CASSAVA SCIENCES INC

1. General, Liquidity and Basis of Presentation

Cassava Sciences, Inc. and its wholly-owned subsidiary (collectively referred to as the “Company”) discovers and develops proprietary pharmaceutical product candidates that* may*offer significant improvements to patients and healthcare professionals. The Company generally focuses its product discovery and development efforts on disorders of the nervous system.

Basis of Consolidation



The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany transactions have been eliminated in consolidation.

Liquidity

The Company has incurred significant net losses and negative cash flows since inception, and as a result has an accumulated deficit of $380.8 million at* December 31, 2023.The Company expects its cash requirements to be significant in the future. The amount and timing of the Company’s future cash requirements will depend on regulatory and market acceptance of its product candidates and the resources it devotes to researching and developing, formulating, manufacturing, commercializing and supporting its products. The Company mayseek additional funding through public or private financing in the future, if such funding is available and on terms acceptable to the Company. There areno* assurances that additional financing will be available on favorable terms, or at all. However, management believes that the current working capital position will be sufficient to meet the Company’s working capital needs for at least the next12 months.

2. Summary of Significant Accounting Policies

Use of Estimates

The Company makes estimates and assumptions in preparing its consolidated financial statements in conformity with accounting principles generally accepted in the United States. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenue earned and expenses incurred during the reporting period. The Company evaluates its estimates on an ongoing basis, including those estimates related to clinical trials and manufacturing agreements. Actual results could differ from these estimates and assumptions.

Proceeds from Grants

During2023, there wereno reimbursements received pursuant to National Institutes of Health (“NIH”) research grants. In2022, and2021, the Company received $0.9 million and $3.9 million of reimbursement, respectively, from the NIH and National Institute on Drug Abuse. The Company records the proceeds from these grants as reductions to its research and development expenses.

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Cash and Cash Equivalents and Concentration of Credit Risk

The Company invests in cash and cash equivalents. The Company considers highly-liquid financial instruments with original maturities ofthree months or less to be cash equivalents. Highly liquid investments that are considered cash equivalents include money market accounts and funds, certificates of deposit and U.S. Treasury securities. The Company maintains its cash and cash equivalents atone financial institution.

Fair Value Measurements

The Company recognizes financial instruments in accordance with the authoritative guidance on fair value measurements and disclosures for financial assets and liabilities. This guidance defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. The guidance also establishes athree-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation. The fair value of cash and cash equivalents was based on Level1 inputs at* December 31, 2023and2022.*

Business Segments

The Company reports segment information based on how it internally evaluates the operating performance of its business units, or segments. The Company’s operations are confined toone business segment: the development of novel drugs and diagnostics.

Stock-based Compensation** **

The Company recognizes non-cash expense for the fair value of all stock options and other share-based awards. The Company uses the Black-Scholes option valuation model (“Black-Scholes”) to calculate the fair value of stock options, using the single-option award approach and straight-line attribution method. This model requires the input of subjective assumptions including expected stock price volatility, expected life and estimated forfeitures of each award. These assumptions consist of estimates of future market conditions, which are inherently uncertain, and therefore, are subject to management’s judgment. For all options granted, it recognizes the resulting fair value as expense on a straight-line basis over the vesting period of each respective stock option, generally three orfour years.

The Company has granted share-based awards that vest upon achievement of certain performance criteria (“Performance Awards”). The Company multiplies the number of Performance Awards by the fair value of its common stock on the date of grant to calculate the fair value of each award. It estimates an implicit service period for achieving performance criteria for each award. The Company recognizes the resulting fair value as expense over the implicit service period when it concludes that achieving the performance criteria is probable. It periodically reviews and updates as appropriate its estimates of implicit service periods and conclusions on achieving the performance criteria. Performance Awards vest and common stock is issued upon achievement of the performance criteria.

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Net Loss per Share

The Company computes basic net loss per share on the basis of the weighted-average number of common shares outstanding for the reporting period. Diluted net loss per share is computed on the basis of the weighted-average number of common shares outstanding plus potential dilutive common shares outstanding using the treasury-stock method. Potential dilutive common shares consist of outstanding common stock options and warrants. There isno difference between the Company’s net loss and comprehensive loss. The numerators and denominators in the calculation of basic and diluted net loss per share were as follows (in thousands, except net loss per share data):

The Company excluded common stock options and warrants outstanding, along with 57,143 restricted stock awards, from the calculation of net loss per share, diluted, because the effect of including outstanding options would have been anti-dilutive. The 57,143 restricted stock awards expired during the year ended* December 31, 2022.*

Fair Value of Financial Instruments

Financial instruments include accounts payable, accrued expenses and other liabilities. The estimated fair value of certain financial instruments* maybe determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value; therefore, the estimates arenot* necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. The effect of using different market assumptions and/or estimation methodologies* may*be material to the estimated fair value amounts. The carrying amounts of accounts payable, accrued expenses and other liabilities are at cost, which approximates fair value due to the short maturity of those instruments.

Research Contracts, Prepaids and Accruals

The Company has entered into various research and development contracts with research institutions and otherthird-party vendors. These agreements are generally cancelable. Related payments are recorded as research and development expenses as incurred. The Company records prepaids and accruals for estimated ongoing research costs. When evaluating the adequacy of the prepaid expenses and accrued liabilities, the Company analyzes progress of the studies including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the prepaid and accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical prepaid and accrual estimates havenot been materially different from actual costs.

Incentive Bonus Plan

In2020, the Company established the2020 Cash Incentive Bonus Plan (the “Plan”) to incentivize Plan participants. Awards under the Plan are accounted for as liability awards under ASC718 “Stock-based Compensation”. The fair value of each potential Plan award will be determined once a grant date occurs and will be remeasured each reporting period. Compensation expense associated with the Plan will be recognized over the expected achievement period for each Plan award, when a Performance Condition (as defined below) is considered probable of being met. See Note11 for further discussion of the Plan.

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Leases

The Company recognizes assets and liabilities that arise from leases. For operating leases, the Company is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments during the lease term, in the consolidated balance sheets. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company doesnot recognize right-of-use assets or lease liabilities. As the Company`s leases donot provide an implicit rate, it uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Property and equipment

Property and equipment is recorded at cost, net of accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets. Owned buildings and related improvements have estimated useful lives of 39 years and approximately 10 years, respectively. Tenant improvements related to leased space are amortized using the straight-line method over the useful lives of the improvements or the remaining term of the corresponding leases, whichever is shorter. The remaining term of the corresponding leases is approximately 0.4 years.

Property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying amount of an asset* may**not* be recoverable. If property and equipment are considered to be impaired, an impairment loss is recognized.

Intangible assets

Acquired intangible assets are recorded at fair value at the date of acquisition and primarily consist of lease-in-place agreements and leasing commissions. Intangible assets are amortized over the estimated life of the lease-in-place agreements, which approximates 0.3 years at* December 31, 2023.*

Intangible assets are reviewed for impairment on an annual basis, and when there is reason to believe that their values have been diminished or impaired. If intangible assets are considered to be impaired, an impairment loss is recognized.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax balances are adjusted to reflect tax rates based on currently enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. The Company has accumulated significant deferred tax assets that reflect the tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of certain deferred tax assets is dependent upon future earnings. The Company is uncertain about the timing and amount of any future earnings. Accordingly, the Company offsets these deferred tax assets with a valuation allowance.

The Company accounts for uncertain tax positions in accordance with ASC740, “Income Taxes”, which clarifies the accounting for uncertainty in tax positions. These provisions require recognition of the impact of a tax position in the Company’s financial statements only if that position is more likely thannot of being sustained upon examination by taxing authorities, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions will be reflected as a component of income tax expense.

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3. Prepaid Expenses and Other Current Assets

Prepaid and other current assets at* December 31, 2023and2022* consisted of the following (in thousands):

Contract research organization and other deposits represent cash payments made to vendors in excess of expenses incurred.

4. Real Property and Other Income, Expense

The Company owns atwo-building office complex in Austin, Texas, a portion of which serves as its corporate headquarters. This property is intended to accommodate the Company’s anticipated growth and expansion of its operations in the coming years. Maintenance, physical facilities, leasing, property management and other key responsibilities related to property ownership are being outsourced to professional real-estate managers. The office complex measures approximately 90,000 rentable square feet. At* December 31, 2023,the Company occupied approximately 25% of the property with the remainder either leased or available for lease tothird* parties.

The Company records the net income from building operations and leases as other income, net, as leasing isnot core to the Company’s operations. Building depreciation and amortization for spacenot occupied by the Company is included in general and administrative expense. Building depreciation and amortization for space occupied by the Company is allocated between general and administrative expense and research and development expense. Components of other income, net, for the periods presented were as follows (in thousands):

The Company had accrued property taxes related to the building totaling $338,000 and $433,000 at* December 31, 2023and2022,* respectively, included in other current liabilities.

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5. Property and Equipment

The components of property and equipment, net, as of* December 31, 2023and2022* were as follows (in thousands):

Depreciation expense for property and equipment was $1,084,000, $804,000 and $310,000 for the years ended* December 31, 2023,*2022 and2021, respectively.

6. Intangible assets

The components of intangible assets, net, as of* December 31, 2023and2022* were as follows (in thousands):

Amortization expense for intangible assets was $446,000, $497,000 and $224,000 for the years ended* December 31, 2023,*2022 and2021, respectively.

Amortization expense for finite-lived intangible assets is expected to be as follows (in thousands):

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7. Stockholders' Equity and Stock-Based Compensation

Preferred Stock

The Company’s Board of Directors (the “Board”) has the authority to issue preferred stock inone or more series and to fix the rights, preferences, privileges, restrictions and the number of shares constituting any series or the designation of the series.

2022 Registered Direct Offering

On* November**22,* 2022, the Company completed a common stock offering pursuant to which certain investors purchased 1,666,667 shares of common stock at a price of $30.00 per share. Net proceeds of the offering were approximately $47.3 million after deducting offering expenses.

2021 Registered Direct Offering

On* February**12,* 2021, the Company completed a common stock offering pursuant to which certain investors purchased 4,081,633 shares of common stock at a price of $49.00 per share. Net proceeds of the offering were approximately $189.8 million after deducting offering expenses.

At the Market (ATM) Common Stock Issuance

On* May 1, 2023,the Company entered into an at-the-market offering program (“ATM”) to sell, from time to time, shares of Company common stock having an aggregate offering price of up to $200 million in common stock pursuant to a shelf registration statement that was filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 1, 2023and became effective immediately upon filing. The Company is obligated to pay a commission of up to 3% of the gross proceeds from the sale of shares of common stock under the ATM. The Company isnot* obligated to sell any shares in the offering.

There wereno common stock sales under the ATM during the year ended* December 31, 2023.*

In* March 2020,the Company entered into an at-the-market offering program (“2020* Program”) to sell, from time to time, shares of Company common stock having an aggregate offering price of up to $100 million in transactions pursuant to a shelf registration statement that was declared effective by the SEC on* May 5, 2020.The Company gave notice of termination for the2020* Program on* April 26, 2023,which was effective May 1, 2023.There wereno* common stock sales under the2020 Program through its termination.

2008 Equity Incentive Plan

Under the Company’s2008 Equity Incentive Plan, or2008 Equity Plan, its employees, directors and consultants received share-based awards, including grants of stock options and performance awards. The2008 Equity Plan expired in* December 2017.Share-based awards generally expireten* years from the date of grant.

2018 Equity Incentive Plan

The Company’s Board or a designated Committee of the Board is responsible for administration of the Company’s2018 Omnibus Incentive Plan (the2018 Plan) and determines the terms and conditions of each option granted, consistent with the terms of the2018 Plan. The Company’s employees, directors, and consultants are eligible to receive awards under the2018 Plan, including grants of stock options and performance awards. Share-based awards generally expireten years from the date of grant. The2018 Plan, as amended on* May 5, 2022,provides for issuance of up to 5,000,000 shares of common stock, par value $0.001 per share, subject to adjustment as provided in the2018* Plan.

When stock options or performance awards are exercised net of the exercise price and taxes, the number of shares of stock issued is reduced by the number of shares equal to the amount of taxes owed by the award recipient and that number of shares are cancelled. The Company* may*then use its cash to pay tax authorities the amount of statutory taxes owed by and on behalf of the award recipient.

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Stock Options

The following summarizes information about stock option activity during2023:

Of the stock options exercised during the year ended* December 31, 2023,101,058 stock options were net settled in satisfaction of the exercise price, withno* cash proceeds received.

The following summarizes information about stock options at* December 31, 2023*by a range of exercise prices:

The Company uses Black-Scholes to estimate the fair value of options granted. Black-Scholes considers a number of factors, including the market price of the Company’s common stock. Factors utilized in Black-Scholes to value each stock option granted, and the weighted average fair value of options granted during the years ended* December 31, 2023,*2022 and2021 were as follows:

Volatility is based on reviews of the historical volatility of the Company’s common stock. Risk-free interest rates are based on yields of U.S. treasury notes in effect at the date of grant. Expected life of option is based on actual historical option exercises. Dividend yield iszero because the Company doesnot anticipate paying cash dividends in the foreseeable future.

As of* December 31, 2023,*the Company expects to recognize compensation expense of $24.2 million related to non-vested options held by equity plan participants over the weighted average remaining recognition period of 2.8 years.

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Performance Awards

The following summarizes information about performance award activity during2023:

During the year ended* December 31, 2022,a total of 57,143 shares of restricted stock awards expired as performance criteria related to these Performance Awards werenot* attained. These shares of restricted stock were returned to the2008 Equity Incentive Plan, which expired in* December 2017,*and thus were retired.

If and when outstanding Performance Awards vest, the Company would recognize $101,000 in stock-based compensation expense. These performance awards expire in2026.

Stock-Based Compensation Expense

The following summarizes information about stock-based compensation expense, in thousands:

8. Employee401(k) Benefit Plan**

The Company has a defined-contribution savings plan under Section401(k) of the Internal Revenue Code. The plan covers substantially all employees. Employees are eligible to participate in the plan thefirst day of the month after hire and* maycontribute up to the current statutory limits under Internal Revenue Service regulations. The401*(k) plan permits the Company to make additional matching contributions on behalf of all employees. Through* December 31, 2023,the Company hasnot* made any matching contributions to the401(k) plan.

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9. Income Taxes

The Company didnot provide for income taxes during the periods presented because it had book and federal taxable losses in those years and the tax benefit that would have resulted from the pre-tax losses was fully offset by a change in the valuation allowance.

The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for periods presented was as follows:

Deferred tax assets and valuation allowance

Deferred tax assets reflect the tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred taxes assets at* December 31, 2023and2022* were valued at the corporate tax rate of 21%. The Company offsets its deferred tax assets by a valuation allowance because it is uncertain about the timing and amount of any future profits. Significant components of its deferred tax assets are as follows (in thousands):

The valuation allowance increased by $23.3 million and $17.8 million in2023 and2022, respectively, due primarily to continuing operations.

The Company’s net operating loss carryforwards of $158.7 million are federal, of which $74.1 million expires between2029 and2037 and $84.6 million carries forward indefinitely. As of* December 31, 2023,the Company had federal research and development tax credits of approximately $21.1 million, which expire in the years2024* through2043.

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Unrecognized tax benefits

As of* December 31, 2023,2022 and2021, the Company has unrecognized tax benefits related to tax credits of $8.4 million, $6.5 million and $5.0 million, respectively. None of the unrecognized tax benefits as of December 31, 2023,*if recognized, would impact the effective tax rate due to the valuation allowance andno interest or penalties have been recognized. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in thousands):

As of* December 31, 2023,there wereno* unrecognized tax benefits that we expect would change significantly over the next12 months.

The Company files U.S. and Texas income tax returns. In the United States, the statute of limitations with respect to the federal income tax returns for tax years after 2019 are open to audit; however, since the Company has net operating losses, the taxing authority has the ability to review tax returns prior to the2020 tax year and make adjustments to these net operating loss carryforwards. We arenot under audit in any taxing jurisdiction at this time.

10. Leases and Commitments

Right-of-use Asset and Liability

The Company had an operating lease for approximately 6,000 square feet of office space in Austin, Texas expiring* April 30, 2024.The Company terminated this lease on February 22, 2023withno* continuing obligations.

Cash paid for operating lease liabilities totaled $24,000, $155,000 and $109,000 during the years ended* December 31, 2023,*2022 and2021, respectively.

Other Commitments

The Company conducts its product research and development programs through a combination of internal and collaborative programs that include, among others, arrangements with universities, contract research organizations and clinical research sites. It has contractual arrangements with these organizations that are generally cancelable. The Company’s obligations under these contracts are largely based on services performed.

The Company is dependent on contract development and manufacturing organizations for the manufacture of all our materials for clinical studies.

Note11. ** 2020 Cash Incentive Bonus Plan**

In* August 2020,the Board approved the Plan. The Plan was established to promote the long-term success of the Company by creating an “at-risk” cash bonus program that rewards Plan participants with additional cash compensation in lockstep with significant increases in the Company’s market capitalization. The Plan is considered “at-risk” because Plan participants willnot* receive a cash bonus unless the Company’s market capitalization increases significantly and certain other conditions specified in the Plan are met. Specifically, Plan participants willnot be paid any cash bonuses unless (1) the Company completes a merger or acquisition transaction that constitutes a sale of ownership of the Company or its assets (a Merger Transaction) or (2) the Compensation Committee of the Board (the Compensation Committee) determines the Company has sufficient cash on hand, as defined in the Plan. Because of the inherent discretion and uncertainty regarding these requirements, the Company has concluded that a Plan grant date hasnot occurred as of* December 31, 2023.*

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Plan participants will be paid all earned cash bonuses in the event of a Merger Transaction.

As of* December 31, 2022,the Company’s independent directors were participants in the Plan. However, effective March 16, 2023,the Board amended the Plan to remove all independent directors as participants in the Plan and the independent directors consented to such removal. The independent directors’ share of potential benefits under the Plan were completely forfeited to the Company and willnot* be allocated to any other participant under the Plan. The Company’s independent directors havenot received, and as a result of such amendment will never receive, any payments under the Plan.

The Company’s market capitalization for purposes of the Plan is determined based on either (1) the Company’s closing price ofone share on the Nasdaq Capital Market multiplied by the total issued and outstanding shares and options to purchase shares of the Company, or (2) the aggregate consideration payable to security holders of the Company in a Merger Transaction. Any warrants outstanding are excluded from the determination of market capitalization. This constitutes a market condition under applicable accounting guidance.

The Plan triggers a potential cash bonus each time the Company’s market capitalization increases significantly, up to a maximum*$5* billion in market capitalization. The Plan specifies 14 incremental amounts between $200 million and $5 billion (each increment, a “Valuation Milestone”). Each Valuation Milestone triggers a potential cash bonus award in a pre-set amount defined in the Plan. Each Valuation Milestone must be achieved and maintained forno less than 20 consecutive trading days for Plan participants to be eligible for a potential cash bonus award. Approximately 67% of each cash bonus award associated with a Valuation Milestone is subject to adjustment and approval by the Compensation Committee. Any amountsnot awarded by the Compensation Committee areno longer available for distribution.

If the Company were to exceed a $5 billion market capitalization forno less than 20 consecutive trading days, all Valuation Milestones would be deemed achieved, in which case cash bonus awards would range from a minimum of $111.4 million up to a hypothetical maximum of $289.7 million. Payment of cash bonuses is deferred until such time as (1) the Company completes a Merger Transaction, or (2) the Compensation Committee determines the Company has sufficient cash on hand to render payment (each, a “Performance Condition”), neither of which* mayever occur. Accordingly, there can beno* assurance that Plan participants will ever be paid a cash bonus that is awarded under the Plan, even if the Company’s market capitalization increases significantly.

The Plan is accounted for as a liability award. The fair value of each Valuation Milestone award will be determined once a grant date occurs and will be remeasured each reporting period. Compensation expense associated with the Plan will be recognized over the expected achievement period for each of the 14 Valuation Milestones, when a Performance Condition is considered probable of being met.

In* October 2020,the Company achieved thefirst* Valuation Milestone. Subsequently in2020, the Compensation Committee approved a potential cash bonus award of $6.5 million in total for all Plan participants (after taking into account the* March 2023*Plan amendment), subject to future satisfaction of a Performance Condition.

During the year ended* December 31, 2021,the Company achieved 11 additional Valuation Milestones triggering potential Company obligations to all Plan participants from a minimum of $74.9 million up to a hypothetical maximum of $202.3 million (after taking into account the March 2023Plan amendment), to be determined by the Compensation Committee and contingent upon future satisfaction of a Performance Condition. However, no compensation expense has been recorded sinceno* grant date has occurred andno Performance Conditions are considered probable of being met. There isno continuing service requirement for Plan participants once the Compensation Committee approves a cash bonus award.

No Valuation Milestones were achieved during the years ended* December 31, 2023and2022.*

No actual cash payments were authorized or made to participants under the Plan through* December 31, 2023and the date of filing of this Annual Report on Form10*-K.

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12. Contingencies

The Company is, and from time to time, the Company* maybecome, involved in litigation or other legal proceedings and claims, including U.S. government inquiries, investigations and Citizen Petitions submitted to FDA. In addition, the Company has received, and from time to time may*receive, inquiries from government authorities relating to matters arising from the ordinary course of business. The outcome of these proceedings is inherently uncertain. Regardless of outcome, legal proceedings can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors. At this time,no assessment can be made as to their likely outcome or whether the outcome will be material to the Company. The Company believes that its total provisions for legal matters are adequate based upon currently available information.

Government Investigations

On* November 15, 2021,the Company disclosed that certain government agencies had asked the Company to provide corporate information and documents. These were confidential requests. The Company has been voluntarily cooperating and intends to continue to cooperate with these inquiries.No government agency has informed the Company that it has found evidence of research misconduct or wrongdoing by the Company or its officers, employees or directors.No government agency has filed any claims or charges relating to these inquiries. We cannot predict the outcome or impact of these ongoing matters, including whether a government agency may*pursue an enforcement action against the Company or others.

Securities Class Actions and Shareholder Derivative Actions

Between* August 27, 2021and October 26, 2021,*four putative class action lawsuits were filed alleging violations of the federal securities laws by the Company and certain named officers. The complaints rely on allegations contained in Citizen Petitions submitted to FDA and allege that various statements made by the defendants regarding simufilam were rendered materially false and misleading. The Citizen Petitions were all subsequently denied by FDA. These actions were filed in the U.S. District Court for the Western District of Texas. The complaints seek unspecified compensatory damages and other relief on behalf of a purported class of purchasers.

On* June 30, 2022,a federal judge consolidated thefour class action lawsuits intoone case and appointed a lead plaintiff and a lead counsel. Lead plaintiff filed a consolidated amended complaint on August 18, 2022on behalf of a putative class of purchasers of the Company’s securities between September 14, 2020and July 26, 2022.On May 11, 2023,the court dismissed with prejudice plaintiffs’ claims against defendant Nadav Friedmann, PhD, MD, our former Chief Medical Officer and a Company director, who is now deceased, but otherwise denied defendants’ motion to dismiss. Defendants filed an answer to the consolidated amended complaint on July 3, 2023.On February 22, 2024,plaintiffs filed a motion to supplement their complaint to extend the putative class period through October 12, 2023.*

On* November 4, 2021,a related shareholder derivative action was filed, purportedly on behalf of the Company, in the U.S. District Court for the Western District of Texas, asserting claims under the U.S. securities laws and state fiduciary duty laws against certain named officers and the members of the Company’s Board. This complaint relies on the allegations made in Citizen Petitions that were submitted to (and subsequently denied by) FDA. The complaint alleges, among other things, that the individual defendants exposed the Company to unspecified damages and securities law liability by causing it to make materially false and misleading statements, in violation of the U.S. securities laws and in breach of their fiduciary duties to the Company. The derivative case seeks, among other things, to recover unspecified compensatory damages on behalf of the Company arising out of the individual defendant’s alleged wrongful conduct. Although the plaintiff in this derivative case doesnot* seek relief against the Company, the Company has certain indemnification obligations to the individual defendants. Between* November 4, 2021and June 20, 2023,four additional shareholder derivative actions were filed alleging substantially similar claims, two in the U.S. District Court for the Western District of Texas, one in Texas state court (Travis County District Court) andone in the Delaware Court of Chancery. On July 5, 2022,thethree federal court actions were consolidated into a single action. All of the foregoing actions are currently stayed pending further developments in the consolidated securities action described above. On November 9, 2023,*another shareholder derivative action alleging substantially similar claims was filed in the U.S. District Court for the Western District of Texas. The parties to that case expect that it will be consolidated into the existing consolidated federal court shareholder derivative action.

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On* February 2, 2024,a putative class action lawsuit was filed alleging violations of the federal securities law by the Company and certain named officers. The complaint relies on an October 12, 2023journal article that describes a purported leaked report of alleged scientific misconduct by a scientific collaborator of the Company at City University of New York. The complaint alleges that various statements made by the defendants regarding simufilam were rendered materially false and misleading by this article. The action was filed in the U.S. District Court for the Northern District of Illinois. The complaint seeks unspecified compensatory damages and other relief on behalf of a purported class of purchasers of the Company’s securities between August 18, 2022and October 12, 2023.*

The Company believes the foregoing claims are without merit and intends to defend against these lawsuits vigorously. The Company is unable to estimate the possible loss or range of loss, if any, associated with these lawsuits.

On* August 19, 2022,a shareholder derivative action was filed, purportedly on behalf of the Company, in the Delaware Court of Chancery, asserting claims under state fiduciary duty laws against certain named officers and members of the Company’s Board. The complaint alleges, among other things, that the individual defendants breached their fiduciary duties by approving the2020* Cash Incentive Bonus Plan in* August 2020.The complaints seek unspecified compensatory damages and other relief. On January 6, 2023,the plaintiffs filed an amended complaint. Defendants filed a partial answer to the amended complaint on March 10, 2023,and moved to partially dismiss the amended complaint on March 14, 2023.On January 25, 2024,the parties entered into a binding settlement term sheet with respect to this action. The settlement is subject to certain conditions, including the filing of a Stipulation of Settlement and final court approval. The proposed settlement resolves the claims asserted against the Company and the individual defendants and would contain provisions that the settlement doesnot* constitute an admission, concession, or finding of any fault, liability, or wrongdoing of any kind by any defendant. There can beno assurance that the final settlement agreement will be executed or that such agreement will be approved by the court.

13. Subsequent Event - Warrant Dividend Distribution

On* January 3, 2024,the Company completed a distribution to the holders of record of the Company’s shares of common stock in the form of warrants to purchase shares of common stock. Each holder of record of the Company's common stock as of the close of business on December 22, 2023*received four warrants for everyten shares of common stock (rounded down for any fractional warrant) resulting in the issuance of approximately 16.9 million warrants.

Each warrant entitles the holder to purchase, at the holder’s sole expense and exclusive election, at an exercise price of $33.00 per warrant, one share of common stock plus, to the extent described below, the Bonus Share Fraction. Payment for shares of common stock upon exercise of warrants must be in cash.

A Bonus Share Fraction entitles a holder to receive an additional 0.5 of a share of common stock (rounded down for any fractional share) for each warrant exercised (the “Bonus Share Fraction”) without payment of any additional exercise price. The right to receive the Bonus Share Fraction will expire upon the earlier of (i) thefirst business day following the last day of thefirst 30 consecutive trading day period (commencing on or after* January 3, 2024)in which the daily volume weighted average price (the “VWAP”) of the shares of common stock has been at the then applicable trigger price, initially $26.40, for at least20* trading days (whether ornot consecutive) (the “Bonus Price Condition”) and (ii) the date specified by the Company uponnot less than20 business days’ public notice (either condition being the “Bonus Share Expiration Date”). Any warrant exercised with an exercise date after the Bonus Share Expiration Date willnot be entitled to the Bonus Share Fraction. The Company will make a public announcement of the Bonus Share Expiration Date (i) at least20 business days prior to such date, in the case of the Company setting a Bonus Share Expiration Date and (ii) prior to market open on the Bonus Share Expiration Date in the case of a Bonus Price Condition.

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Unless earlier redeemed, the warrants will expire and cease to be exercisable on* November 15, 2024 (the “Expiration Date”). The warrants are redeemable at the Company’s sole option at any time with a redemption date on or after April 15, 2024.The Company will provide at least20* calendar days’ notice by press release of the date selected for redemption (the “Redemption Date”). The redemption price upon any redemption shall equal to 1/10 of $0.01 per warrant. The warrants* maybe exercised at any time starting on January 3, 2024*until the earlier of (1) the Expiration Date and (2) the business day prior to the Redemption Date.

The number of shares of Common Stock issuable upon exercise is subject to certain anti-dilution adjustments, including for share dividends, splits, subdivisions, spin-offs, consolidations, reclassifications, combinations, non-cash distributions and cash dividends. Terms of the warrants prohibit ownership by warrant exercise of9.9% or more of the Company's common stock by a single or affiliated group of stockholders without the Company's prior written consent.

The right to exercise warrants shall be automatically suspended in a circumstance while there isno effective registration statement registering the shares of common stock issuable upon exercise of the warrants. Such registration statement was declared effective by the SEC on* May 1, 2023.The warrant Expiration Date or the Redemption Date, as the case may*be, shall be extended by the number of days comprised in the event of a suspension.

The Company* mayfrom time to time and in its sole discretion amend warrants forone* or more of the following purposes: (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to provide for the assumption by a successor company in any business combination; (iii) to postpone the Expiration Date; (iv) to decrease the warrant exercise price or increase the basic warrant exercise rate or the Bonus Share Fraction; (v) to reinstate a Bonus Share Period after the Bonus Share Expiration Date; (vi) to provide for net share settlement upon exercise of the warrants; (vii) to make any change that doesnot adversely affect the rights of any warrant holder in any material respect; (viii) to provide for a successor warrant agent or calculation agent; (ix) in connection with any business combination, to provide that the warrants are exercisable for appropriate consideration; or (x) other conforming changes.

The warrants are listed and traded separately from the Company's common stock on the Nasdaq Capital Market under the ticker “SAVAW”.

From* January 3, 2024to February 26, 2024,a total of approximately 659,000 warrants were exercised resulting in gross proceeds to the Company of approximately $21.8 million. The Company issued approximately 989,000 shares of common stock, including Bonus Share Fractions, from the exercise of warrants through February 26, 2024.After thefirst* $20 million of gross proceeds, the Company is obligated to pay a commission of 2.5% of the gross proceeds from the sale of shares of common stock in the offering to the Company's financial advisor for the warrant distribution.