AVENUE THERAPEUTICS, INC.

To the Stockholders and Board of Directors

Avenue Therapeutics, Inc.:

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Avenue Therapeutics, Inc. and subsidiary (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred substantial operating losses since its inception and expects to continue to incur significant operating losses for the foreseeable future that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 consolidated 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

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Critical Audit Matter

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

Valuation of warrants

As discussed in Note 2 to the consolidated financial statements, the Company has issued freestanding warrants to purchase shares of its common stock in connection with financing activities and accounts for them in accordance with applicable accounting guidance as either liabilities or as equity instruments depending on the specific terms of the warrant agreements. As discussed in Note 1, the January 2024 Warrants and May 2024 Warrants were considered part of the cost of an inducement and were fair valued using the Black-Scholes Model on the date of issuance. The fair value of the equity-classified January 2024 Warrants and May 2024 Warrants were deemed to be dividends that were included in the calculation of net loss per share. As discussed in Note 7, key inputs to the Black-Scholes Model included the Company’s common stock price, risk-free interest rate, expected dividend yield, expected term in years, and expected volatility. The deemed dividend for the January 2024 Warrants and May 2024 Warrants were $4.3 million and $4.5 million, respectively.

We identified the evaluation of the fair value of the January 2024 Warrants and May 2024 Warrants as a critical audit matter. A high degree of auditor judgment and specialized skills and knowledge were required in the evaluation of the estimated fair values due to the degree of subjectivity associated with the expected volatility assumptions and their sensitivity to variation.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of an internal control related to the Company’s warrants valuation process, including determination of the expected volatility assumptions. We involved valuation professionals with specialized skills and knowledge, who assisted in:

● developing an independent expectation of the volatility assumptions based on consideration of historical and implied share price volatility information

● developing an independent range of the fair value of the warrants for the January 2024 Warrants as of January 5, 2024 and for the May 2024 Warrants as of May 1, 2024, using independently developed assumptions, including volatility

● comparing the independently developed ranges to the respective fair value for the January 2024 Warrants as of January 5, 2024 and for the May 2024 Warrants as of May 1, 2024 used by management to calculate the deemed dividend.

/s/KPMG LLP

We have served as the Company’s auditor since 2022.

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New York, New York

March 31, 2025

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