Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "objective," "ongoing," "plan," "predict," "project," "potential," "should," "will," or "would," and or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

? our business strategies;

? the timing of regulatory submissions;

our ability to obtain and maintain regulatory approval of our existing product

? candidates and any other product candidates we may develop, and the labeling

under any approval we may obtain;

? risks relating to the timing and costs of clinical trials and the timing and

costs of other expenses;

? risks related to market acceptance of products;

? risks associated with our reliance on third-party organizations;

? our competitive position;

? assumptions regarding the size of the available market, product pricing and

timing of commercialization of our product candidates;

? our intellectual property position and our ability to maintain and protect our

intellectual property rights;

? our results of operations, financial condition, liquidity, prospects, and

growth strategies;

? our cash needs and financing plans;

? the industry in which we operate; and

? the trends that may affect the industry or us.

You should refer to Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Those factors are updated, as applicable, in "Factors that May Affect Future Results" below. As a result of the risks, uncertainties and assumptions described above and elsewhere, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the



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significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to new information, actual results or changes in our expectations, except as required by law.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with: (i) the interim financial statements and related notes thereto which are included in this Quarterly Report on Form 10-Q; and (ii) our annual financial statements for the year ended December 31, 2020 which are included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Company Overview

We are a clinical stage, drug platform company addressing neurodegeneration such as Alzheimer's disease ("AD"), Parkinson's disease ("PD") and Down Syndrome patients with AD ("DS-AD"). The toxic cascade in neurodegeneration begins with high levels of neurotoxic proteins which lead to impaired axonal transport, inflammation, death of nerve cells and loss of cognition and motor function. Our lead compound, ANVS401, is a small molecule administered orally that attacks neurodegeneration by entering the brain and inhibiting the translation of neurotoxic proteins-amyloid precursor protein APP/A? ("APP"), tau/phospho-tau ("tau") and ?-Synuclein ("?SYN")-thereby impeding the toxic cascade. Human studies in four mildly cognitive impaired patients have shown that ANVS401 lowered the levels of neurotoxic proteins and inflammatory factors. In preclinical studies, lower neurotoxic protein levels led to improved axonal transport, reduced inflammation, lower nerve cell death and improved function.

In collaboration with the Alzheimer's Disease Cooperative Study ("ADCS") we are conducting a trial in 24 early AD patients (the "ADCS Trial"). Under an agreement with UC San Diego, where ADCS is located, we have contracted to provide study supplies at our cost but the remaining costs of the ADCS Trial are paid for by the National Institutes of Health ("NIH"). We are also conducting a Phase 2a clinical trial in 14 AD and 54 PD patients (the "AD/PD Trial") which finished treating patients in August 2021. Both clinical trials are double-blind, placebo-controlled studies.

The extent to which the COVID-19 pandemic could have a material impact on our current or future clinical trials is dependent on the spread of the disease and government and healthcare system responses to such spread, which are presently highly uncertain. We continue to evaluate the potential impact.

We have never been profitable and have incurred net losses since inception. Our accumulated deficit at September 30, 2021 was $22,811.6 thousand. We expect to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability.



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Results of Operations

Operating expenses and other income (expense) were comprised of the following:






                                                     Three Months Ended       Nine Months Ended
                                                       September 30,            September 30,
                                                      2021         2020       2021         2020

                                                       (in thousands)           (in thousands)
Operating expenses:
Research and development                           $   1,380.8    $ 718.9   $ 5,594.9    $ 1,641.8
General and administrative                             1,473.0      884.9     3,022.2      3,088.7
Other income (expense):
Change in fair value of derivative liability                 -          -           -       (26.5)
Interest income, net                                       5.6       10.5         7.9         47.0
Grant income                                                 -      586.9        36.8        952.6

Three Months Ended September 30, 2021 and 2020

Research and Development Expenses

Research and development expenses increased by $661.9 thousand for the three months ended September 30, 2021 compared to the prior year period. The increase was primarily the result of an increase of $715.8 thousand in expenses related to our clinical trials. For the year ending December 31, 2021, we expect research and development expenses to be higher than the prior year as we complete our AD/PD Trial and commence the planning of a Phase 3 study.

General and Administrative Expenses

General and administrative expenses increased by $588.1 thousand for the three months ended September 30, 2021 compared to the prior year period. The increase was primarily the result of an increase in conference expenses, professional fees and recruiting expenses. We expect general and administrative expenses in 2021 will be higher as compared to 2020 due to increased personnel expenses.

Interest Income, Net

Interest income, net decreased $4.9 thousand for the three months ended September 30, 2021 compared to the prior year period. The decrease was primarily the result of lower interest rates compared to the prior year period.

Grant Income

Grant income decreased $586.9 thousand for the three months ended September 30, 2021 compared to the prior year period. The income relates to a grant from the NIH to reimburse the costs of our long-term toxicology studies in rats and dogs, which was substantially completed in 2020.

Nine months Ended September 30, 2021 and 2020

Research and Development Expenses

Research and development expenses increased by $3,953.1 thousand for the nine months ended September 30, 2021 compared to the prior year period. The increase was primarily the result of an increase of $3,800.6 thousand in expenses related to our clinical trials and an increase of $540.5 thousand in personnel expenses, including share-based compensation expense, partially offset by a decrease of $451.5 thousand in expenses related to our long-term toxicology studies. For the year ending December 31, 2021, we expect research and development expenses to be higher than the prior year as we complete our AD/PD Trial and commence the planning of a Phase 3 study.



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General and Administrative Expenses

General and administrative expenses decreased by $66.5 thousand for the nine months ended September 30, 2021 compared to the prior year period. The decrease was primarily the result of a decrease in share-based compensation expense of $1,119.9 thousand, partially offset by an increase in accrued incentive compensation expense, conference expenses and an increase in recruiting expenses. We expect general and administrative expenses in 2021 will be higher as compared to 2020 due to increased personnel expenses.

Change in Fair Value of Derivative Liability

The derivative liability represents an embedded derivative in our convertible promissory notes which were issued in March 2019. At each balance sheet date, we estimated the fair value of the derivative liability and recognized any change in our statements of operations. The fair value of the derivative liability was adjusted to $132.5 thousand immediately prior to the closing of the IPO on January 31, 2020. Effective upon the closing of the IPO, the derivative liability was eliminated, and the amount was reclassified to additional paid-in capital on the balance sheet.

Interest Income, Net

Interest income, net decreased $39.1 thousand for the nine months ended September 30, 2021 compared to the prior year period. The decrease was primarily the result of lower interest rates compared to the prior year period.

Grant Income

Grant income decreased $915.8 thousand for the nine months ended September 30, 2021 compared to the prior year period. The income relates to a grant from the NIH to reimburse the costs of our long-term toxicology studies in rats and dogs, which was substantially completed in 2020.

Liquidity and Capital Resources

Since our inception in 2008, we have devoted most of our cash resources to research and development and general and administrative activities. We have financed our operations primarily with the proceeds from the sale of common stock, redeemable convertible preferred stock, and convertible promissory notes and funding from research grants. To date, we have not generated any revenues from the sale of products, and we do not anticipate generating any revenues from the sales of products for the foreseeable future. We have incurred losses and generated negative cash flows from operations since inception. As of September 30, 2021, our principal source of liquidity was our cash, which totaled $47,455.3 thousand.

Equity Financings

We closed our IPO on January 31, 2020, raising gross proceeds of $13,800.0 thousand and net proceeds of $12,034.4 thousand, after deducting underwriting discounts and commissions and issuance costs paid by us, in the nine months ended September 30, 2020.

We closed an equity offering on May 26, 2021, raising gross proceeds of $50,000.0 thousand and net proceeds of $46,648.4 thousand, after deducting underwriting discounts and commissions and issuance costs paid or payable by us, in the nine months ended September 30, 2021.

Debt Financings

In March 2019 we issued $530.0 thousand principal amount of convertible promissory notes. Upon the closing of our IPO on January 31, 2020, the outstanding convertible promissory notes plus accrued interest converted into 118,470 shares of our common stock at a 20% discount to the public offering price.



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