Allarity Therapeutics, Inc 10-Q for FY2024 Q1
Allarity Therapeutics, Inc. (ALLR)
About this 10-Q
Allarity Therapeutics, Inc filed this 10-Q on May 14, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $3.84M
- compared with a net loss of $3.35M a year earlier
- Diluted EPS
- -$22.14
- compared with -$6,356.06 a year earlier
UNITED
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Table of Contents
i
Unless the context indicates otherwise, references in this Quarterly Report on Form 10-Q (the “Quarterly Report”) to the “Company,” “Allarity,” “we,” “us,” “our” and similar terms refer to Allarity Therapeutics, Inc., Allarity Therapeutics A/S (as predecessor) and its respective consolidated subsidiaries. On April 9, 2024, we effected a 1-for-20 reverse stock split of the shares of our Common Stock (the “Reverse Stock Split”). All historical share and per share amounts reflected throughout this Quarterly Report have been adjusted to reflect the Reverse Stock Split.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains statements we believe are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that act as well as protections afforded by other federal securities laws. Generally, words such as “achieve,” “aim,” “ambitions,” “anticipate,” “believe,” “committed,” “continue,” “could,” “designed,” “estimate,” “expect,” “forecast,” “future,” “goals,” “grow,” “guidance,” “intend,” “likely,” “may,” “milestone,” “objective,” “on track,” “opportunity,” “outlook,” “pending,” “plan,” “position,” “possible,” “potential,” “predict,” “progress,” “roadmap,” “seek,” “should,” “strive,” “targets,” “to be,” “upcoming,” “will,” “would,” and variations of such words and similar expressions identify forward-looking statements, which are not historical in nature. Forward-looking statements may appear throughout this Quarterly Report and other documents we file with the Securities and Exchange Commission (the “SEC”). Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned “Risk Factors” in our Annual Report on Form 10-K, as amended (the “Form 10-K”), initially filed with the SEC on March 8, 2024.
We urge investors to consider all of the risks, uncertainties, and other factors disclosed in these filings carefully in evaluating the forward-looking statements contained in this Quarterly Report. We cannot assure you that the results or developments anticipated by us and reflected or implied by any forward-looking statement contained in this Quarterly Report will be realized or, even if substantially realized, that those results or developments will result in the forecasted or expected consequences for us or affect us, our operations or financial performance as we forecasted or expected. As a result of the matters discussed above and other matters, including changes in facts, assumptions not being realized, or other factors, the actual results relating to the subject matter of any forward-looking statement in this Quarterly Report may differ materially from the anticipated results expressed or implied in that forward-looking statement. The forward-looking statements included in this Quarterly Report are made only as of the date of this Quarterly Report, and we undertake no obligation to update any such statements to reflect subsequent events or circumstances.
ii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
ALLARITY THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except for share and per share data)
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Other current assets | ||||||||
| Prepaid expenses | ||||||||
| Tax credit receivable | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Warrant derivative liability | ||||||||
| Income taxes payable | ||||||||
| Convertible promissory notes and accrued interest, net of debt discount | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Deferred tax | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 16) | ||||||||
| Stockholders’ (deficit) equity | ||||||||
| Series A Preferred stock $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities, preferred stock and stockholders’ (deficit) equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
1
ALLARITY THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(U.S. dollars in thousands, except for share and per share data)
| Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating expenses: | ||||||||
| Research and development | $ | $ | ||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses) | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Foreign exchange gains | ||||||||
| Change in fair value adjustment of derivative and warrant liabilities | ||||||||
| Net other income | ||||||||
| Net loss for the period before tax benefit | ( | ) | ( | ) | ||||
| Income tax benefit | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Deemed dividend of 5% on Series C Convertible Preferred stock | ( | ) | ||||||
| Gain on extinguishment of Series A Convertible Preferred stock | ||||||||
| Deemed dividend on Series A Convertible Preferred stock | ( | ) | ||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
| Other comprehensive loss, net of tax: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Change in cumulative translation adjustment | ||||||||
| Total comprehensive loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
See accompanying notes to condensed consolidated financial statements.
2
ALLARITY THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
For the three months ended March 31, 2024 and 2023
(Unaudited)
(U.S. dollars in thousands, except for share data)
| Series A Preferred Stock | Series B Preferred Stock | Series C Convertible Preferred Stock | Series A Preferred Stock | Common Stock | Additional Paid in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
| Number | Value | Number | Value | Number | Value | Number | Value | Number | Value | Capital | Loss | Deficit | (Deficit) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series C Convertible Preferred Stock, net | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend of | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Round up of common shares issued as a result of | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Preferred Stock into common stock, net | ( | ) | ( | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Redemption of Series B Preferred Stock | ( | ) | ( | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation (recoveries) | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
| Series A Convertible Preferred Stock | Common Stock | Additional Paid in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||||||
| Number | Value, net | Number | Value | Capital | Loss | Deficit | (Deficit) | |||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Conversion of preferred stock into common stock, net | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Extinguishment of preferred stock | — | ( | ) | |||||||||||||||||||||||||||||
| Deemed dividend on preferred stock | — | ( | ) | |||||||||||||||||||||||||||||
| Shares issued for compensation | — | |||||||||||||||||||||||||||||||
| Sale of common shares, net | — | |||||||||||||||||||||||||||||||
| Stock based compensation (recoveries) | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Currency translation adjustment | — | — | ||||||||||||||||||||||||||||||
| Loss for the period | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
4
ALLARITY THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars in thousands)
| Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss for the period | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation (recoveries) | ( | ) | ( | ) | ||||
| Unrealized foreign exchange gain | ( | ) | ( | ) | ||||
| Non-cash finance expense | ||||||||
| Non-cash interest | ||||||||
| Change in fair value adjustment of warrant and derivative liabilities | ( | ) | ( | ) | ||||
| Deferred income taxes | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Other current assets | ( | ) | ||||||
| Tax credit receivable | ( | ) | ( | ) | ||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Income taxes payable | ( | ) | ( | ) | ||||
| Operating lease liability | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible promissory notes and accrued interest, net of discount | ||||||||
| Net proceeds from sale of common shares | ||||||||
| Proceeds from Series C Convertible Preferred Stock issuance, net of costs | ||||||||
| Redemption of Series B Preferred Stock | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Effect of exchange rate changes on cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental information | ||||||||
| Cash paid for income taxes | ||||||||
| Cash paid for interest | ||||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Conversion of Series A Convertible Preferred stock to equity, net | ||||||||
| Deemed dividend on Series A Convertible Preferred Stock | ( | ) | ||||||
| Gain on extinguishment of Series A Convertible Preferred Stock | ||||||||
| Deemed 5% dividend on Series C Convertible Preferred Stock | ( | ) | ||||||
| Accretion of Series C Preferred shares to redemption value | ( |
) | ||||||
| Stock issued in conjunction with consulting agreement | ||||||||
See accompanying notes to condensed consolidated financial statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2024 and March 31, 2023
(UNAUDITED)
(U.S. dollars in thousands, except for share and per share data and where otherwise noted)
1. Organization, Principal Activities and Basis of Presentation
Allarity Therapeutics, Inc. and Subsidiaries (the “Company”) is a clinical stage pharmaceutical company that develops drugs for the personalized treatment of cancer using drug specific companion diagnostics generated by its proprietary drug response predictor technology, DRP®. Additionally, the Company, through its Danish subsidiary, Allarity Denmark (previously Oncology Venture ApS), specializes in the research and development of anti-cancer drugs.
The Company’s principal operations are located at Venlighedsvej 1, 2970 Horsholm, Denmark. The Company’s business address in the Unites States is located at 24 School Street, 2nd Floor, Boston, MA 02108.
(a) Reverse Stock Split
On April 9, 2024, the Company effected a 1-for-20 reverse stock split of the shares of its Common Stock (the “Reverse Stock Split”). All historical share and per share amounts reflected throughout the Financial Statements (as defined below in 1(b)) and these notes to the financial statements have been adjusted to reflect the Reverse Stock Split. See Note 10(a).
(b) Liquidity and Going Concern
The accompanying unaudited condensed interim consolidated financial statements (the “Financial Statements”) have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Financial Statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.
Pursuant to the requirements of Accounting Standard Codification (ASC) 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date of the Financial Statements, and (1) is probable that the plan will be effectively implemented within one year after the date the financial statements are issued, and (2) it is probable that the plan, when implemented, will mitigate the relevant condition or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued. Certain elements of the Company’s operating plan to alleviate the conditions that raise substantial doubt are outside of the Company’s control and cannot be included in management’s evaluation under the requirements of ASC 205-40.
Since inception, the Company has devoted substantially all its efforts to business planning, research and development, clinical expenses, recruiting management and technical staff, and securing funding via collaborations. The Company has historically funded its operations with proceeds received from its collaboration arrangements, sale of equity capital and proceeds from sales of convertible notes.
The Company has incurred significant
losses and has an accumulated deficit of $
Management’s plans to mitigate the conditions or events that raise substantial doubt include additional funding through public equity, private equity, debt financing, collaboration partnerships or other sources.
6
On March 19, 2024, the Company entered into an At-The-Market Issuance
Sales Agreement with Ascendiant Capital Markets, LLC to sell shares of the Company’s Common Stock, with aggregate gross sales proceeds
of up to $
In light of the Company’s cash position as of the date of this Quarterly Report, the Company does not have sufficient funds for its current operations and planned capital expenditures. As discussed above, the Company intends to seek capital through sale of its securities or other sources. There are no assurances, however, that the Company will be successful in raising additional working capital, or if it is able to raise additional working capital, it may be unable to do so on commercially favorable terms. The Company’s failure to raise capital or enter into other such capital raising arrangements if and when needed would have a negative impact on its business, results of operations and financial condition and its ability to develop its product candidates.
Although management continues to pursue its funding plans, there is no assurance that the Company will be successful in obtaining sufficient funding to fund continuing operations on terms acceptable to the Company, if at all. Accordingly, based upon cash on hand at March 31, 2024, the Company does not have sufficient funds to finance its operations for at least twelve months from March 31, 2024 and therefore has concluded that substantial doubt exists about the Company’s ability to continue as a going concern.
(c) Basis of Presentation
The Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as established by the Financial Accounting Standards Board (the “FASB”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”).
The Financial Statements contain all normal and recurring adjustments necessary to state fairly the consolidated balance sheet, results of operations and comprehensive loss, statements of changes in redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows of the Company for the interim periods presented. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the current fiscal year ending December 31, 2024. The financial data presented herein do not include all disclosures required by U.S. GAAP and should be read in conjunction with the audited consolidated financial statements and accompanying notes as of and for the fiscal years ended December 31, 2023 and 2022, thereto included in the Company’s Annual Report on Form 10-K, as amended (the “Form 10-K”) initially filed with the SEC on March 8, 2024.
The preparation of the Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The results of operations and cash flows for the interim periods included in the Financial Statements are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.
(d) Risks and Uncertainties
The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel and collaboration partners, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations, and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. Even if the Company’s research and development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
7
2. Summary of Significant Accounting Policies
There have been no new or material changes to the significant accounting policies discussed in the Form 10-K, that are of significance, or potential significance, to the Company.
(a) Organization and Principles of Consolidation
| Name | Country of Incorporation | |
| Allarity Acquisition Subsidiary Inc. | ||
| Allarity Therapeutics Europe ApS (formerly Oncology Venture Product Development ApS)* | ||
| Allarity Therapeutics Denmark ApS (formerly OV-SPV2 ApS)* | ||
| MPI Inc.*(1) |
| * | |
| (1) | In the process of being dissolved because inactive. |
All intercompany transactions and balances, including unrealized profits from intercompany sales, have been eliminated upon consolidation.
(b) Use of Estimates and Assumptions
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting years. Significant estimates and assumptions reflected in the Financial Statements include, but are not limited to, the fair value of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, warrants, convertible debt, convertible promissory note, and the accrual for research and development expenses, fair values of acquired intangible assets and impairment review of those assets, share based compensation expense, and income tax uncertainties and valuation allowances. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Estimates are periodically reviewed considering reasonable changes in circumstances, facts, and experience. Changes in estimates are recorded in the period in which they become known and if material, their effects are disclosed in the notes to the financial statements. Actual results could differ from those estimates or assumptions.
(c) Foreign currency and currency translation
The functional currency is the currency of the primary economic environment in which an entity’s operations are conducted. The Company and its subsidiaries operate mainly in Denmark and the United States. The functional currencies of the Company’s subsidiaries are their local currency.
The Company’s reporting currency is the U.S. dollar. The Company translates the assets and liabilities of its Denmark subsidiaries into the U.S. dollar at the exchange rate in effect on the balance sheet date. Revenues and expenses are translated at the average exchange rate in effect during each monthly period. Unrealized translation gains and losses are recorded as a cumulative translation adjustment, which is included in the condensed consolidated statements of changes in redeemable convertible preferred stock and stockholders’ equity (deficit) as a component of accumulated other comprehensive loss.
8
Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured into the functional currency at rates of exchange prevailing at the balance sheet dates. Non-monetary assets and liabilities denominated in foreign currencies are re-measured into the functional currency at the exchange rates prevailing at the date of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net loss for the respective periods. Adjustments that arise from exchange rate translations are included in other comprehensive loss in the condensed consolidated statements of operations and comprehensive loss as incurred.
Adjustments
that arise from exchange rate translations are included in other comprehensive loss in the consolidated statements of operations and
comprehensive loss as incurred. The Company recorded a foreign exchange translation gain of $
(d) Concentrations of credit risk and of significant suppliers
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash. The Company maintains its cash in financial institutions in amounts that could exceed government-insured limits. The Company does not believe it is subject to additional credit risks beyond those normally associated with commercial banking relationships. The Company has not experienced losses on its cash accounts and management believes, based upon the quality of the financial institutions, that the credit risk regarding these deposits is not significant. The Company is dependent on third-party manufacturers to supply products for research and development activities in its programs. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply its requirements for supplies and raw materials related to these programs. These programs could be adversely affected by a significant interruption in these manufacturing services or the availability of raw materials.
(e) Cash
Cash consists primarily of highly liquid investments with original maturities of three months or less at date of purchase to be cash equivalents.
(f) Accumulated other comprehensive loss
Accumulated other comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with shareholders. The Company records unrealized gains and losses related to foreign currency translation and instrument specific credit risk as components of other accumulated comprehensive loss in the condensed consolidated statements of operations and comprehensive loss. During the three months ended March 31, 2024, and 2023, the Company’s other comprehensive gain was comprised of currency translation adjustments.
(g) Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. At each reporting date, the Company evaluates whether a potential loss amount or a potential loss range is probable and reasonably estimable under the provisions of the authoritative guidelines that address accounting for contingencies. The Company expenses costs as incurred in relation to such legal proceedings as general and administrative expense within the condensed consolidated statements of operations and comprehensive loss.
9
(h) Reclassification
During
the three months ended March 31, 2023, we have reclassified financing costs of $
(i) Recently Issued Accounting Pronouncements
Changes to U.S. GAAP are established by the FASB in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. All other ASUs issued through the date of the Financial Statements were assessed and determined not to be applicable or are expected to have minimal impact on the Company’s condensed consolidated financial position and results of operations.
3. Intangible assets
During the three months ended
March 31, 2024, because of continuing downward pressure on the Company’s shares of Common Stock, the Company performed an impairment
assessment with a WACC of
The Company’s IPR&D
assets have been classified as indefinite-lived intangible assets. The Company’s individual material development project in progress,
Stenoparib, is recorded at $
4. Accrued liabilities
| March 31, 2024 | December 31, 2023 | |||||||
| Development cost liability | $ | $ | ||||||
| Accrued interest on milestone liabilities | ||||||||
| Accrued audit and legal | ||||||||
| Payroll accruals | ||||||||
| Accrued consulting fees | ||||||||
| Accrued Board member and scientific advisory fees | ||||||||
| Other | ||||||||
| $ | $ | |||||||
5. Convertible promissory note due to Novartis
On January 26, 2024, we received
a termination notice from Novartis Pharma AG, a company organized under the laws of Switzerland (“Novartis”) due to a material
breach of that certain license agreement dated April 6, 2018, as amended to date (the “License Agreement”). Accordingly,
under the terms of the License Agreement, the Company ceased all development and commercialization activities with respect to all licensed
products, all rights and licenses granted by Novartis to the Company reverted to Novartis; and all liabilities due to Novartis became
immediately due and payable inclusive of interest which is continuing to accrue at 5% per annum. As of March 31, 2024, the liability
is recorded as a current liability on the Company’s condensed unaudited consolidated balance sheets as follows: $
10
6. Convertible senior promissory notes due to 3i, LP (3i”)
| (a) | 3i Convertible Senior Promissory Notes (2024) (collectively the “2024 Notes”) |
During the three months ended March 31, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”), as amended, with 3i, pursuant to which three senior convertible promissory notes were issued as follows:
| i. | On January 18, 2024, in an aggregate principal amount of $ |
| ii. | On February 13, 2024, in an aggregate principal amount of $ |
| iii. | On March 14, 2024, in an aggregate principal amount of $ |
The Company agreed to use the net proceeds from the sale of the 2024 Notes, among other things, for accounts payable and for working capital purposes. Unless the transaction documents state otherwise, the Company may not prepay any portion of the principal amount of the 2024 Notes without 3i’s prior written consent.
The
Company evaluated the terms of the 2024 Notes as required pursuant to ASC 570, 480, 815 and ASU 2020-06, and concluded the 2024 Notes
will be recorded at $
The Company agreed to pay
interest to 3i on the aggregate unconverted and then outstanding principal amount of the 2024 Notes at the rate of
Conversion of the 2024 Notes
The
Company has committed to keeping enough of its authorized but unissued shares of Common Stock available exclusively for conversion of
the 2024 Notes. The number of shares to be issued upon conversion of the 2024 Notes will be calculated by dividing the outstanding principal
amount of the respective 2024 Notes to be converted by their respective conversion prices as described above. The conversion prices of
the 2024 Notes are subject to adjustment to equal the price of subsequent equity sales. 3i’s ownership percentage of our shares
of Common Stock is limited to no more than
Redemption
Subject to the provisions
of the 2024 Notes, if, at any time while the 2024 Notes are outstanding, the Company engages in one or more subsequent financings, 3i
may require us to first use up to
11
Events of Default
The 2024 Notes include customary
event of default provisions and provide for a mandatory default provision. Upon the occurrence of an event of default, 3i may require
the Company to pay in cash the “Mandatory Default Amount” which is defined in the 2024 Notes to mean the sum of (a) the greater
of (i) the outstanding principal amount of the First Note, the Second Note and the Third Note, plus all accrued and unpaid interest thereon,
divided by the lesser of (i) $
Negative Covenants
While
any of the 2024 Notes are outstanding, without prior written consent from 3i and holders of at least
Registration Rights
The Company agreed to register with the SEC the resale of its shares of the Common Stock issuable upon conversion of the 2024 Notes pursuant to the SPA. We agreed to reimburse 3i of reasonable attorneys’ fees and expenses incurred by 3i for significant work in connection with the closings contemplated in the SPA. The SPA also provides for indemnification of 3i if it incurs losses, liabilities, obligations, claims, contingencies, damages, costs and expenses related to, among other things, a breach by us of any of our representations, warranties or covenants under the SPA.
| (b) | 3i Convertible Secured Promissory Notes (2023) |
On
November 22, 2022, the Company entered into a Secured Note Purchase Agreement (“Purchase Agreement”) with 3i, whereby the
Company authorized the sale and issuance of three Secured Promissory Notes (each a “Note” and collectively, the “Notes”).
Effective November 28, 2022, the Company issued: (1) a Note in the principal amount of $
Each
Note matured on
The 3i Convertible Secured Promissory Notes were paid in full and cancelled on April 21, 2023.
12
7. Preferred Stock
| A. | Series A Convertible Preferred Stock and Common Stock Purchase Warrants |
(a) Amendments to Series A Convertible Preferred Stock
| i. | Determination of Conversion Price Adjustments for Series A Preferred Stock |
On December 9, 2022, the Company and 3i entered into a letter agreement (the “2022 Letter Agreement”) which provided that pursuant to Section 8(g) of the Company’s Certificate of Designations for the Series A Preferred Stock (the “COD”), the Company and 3i agreed that the Conversion Price (as defined in the COD) was modified to mean the lower of: (i) the Closing Sale Price (as defined in the COD) on the trading date immediately preceding the Conversion Date (as defined in the COD) and (ii) the average Closing Sale Price (as defined in the COD) of the common stock for the five trading days immediately preceding the Conversion Date (as defined in the COD), for the Trading Days (as defined in the COD) through and inclusive of January 19, 2023. Any conversion which occurs shall be voluntary at the election of 3i, which shall evidence its election as to the Series A Preferred Stock being converted in writing on a conversion notice setting forth the then Minimum Price (as defined in the COD). Management determined that the adjustment made to the Conversion Price is not a modification of the COD which allows for adjustments to the Conversion Price (as defined in the COD) at any time by the Company and the other terms of the COD remained unchanged.
On January 23, 2023, the Company and 3i amended the 2022 Letter Agreement, to provide that the modification of the term Series A Preferred Stock Conversion Price (the “Series A Preferred Stock Conversion Price”) to mean the lower of: (i) the Closing Sale Price (as defined in the COD) on the trading date immediately preceding the Conversion Date (as defined in the COD and (ii) the average Closing Sale Price (as defined in the COD) of the Company’s shares of Common Stock for the five trading days immediately preceding the Conversion Date (as defined in the COD), for the Trading Days (as defined in the COD) will be in effect until terminated by the Company and 3i.
| ii. | Modification to Conversion Price of Series A Preferred Stock and 3i Exchange Warrants |
On January 14, 2024, pursuant
to the terms of the First Note, the Company modified the conversion price of the 3i Exchange Warrants from $
On February 13, 2024, pursuant
to the terms of the Second Note, the Company modified the conversion price of the 3i Exchange Warrants from $
13
On March 14, 2024, pursuant
to the terms of the Third Note, the Company modified the conversion price of the 3i Exchange Warrants from $
(b) Accounting
| i. | Series A Preferred Stock |
As a result of fair value
adjustments during the three month period ended March 31, 2024, the Company recognized a deemed dividend of $
| January 14, 2024 | February 14, 2024 | March 14, 2024 | ||||||||||
| Initial exercise price | $ | $ | $ | |||||||||
| Stock price on valuation date | $ | $ | $ | |||||||||
| Risk-free rate | % | % | % | |||||||||
| Term (in years) | ||||||||||||
| Rounded annual volatility | % | % | % | |||||||||
14
| iii. | 3i Warrants |
The 3i Warrants were identified as a freestanding financial instrument and meet the criteria for derivative liability classification, initially measured at fair value. Subsequent changes in fair value are recognized through earnings for as long as the contracts continue to be classified as a liability. The measurement of fair value is determined utilizing an appropriate valuation model considering all relevant assumptions current at the date of issuance and at each reporting period (i.e., share price, exercise price, term, volatility, risk-free rate and expected dividend rate).
(c) Series A Preferred Stock Conversions
| i. | Three month period ended March 31, 2024 |
During
the three month period ended March 31, 2024, 3i exercised its option to convert
| ii. | Three month period ended March 31, 2023 |
During
the three month period ended March 31, 2023, 3i exercised its option to convert
| Consolidated Balance Sheets | Consolidated Statement of Operations & Comprehensive Loss | |||||||||||||||||||
| 3i Exchange Warrant liability | Series A Preferred Stock | Common Stock | Additional paid-in capital | Fair value adjustment to derivative and warrant liabilities | ||||||||||||||||
| Balances at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Conversion of | ( | ) | ||||||||||||||||||
| Extinguishment of Series A Preferred Stock | ( | ) | ||||||||||||||||||
| Deemed dividend on January 14, 2024, modification | ( | ) | ||||||||||||||||||
| Fair value adjustment at March 31, 2024 | ( | ) | ||||||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
15
| Consolidated Balance Sheets | Consolidated Statement of Operations & Comprehensive Loss | |||||||||||||||||||
| 3i Exchange Warrant liability | Series A Convertible Preferred Stock – Mezzanine Equity | Common Stock | Additional paid-in capital | Fair value adjustment to derivative and warrant liabilities | ||||||||||||||||
| Balances at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Conversion of | ( | ) | ||||||||||||||||||
| Fair value adjustment at March 31, 2023 | ( | ) | ||||||||||||||||||
| $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
| B. | Series C Convertible Preferred Stock |
On February 28, 2023, the
Company entered into a Securities Purchase Agreement (the “2023 SPA”) with 3i for the purchase and sale of
The
Company evaluated the terms of the Series C Preferred Stock as required pursuant to ASC 570, 480, 815 and ASU 2020-06, and concluded
the Series C Preferred Stock will be recorded at fair value of $
| March 31, 2023 |
||||
| Series C Preferred Stock, cash received | $ | |||
| Less debt discount, opening | ( |
) | ||
| Plus, |
||||
| Series C Preferred Stock – net, ending balance | $ | |||
Effective
April 21, 2023, all of the
16
8. Derivative Liabilities
| (a) | Continuity of Common Share Purchase Warrant and 3i Warrant Derivative Liabilities |
| Common Share Purchase Warrants | 3i Exchange Warrants | |||||||
| Balance as of January 1, 2023 | $ | $ | ||||||
| Issuance date fair value of April, July & September 2023 Common share purchase warrants | ||||||||
| Modifications to fair value upon exercise | ||||||||
| Change in fair value adjustment of derivative and warrant liabilities | ( | ) | ||||||
| Amount transferred to Equity | ( | ) | ( | ) | ||||
| Balance as of December 31, 2023 | $ | $ | ||||||
| Fair value per Common warrant / 3i Warrant / issuable at period end | $ | $ | ||||||
| Common Share Purchase Warrants | 3i Exchange Warrants | |||||||
| Balance as of January 1, 2024 | $ | $ | ||||||
| Change in fair value adjustment of derivative and warrant liabilities | ( | ) | ||||||
| Balance as of March 31, 2024 | $ | $ | ||||||
| Fair value per Common warrant / 3i Warrant / issuable at period end | $ | $ | ||||||
| (b) | Common Share Purchase Warrants – Valuation Inputs |
| April 2023 Warrants |
July 2023 Warrants |
September 2023 Inducement Warrants |
||||||||||
| Initial exercise price | $ | $ | $ | |||||||||
| Stock price on valuation date | $ | $ | $ | |||||||||
| Risk-free rate | % | % | % | |||||||||
| Term (in years) | ||||||||||||
| Rounded annual volatility | % | % | % | |||||||||
17
| (c) | 3i Warrants – Valuation Inputs |
On March 31, 2024 and 2023,
the Company utilized the reset strike options Type 2 model by Espen Garder Haug and Black-Scholes Merton models to estimate the fair value
of the 3i Warrants to be approximately $
| March 31, 2024 | March 31, 2023 | |||||||
| Initial exercise price | $ | $ | ||||||
| Stock price on valuation date | $ | $ | ||||||
| Risk-free rate | % | % | ||||||
| Expected life of the Warrant to convert (years) | ||||||||
| Rounded annual volatility | % | % | ||||||
| Timing of liquidity event | ||||||||
| Expected probability of event | % | % | ||||||
The shares of Series A Preferred Stock converted in the three-month
periods ended March 31, 2024 and 2023, were recorded at $
9. Stockholders’ Equity
(a) Amendment to Certificate of Incorporation – Reverse Stock Split
On April 4, 2024,
(b) Share issuances
| i. | Three month period ended March 31, 2024 |
During the three month period ended March 31, 2024,
| (a) | 3i exercised its option to convert 202 shares of Series A Preferred Stock for |
| (b) | The Company issued |
| (c) | Pursuant to the terms of an ATM Offering, the Company issued and sold |
| i. | Three month period ended March 31, 2023 |
During the three months ended
March 31, 2023, the Company issued
18
10. Stock-based payment plan and stock-based payments
Amended and Restated 2021 Equity Incentive Plan (the “Plan”)
During the three months ended March 31, 2024, pursuant to approval by the Company’s Board of Directors, the Company has amended and restated the Plan as follows:
| i. | Number of shares available: increased the number of shares reserved and available for grant and issuance pursuant to the Plan to |
| ii. | Automatic Share Reserve Increase: The number of Shares available for grant and issuance under the Plan will be increased on January 1st of each of 2022 through 2031, by the lesser of (a) |
Stock-based payments
During
the three months ended March 31, 2024, total stock-based payment (recoveries) / expenses recorded in the condensed consolidated statement
of operations and comprehensive loss were ($
Total compensation cost for non-vested warrants as at March 31,
2024, is $
| Options Outstanding | ||||||||||||
| Number of Shares | Weighted Average Exercise Price Share | Weighted Average Life (in years) | ||||||||||
| Outstanding December 31, 2023 | $ | |||||||||||
| Cancelled or expired | ( | ) | — | |||||||||
| Outstanding as of March 31, 2024 | $ | |||||||||||
| Options exercisable at March 31, 2024 | $ | |||||||||||
19
11. License and Development Agreements
(a) License Agreement with Novartis for Dovitinib
On January 26, 2024, we received
a termination notice from Novartis due to a material breach of the License Agreement. Accordingly, under the terms of the License Agreement,
the Company ceased all development and commercialization activities with respect to all licensed products, all rights and licenses granted
by Novartis to the Company reverted to Novartis; and all liabilities due to Novartis became immediately due and payable inclusive of interest
which is continuing to accrue at
(b) License Agreement with Eisai Inc. for Stenoparib
The Company holds the exclusive worldwide rights to all preventative, therapeutic and/or diagnostic uses related to cancer in humans and by amendment to the agreement on December 11, 2020, viral infections in humans (including, but not limited to, coronaviruses) for Stenoparib from Eisai, Inc. (“Eisai”) pursuant to a license agreement (the “Eisai License Agreement”). Pursuant to the Eisai License Agreement, the Company is solely responsible for the development of Stenoparib during the term of the Eisai License Agreement. Eisai License Agreement also provides for a joint development committee consisting of six members, three appointed by us and three appointed by Eisai. One of the Company’s members of the joint development committee is designated chair of the committee and has the power to break any deadlock in decisions by the committee that must be made by a majority vote with each representative having one vote. The purpose of the committee is to implement and oversee development activities for Stenoparib pursuant to the clinical development plan, serving as a forum for exchanging data, information and development strategy.
Effective July 12, 2022, the Company’s July 6, 2017 Exclusive License Agreement with Eisai Inc. (the “Third Amendment”), the terms of the original exclusive license were further amended in order to (1) further postpone the due date of the extension payment and extend the deadline for the Company’s successful completion of its first Phase 1b or Phase 2 clinical trial for Stenoparib beyond December 31, 2022; and (2) amend terms related to Eisai’s right of termination of development.
On May 26, 2023, the Company
and Eisai entered into a fourth amendment to the Exclusive License Agreement with an effective date of May 16, 2023, to postpone the extension
payment, restructure the payment schedule and extend the deadline to complete enrollment in a further Phase 1b or Phase 2 Clinical Trial
for the Stenoparib. The Company agreed to pay Eisai in periodic payments as follows: (i) $
On February 26, 2024, in exchange
for an additional $
Development Milestone Payments
The
Company has agreed to make milestone payments to Eisai in connection with the development of Stenoparib by the Company or its affiliates,
or by a third-party program acquirer that assumes control of the Stenoparib development program from the Company corresponding to: (i) successful
completion of a Phase 2 clinical trial; (ii) upon dosing of the first patient in the first Phase 3 clinical trial; (iii) upon
submission of the first NDA with the FDA; (iv) submission of an MAA to the EMA; (v) submission of an NDA to the MHLW in Japan;
(vi) upon receipt of authorization by the FDA to market and sell a licensed product; (vii) upon receipt of approval of an MAA
by the EMA for a licensed product; and (viii) upon receipt of approval by the MHLW in Japan for a licensed product. If all milestones
have been achieved, the Company may be obligated to pay Eisai up to a maximum of $
20
Royalty Payments
In addition to the milestone
payments described above, the Company has agreed to pay Eisai royalties based on annual incremental sales of product derived from Stenoparib
in an amount between
The Company is obligated to pay royalties under the agreement on a country-by-country and product-by-product basis for a period that commences with the first commercial sale of a product until the later of (i) the expiration of the last to expire valid claim of any licensed patent covering such licensed product in such country; or, (ii) the expiration of regulatory-based exclusivity for such licensed product in such country or (iii) the 15 year anniversary of the date of first commercial sale of such licensed product in such country. However, the agreement may be terminated sooner without cause by the Company upon 120 days prior written notice, or upon written notice of a material breach of the agreement by Eisai that is not cured within 90 days (30 days for a payment default).
Eisai
also has the right to terminate the agreement upon written notice of a material breach of the agreement by the Company that is not cured
within 90 days (30 days for a payment default) or if the Company files for bankruptcy. By an amendment effective as of August
3, 2021, and executed by Eisai on August 23, 2021, Eisai also has the right to terminate the agreement if the Company does not complete
a Phase 2 clinical trial before December 31, 2022, unless we elect to pay a $
Option to Reacquire Rights to Stenoparib
For the period commencing with enrollment of the first five patients in a Phase 2 clinical trial pursuant to the clinical development plan and ending 90 days following successful completion of such Phase 2 clinical trial, Eisai has the option to reacquire our licensed rights to develop Stenoparib for a purchase price equal to the fair market value of our rights, giving effect to the stage of development of Stenoparib that we have completed under the agreement. The Company commenced a Phase 2 clinical trial April 15, 2019, and as of the date of the Financial Statements, Eisai has not indicated an intention to exercise its repurchase option.
(c) Development, Option and License Agreement with R-Pharm for IXEMPRA®
On March 1, 2019, the Company
entered into an option to in-license the rights to any and all therapeutic and/or diagnostic uses in humans for IXEMPRA®
in the European Union (Great Britain but excluding Switzerland and Lichtenstein) (the “Territory”) from R-Pharm U.S. Operating,
LLC (“R-Pharm”), pursuant to a Development, Option and License Agreement (the “Option”). By an amendment to the
agreement dated August 4, 2022, for no consideration, the Option will expire on September 1, 2023, if not exercised by the Company before
then. The Option provides a right of extension, should we elect, for an additional $
21
12. Related party
During
the three month periods March 31, 2024 and 2023, a director of the Company was paid $
13. Loss per share of common stock
Basic loss per share is derived
by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each
period. Diluted loss per share includes the effect, if any, of the potential exercise or conversion of securities, such as warrants and
stock options, which would result in the issuance of incremental shares of common stock unless such effect is anti-dilutive. In calculating
the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remained the same for
both calculations because when a net loss exists, dilutive shares are not included in the calculation.
| March 31, | March 31, | |||||||
| 2024 | 2023 | |||||||
| Warrants and stock options | ||||||||
| Series A Convertible Preferred stock | ||||||||
| Series C Convertible Preferred stock | ||||||||
| Convertible debt | ||||||||
14. Financial Instruments
| Fair Value Measurements as of March 31, 2024, Using: | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| Derivative warrant liability | ( | ) | ( | ) | ||||||||||||
| $ | — | $ | $ | ( | ) | $ | ( | ) | ||||||||
| Fair Value Measurements as of December 31, 2023, Using: | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| Derivative warrant liability | ( | ) | ( | ) | ||||||||||||
| $ | — | $ | $ | ( | ) | $ | ( | ) | ||||||||
Methods used to estimate the fair values of our financial instruments, not disclosed elsewhere in the Financial Statements, are as follows:
When available, the Company’s marketable securities are valued using quoted prices for identical instruments in active markets. If the Company is unable to value its marketable securities using quoted prices for identical instruments in active markets, the Company values its investments using broker reports that utilize quoted market prices for comparable instruments. The Company has no financial assets or liabilities measured using Level 2 inputs. Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable.
22
The Company recognizes its derivative liabilities as Level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using terms in the notes that are subject to volatility and market price of the underlying shares of Common Stock.
The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company’s policy is to recognize transfers into and out of levels within the fair value hierarchy at the date the actual event or change in circumstances that caused the transfer occurs. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. There were no transfers between Level 1 or Level 2 during the three-month periods ended March 31, 2024 and 2023.
15. Income Taxes
The effective tax rate for the three-month periods ended March 31, 2024 and 2023, was not impacted by unbenefited losses.
16. Commitments and Contingencies
(a) SEC Request
In January 2023, the Company received a request to produce documents from the SEC that stated that the staff of the SEC is conducting an investigation known as “In the Matter of Allarity Therapeutics, Inc.” to determine if violations of the federal securities laws have occurred. The documents requested appear to focus on submissions, communications, and meetings with the FDA regarding our NDA for Dovitinib or Dovitinib-DRP. The SEC letter also stated that investigation is a fact-finding inquiry and does not mean that that the SEC has concluded that the Company or anyone else has violated the laws. As a result of the disclosure of the SEC request, The Nasdaq Stock Market LLC (“Nasdaq”) staff has also requested us to provide them with the information requested by the SEC in which the Company is complying.
(b) Nasdaq Delisting Notifications
23
On February 1, 2024, the Company attended a de-listing appeal hearing with Nasdaq, and on March 12, 2024, the Company received a response from Nasdaq granting the Company’s request to continue its listing on Nasdaq subject to the requirement that on or before April 24, 2024, the Company shall demonstrate compliance with the Bid Price and on Equity Rules. On April 27, 2024, we received a confirmation from Nasdaq that the Company has regained compliance with the minimum bid price requirement in Listing Rule 5550(a)(2) (the “Bid Price Rule”), as required by the Hearing Panel’s (“Panel”) decision of March 12, 2024. As a result of the capital raise under the ATM Offering, the Company has communicated to Nasdaq its belief that it has achieved compliance with the Equity Rules, subject to a confirmation from Nasdaq.
17. Subsequent Events
For the Financial Statements, and for the three months then ended, the Company evaluated subsequent events through the date on which the Financial Statements were issued. All subsequent events not disclosed elsewhere in this Quarterly Report are disclosed below.
(a) 3i LP Transactions
During the period April 1, 2024, through May 6, 2024, 3i:
| i. | converted |
| ii. | converted |
| iii. | completely redeemed the 2024 Notes and interest for cash in the amount of $ |
(b) Amended and Restated COD of Series A Convertible Preferred Stock and Warrant Adjustments
During
the period April 1, 2024, through May 2, 2024, the Company has amended the conversion prices of the Series A Convertible Preferred Stock,
the Exchange Warrants and the 2024 Notes to equal the current last sale price of its shares of Common Stock of $
24
(c) ATM Offering – Sales
During
the period April 1, 2024 through May 13, 2024, the Company has sold
(d) Pro-forma Balance Sheet (unaudited)
| As of March 31, 2024 (UNAUDITED) | ||||||||
| (In thousands, except share data) | Actual | Pro Forma | ||||||
| ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Total other current assets | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT) | ||||||||
| Total current liabilities | $ | $ | ||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Shareholders equity (deficit) | ||||||||
| Total Redeemable preferred stock | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ (deficit) equity | ( | ) | ||||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
You should read the following discussion and analysis of our financial condition and results of operations together with “Cautionary Note Regarding Forward-Looking Statements” and our condensed consolidated financial statements and related notes included under Item 1 of this Quarterly Report as well as our most recent Annual Report on Form 10-K for the year ended December 31, 2023, as amended, including Part 1, Item 1A “Risk Factors.”
Overview
We are a biopharmaceutical company focused on discovering and developing highly targeted anti-cancer drug candidates. Through the use of its Drug Response Predictor (DRP®) platform, we identify the value in drug assets that have otherwise been discontinued by identifying patient populations where these drugs are active. Our lead drug candidate is:, the poly-ADP-ribose polymerase (PARP) inhibitor stenoparib, or Stenoparib.
Recent Developments
NASDAQ Delisting Notifications
26
On February 1, 2024, the Company attended a de-listing appeal hearing with Nasdaq, and on March 12, 2024, the Company received a response from Nasdaq granting the Company’s request to continue its listing on Nasdaq subject to the requirement that on or before April 24, 2024, the Company shall demonstrate compliance with the Bid Price and on Equity Rules. On April 27, 2024, we received a confirmation from Nasdaq that the Company has regained compliance with the minimum bid price requirement in Listing Rule 5550(a)(2) (the “Bid Price Rule”), as required by the Hearing Panel’s (“Panel”) decision of March 12, 2024. As a result of the capital raise under the ATM Offering, the Company has communicated to Nasdaq its belief that it has achieved compliance with the Equity Rules, subject to a confirmation from Nasdaq.
Amendments to the Certificate of Designation of Series A Preferred Stock
On January 14, 2024, pursuant to the terms of the First Note, the Company modified the conversion price of the 3i Exchange Warrants from $20.00 to $8.95, thereby increasing the number of Exchange Warrants outstanding from 220,361 at December 31, 2023 to 492,317 outstanding at January 14, 2024. Also on January 14, 2024, the conversion price of the outstanding 1,417 shares of Series A Preferred Stock was revised from $20.00 to $8.95. The Company filed the Fifth Certificate of Amendment to Amended and Restated COD (the “Fifth Amendment”) with the Secretary of State of the State of Delaware to reflect the new conversion price of the Series A Preferred Stock of $8.95. As of January 14, 2024, the Company used the Black-Scholes option pricing model to determine the fair value of the 1,417 Series A Preferred Stock outstanding at $1,970 versus their carrying value of $1,742. Accordingly, the Company has recorded a deemed dividend of $228 as at January 14, 2024. At a stated value of $1,080 for each share of Series A Preferred Stock, the revised price of $8.95 per share results in the 1,417 shares being convertible into 170,952 shares of Common Stock as of January 14, 2024.
On February 13, 2024, pursuant to the terms of the Second Note, the Company modified the conversion price of the 3i Exchange Warrants from $8.95 to $8.10 and thereby increased the number of Exchange Warrants outstanding from 492,317 on January 18, 2024, to 544,101 on February 13, 2024. The Company filed the Sixth Certificate of Amendment to Amended and Restated COD (the “Sixth Amendment”) with the Secretary of State of the State of Delaware to reflect the new conversion price of the Series A Preferred Stock of $8.10. As of February 14, 2024, the Company used the Black-Scholes option pricing model to determine the fair value of the then 1,296 Series A Preferred Stock outstanding and concluded there was a gain on extinguishment of $122. At a stated value of $1,080 for each share of Series A Preferred Stock, the revised price of $8.10 per share results in the 1,296 shares being convertible into 493,573 shares of Common Stock.
On March 14, 2024, pursuant to the terms of the Third Note, the Company modified the conversion price of the 3i Exchange Warrants from $8.10 to $7.00 and thereby increased the number of Exchange Warrants outstanding from 544,101 on February 13, 2024, to 829,423 on March 14, 2024. The Company filed the Seventh Certificate of Amendment to Amended and Restated COD (the “Seventh Amendment”) with the Secretary of State of the State of Delaware to reflect the new conversion price of the Series A Preferred Stock of $7.00. As of March 14, 2024, the Company used the Black-Scholes option pricing model to determine the fair value of the then 1,296 Series A Preferred Stock outstanding and concluded there was a gain on extinguishment of $69. At a stated value of $1,080 for each share of Series A Preferred Stock, the revised price of $7.00 per share results in the 1,215 shares being convertible into 535,286 shares of Common Stock.
During the period April 1, 2024, through the date of this Quarterly Report, the Company has further amended the conversion prices of the Series A Convertible Preferred Stock, the Exchange Warrants and the 2024 Notes to equal the current last sale price of shares of its common stock of $1.15 as of May 1, 2024.
Special Meeting of Stockholders; Share Consolidation
On April 1, 2024, we held a Special Meeting of Stockholders (the “Special Meeting”) for our stockholders of record of our outstanding shares of Common Stock and Series A Preferred Stock. At the Special Meeting, the stockholders of Common Stock and Series A Preferred Stock approved an amendment to our Certificate of Incorporation, to, at the discretion of the Company’s board and after the Company’s stockholders’ approval, effected the Reverse Stock Split. In addition, the Company filed a Fifth Certificate of Amendment of the COD in Delware.
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We effected a 1-for-20 share consolidation of our Common Stock on April 9, 2024 (“Share Consolidation”). No fractional shares were issued in connection with the Share Consolidation. If, as a result of the Share Consolidation, a stockholder would otherwise have been entitled to a fractional share, each fractional share was rounded up to the next whole number. The Share Consolidation resulted in a reduction of our outstanding shares of Common Stock on March 31, 2024 from 6,854,604 to 342,774. The par value of our authorized stock remained unchanged at $0.0001.
3i Transactions
During the period April 1, 2024, through May 6, 2024, 3i:
i. converted 1,215 Series A Preferred Stock for 452,131 shares of Common Stock at prices of between $1.15 and $7.00 per share (as of the date of the Financial Statements, all Series A Preferred Stock have been converted and there are no outstanding shares of Series A Preferred Stock);
ii. converted 200,000 Exchange Warrants on a cashless basis for 84,712 shares of Common Stock at $2.30 per share on April 12 2024 and 3,432,366 Exchange Warrants at $1.15 per share for 2,274,938 shares of Common Stock on May 2, 2024 (as of the date of the Financial Statements, there are no outstanding Exchange Warrants); and
iii. completely redeemed all of the 3i 2024 Notes and interest for cash in the amount of $1,746, inclusive of principal of $1,540 and interest of $123,200.
Risks and Uncertainties
The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel and collaboration partners, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations, and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. Even if the Company’s research and development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
Financial Operations Overview
Since our inception in September of 2004, we have focused substantially all our resources on conducting research and development activities, including drug discovery and preclinical studies, establishing, and maintaining our intellectual property portfolio, the manufacturing of clinical and research material, hiring personnel, raising capital and providing general and administrative support for these operations. In recent years, we have recorded very limited revenue from collaboration activities, or any other sources. We have funded our operations to date primarily from convertible notes and the issuance and sale of our ordinary shares.
We have incurred net losses in each year since inception. Our net losses were $3.8 million and $3.4 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $98.3 million and cash of $312 thousand. Substantially all our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses over at least the next several years. We expect our expenses will increase substantially in connection with our ongoing activities, as we:
| ● | advance drug candidates through clinical trials; | |
| ● | pursue regulatory approval of drug candidates; |
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| ● | operate as a public company; | |
| ● | continue our preclinical programs and clinical development efforts; | |
| ● | continue research activities for the discovery of new drug candidates; and | |
| ● | manufacture supplies for our preclinical studies and clinical trials. |
Components of Operating Expenses
Research and Development Expenses
Research and development expenses include:
| ● | expenses incurred under agreements with third-party contract organizations, and consultants; | |
| ● | costs related to production of drug substance, including fees paid to contract manufacturers; | |
| ● | laboratory and vendor expenses related to the execution of preclinical trials; and | |
| ● | employee-related expenses, which include salaries, benefits, and stock-based compensation. |
We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks and estimates of services performed using information and data provided to us by our vendors and third-party service providers. Non-refundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and accounted for as prepaid expenses. The prepayments are then expensed as the related goods are delivered and as services are performed. To date, most of these expenses have been incurred to advance our lead drug candidate Stenoparib.
We expect our research and development expenses on Stenoparib to increase substantially for the foreseeable future as we continue to invest to accelerate Stenoparib in clinical trials designed to attain regulatory approval. Costs related to dovitinib and IXEMPRA will decrease precipitously as these have been deprioritized/ terminated. We expect additional costs in research and development activities as we continue to conduct clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our drug candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our drug candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, facilities costs, depreciation and amortization expenses and professional services expenses, including legal, human resources, audit, and accounting services. Personnel-related costs consist of salaries, benefits, and stock-based compensation. Facilities costs consist of rent and maintenance of facilities. We expect our general and administrative expenses to increase for the foreseeable future due to anticipated increases in headcount to advance our drug candidates and as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services.
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Results of Operations for the Three Months Ended March 31, 2024, and 2023 (unaudited) (in thousands, except where otherwise noted)
The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023:
| For the Three Months Ended March 31, | Increase/ | |||||||||||
| 2024 | 2023 | (Decrease) | ||||||||||
| (In thousands) | ||||||||||||
| Operating expenses: | ||||||||||||
| Research and development | $ | 2,170 | $ | 1,427 | $ | 743 | ||||||
| General and administrative | 2,070 | 2,241 | (171 | ) | ||||||||
| Total operating expenses | 4,240 | 3,668 | 572 | |||||||||
| Loss from operations: | (4,240 | ) | (3,668 | ) | (572 | ) | ||||||
| Other income | 393 | 316 | 77 | |||||||||
| Net loss | $ | (3,847 | ) | $ | (3,352 | ) | $ | (491 | ) | |||
Research and Development Expenses
For the three months ended March 31, 2024, compared to March 31, 2023
The increase of $743 thousand in research and development expenses was primarily because manufacturing and supplies expenses increased by $524 thousand, research study expenses increased by $113 thousand, contractors and consultants expenses increased by $51 thousand, stock based compensation expense increased by $28 thousand, and other research expense increased by $2 thousand; offset by increased tax credits of $56 thousand, decreased staffing expenses of $71 thousand, and decreased amortization of $8 thousand. Manufacturing and supplies expenses have increased because of increased drug manufacturing. Staffing and contractor costs have decreased as a result of cost-cutting measures.
General and Administrative Expenses
General and administrative expenses decreased by $171 thousand for the three months ended March 31, 2024, compared to March 31, 2023. The decrease was primarily due to a decrease in insurance expense of $307 thousand, audit and legal expenses of $54 thousand, financial consultants’ expense of $39 thousand, communications expenses of $27 thousand, listings expenses of $16 thousand, finance expenses of $6 thousand, and other expenses of $9 thousand; offset by increased staffing expenses of $115 thousand, and Delaware franchise tax of $162 thousand. Staffing costs have increased as a result of severance accruals.
Other Income (Expenses), Net
For the three months ended March 31, 2024, compared to March 31, 2023
Other income (expense) of $393 thousand recognized in the three months ended March 31, 2024, consisted primarily of a $419 thousand fair value adjustment to derivative and warrant liabilities and foreign exchange gains of $76 thousand, offset by ($102) in interest expenses.
Other income (expense) of $316 thousand recognized in the three months ended March 31, 2023, consisted primarily of a $309 thousand fair value adjustment to derivative and warrant liabilities, foreign exchange gains of $95, and interest income of $4, offset by ($92) in interest expenses.
Changes in fair value of our derivative liabilities and convertible debt are measured using Level 3 inputs as described in our condensed consolidated financial statements.
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Liquidity, Capital Resources and Plan of Operations
Since our inception through March 31, 2024, our operations have been financed primarily by the sale of convertible promissory notes and the sale and issuance of our securities. As of March 31, 2024, we had $312 in cash, and an accumulated deficit of $98.3 million. We had a working capital deficit of $15.7 million.
Our primary use of cash is to fund operating expenses, which consist of research and development as well as regulatory expenses related to our lead drug candidate and clinical programs for Stenoparib, and to a lesser extent, general and administrative expenses. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
As of March 31, 2024, the Company’s cash deposits of $312 were determined to be insufficient to fund its current operating plan and planned capital expenditures for the next month. On March 21, 2024, the Company commenced an at the market offering of its common shares and as of March 31, 2024, had sold 6,792 common shares for net proceeds of $40. Subsequent to March 31, 2024, an additional 8,259,150 shares of our common stock were sold at the market for net proceeds of $15,572. In light of the Company’s cash position as of the date of this Quarterly Report, the Company does not have sufficient funds for its current operations and planned capital expenditures. As discussed above the Company intends to seek capital through sale of its securities or other sources. There are no assurances, however, that the Company will be successful in raising additional working capital, or if it is able to raise additional working capital, it may be unable to do so on commercially favorable terms. The Company’s failure to raise capital or enter into other such arrangements if and when needed would have a negative impact on its business, results of operations and financial condition and its ability to develop its product candidates.
Management’s plans to mitigate the conditions or events that raise substantial doubt include additional funding through public equity, private equity, debt financing, collaboration partnerships, or other sources. We currently plan on completing an additional public offering in the near future, however there are no assurances that the Company will be successful in raising additional working capital, or if it is able to raise additional working capital, it may be unable to do so on commercially favorable terms. The Company’s failure to raise capital or enter into other such arrangements when needed would have a negative impact on its business, results of operations and financial condition and its ability to continue its plan of operations.
We expect to incur substantial expenses in the foreseeable future for the development and potential commercialization of our drug candidates and ongoing internal research and development programs. At this time, we cannot reasonably estimate the nature, timing, or aggregate amount of costs for our development, potential commercialization, and internal research and development programs. However, to complete our current and future preclinical studies and clinical trials, and to complete the process of obtaining regulatory approval for our drug candidates, as well as to build the sales, marketing, and distribution infrastructure that we believe will be necessary to commercialize our drug candidates, if approved, we may require substantial additional funding in the future.
Contractual Obligations and Commitments
We enter into agreements in the normal course of business with vendors for preclinical studies, clinical trials, and other service providers for operating purposes. We have not included these payments in the table of contractual obligations above since these contracts are generally cancellable at any time by us following a certain period after notice and therefore, we believe that our non-cancellable obligations under these agreements are not material.
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Cash Flows
The following table summarizes our cash flows for the periods indicated:
| For the three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (In thousands) | ||||||||
| Net cash flows used in operating activities | $ | (1,487 | ) | $ | (3,201 | ) | ||
| Net cash flows provided by financing activities | 1,380 | 1,158 | ||||||
| Effect of foreign exchange rates on cash | 253 | 309 | ||||||
| Net increase (decrease) in cash | $ | 146 | $ | (1,734 | ) | |||
Operating Activities
For the three months ended March 31, 2024, net cash used in operating activities was approximately $1.5 million compared to approximately $3.2 million for the three months ended March 31, 2023. The $1.7 million decrease in net cash used in operating activities was primarily the result of an increase in cash provided non-cash operating assets of $2.3 million, offset by an increased loss of $500 thousand and higher non-cash operating expenses of $100 thousand.
Investing Activities
In the three months ended March 31, 2024, and 2023, there were no cash flows from investing activities.
Financing Activities
For the three months ended March 31, 2024, net cash provided by financing activities was approximately $1.4 million compared to $1.2 million for the three months ended March 31, 2023. The increase in net cash provided by investing activities was primarily due to proceeds from the sale of the 2024 Notes to 3i during the three months ended March 31, 2024.
Operating Capital and Capital Expenditure Requirements
We believe that our existing cash and cash equivalents and our anticipated expenditures and commitments for the next twelve months, will not enable us to fund our operating expenses and capital expenditure requirements for at least twelve months from the date of this Quarterly Report. Our estimate as to how long we expect our cash to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
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Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based upon our unaudited condensed interim consolidated financial statements for the three months ended March 31, 2024 and 2023, and our audited consolidated financial statements for the years ended December 31, 2023 and 2022, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.
Our significant accounting policies are described in the notes to our consolidated financial statements for the years ended December 31, 2023 and 2022, included in the Form 10-K, and there have been no significant changes to our significant accounting policies during the three months ended March 31, 2024. These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes.
Recently Issued Accounting Pronouncements
See the sections titled “Recently adopted accounting pronouncements” in Note 2(cc) and “Recently issued accounting pronouncements not yet adopted” in Note 2(x) to the Company’s consolidated financial statements for the years ended December 31, 2023 and 2022, respectively, appearing in the Form 10-K; and in Note 2(h) to the Company’s unaudited condensed interim consolidated financial statements for the three months ended March 31, 2024 and 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management and consultants, including our Chief Executive Officer and our Chief Financial Officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as of March 31, 2024, as such term is defined in Rules 13a-15I and 15d-15(e) of the Exchange Act. Based upon the foregoing, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2024.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time in the future, we may become involved in litigation or other legal proceedings that arise in the ordinary course of business. We are not currently party to any legal proceedings, and we are not aware of any pending or threatened litigation against us that we believe could have a material adverse effect on our business, operating results or financial condition. In the event we are subject to a legal proceeding, it could have a material adverse impact on us because of litigation costs and diversion of management resources.
Item 1A. Risk Factors.
There are no material changes to the “Risk Factors” set forth in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
In March 19, 2024, we entered into an At-The-Market Issuance Sales Agreement, as may be amended from time to time (the “Sales Agreement”) with Ascendiant Capital Markets, LLC (“Ascendiant”) under which we may, from time to time, issue and sell shares of our Common Stock having aggregate sales proceeds of up to $22 million, in a series of one or more “at-the-market” equity offerings (the “ATM Program”). Ascendiant is not required to sell any specific share amounts but acts as our sales agent, using commercially reasonable efforts consistent with its normal trading and sales practices. We agreed to pay Ascendiant a commission equal to 3.0% of the aggregate gross proceeds we receive from each sale of shares of our Common Stock. Pursuant to the Sales Agreement, any shares will be sold pursuant to our shelf registration statement on Form S-3 (File No. 333-275282) filed with the SEC on November 2, 2023, including the base prospectus contained therein, as declared effective by the SEC on November 29, 2023. Shares of our Common Stock will be sold at prevailing market prices at the time of the sale, and as a result, prices may vary.
During the period April 1, 2024, through May 13, 2024, the Company has sold 14,352,186 shares of its Common Stock for net proceeds of $20,610.
Item 3. Defaults Upon Senior Securities.
For a discussion of the “Convertible Promissory Note Due to Novartis” refer to Note 5 to the Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Quarterly Report.
Item 4. Mine Safety Disclosures.
Not applicable.
Item
5.
Our 2024 annual meeting of stockholders will be delayed by more than 30 days from February 3, the anniversary date of the 2023 annual meeting of stockholders. Our board of directors has not yet determined the date of the 2024 annual meeting of stockholders. We will provide all required information about the 2024 annual meeting of stockholders when it becomes available.
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Item 6. Exhibits.
See the Exhibit Index to this Quarterly Report immediately below and before the signature page hereto, which Exhibit Index is incorporated by reference as if fully set forth herein.
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| 10.5 | Securities Purchase Agreement, dated as of January 18, 2024, by and between the Company and the Purchaser listed on the signature page attached thereto | 8-K | 001-41160 | 10.1 | January 19, 2024 | |||||||
| 10.6† | Consulting Agreement (James G. Cullem) | — | — | — | — | X | ||||||
| 10.7† | Confidential Settlement Agreement and General Release (James G. Cullem) | — | — | — | — | X | ||||||
| 99.1† | Allarity Therapeutics, Inc. 2021 Equity Incentive Plan (as amended and restated as of March 7, 2024) | DEF14A | 001-41160 | Appendix A | March 8, 2024 | |||||||
| 31.1 | Certifications of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act | — | — | — | — | X | ||||||
| 31.2 | Certifications of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act | — | — | — | — | X | ||||||
| 32.1* | Certifications of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act | — | — | — | — | X | ||||||
| 32.2* | Certifications of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act | — | — | — | — | X | ||||||
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | — | — | — | — | X | ||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | — | — | — | — | X | ||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | — | — | — | — | X | ||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | — | — | — | — | X | ||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | — | — | — | — | X | ||||||
| 101PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | — | — | — | — | X | ||||||
| 104* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | — | — | — | — | — |
| + | Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601. The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. |
| † | Indicates management contract or compensatory plan or arrangement. |
| * | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ALLARITY THERAPEUTICS, INC., | ||
| Date: May 14, 2024 | By: | /s/ Thomas H. Jensen |
| Thomas H. Jensen | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Date: May 14, 2024 | By: | /s/ Joan Y. Brown |
| Joan Y. Brown | ||
| Chief
Financial Officer (Principal Financial and Accounting Officer) | ||
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Exhibit 10.6
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (the “Agreement”) is made as of this 7th day of March 2024, by and between Allarity Therapeutics, Inc. (the “Company”) and James G. Cullem, an individual and resident of Massachussetts, U.S.A. (the “Consultant”), collectively referred to herein as the “Parties.”
RECITALS
WHEREAS, the Company desires to engage the Consultant and the Consultant desires to accept such engagement upon the terms and conditions contained in this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
1. Scope of Work. The terms of this Agreement apply to the Consultant for the provision of services to the Company. The Consultant shall perform projects (the “Scope of Work”) assigned by the Company’s management (“Management”), the scope of which will be mutually agreed to by the parties hereto in the case of each project The Parties agree that neither the Company, nor the Company’s agents, employees, or representatives, shall have any right to control or direct the details, manner or means by which the Consultant accomplishes his work under this Agreement. Consultant shall be deemed a “Consultant” as said term is defined in the Allarity Therapeutics, Inc. 2021 Equity Incentive Plan.
2. Term of Agreement. This Agreement shall continue from the date first written above and continue through September 30, 2024 (the “Term”), unless earlier terminated pursuant to Section 7. This Agreement shall not automatically renew unless both Parties agree to a renewal in a signed writing.
3. Assignment of Contract. The Consultant may not assign his rights or obligations under this Agreement.
4. Payment for Services. For services rendered hereunder, the Company shall pay the Consultant the consideration outlined in the Settlement Agreement with the Company dated March 7, 2024. Consultant shall have no obligation to provide services hereunder beyond the scope of consideration outlined in the Settlement Agreement.
5. Ineligibility for Benefits. The Consultant agrees that he is not an employee of the Company and, except as specifically defined herein, he is not entitled to (and also hereby waives) any benefits provided to Company employees, including but not limited to group insurance, liability insurance, disability insurance, paid vacations, sick leave or other leave, retirement plans, health plans, and the like.
6. Indemnity. The Consultant shall indemnify and hold the Company harmless from all costs which the Company may incur as a result of the Consultant’s conduct under this Agreement, and vice versa.
7. Termination. The Agreement and the Consultant’s engagement may be terminated only by the Company with written notice to the Consultant. The Consultant shall not have the right to terminate the Agreement except that the Consultant’s engagement shall terminate immediately upon the Consultant’s death or incapacity and/or upon any uncured material breach, by Company, of the Settlement Agreement.
8. Services to Others. Nothing in this Agreement prohibits the Consultant from providing services to others, so long as he fulfills his responsibilities hereunder and the services to others do not present a conflict of interest regarding the services the Consultant provides to the Company.
9. Successors. This Agreement shall inure to the benefit of and be binding upon the Parties, their legal representatives and successors and assigns. However, the Consultant’s performance hereunder is personal to the Consultant and shall not be assignable by the Consultant. The Company may assign this Agreement to any affiliate or to any successor to all or substantially all of the business and/or assets of the Company, whether directly or indirectly, by purchase, merger, consolidation, acquisition of stock, or otherwise.
10. Miscellaneous.
(a) Waiver; Amendment. The failure of a party to enforce any term, provision, or condition of this Agreement at any time or times shall not be deemed a waiver of that term, provision, or condition for the future, nor shall any specific waiver of a term, provision, or condition at one time be deemed a waiver of such term, provision, or condition for any future time or times. This Agreement may be amended or modified only by a writing signed by both Parties hereto.
(b) Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Massachusetts without giving effect to principles of conflicts of law.
(c) Severability. Each provision of this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of this Agreement.
(d) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same instrument.
(e) Use of E-mail. Any written notice may be sent via e-mail. If not earlier received, a written notice sent via e-mail will be deemed to be received on the next calendar day if it is sent to the e-mail address from which the sending party last received an e-mail from the receiving party.
[Signature Page Follows]
-2-
IN WITNESS WHEREOF, each of the Parties hereto has executed this Agreement as of the date first above written.
| AS TO: Allarity Therapeutics, Inc. | ||
| By: | /s/ Thomas Jensen | |
| Print Name: Thomas Jensen | ||
| Title: Chief Executive Officer | ||
| AS TO: CONSULTANT | ||
| By: | /s/ James G. Cullem | |
| Print Name: Thomas Jensen | ||
-3-
Exhibit 10.7
CONFIDENTIAL SETTLEMENT AGREEMENT AND GENERAL RELEASE
This Confidential Settlement Agreement and General Release (“Agreement”) is made as of the final date of execution below (the “Effective Date”), by and between James G. Cullem (“Mr. Cullem”), on Mr. Cullem’s behalf and on behalf of his heirs, executors, administrators, successors and assigns, and Allarity Therapeutics, Inc. (“Allarity” or the “Company”). Mr. Cullem and Allarity are collectively referred to herein as the “Parties” and each individually as “Party.”
WHEREAS, Mr. Cullem was previously employed by Allarity as Chief Executive Officer, from in or around June 2022 until his separation on or around December 8, 2023;
WHEREAS, Mr. Cullem and Allarity entered into an Employment Agreement (effective January 12, 2023), which Employment Agreement includes certain severance payment provisions in the event of Mr. Cullem’s separation from the Company;
WHEREAS, Allarity terminated Mr. Cullem’s employment on December 8, 2023 and has not paid him any severance payments pursuant to the Employment Agreement;
WHEREAS, on December 12, 2023, Mr. Cullem, through his counsel, sent a demand letter to Allarity alleging breach of contract, breach of the covenant of good faith and fair dealing, and violations of the Massachusetts Wage Act (the “Asserted Claims”);
WHEREAS, Allarity denies the Asserted Claims and further denies any wrongdoing whatsoever;
WHEREAS, the Parties, through counsel, engaged in settlement discussions that resulted in an agreement in principle to fully and finally resolve all claims, defenses, and disputes between Mr. Cullem and Allarity, whether known or unknown, including but not limited to the Asserted Claims;
WHEREAS, to avoid the uncertainties and expenses of litigation, and to effectuate a compromise of the Parties’ respective legal positions without any admission of wrongdoing or liability, the Parties now wish to memorialize through this Agreement the full and complete terms of their agreement to fully and finally settle and resolve all disputes between them;
NOW, THEREFORE, in consideration of the mutual promises contained herein, the recitals above which are hereby incorporated by reference, and other good and valuable consideration as hereinafter recited, the receipt and adequacy of which is hereby acknowledged, the Parties agree as follows:
| 1. | Consideration for Release of Claims. |
| a. | Initial Settlement Payment: In consideration for Mr. Cullem’s promises herein, including Mr. Cullem’s general release of claims in Section 4 of this Agreement, Allarity shall pay Mr. Cullem a total amount of Seventy Thousand Dollars and Zero Cents ($70,000.00) (the “Initial Settlement Payment”) on April 1, 2024. [The Initial Settlement Payment shall be made to Mr. Cullem with appropriate withholdings by the Company]. This Initial Settlement Payment shall be made via wire transfer to a U.S. bank account designated by Mr. Cullem in writing to Company’s CFO, Joan Brown. |
| b. | Installment Payments: Allarity further agrees to pay Mr. Cullem a total of One- Hundred and Seventy-Nine Thousand, One-Hundred and Fifty-Five Dollars ($179,155.00) (the “Installment Payment”), to be divided equally into five monthly payments of Thirty-Five Thousand, Eight-Hundred and Thirty-Three Dollars ($35,833) (the “Monthly Payments”). The first Monthly Payment will be paid by May 1, 2024, with each subsequent payment due on the first day of each subsequent month, ending with the last Monthly Payment by September 1, 2024. These Monthly Payments shall be made via wire transfer to a U.S. bank account designated by Mr. Cullem in writing to Company’s CFO, Joan Brown. |
| i. | In the event that the Company lacks sufficient cash on hand to make any of the Monthly Payments, Company agrees to issue to Mr. Cullem shares in the Company in an amount equal in value to the amount of any Monthly Payments which are in arrears. These shares shall be transferred to a U.S. brokerage account designated by Mr. Cullem in writing to the Company’s CFO, Joan Brown. The number of shares in lieu of cash shall be determined by the FMV closing share price of Company’s stock on the date hereof; provided, however, that if the Company does not have shares available under any applicable stock option plan (the unavailability of which shall be confirmed by written affirmation by Joan Brown) that pursuant to this Section 1(b)(i), payment of shares will be contingent upon the Company receiving shareholder approval to increase the number of shares available under the Company’s stock option plan, and the Company shall seek such approval without delay and with the understanding that time is of the essence. |
| ii. | In the event that the Company does not receive shareholder approval to increase the number of shares, the Company agrees to pay Mr. Cullem an amount equal to the amount of any Monthly Payments which are in arrears, upon either a financing or combination of financings by the Company which totals Three-Million Dollars ($3,000,000) gross. If the Company fails to make a Monthly Payment, ten percent interest will accrue until such Monthly Payment is paid. |
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| c. | Issuance of Shares: Allarity further agrees to issue to Mr. Cullem Two-Hundred and Ninety Thousand shares of the Company’s common stock (the “Settlement Shares”), subject to compliance with the Company’s organizational documents and federal and state securities laws. The Settlement Shares will be issued on Monday, April 1, 2024. These shares shall be transferred to a U.S. brokerage account designated by Mr. Cullem in writing to the Company’s CFO, Joan Brown. |
| d. | In the event that the Initial Settlement Payment pursuant to Section 1(a) and the Issuance of Shares pursuant to Section 1(c) are not made to Mr. Cullem in full by 7 p.m. EST on April 1, 2024, this Agreement in its entirety shall be rendered null and void and of no further force and effect, the parties shall be released from any obligation hereunder unless such obligations otherwise remain in force by prior binding contract or agreement, and both parties shall retain any and all rights, claims, and causes of action which would otherwise have been released by this Agreement. |
| 2. | Adequacy of Consideration. Mr. Cullem acknowledges and agrees that the consideration described in Section 1 constitutes adequate consideration for his waiver of rights and other promises herein. Mr. Cullem’s entitlement to the Settlement Payment and Installment Payment does not include any benefit, whether monetary or otherwise, that was earned or accrued, or to which Mr. Cullem would already be entitled without his waiver of rights and other promises in this Agreement. Mr. Cullem acknowledges and agrees that execution of this Agreement shall fully extinguish any claim that Mr. Cullem is owed any wages, damages, monetary payments, or other benefits of any kind from Allarity. |
| 3. | Indemnification for Tax Liabilities. Mr. Cullem promises to jointly and severally indemnify and hold Allarity harmless from and against all tax liabilities, penalties, and related costs arising from the Settlement Payment or Monthly Payments due to Mr. Cullem pursuant to this Agreement. Mr. Cullem understands and agrees that this indemnification obligation shall include reimbursement of reasonable attorneys’ fees that Allarity or its affiliated entities incur in connection with a governmental investigation or legal proceeding related to the tax treatment of the Settlement Payment. Mr. Cullem acknowledges and further agrees that Allarity has not provided Mr. Cullem with any tax advice regarding any portion of the Settlement Payment or Monthly Payments, and that he has been advised to consult with a tax professional of his own choosing and at his own expense regarding the tax reporting of the Settlement Payment or Monthly Payments. |
| 4. | General Release of Claims. |
a. In General: For valuable consideration, including Allarity’s promises described in Section 1 of this Agreement, the receipt and adequacy of which is hereby acknowledged, Mr. Cullem agrees to release all claims he may now have against Allarity and other parties as set forth in this Section 4 of the Agreement and all subsections thereof.
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b. Released Parties: The “Released Parties” are: (i) Allarity Therapeutics, Inc.; (ii) any affiliate of Allarity Therapeutics, Inc., and any parent entities, subsidiary entities, or successor entities; (iii) each of Allarity Therapeutics, Inc.’s and its affiliates’ past and present employees, officers, trustees, directors, shareholders, owners, representatives, assigns, attorneys, agents, insurers; and (iv) any other persons acting through or with any of the persons or entities listed in this subsection.
c. Claims Released by Mr. Cullem: Mr. Cullem understands and agrees that under this Section, he is hereby, as of the Effective Date, releasing all known and unknown claims, promises, demands, obligations, damages or rights of any type that he may have, including the Asserted Claims (collectively, “Claims”) against any of the Released Parties, except that Mr. Cullem is not releasing any Claims that relate to: (i) his right to enforce this Agreement; (ii) his right, if any, to claim government-provided unemployment benefits and/or workers’ compensation benefits; (iii) any vested benefits that Mr. Cullem has under any employee benefit plan, including any claim for disability insurance; and (iv) the in-force Indemnification Agreement between the Company and Mr. Cullem (effective date August 2, 2022). Mr. Cullem understands that the Claims he is releasing may arise under many different laws (including but not limited to statutes, regulations, other administrative guidance, and common law doctrines), including, but by no means limited to:
Anti-discrimination statutes, such as the Americans With Disabilities Act, Age Discrimination in Employment Act, Sections 503 and 504 of the Rehabilitation Act of 1973, and the Family Medical Leave Act of 1993, as amended, which prohibit discrimination based on disability; Title VII of the Civil Rights Act of 1964, Section 1981 of the Civil Rights Act of 1866, and Executive Order 11246, which prohibit discrimination based on race, color, national origin, religion, or sex; the Equal Pay Act, which prohibits paying men and women unequal pay for equal work; all of the retaliation provisions of the aforementioned statutes; and any other federal, state, or local laws prohibiting employment or wage discrimination, including but by no means limited to the Massachusetts Fair Employment Practices Law, the Massachusetts Civil Rights Act, the Massachusetts Equal Rights Act, New York State Human Rights Law, and New York City Human Rights Law.
Federal employment statutes, such as the Employee Retirement Income Security Act of 1974, which, among other things, protects employee benefits; and any other federal laws relating to employment, such as veterans’ reemployment rights laws.
Other laws, such as any federal, state, or local laws governing the payment of wages or benefits, including but by no means limited to the Massachusetts Wage Act and New York Labor Law, governing working conditions, restricting an employer’s right to terminate employees, or otherwise regulating employment; retaliation and whistleblower claims; any federal, state, or local law enforcing express or implied employment contracts or requiring an employer to deal with employees fairly or in good faith.
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Tort and Contract Claims, such as claims for wrongful discharge, physical or personal injury, emotional distress, fraud, fraud in the inducement, negligent misrepresentation, defamation, invasion of privacy, interference with contract or with prospective economic advantage, breach of express or implied contract, breach of covenants of good faith and fair dealing, and similar or related claims.
Examples of released Claims include, but are not limited to: (i) Claims that in any way relate to Mr. Cullem’s employment with or engagement by Allarity or any other Released Party, or the termination of that employment or engagement, such as Claims for compensation, bonuses, commissions, lost wages, or unused accrued vacation or sick pay, including but not limited to Claims under the Massachusetts Wage Act; (ii) Claims that in any way relate to the design of any employee benefit program; (iii) Claims that Mr. Cullem has to irrevocable or vested rights to severance or similar benefits or to post-employment health benefits (except as otherwise provided in this Agreement); and (iv) any Claims to attorneys’ fees or other indemnities.
d. Sole Remedy: Mr. Cullem hereby expressly acknowledges that, unless this Agreement is rendered null and void pursuant to Section 1(d), the releases contained in this Section 4 are valid and binding upon execution of this Agreement. In the event that Allarity fails to satisfy any of the promises contained in Section 1, Mr. Cullem acknowledges that the releases contained in this Section 4 survive such breach, and that Mr. Cullem’s sole remedy shall be an action for damages for breach of this Agreement against Allarity.
e. The Company’s Release of Mr. Cullem
In consideration for, among other terms, promises contained in this Agreement the Company, including Company subsidiary entities, or successor entities (“Company Parties”), voluntarily release and forever discharge Mr. Cullem, his estate, and his heirs generally from all claims, demands, debts, damages and liabilities of every name and nature, known or unknown (“Company Claims”) that, as of the date of this Agreement, the Company Parties have, ever had, now claim to have or ever claimed to have had against you, your estate and your heirs.
The Company Parties represent that they have not filed, and have not caused to be filed, against Mr. Cullem, any action or legal proceeding in any court or any administrative agency concerning any matter involving him. As a material inducement to Mr. Cullem to enter into this Agreement, the Company Parties represent that they have not assigned to any third party and they have not filed with any agency or court any Claim released by this Agreement.
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| 5. | Other Promises and Acknowledgments. In exchange for the Settlement Payment, the Parties also promise and acknowledge the following: |
a. Covenant Not to Sue: Mr. Cullem represents and warrants that he does not know of any claims, causes of action, grievances, charges, or other complaints that have been asserted by his or on his behalf against any of the Released Parties that are currently pending in any local, state, or federal court, tribunal, or administrative or regulatory agency. Mr. Cullem and the Company further covenant that they shall not, after his execution of this Agreement, commence or cause to be commenced any suits, charges, complaints, or other legal proceedings arising from any legal claims intended to be waived by this Agreement, including without limitation, the claims waived pursuant to the General Release of Claims in Section 4 of this Agreement. To the extent this representation is false when either party signs this Agreement, the General Release of Claims in Section 4 of this Agreement shall fully extinguish any other claims, complaints, or other causes of action that are pending against any of the Released Parties
b. Confidentiality of Allarity’s Confidential Information: Mr. Cullem hereby acknowledges that during his employment with Allarity, he may have acquired proprietary, private, and/or otherwise confidential information (“Confidential Information,” as defined and described in this Section). Confidential Information shall mean all non-public information, whether or not created or maintained in written or electronic form, which constitutes, relates to, or refers to Allarity or any Released Party, and to any current, former or potential employee, service provider, client, investor, or business partner of Allarity, and any aspect of the operation of the business of Allarity or any Released Party, including without limitation, all financial, operational, marketing, investor, and statistical information. All the foregoing are illustrative, and Confidential Information shall not be limited to those illustrations. By signing this Agreement, Mr. Cullem promises that he has not divulged any Confidential Information to any third party and that he will not disclose Confidential Information in any form to a third party. Mr. Cullem shall give immediate notice to Allarity if compelled by law to reveal any Confidential Information to any third party. Mr. Cullem acknowledges and agrees that any unauthorized disclosure to any person or persons of Confidential Information shall cause irreparable damage to Allarity and that, therefore, Allarity shall, in addition to any other available remedy, be entitled to seek an injunction prohibiting Mr. Cullem from any further disclosure or attempted disclosure.
c. Allarity’s Property: Mr. Cullem agrees and acknowledges that he has returned and/or deleted to Allarity all Confidential Information (as defined in Section 5b herein) in his possession or otherwise under his control, unless expressly required to be preserved by the SEC, in whatever format, whether written, recorded, electronically or digitally stored and/or retrieved. Mr. Cullem agrees that he is not retaining any copies of any documents, records, or materials of any kind, whether written or electronically created or stored, which contain, relate to, or refer to any Confidential Information, and affirms that he has no such documents, records, or materials. It is understood and agreed that Mr. Cullem’s above-described return and non-retention of Allarity’s Confidential Information is a material condition of this Agreement.
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d. Ownership of Claims: Mr. Cullem promises that he has not assigned any rights or claims he may have against any of the Released Parties to any other person or entity, including but not limited to the Asserted Claim or any of the other Claims intended or purported to be waived via this Agreement as of the Effective Date. Mr. Cullem also promises that no child support order, garnishment orders, or other orders requiring him to pay money to any other person are now in effect.
e. Non-Admission of Liability: Mr. Cullem agrees that this Agreement is not an admission of guilt or wrongdoing by any of the Released Parties.
f. Non-Disparagement: Mr. Cullem agrees to refrain from making any statements or comments of a defamatory or disparaging nature to third parties regarding the Company or its shareholders, officers, directors, personnel or products, or those of its affiliates. This prohibition against defamatory or disparaging remarks includes, without limitation, statements to any individual or entity which could adversely affect Allarity’s business or reputation. Notwithstanding the foregoing, nothing herein is intended to prevent Mr. Cullem from testifying in good faith under oath pursuant to a subpoena or as otherwise required by law. Further, nothing in this Agreement prohibits Mr. Cullem from engaging in protected activities under the NLRA, including those protected by Section 7 of the NLRA.
g. The Company agrees to refrain from making any statements or comments of a defamatory or disparaging nature to third parties regarding Mr. Cullem and will instruct the Company’s directors and officers not to make any statements of comments of a defamatory or disparaging nature to third parties. This prohibition against defamatory or disparaging remarks includes, without limitation, statements to any individual or entity which could affect adversely Mr. Cullem’s business or reputation. Notwithstanding the foregoing, nothing herein is intended to prevent any directors, officers or employees of the Company from testifying in good faith under oath pursuant to a subpoena or as otherwise required by law.
h. Confidentiality: The terms and conditions of this Agreement, including but not limited to the amount of the Payment or any other provision of this Agreement, as well as the Agreement itself, shall be kept strictly confidential and shall not be disclosed by Mr. Cullem to any other person or entity without the express written consent of Allarity, except that, if asked about any employment dispute with Allarity, Mr. Cullem may state that the matter is settled and except to the extent required by law, subpoena, court order, or the rules of any governmental agency. For clarity, the Parties acknowledge that this provision does not prohibit Mr. Cullem from initiating, testifying, assisting, complying with a subpoena from, or participating in any manner with an investigation conducted by the appropriate local, state, or federal agency; or filing or disclosing any facts necessary to receive unemployment insurance, Medicaid, or other public benefits to which the complainant is entitled; or speaking with law enforcement, the Equal Employment Opportunity Commission, the Massachusetts Commission Against Discrimination, the New York State Division of Human Rights, a local commission on human rights, or his attorney. Mr. Cullem may also disclose the terms of the Agreement to his accountant, tax advisor or attorney who has a need to know to advise his as to his tax obligations or related obligations under the law; in any instance where he makes such disclosure to an accountant, tax advisor or attorney, he agrees to inform them that they similarly are bound by the confidentiality provisions set forth in this Paragraph. The provisions of this Paragraph shall survive the termination of this Agreement. Any violation of this provision will be deemed a material breach.
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i. Neutral Reference: In the event that Allarity’s Human Resources Department or any of its Board Directors or Officers receives any inquiry about Mr. Cullem from any prospective employer, Allarity’s Human Resources Department shall provide only Mr. Cullem’s dates of employment and positions held. Nothing herein shall prevent Mr. Cullem from seeking, or any person from voluntarily providing, a personal or professional reference for Mr. Cullem.
j. Cooperation by Mr. Cullem: Mr. Cullem agrees that he shall reasonably cooperate with, and shall be reasonably available to, Allarity or any Released Party to assist in any matter, including, without limitation, government agency investigations and actual or potential court litigation or arbitration, in connection with which Mr. Cullem may have knowledge. If Mr. Cullem receives a subpoena or process from any person or entity (including, but not limited to, any governmental agency) which would or may require Mr. Cullem to disclose documents or information or provide testimony (in a deposition, court proceeding, or otherwise) regarding, in whole or in part, any of the Released Parties or any proprietary or confidential information, Mr. Cullem shall: (i) notify Allarity of the subpoena or other process within five (5) business days of receiving it (or a shorter period such that not less than one (1) business day shall remain between such notification and any deadline for response thereto); and (ii) to the maximum extent permissible under applicable law, not make any disclosure pursuant to the subpoena, until the appropriate Released Parties have had a reasonable opportunity to contest the right of the requesting person or entity to such disclosure, limit the scope or nature of such disclosure, and/or seek to participate in the proceeding or matter in which the disclosure is sought. Mr. Cullem shall further cooperate with Allarity and any Released Party in responding to any such subpoena or process. If Mr. Cullem’s cooperation obligation as described in this Section requires Mr. Cullem to use paid vacation time from Mr. Cullem’s position with his then-current employer, Allarity will reimburse Mr. Cullem for the amount of paid vacation time he uses at a rate no less than Allarity’s rate of pay from his then-current employer. Allarity further agrees that it shall reimburse Mr. Cullem for reasonable expenses incurred by his in connection with his cooperation (as described in this Section) and in accordance with Allarity’s policies for the reimbursement of employee’s expenses and in accordance with the in-force Indemnification Agreement between the Company and Mr. Cullem (effective date August 2, 2022).
k. Consequences of Violating Promises. In the event any action is brought to enforce the terms of this Agreement, the prevailing party shall be entitled, in addition to any other right or remedy it may have at law or in equity, to all costs associated with enforcing this Section and the Agreement overall, including but not limited to attorneys’ fees. The prevailing party also shall be entitled to recover all reasonable attorneys’ fees and costs incurred in connection with proving entitlement and/or the amounts of attorneys’ fees and costs to be awarded under this Section.
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| 6. | No Other Agreements. Mr. Cullem promises that he is not entering into this Agreement because of, or otherwise relying upon, any representations or statements by Allarity, or anyone affiliated with Allarity that is not otherwise contained or referenced in this Agreement. This Agreement contains the entire understanding between the Parties and supersedes all prior oral and written agreements regarding the subject matter hereof. This Agreement can only be modified by a writing signed by both Parties. |
| 7. | Choice of Law. This Agreement shall be governed by the laws of the State of Massachusetts, excluding any choice of law principles. Any action to enforce this Agreement must be brought in a state or federal court of competent jurisdiction located in the State of Massachusetts, and the Parties expressly, irrevocably, and unconditionally consent to the personal jurisdiction of said court(s). |
| 8. | Revocation. Mr. Cullem acknowledges that: (a) he understands all the terms and conditions of this Settlement Agreement and Release; (b) the Company has provided him at least 21 days to decide whether he wants to sign this Agreement and has advised Mr. Cullem to consult with an attorney of Mr. Cullem’s choice at Mr. Cullem’s expense concerning this Agreement, and Mr. Cullem has taken that opportunity to the extent Mr. Cullem wishes to do so; and (c) Mr. Cullem understands that in exchange for signing this Agreement, Mr. Cullem is receiving consideration to which Mr. Cullem would not otherwise be entitled. |
Mr. Cullem may revoke this Agreement at any time during the seven days after Mr. Cullem signs it, and the Agreement, and Mr. Cullem’s entitlement to the consideration herein, shall not become effective until that revocation period passes without Mr. Cullem revoking the Agreement (the “Effective Date”). If Mr. Cullem chooses to revoke the Agreement, such revocation must be by means of a writing signed by Mr. Cullem and delivered within the seven-day revocation period by notice as provided in Section 10 of this Agreement. The Companies advise Mr. Cullem of Mr. Cullem’s right to consult with an attorney prior to executing this Agreement. Mr. Cullem understands that he has twenty-one (21) days from the date of receipt of this Agreement to consider whether to sign it and to consult with an attorney (the “Consideration Period”). Mr. Cullem’s signature on this Agreement constitutes an express waiver of the Consideration Period if affixed prior to the expiration of that period. By signing this Agreement, Mr. Cullem expressly acknowledges that Mr. Cullem’s decision to sign this Agreement sooner than the expiration of the Consideration Period was knowing and voluntary.
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| 9. | Notices. Any notice under this Agreement shall be sent by email and first-class mail. If to Allarity, such notice shall be sent to Thomas Jensen at tjensen@allarity.com, with a copy to Benjamin Stockman, at bestockman@venable.com, Venable LLP, 151 W. 42nd Street, 49th Fl., New York, NY 10036. If to Mr. Cullem, such notice shall be sent to James G. Cullem, via U.S. mail and at , with a copy to , . A party may change its address or email for notices by providing notice to such effect in accordance with this Section 9. |
| 10. | Titles/Captions. The titles/captions to the Sections contained in this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. |
| 11. | Severability. If any provision of this Agreement is declared or determined by any court to be illegal or invalid, that part shall be modified or excluded from this Agreement only to the extent required by law, but the validity of the remaining parts, terms, or provisions shall not be affected and shall continue in full force and effect. |
| 12. | Counterparts. This Agreement may be executed in counterparts, via electronic or wet signatures, or by facsimile signatures, and each such duly executed counterpart shall be of the same validity, force, and effect as the original. Original signatures shall not be required for enforcement of this executed Agreement. Allarity, and the undersigned individual executing this Agreement on Allarity’s behalf, represents and agrees that the undersigned individual has the full right and authority to execute this Agreement on Allarity’s behalf and to legally bind Allarity to this Agreement with his/her signature. |
| 13. | Successors and Assigns. This Agreement will apply to and inure to the benefit of the respective successors and assigns of the Parties, including without limitation their personal representatives, administrators, executors, heirs, and others taking from them; provided, however, that no party may delegate or avoid any of its liabilities, obligations or responsibilities under this Agreement. |
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| 14. | Voluntary Execution of this Agreement. Mr. Cullem acknowledges, represents, and agrees that: |
(a) He is not suffering from any disability or impairment that would render his unable to read, consider, or understand this Agreement;
(b) He has carefully read and fully understands all of the provisions of this Agreement;
(c) He is freely and voluntarily entering into this Agreement and knowingly discharging the Company and other Released Parties in accordance with the terms contained herein in exchange for the consideration described herein, which he acknowledges exceeds anything of value to which he was or is already entitled;
(d) He has not been pressured, coerced, threatened, or otherwise unduly influenced to enter into this Agreement, and he does so under his own free will;
(e) He has been offered a reasonable amount of time to review and consider whether to sign this Agreement;
(f) He has been represented by counsel throughout the negotiation of this agreement and he has consulted with his counsel regarding the terms and conditions set forth within this Agreement; and
(g) There is no portion of this Agreement that Mr. Cullem does not understand because of his inability to understand a particular language.
IN WITNESS WHEREOF, the Parties hereto have executed, or caused their duly authorized officer to execute, this Agreement as of the day and year so designated below.
| AS TO JAMES G. CULLEM: | AS TO ALLARITY THERAPEUTICS, INC.: | |||
| By: | /s/ JAMES G. CULLEM | By: | /s/ Thomas Jensen | |
| Date: | March 7, 2024 | Name: | ||
| Title: | ||||
| Date: | ||||
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Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas H. Jensen, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Allarity Therapeutics, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 14, 2024
| /s/ Thomas H. Jensen | |
| Thomas H. Jensen | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joan Y. Brown, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Allarity Therapeutics, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 14, 2024
| /s/ Joan Y. Brown | |
| Joan Y. Brown | |
| Chief Financial Officer | |
| (Principal Financial Officer
and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Allarity Therapeutics, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
Date: May 14, 2024
| /s/ Thomas H. Jensen | |
| Thomas H. Jensen | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Allarity Therapeutics, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to her knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
Date: May 14, 2024
| /s/ Joan Y. Brown | |
| Joan Y. Brown | |
| Chief Financial Officer | |
| (Principal Financial Officer
and Principal Accounting Officer) |