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’s pipeline includes four programs: ACER-001 (sodium phenylbutyrate) for the treatment of various inborn errors of metabolism, including urea cycle disorders (“UCDs”) and Maple Syrup Urine Disease (“MSUD”); ACER-801 (osanetant) for the treatment of induced vasomotor symptoms (“iVMS”); EDSIVO™ (celiprolol) for the treatment of vascular Ehlers-Danlos syndrome (“vEDS”) in patients with a confirmed type III collagen (COL3A1) mutation; and ACER-2820 (emetine), a host-directed therapy against a variety of infectious diseases, including COVID-19. The Company’s product candidates are believed to present comparatively de-risked programs, as evidenced by having one or more of the following: favorable safety profile, clinical proof-of-concept data, mechanistic differentiation, and/or accelerated paths for development through specific programs and procedures established by the United States (“U.S.”) Food and Drug Administration (“FDA”).

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 generated revenue 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 to date and may never generate any product revenue in the future.

The Company had an accumulated deficit of $106.8 million and cash and cash equivalents of $22.1 million as of June 30, 2021. Net cash provided by operating activities was $9.2 million for the six months ended June 30, 2021, as compared to net cash used in operating activities of $8.7 million for the six months ended June 30, 2020.

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 three months ended June 30, 2021, the Company did not sell any shares through its ATM facility. During the six months ended June 30, 2021, during multiple trading days, the Company sold an aggregate of 877,107 shares at an average gross sale price of $3.1692 per share, resulting in gross proceeds of $2.8 million. Proceeds during the six months ended June 30, 2021, net of $0.2 million of fees and offering costs, were $2.6 million.

On April 30, 2020, the Company entered into a purchase agreement and registration rights agreement pursuant to which Lincoln Park Capital Fund, LLC (“Lincoln Park”) has 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 has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $15.0 million of the Company’s common stock, with $12.1 million obligation remaining as of June 30, 2021. Such sales of common stock by the Company will be subject to certain limitations, and may occur 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 may sell to Lincoln Park on any single business day in a regular purchase is 50,000, but that amount may 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 will be 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 may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold prices as set forth in the purchase agreement. 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 expense along with other costs incurred in connection with entering into the purchase agreement. During the three months ended June 30, 2021, the Company did not sell any shares of common stock under its purchase agreement with Lincoln Park. During the six months ended June 30, 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.

On July 24, 2020, the Company entered into a securities purchase agreement for the sale and issuance of an aggregate of 244,998 shares of the Company’s common stock, for an aggregate purchase price of $0.9 million, in a private placement transaction

(“Private Placement”) with certain directors, officers, and employees at a price per share of $3.50. The shares of common stock issued in the Private Placement constitute “restricted securities” under the federal securities laws and were subject to a minimum six-month holding period.

On March 19, 2021, the Company entered into the Collaboration Agreement with Relief providing for the development and commercialization of ACER-001 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 the Company and Relief on January 25, 2021. Pursuant to the Agreements, the Company 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 the Company up to $20.0 million in 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 is contractually entitled to receive from Relief an additional $10.0 million Second Development Payment conditioned upon the FDA accepting a New Drug Application (“NDA”) for ACER-001 in a UCD for filing and review. Should that payment not occur, the Company’s development plans could be affected unless it is able to obtain other funds. There is no guarantee that ACER-001 will be accepted for substantive review by the FDA, or if accepted, receive regulatory authority approval in any territory, or become commercially available for the indications under investigation. The Company could also receive a total of $6.0 million in milestones based on the first European marketing approvals of ACER-001 for a UCD and MSUD. The terms of the Agreements are further described below in the Revenue Recognition section of Note 2, Significant Accounting Policies.

The Company’s existing cash and cash equivalents available at June 30, 2021, plus the $10.0 million Second Development Payment conditioned upon the FDA accepting an NDA for ACER-001 in a UCD for filing and review per the Collaboration Agreement with Relief, are expected to fund its currently anticipated operating and capital requirements into mid-2022, excluding support for planned ACER-801 and EDSIVO^TM clinical trials.

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 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 not established a source of commercial product revenues and, as such, has been dependent on funding operations through the sale of equity securities and through a collaboration agreement. Since inception, the Company has experienced significant losses and incurred negative cash flows from operations. The Company has an accumulated deficit of $106.8 million as of June 30, 2021 and expects to incur further losses for the foreseeable future as it develops its business. 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 June 30, 2021, the Company had cash and cash equivalents of $22.1 million and current liabilities of $35.1 million, which include $22.2 million associated with deferred collaboration funding, as well as a $9.4 million liability related to the securities class action and stockholder derivative actions settlements and legal costs, for which the Company has also recorded a receivable from its insurance carriers. The Company’s cash and cash equivalents available at June 30, 2021, plus the $10.0 million Second Development Payment conditioned upon the FDA accepting an NDA for ACER-001 in a UCD for filing and review per the Collaboration Agreement with Relief, are expected to fund its currently anticipated operating and capital requirements into mid-2022, excluding support for planned ACER-801 and EDSIVO^TM clinical trials.

The Company will need to raise additional capital to fund continued operations in the second half of 2022 because neither FDA approval of ACER-001 nor subsequent product revenues are assured. 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 mid-2022, including raising additional capital through either private or public equity or debt financing or non-dilutive funding, as well as using its ATM facility and/or its remaining $12.1 million equity line facility entered into on April 30, 2020 with Lincoln Park, which is subject to certain limitations and conditions. The Company has no commitments for any additional financing, except for the agreement with Lincoln Park and the Collaboration Agreement with Relief. Any amounts raised will be used for further development of its product candidates, precommercial activities, potential acquisitions of additional product candidates, and for other working capital purposes.

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 proposed, 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. The accompanying unaudited condensed 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.

The accompanying condensed financial statements are unaudited and have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. The unaudited condensed financial statements have been prepared on the same basis as the audited annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial position, results of operations, stockholders’ equity and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other future annual or interim period. The condensed balance sheet as of December 31, 2020, included herein, was derived from the audited financial statements as of that date but does not include all disclosures required by GAAP. These unaudited financial statements should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020.

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The Company has restated its previously reported unaudited condensed interim financial statements for the three and six months ended June 30, 2021. The restatement reflects the correction of a non-cash error identified in connection with the preparation of the unaudited condensed interim financial statements for the three months ended March 31, 2021 and relates to the allocation of transaction price related to the Collaboration Agreement with Relief, which was entered into on March 19, 2021, and the associated estimate of stand-alone selling price of each of the units of account identified in the Collaboration Agreement. For the six months ended June 30, 2021, correcting this error increased the Company’s net loss by $3.1 million.

The correction of the error reduced revenue recognized during the six months ended June 30, 2021, to $0.9 million down from $4.0 million, as a result of the corrected transaction price allocation which the Company applied to the initial transaction price of $25.0 million associated with the Collaboration Agreement. The deferred collaboration funding liability was increased by a corresponding amount of $3.1 million, resulting in a corrected short-term deferred collaboration funding liability of $22.2 million, up from the previously reported $19.3 million.

The Company also adjusted for other immaterial corrections for the three and six months ended June 30, 2021. The following table presents the effect of the error correction on the Company’s unaudited condensed interim balance sheet as of June 30, 2021, unaudited condensed interim statement of operations for the three and six months ended June 30, 2021, and unaudited condensed interim statement of cash flows for the six months ended June 30, 2021.

	Three Months Ended June 30, 2021									Six Months Ended June 30, 2021
	As Previously Reported			Correction of Error			As Restated			As Previously Reported			Correction of Error			As Restated
Changes in the balance sheet:
Deferred collaboration funding, short-term	$	19,251,394		$	2,939,898		$	22,191,292
Total current liabilities		32,207,156		$	2,939,898			35,147,054
Total liabilities		32,207,156		$	2,939,898			35,147,054
Accumulated deficit		(103,876,405	)	$	(2,939,898	)		(106,816,303	)
Total stockholders' equity		7,777,036		$	(2,939,898	)		4,837,138
Changes in the statement of operations:
Revenue		—			—			—		$	3,998,133		$	(3,098,133	)	$	900,000
Research and development		1,460,975			(99,688	)		1,361,287			3,466,880			(99,688	)		3,367,192
General and administrative		2,327,055			(58,547	)		2,268,508			5,841,196			(58,547	)		5,782,649
Total operating expenses		3,788,030			(158,235	)		3,629,795			9,308,076			(158,235	)		9,149,841
Loss from operations		(3,788,030	)		158,235			(3,629,795	)		(5,309,943	)		(2,939,898	)		(8,249,841	)
Net loss		(3,227,272	)		158,235			(3,069,037	)		(4,740,444	)		(2,939,898	)		(7,680,342	)
Net loss per share - basic and diluted		(0.23	)		0.02			(0.21	)		(0.33	)		(0.21	)		(0.54	)
Research and development collaboration funding offset		926,247			99,688			1,025,935			1,212,350			99,688			1,312,038
General and administrative collaboration funding offset		543,987			58,547			602,534			543,987			58,547			602,534
Changes in the statement of cash flows:
Net loss											(4,740,444	)		(2,939,898	)		(7,680,342	)
Deferred collaboration funding, short-term											15,251,394			2,939,898			18,191,292