. Those CRO agreements are subject to termination at any
time, with or without cause, by the Company, in which case only costs earned or
non-cancellable to date of termination would remain subject to reimbursement.

9. STOCKHOLDERS' (DEFICIT) EQUITY

At-the-Market Facility



On November 9, 2018, the Company entered into a sales agreement with Roth
Capital Partners, LLC, and on March 18, 2020, the Company entered into an
amended and restated sales agreement with JonesTrading Institutional Services
LLC and Roth Capital Partners, LLC. The agreement provides a facility for the
offer and sale of shares of common stock from time to time having an aggregate
offering price of up to $50.0 million depending upon market demand, in
transactions deemed to be an "at-the-market" ("ATM") offering. The Company has
no obligation to sell any shares of common stock pursuant to the agreement and
may at any time suspend sales pursuant to the agreement. Each party may
terminate the agreement at any time without liability. The Company will need to
keep current its shelf registration statement and the offering prospectus
relating to the ATM facility, in addition to providing certain periodic
deliverables under the sales agreement, in order to use such facility. Due to
the SEC's "baby shelf rules," which prohibit companies with a public float of
less than $75 million from issuing securities under a shelf registration
statement in excess of one-third of such company's public float in a 12-month
period, the Company is currently only able to issue a limited number of shares
which aggregate to not more than one-third of the Company's public float. During
the year ended December 31, 2022, the Company sold an aggregate of 3,312,471
shares of common stock through the ATM at an average gross sale price of $1.9749
per share, for gross proceeds of $6.5 million. Proceeds, net of $0.2 million in
fees and offering costs, were $6.3 million. During the year ended December 31,
2021, the Company sold 877,107 shares of common stock at an average gross sale
price of $3.1692 per share, for gross proceeds of $2.8 million. Proceeds, net of
$0.2 million of fees and offering costs were $2.6 million. As of December 31,
2022, $33.5 million remained available under the Company's ATM facility.

See Note 12, Subsequent Events for further discussion of the status of the Company's ATM facility.

Common Stock Purchase Agreement



On April 30, 2020, the Company entered into an equity line purchase agreement
and a registration rights agreement pursuant to which Lincoln Park committed to
purchase up to $15.0 million of the Company's common stock. Under the terms and
subject to the conditions of the purchase agreement, the Company had the right,
but not the obligation, to sell to Lincoln Park, and Lincoln Park was obligated
to purchase up to $15.0 million of the Company's common stock. Such sales of
common stock by the Company were subject to certain limitations, and occurred
from time to time, at the Company's sole discretion, over the 36-month period
commencing on June 8, 2020. The number of shares the Company was able to sell to
Lincoln Park on any single business day in a regular purchase was 50,000, but
that amount was able to be increased up to 100,000 shares, depending upon the
market price of the Company's common stock at the time of sale and subject to a
maximum limit of $1.0 million per regular purchase. The purchase price per share
for each such regular purchase was based on prevailing market prices of the
Company's common stock immediately preceding the time of sale as computed under
the purchase agreement. In addition to regular purchases, the Company was also
able to direct Lincoln Park to purchase other amounts as accelerated purchases
or as additional accelerated purchases if the closing sale price of the common
stock exceeded certain threshold prices as set forth in the purchase agreement.

Under applicable rules of the Nasdaq Capital Market, in no event may the Company
issue or sell to Lincoln Park under the purchase agreement more than 19.99% of
the shares of the Company's common stock outstanding immediately prior to the
execution of the purchase agreement, unless (i) the Company obtains stockholder
approval to issue shares of common stock in excess of the Exchange Cap or (ii)
the average price of all applicable sales of common stock to Lincoln Park under
the purchase agreement equals or exceeds $2.1668, such that issuances and sales
of the common stock to Lincoln Park under the purchase agreement would be exempt
from the issuance limitation under applicable Nasdaq rules.

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Lincoln Park has no right to require the Company to sell any shares of common
stock to Lincoln Park, but Lincoln Park is obligated to make purchases as the
Company directs, subject to certain conditions. In all instances, the Company
may not sell shares of its common stock to Lincoln Park under the purchase
agreement if doing so would result in Lincoln Park beneficially owning more than
9.99% of its common stock. The Company determined that the right to sell
additional shares represents a freestanding put option under ASC 815 Derivatives
and Hedging, but has a fair value of zero, and therefore no additional
accounting was required.

Actual sales of shares of common stock to Lincoln Park under the purchase
agreement will depend on a variety of factors to be determined by the Company
from time to time, including, among others, market conditions, the trading price
of the common stock and determinations by the Company as to the appropriate
sources of funding for the Company and its operations. However, there can be no
assurance that the Company will be able to receive the entire obligation amount
from Lincoln Park because the purchase agreement contains limitations,
restrictions, requirements, events of default and other provisions that could
limit the Company's ability to cause Lincoln Park to buy common stock from the
Company.

The proceeds under the purchase agreement to the Company will depend on the
frequency and prices at which the Company sells shares of its stock to Lincoln
Park. The Company issued 148,148 shares of common stock to Lincoln Park as a
commitment fee in connection with entering into the purchase agreement. The $0.4
million fair value of the commitment fee shares was recorded to General and
administrative expenses along with other costs incurred in connection with
entering into the purchase agreement.

During the year ended December 31, 2022, the Company sold 772,057 shares of
common stock under its purchase agreement with Lincoln Park at a weighted
average price of $1.42 per share, resulting in net proceeds of $1.1 million.
During the year ended December 31, 2021, the Company sold 200,000 shares of
common stock under its purchase agreement with Lincoln Park at a weighted
average price of $2.47 per share, resulting in proceeds of $0.5 million. The
Lincoln Park facility was completed on December 30, 2022.

Private Placement



On November 29, 2022, the Company entered into a securities purchase agreement
for the sale and issuance of an aggregate of 1,229,508 shares of the Company's
common stock, for an aggregate purchase price of $1.5 million, in a private
placement with the Company's President and Chief Executive Officer and a member
of the Company's Board of Directors and with the Chairman of the Company's Board
of Directors at a price per share of $1.22. The shares of common stock issued in
the private placement constitute "restricted securities" under the federal
securities laws and are subject to a minimum six-month holding period.

2018 Stock Incentive Plan



The Company's 2018 Stock Incentive Plan (the "2018 Plan"), adopted on May 14,
2018, originally provided for the grant of up to 500,000 shares of common stock
as stock options, restricted stock, stock appreciation rights, restricted stock
units, performance-based awards and cash-based awards that may be settled in
cash, stock or other property to employees, executive officers, directors, and
consultants.

In addition to the 500,000 shares, the total number of shares reserved for
issuance under the 2018 Plan also consists of the sum of the number of shares
subject to outstanding awards under the Company's 2010 Stock Incentive Plan, as
amended and restated (the "2010 Plan"), and the 2013 Stock Incentive Plan, as
amended (the "2013 Plan"), as of the effective date of the 2018 Plan that are
subsequently forfeited or terminated for any reason prior to being exercised or
settled, plus the number of shares subject to vesting restrictions under the
2010 Plan and the 2013 Plan on the effective date of the 2018 Plan that are
subsequently forfeited, plus the number of shares reserved but not issued or
subject to outstanding grants under the 2010 Plan and the 2013 Plan as of the
effective date of the 2018 Plan, up to a maximum of 635,170 shares in aggregate.
In addition, the number of shares authorized for issuance under the 2018 Plan is
automatically increased (the "evergreen provision") on the first day of each
fiscal year beginning on January 1, 2019, and ending on (and including) January
1, 2028, in an amount equal to the lesser of (i) 4% of the outstanding shares of
common stock on the last day of the immediately preceding fiscal year, or (ii)
another amount (including zero) determined by the Company's Board of Directors.
On January 1, 2022 and

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2021, 572,410 and 529,325 additional shares, respectively, were authorized
according to the evergreen provision. On February 18, 2022, the Company's Board
of Directors amended and restated the 2018 Plan to add a provision permitting
the grant of inducement awards under Nasdaq Marketplace Rule 5635(c)(4) to
eligible recipients and initially reserved 200,000 shares of the Company's
common stock for issuance pursuant to inducement awards granted under the 2018
Plan. Any shares subject to awards granted under the 2018 Plan that are
forfeited or terminated before being exercised or settled, or are not delivered
to the participant because such award is settled in cash, will again become
available for issuance under the 2018 Plan. Shares withheld to satisfy the
grant, exercise price or tax withholding obligation related to an award will
again become available for issuance under the 2018 Plan.

The 2018 Plan is administered by the Company's Board of Directors, which may in
turn delegate authority to administer the plan to a committee such as the
Compensation Committee, referred to herein as the 2018 Plan administrator.
Subject to the terms of the 2018 Plan, the 2018 Plan administrator will
determine recipients, the number of shares or amount of cash subject to awards
to be granted, whether an option is to be an incentive stock options or
non-incentive stock options and the terms and conditions of the stock awards,
including the period of their exercisability and vesting. Subject to the
limitations set forth below, the 2018 Plan administrator will also determine the
exercise price of options granted under the 2018 Plan. The 2018 Plan expressly
provides that, without the approval of the stockholders, the 2018 Plan
administrator does not have the authority to reduce the exercise price of any
outstanding stock options or stock appreciation rights under the 2018 Plan
(except in connection with certain corporate transactions, such as stock splits,
certain dividends, recapitalizations, reorganizations, mergers, spin-offs and
the like), or cancel any outstanding underwater stock options or stock
appreciation rights in exchange for cash or new stock awards under the 2018
Plan.

Option awards are generally granted with an exercise price equal to the fair
value of the common stock at the date of grant and have contractual terms of ten
years. Stock options granted to executive officers and employees generally vest
either 1) over a four-year period, with 25% vesting on the one-year anniversary
of the grant date and the remaining 75% vesting quarterly over the remaining
three years, assuming continued service, and with vesting acceleration in full
immediately prior to a change in control, or 2) for certain stock options
granted on September 18, 2019, 50% vest on each of January 1, 2021 and January
1, 2022, assuming continued service, and with vesting acceleration in full
immediately prior to a change in control. For certain grants such as those made
to members of the Company's Board of Directors, vesting occurs 12 months after
the date of the grant. Restricted stock units generally vest and are settled
upon the first anniversary of the grant date. There were no grants of restricted
stock units during the years ended December 31, 2022 or 2021 and no unvested
restricted stock units as of December 31, 2022 or 2021.

At December 31, 2022, 389,313 shares of common stock remained available for the grant of future awards under the 2018 Plan.

2013 Stock Incentive Plan



The Company's 2013 Plan provided for the issuance of up to 165,000 shares of
common stock as incentive or non-qualified stock options and/or restricted
common stock to employees, officers, directors, consultants and advisers. Option
awards were generally granted with an exercise price equal to the fair value of
the common stock at the date of grant and had contractual terms of ten years. At
December 31, 2022, all shares available under the 2013 Plan were subject to
outstanding equity awards, and no new awards may be granted under the 2013 Plan.

2010 Stock Incentive Plan



The Company's 2010 Plan, as amended and restated, provided for the grant of up
to 470,170 shares of common stock as incentive or non-qualified stock options,
stock appreciation rights, restricted stock units and/or restricted common stock
to employees, officers, directors, consultants and advisers. Option awards were
generally granted with an exercise price equal to the fair value of the common
stock at the date of grant and had contractual terms of ten years. At December
31, 2022, all shares available under the 2010 Plan were subject to outstanding
equity awards, and no new awards may be granted under the 2010 Plan.

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Stock Plan Activity

A summary of option activity under the 2018 Plan, 2013 Plan, and 2010 Plan for the year ended December 31, 2022 is as follows:


                                                                             Weighted
                                                             Weighted         Average          Aggregate
                                                             Average         Remaining         Intrinsic
                                             Number of       Exercise       Contractual        Value (in
                                              Shares          Price        Term (Years)        Thousands)
Options outstanding at December 31, 2021      1,954,975     $     8.16

7.8


Granted                                         960,500     $     2.33
Cancelled/forfeited                            (120,625 )   $     3.41

Options outstanding at December 31, 2022 2,794,850 $ 6.36

          7.4     $          211
Options exercisable at December 31, 2022      1,462,238     $     9.56               6.3     $            4



At December 31, 2022, there was $2.2 million of unrecognized compensation
expense related to the stock-based compensation arrangements granted under all
plans, which will be recognized as expense over the remaining vesting period for
those options of 2.6 years. The weighted average grant-date fair value of
options granted during the years ended December 31, 2022 and 2021 was $1.99 and
$2.57, respectively. The fair value of shares vested during the years ended
December 31, 2022 and 2021 was $2.2 million and $2.0 million, respectively. The
amount of stock-based compensation expense recorded to research and development
expenses and to general and administrative expenses is detailed in table below:

                                           Years Ended December 31,
                                             2022             2021
Stock-based compensation expense
Research and development                 $     615,477     $   696,283
General and administrative                   1,225,022       1,590,724

Total stock-based compensation expense $ 1,840,499 $ 2,287,007




Warrants issued to SWK

                                                          Year Ended December 31,
                                                 2022                                   2021
                                                                                              Weighted
                                                    Weighted Average                           Average
                                    Number           Exercise Price          Number        Exercise Price
Outstanding at beginning of
the period                                   -     $                -                -                   -
Granted during the period              250,000                   2.08                -                   -
Outstanding at end of the
period                                 250,000     $             2.08                -     $             -

Exercisable at end of the
period                                 250,000     $             2.08                -     $             -

Weighted average remaining
life                                 6.3 years                                       -




10. INCOME TAXES

There was no provision for income taxes for the years ended December 31, 2022
and 2021, due to the Company's operating losses and a full valuation allowance
on deferred tax assets. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities are
as follows:

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                                                      December 31,
                                                 2022              2021
Deferred tax assets:
Net operating loss carry forwards            $  17,548,951     $

12,059,019


Capitalized research and development costs      22,913,646        18,865,707
Accrued liabilities                                691,212           156,415
Tax credit carryforwards                         9,457,090         8,730,816
Stock-based compensation                         2,086,266         1,745,654
Deferred collaboration funding                   2,151,339         3,312,415
Operating lease                                     63,824            94,946
Debt issuance costs                                229,073                 -
Unrealized foreign exchange gain                    13,756            (3,616 )
Total deferred tax assets                       55,155,157        44,961,356

Valuation allowance                            (55,033,001 )     (44,866,411 )
Net deferred tax assets                            122,156            94,945

Deferred tax liabilities:
Operating lease right of use asset                 (59,470 )         (94,945 )
Fair value debt                                    (62,686 )               -
Total deferred tax liabilities                    (122,156 )         (94,945 )

                                             $           -     $           -


A reconciliation of the U.S. federal statutory tax rate to the effective tax
rate is as follows:

                                                   December 31,
                                                2022         2021
Federal statutory rate                            21.0 %       21.0 %
R&D and Orphan Drug credits                        2.7 %        6.4 %
State income tax, net of federal tax benefit      15.9 %        5.4 %
Valuation allowance                              (38.9 %)     (33.2 %)
Share-based compensation                          (0.7 %)      (0.3 %)
Other, net                                         0.0 %        0.7 %
Effective tax rate                                 0.0 %        0.0 %


Management currently believes that it is more likely than not that the deferred
tax assets relating to the loss carryforwards and other temporary differences
will not be realized in the future. Through December 31, 2022, for income tax
reporting purposes, the Company had U.S. federal net operating loss
carryforwards of $66.6 million and research and development credits and Orphan
Drug credits of $9.4 million that can be carried forward and offset against
taxable income. For state purposes, the Company had state net operating loss
carryforwards of $65.6 million and research and development credits of $67
thousand that can be carried forward and offset against taxable income. Federal
net operating loss generated prior to 2018 and Massachusetts net operating
losses can be carried forward for 20 years and begin to expire in 2031. Research
and development credits and Orphan Drug credits begin to expire in 2032 and
2034, respectively. Federal net operating loss generated after 2017 can be
carried forward indefinitely. Utilization of net operating losses may be subject
to substantial annual limitations due to the "change in ownership" provisions of
the Internal Revenue Code of 1986, and similar state provisions. The annual
limitations may result in the expiration of net operating losses before
utilization.

There were no uncertain tax positions that require accrual or disclosure in the
financial statements as of December 31, 2022 and 2021. The Company's policy is
to recognize interest and penalties related to income tax, if any, in income tax
expense. As of December 31, 2022 and 2021, the Company had no accruals for
interest or penalties related to income tax matters.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 ("TCJA") eliminated the option to deduct research and development expenditures in the current year pursuant to IRC Section 174 and requires taxpayers to amortize them

--------------------------------------------------------------------------------

over five years for research performed in the U.S. and fifteen years for research performed outside the U.S. We have included the impact of this provision, which results in a gross deferred tax asset of approximately $19.0 million as of December 31, 2022.



The 2017 merger of Opexa Therapeutics, Inc. and private Acer Therapeutics Inc.
resulted in an ownership change for the Company. Additional ownership changes in
the future could result in additional limitations on the Company's net operating
loss carryforwards and certain other tax attributes. Consequently, even if the
Company achieves profitability, it may not be able to utilize a material portion
of its net operating loss carryforwards and certain other tax attributes, which
could increase its tax obligations and thus have a material adverse effect on
its cash flow and results of operations.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if
a corporation undergoes an ''ownership change,'' the corporation's ability to
use its pre-change net operating loss carryforwards and other pre-change tax
attributes to offset its post-change income and taxes may be limited. In
general, an "ownership change" generally occurs if there is a cumulative change
in the Company's ownership by "five-percent shareholders" that exceeds 50
percentage points over a rolling three-year period. Similar rules may apply
under state tax laws. The Company experienced an ownership change on July 17,
2015 and August 3, 2018, and may experience ownership changes in the future as a
result of this issuance or future transactions in the Company's stock, some of
which may be outside the Company's control. As a result, if the Company earns
net taxable income, the Company's ability to use the Company's pre-change net
operating loss carryforwards, or other pre-change tax attributes, to offset U.S.
federal and state taxable income and taxes may be subject to significant
limitations.

11. NET LOSS PER SHARE



Basic net loss per share is computed by dividing the net loss in each period by
the weighted-average number of common shares outstanding during such period.
Diluted net loss per share is computed similarly to basic net loss per share
except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential common shares
had been issued and if the additional common shares were dilutive. For the
periods presented, common stock equivalents, consisting of stock-based awards
and the SWK Warrants, were not included in the calculation of the diluted loss
per share because to do so would be antidilutive. The exercise prices of the SWK
Warrants are subject to a proportionate adjustment in the event of a stock
dividend or stock split. The Company concluded that they should be deemed
participating securities. However, as the Company is currently operating in a
net loss position as of the December 31, 2022 and has not declared any
dividends, such inclusion of the participating securities related to the SWK
Warrants (as common stock equivalents) would be antidilutive and thus would be
excluded from the calculation of net loss per share. When calculating diluted
net loss per share, the Company includes, only if dilutive, the potential common
shares associated with the Marathon Convertible Notes using the "if-converted"
method, which adjusts the numerator for any impact to earnings for the period
and includes in the denominator the shares assumed to be converted at the
beginning of the period.

As of December 31, 2022 and 2021, the number of shares of common stock underlying potentially dilutive securities consist of:



                                          December 31,
                                      2022            2021

Options to purchase common stock 2,794,850 1,954,975 SWK Warrants

                           250,000               -
Total                                3,044,850       1,954,975

The application of the "if-converted" method to the 2.4 million shares associated with the Marathon Convertible Notes was not applicable for the year ended December 31, 2022 because to do so would have been antidilutive.

--------------------------------------------------------------------------------

12. SUBSEQUENT EVENTS



Subsequent to December 31, 2022, the Company sold an aggregate of 1,462,254
shares of common stock under its ATM facility at an average gross sale price of
$2.81 per share, resulting in gross proceeds of $4.1 million. Proceeds, net of
$0.1 million of offering costs, were $4.0 million.

On March 14, 2023, the Company granted options to acquire a total of 630,000 shares of its common stock to its directors, officers, and employees.

Amendments to Borrowing Agreements



On January 30, 2023, the Company entered into a Second Amendment (the "Second
Amendment") to the SWK Credit Agreement. In addition to other provisions, the
Second Amendment provides for an additional senior secured term loan to be made
to the Company in an aggregate amount of $7.0 million in a single borrowing
which was funded on January 31, 2023 (the "Second Term Loan", and together with
the Original Term Loan, the "SWK Loans").

Pursuant to the terms of the August 2022 SWK Credit Agreement as amended by the Second Amendment (the "Current SWK Credit Agreement"):

•


Interest Rate: Interest is now calculated on the SWK Loans based on 3-month SOFR
instead of 3-month LIBOR, such that the SWK Loans now bear interest at an annual
rate of the sum of (i) 3-month SOFR, subject to a 1% floor, plus (ii) a margin
of 11%, with such interest payable quarterly in arrears.

•

Capitalization of Interest: The Company's option to capitalize accrued interest (the "PIK Amount") has been extended through May 15, 2023 (instead of the previous February 15, 2023).

•

Maturity Date: The final maturity date of the Second Term Loan is March 4, 2024, which is the same as the final maturity date of the Original Term Loan.

•


Exit Fees: The Company has the option to prepay the Second Term Loan in whole or
in part. Upon the repayment of the Second Term Loan (whether a voluntary
prepayment, an accelerated repayment or at scheduled maturity), the Company must
pay an exit fee so that SWK receives an aggregate amount (inclusive of all
principal, interest and origination and other fees paid in cash to SWK under the
SWK Credit Agreement with respect to the Second Term Loan, but excluding the
Third Warrant (defined below)) equal to the outstanding principal amount of the
Second Term Loan (inclusive of PIK Amounts) multiplied by: (i) if the repayment
occurs on or before April 15, 2023, 1.18, (ii) if the repayment occurs on or
after April 16, 2023 but prior to May 16, 2023, 1.28667, (iii) if the repayment
occurs on or after May 16, 2023 but prior to June 16, 2023, 1.39334, and (iv) if
the repayment occurs on or after July 16, 2023, 1.5. The Second Amendment did
not modify the exit fee applicable to the Original Term Loan.

•


Minimum Cash Requirement: The Second Amendment revised the liquidity covenant
and, due to topline results announced in March 2023 from the Company's Phase 2a
proof of concept clinical trial to evaluate ACER-801 as a potential treatment
for moderate to severe VMS associated with menopause, , which showed that
ACER-801 was safe and well-tolerated but did not achieve statistical
significance when evaluating ACER-801's ability to decrease the frequency or
severity of hot flashes in postmenopausal women, the Current SWK Credit
Agreement now provides that the Company's cash and cash equivalents balance
minus the aggregate amount of any accounts payable which are unpaid more than 90
days beyond terms consistent with the Company's practice must not be less than
the lesser of (a) the outstanding principal amount of the SWK Loans, or (b) $3.0
million (as opposed to $1.5 million for clause (b) prior to the announcement of
such topline results).

•


Amortization: Due to topline results announced in March 2023 from the Company's
Phase 2a proof of concept clinical trial to evaluate ACER-801 as a potential
treatment for moderate to severe VMS associated with menopause, the principal
amount of the SWK Loans amortizes at a monthly rate of $0.6 million starting
April 15, 2023, until the Company has issued additional equity or subordinated
debt resulting in net cash proceeds of not less than $7.7 million (i.e., the sum
of $10.0 million less the net

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proceeds from the March 2023 Offering), at which point the SWK Loans would revert to amortizing at a rate of $1.3 million payable quarterly.



In connection with the execution of the Second Amendment, the Company issued to
SWK an additional warrant (the "Third Warrant") to purchase 250,000 shares of
the Company's common stock at an exercise price of $2.39 per share. SWK may
exercise the Third Warrant in accordance with the terms thereof for all or any
part of such shares of common stock from the date of issuance until and
including March 4, 2029.

On January 30, 2023, the Company entered into an Amendment Agreement (the "Marathon Amendment Agreement") with Marathon and Marathon Fund (i.e., the Holders) with respect to the Marathon Convertible Notes.

Pursuant to the terms of the Marathon Amendment Agreement:

•


Each Holder agrees to defer payment by the Company of accrued and unpaid
interest on their respective Marathon Convertible Note existing on the date of
the Marathon Amendment Agreement through March 31, 2023, with such deferred
interest, together with any accrued and unpaid interest on each Marathon
Convertible Note incurred after March 31, 2023, to be due and payable in cash by
the Company on April 15, 2023.

•

Each Marathon Convertible Note is amended with retroactive effect to delete the concept of a default rate of interest.

•


Each Marathon Convertible Note is amended to obligate the Company to repurchase
such Marathon Convertible Note, on or before the fifth (5th) business day (but
with five (5) business days' notice) following the earlier of June 15, 2023 or
the Company's receipt of gross proceeds of at least $40.0 million from the
issuance or sale of equity, debt and/or hybrid securities, loans or other
financing on a cumulative basis since January 1, 2023 (excluding the Second Term
Loan), at a price equal to 200% (the "Buy-Out Percentage") of the outstanding
principal amount of such Marathon Convertible Note, together with any accrued
but unpaid interest thereon to the date of such repurchase; provided, that if
the Company is prohibited from effectuating such repurchases pursuant to a
subordination agreement with SWK, the Company shall cause the repurchase to
occur on or before the fifth (5th) business day following the earlier of such
prohibition being no longer applicable or the payment in full of all senior
indebtedness described in such subordination agreement, but with five (5)
business days' notice; and provided, further, that if such repurchase has not
occurred by April 15, 2023, the Buy-Out Percentage shall be increased by 2500
basis points for each 90-day period after April 15, 2023, pro-rated for the
actual number of days elapsed in the 90-day period before repurchase actually
occurs (for example, if the repurchase occurs on May 30, 2023, the Buy-Out
Percentage shall be increased to 212.5%).

With respect to the Credit Agreement, dated as of March 4, 2022, as amended by
the Extension Agreement dated as of December 30, 2022 (as so amended, the
"Marathon Term Credit Agreement"), among the Company, the Lenders party thereto
(the "Lenders") and Marathon, not individually, but solely in its capacity as
administrative and collateral agent for the Lenders (the "Administrative
Agent"), which provided for a senior secured term loan facility in an aggregate
amount of up to $42.5 million in a single borrowing, the parties have entered
into a Termination Agreement dated as of January 30, 2023 (the "Termination
Agreement"). Pursuant to the Termination Agreement, the lending commitments of
the Lenders are terminated without having been drawn upon, the Marathon Term
Credit Agreement and all other loan documents entered into in connection
therewith are terminated, and the Company agrees to pay the Administrative Agent
a commitment fee of $0.6 million (which was earned as a result of the recent
approval by the FDA of OLPRUVA™ for oral suspension in the U.S. for the
treatment of certain patients living with urea cycle disorders involving
deficiencies of carbamylphosphate synthetase, ornithine transcarbamylase, or
argininosuccinic acid synthetase) and certain legal costs on the date on which
the repurchase of the Marathon Convertible Notes occurs pursuant to the Marathon
Amendment Agreement.

Results from ACER-801 Phase 2a Trial



The Company announced on March 17, 2023, that topline results from its Phase 2a
proof of concept clinical trial to evaluate ACER-801 (osanetant) as a potential
treatment for moderate to severe Vasomotor Symptoms (VMS) associated with
menopause showed that ACER-801 was safe and well-tolerated but did not achieve
statistical

                                      138


--------------------------------------------------------------------------------
significance when evaluating ACER-801's ability to decrease the frequency or
severity of hot flashes in postmenopausal women. As a result, the Company
announced it is pausing the ACER-801 program until it has conducted a thorough
review of the full data set.

Securities Purchase Agreement



On March 21, 2023, the Company entered into a securities purchase agreement (the
"Purchase Agreement") with an institutional accredited investor (the
"Purchaser") pursuant to which the Company agreed to issue and sell, (i) in a
registered direct offering, an aggregate of 2,335,000 shares (the "Shares") of
the Company's common stock, par value $0.0001 per share ("Common Stock"), and
pre-funded warrants to purchase up to 585,306 shares of Common Stock (the
"Pre-Funded Warrants") at an exercise price of $0.001 per share, and (ii) in a
concurrent private placement, warrants to purchase up to 2,920,306 shares of
Common Stock (the "Common Warrants") at an exercise price of $0.791 per share.
Such registered direct offering and concurrent private placement are referred to
herein as the "March 2023 Offering." The combined purchase price for one Share
and one Common Warrant was $0.916, and the combined purchase price for one
Pre-Funded Warrant and one Common Warrant was $0.915. The March 2023 Offering
was priced at-the-market under Nasdaq rules. The Company received aggregate
gross proceeds from the Offering of approximately $2.7 million before deducting
the placement agent fee (as described in greater detail below) and related
offering expenses, resulting in net proceeds of approximately $2.3 million. The
March 2023 Offering closed on March 24, 2023.

The Purchase Agreement contains customary representations and warranties and
agreements of the Company and the Purchaser and customary indemnification rights
and obligations of the parties. Pursuant to the terms of the Purchase Agreement
and subject to certain exceptions, the Company has agreed to certain
restrictions on the issuance and sale of its Common Stock or Common Stock
Equivalents (as defined in the Purchase Agreement) during the 30-day period
following the closing of the March 2023 Offering.

The Shares, the Pre-Funded Warrants and the shares of Common Stock issuable
thereunder were offered by the Company pursuant to a registration statement on
Form S-3 (File No. 333-261342), which was filed with the Securities and Exchange
Commission (the "Commission") on November 24, 2021 and was declared effective by
the Commission on December 7, 2021 (the "Registration Statement"), and a
prospectus supplement dated as of March 21, 2023. With respect to the Company's
amended and restated sales agreement dated March 18, 2020 (the "Sales
Agreement"), with JonesTrading Institutional Services LLC and Roth Capital
Partners, LLC (the "Agents") relating to the offer and sale of Common Stock
having an aggregate offering price of up to $50.0 million from time to time
through or to the Agents acting as the Company's sales agent or principal,
pursuant to which the Company has filed with the Commission several prospectus
supplements to the base prospectus included with the Registration Statement (the
"Prospectuses"), in connection with the March 2023 Offering, the Company filed
with the Commission a further prospectus supplement to suspend the Sales
Agreement and terminate the continuous offering by the Company under the
Prospectuses.

The Common Warrants were offered in a private placement under Section 4(a)(2) of
the Securities Act of 1933, as amended (the "Securities Act"), and, along with
the shares of Common Stock underlying the Common Warrants, have not been
registered under the Securities Act or applicable state securities laws.

The Pre-Funded Warrants were offered, in lieu of shares of Common Stock, to any
Purchaser whose purchase of shares of Common Stock and Common Warrants in the
Offering would otherwise result in such Purchaser, together with its affiliates
and certain related parties, beneficially owning more than 4.99% (or, at such
Purchaser's option upon issuance,9.99%) of the Company's outstanding Common
Stock immediately following the consummation of the Offering. Each Pre-Funded
Warrant represents the right to purchase shares of Common Stock at an exercise
price of $0.001 per share of Common Stock. The Pre-Funded Warrants are
exercisable immediately and may be exercised at any time until the Pre-Funded
Warrants are exercised in full, subject in each case to the beneficial ownership
limitations set forth in the Pre-Funded Warrant.

Each Common Warrant represents the right to purchase shares of Common Stock at
an exercise price of $0.791 per share of Common Stock. The Common Warrants are
exercisable immediately and have a term of five

                                      139

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and one-half years from the issuance date, subject in each case to the beneficial ownership limitations set forth in the form of Common Warrant.



The Company entered into an engagement letter with H.C. Wainwright & Co., LLC
("Wainwright"), pursuant to which Wainwright agreed to serve as the exclusive
placement agent for the issuance and sale of securities of the Company pursuant
to the Purchase Agreement. As compensation for such placement agent services,
the Company has agreed to pay Wainwright a total cash fee equal to 7.5% of the
aggregate gross proceeds of the Offering; a non-accountable expense allowance of
$70,000 and clearing fees of $15,950. The Company has also granted Wainwright a
right of first refusal for a period of six months following the closing of the
Offering to act as sole book-running manager, sole underwriter or sole placement
agent for any public or private placement or other capital-raising financing,
subject to certain exceptions.

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Acer Therapeutics Inc. Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2023	Nov. 20	CI
Chris Schelling Ceases to Be Chief Executive Officer of Acer Therapeutics Inc	Nov. 20	CI
Harry S. Palmin Ceases to Be Chief Financial Officer of Acer Therapeutics Inc	Nov. 20	CI
Acer Therapeutics Inc. Announces Executive Changes	Nov. 20	CI
Zevra Therapeutics Completes Acer Acquisition	Nov. 20	MT
Zevra Therapeutics, Inc. completed the acquisition of Acer Therapeutics Inc. from funds affiliated with TVM Capital Life Science and others.	Nov. 16	CI
Zevra Therapeutics, Inc. completed the acquisition of Acer Therapeutics Inc. from funds affiliated with TVM Capital Life Science and others.	Nov. 16	CI
Acer Therapeutics Inc.(OTCPK:ACER) dropped from S&P TMI Index	Nov. 13	CI
Transcript : Acer Therapeutics Inc. - Shareholder/Analyst Call	Nov. 08
Acer Therapeutics Inc.(OTCPK:ACER) dropped from NASDAQ Composite Index	Nov. 08	CI
North American Morning Briefing : Inflation -2-	23-09-06	DJ
HC Wainwright Downgrades Acer Therapeutics to Neutral From Buy	23-09-05	MT
North American Morning Briefing : Chinese Data -2-	23-09-05	DJ
Top Midday Decliners	23-09-01	MT
Roth MKM Downgrades Acer Therapeutics to Neutral From Buy, Price Target is $1.50	23-09-01	MT
Sector Update: Health Care Stocks Lower in Late Afternoon Trading	23-08-31	MT
Sector Update: Health Care	23-08-31	MT
Top Midday Gainers	23-08-31	MT
Zevra Therapeutics to Acquire Acer Therapeutics in Merger Deal	23-08-31	MT
Transcript : Acer Therapeutics Inc., Zevra Therapeutics, Inc. - M&A Call	23-08-31
Relief Therapeutics Sells License for Urea Cycle Disorder Drug to Acer Therapeutics	23-08-31	MT
Zevra Therapeutics, Inc. entered into definitive Agreement to acquire Acer Therapeutics Inc. from funds affiliated with TVM Capital Life Science and others for $91.7 million.	23-08-30	CI
Relief Therapeutics Holding AG Announces New Exclusive Definitive License Agreement for OLPRUVA(TM) (ACER-001) with Acer Therapeutics	23-08-30	CI
North American Morning Briefing : China Trouble Hits Sentiment	23-08-18	DJ
Acer Therapeutics Inc. Reports Earnings Results for the Second Quarter Ended June 30, 2023	23-08-14	CI

	1st Jan change	Capi.
VERTEX PHARMACEUTICALS INCORPORATED	+20.63%	127B
ARGENX SE	+24.89%	27.67B
BIONTECH SE	-20.17%	20.33B
GENMAB A/S	-16.64%	16.79B
BEIGENE, LTD.	-18.07%	15.63B
WUXI APPTEC CO., LTD.	-47.70%	14.65B
NEUROCRINE BIOSCIENCES, INC.	+11.92%	14.84B
SAREPTA THERAPEUTICS, INC.	+58.32%	14.43B
INSMED INCORPORATED	+149.98%	12.49B

Acer Therapeutics Inc.

Equities

ACER

US00444P1084

Biotechnology & Medical Research

ACER THERAPEUTICS INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

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