Allarity Therapeutics, Inc 10-Q for FY2023 Q3
Allarity Therapeutics, Inc. (ALLR)
About this 10-Q
Allarity Therapeutics, Inc filed this 10-Q on November 14, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $4.45M
- compared with a net loss of $5.04M a year earlier
- Diluted EPS
- -$2.03
- compared with -$934.29 a year earlier
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the Quarterly Period Ended
Commission
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
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by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
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| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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As of November 8, 2023, the registrant had
Table of Contents
i
Unless the context indicates otherwise, references in this Quarterly Report on Form 10-Q (the “Quarterly Report” or “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 June 28, 2023, the Company effected a 1-for-40 reverse stock split of the shares of common stock of the Company and on March 24, 2023 we effected a 1-for-35 reverse stock split (collectively, the “Reverse Stock Splits”). All historical share and per share amounts reflected throughout this Quarterly Report have been adjusted to reflect the Reverse Stock Splits.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements in this report other than statements of historical fact are forward-looking statements for purposes of these provisions, including any statements of the Company’s plans and objectives for future operations, the Company’s future financial or economic performance (including known or anticipated trends), and the assumptions underlying or related to the foregoing. Statements that include the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential,” or “continue,” or the negative thereof, or other comparable terminology, are 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 (“Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on March 13, 2023. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. You should read these factors and the other cautionary statements made in this report as being applicable to all related forward-looking statements wherever they appear in this report. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may impact such forward-looking statements include:
| ● | our estimates regarding expenses, capital requirements and need for additional financing. We have insufficient cash to continue our operations, and our continued operations are dependent on us raising capital and these conditions give rise to substantial doubt over our ability continue as a going concern; | |
| ● | the number of shares of Common Stock that may be sold in the public pursuant to Rule 144 under the Securities Act and current prospectus in relation to the number of our outstanding shares of Common Stock. If these shares of Common Stock are sold in the market all at once or at about the same time, it could depress the market price of our Common Stock and would also affect our ability to raise equity capital; | |
| ● | our ability to meet the Nasdaq Capital Market (“Nasdaq”) continued listing standards. The listing of our Common Stock on Nasdaq is contingent on our compliance with Nasdaq’s conditions for continued listing. We have a history of non-compliance and currently are not in compliance with the continued listing requirements. Pursuant to a Nasdaq letter dated July 14, 2023, the Company is subject to a panel monitor for a period of one year, which includes continued compliance with the stockholders’ equity requirement and other continued listing requirements. Failure to meet the stockholders’ equity requirement of $2,500,000 will result in immediate delisting, subject to the Company’s right to appeal. On October 27, 2023, we received notification from the Nasdaq Listing Qualifications staff that it intends to delist our Common Stock because the bid price of our Common Stock has closed at less than $1 per share over the previous 30 consecutive business days. The Company filed a notice of appeal and received a hearing date of February 1, 2024. In the event our Common Stock is no longer listed for trading on Nasdaq, our trading volume and share price may decrease, and you may have a difficult time selling your shares of Common Stock. In addition, we may experience difficulties in raising capital which would materially adversely affect our operations and financial results. Further, delisting from Nasdaq markets could also have other negative effects, including potential loss of confidence by partners, lenders, suppliers and employees; | |
| ● | our ability to maintain effective internal control over financial reporting, disclosures and procedures. If we do not maintain effective internal controls, our ability to record, process and report financial information timely and accurately could be adversely affected and could result in a material misstatement in our financial statements, which could subject us to litigation or investigations, require management resources, increase our expenses, negatively affect investor confidence in our financial statements and adversely impact the trading price of our Common Stock; | |
| ● | the impact of adjustments to our outstanding warrants because of future dilutive financings resulting in the decrease of exercise price and increase the number of shares of issuable under outstanding warrants, adjustment and exercise of such warrants would result in the material dilution of the percentage ownership of our stockholders and increase the number of shares of Common Stock in the public markets. The perception that such sales could occur could cause our stock price to fall; | |
| ● | our ability to cure the default under our license agreement with Novartis. We failed to make a milestone payment, and on April 4, 2023, we received notice from Novartis stating that Allarity Therapeutics Europe ApS was in breach of the license agreement and has 30 days from April 4, 2023, to cure. As a result of ongoing negotiations with Novartis to address our non-payment, we made payments to Novartis in the amount of $100,000 and $300,000 in April and August 2023, respectively. We intend to cure this breach upon and subject to availability of funds and/or continue working with Novartis on an alternate payment structure. However, no assurance can be given that Novartis will accept an alternative payment structure and if we fail to make the milestone payments, Novartis does not agree to an alternative payment structure or we are otherwise in breach of the license agreement, we may lose our right to use dovitinib, which will adversely affect our ability to conduct our clinical trials and to achieve our business objectives and adversely affect our financial results; |
ii
| ● | the initiation, cost, timing, progress and results of our current and future preclinical studies and clinical trials, as well as our research and development programs; | |
| ● | our plans to develop and commercialize our drug candidates; | |
| ● | our ability to successfully acquire or in-license additional product candidates on reasonable terms; | |
| ● | our ability to maintain and establish collaborations or obtain additional funding; | |
| ● | our ability to obtain regulatory approval of its current and future drug candidates; | |
| ● | our expectations regarding the potential market size and the rate and degree of market acceptance of such drug candidates; | |
| ● | our expectations regarding our ability to fund operating expenses and capital expenditure requirements with our existing cash and cash equivalents, and future expenses and expenditures; | |
| ● | our ability to secure sufficient funding and alternative sources of funding to support when needed and on terms favorable to us to support our business objective, product development, other operations or commercialization efforts; | |
| ● | our ability to enroll patients in our clinical trials, or our clinical development activities; | |
| ● | our ability to retain key employees, consultants and advisors; | |
| ● | our ability to retain reliable third parties to perform work associated with our drug discovery, preclinical activities and to conduct our preclinical studies and clinical trials in a satisfactory manner; | |
| ● | our ability to secure reliable third party manufacturers to produce clinical and commercial supplies of API for our therapeutic candidates; | |
| ● | our ability to obtain, maintain, protect and enforce sufficient patent and other intellectual property rights for our therapeutic candidates and technology; | |
| ● | our anticipated strategies and our ability to manage our business operations effectively; | |
| ● | the impact of governmental laws and regulations; | |
| ● | the possibility that we may be adversely impacted by other economic, business, and/or competitive factors; and | |
| ● | our ability to maintain our licensed intellectual property rights to develop, use and market our therapeutic candidates. |
Any forward-looking statements contained in this Quarterly Report are only estimates or predictions of future events based on information currently available to our management and management’s current beliefs about the potential outcome of future events. Whether these future events will occur as management anticipates, whether we will achieve our business objectives, and whether our revenues, operating results or financial condition will improve in future periods are subject to numerous risks. There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These important factors include those that we discuss under the heading “Risk Factors” in this Quarterly Report and in other reports filed from time to time with the SEC. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements.
All forward-looking statements and descriptions of risks included in this report are made as of the date hereof based on information available to the Company as of the date hereof, and except as required by applicable law, the Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You should, however, consult the risks and other disclosures described in the reports the Company files from time to time with the SEC after the date of this report for updated information.
iii
PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ALLARITY
THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except for share and per share data)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Other current assets | ||||||||
| Prepaid expenses | ||||||||
| Tax credit receivable | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right of use assets | ||||||||
| Intangible assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Warrant liability | ||||||||
| Derivative warrant liability | ||||||||
| Income taxes payable | ||||||||
| Convertible debt and accrued interest, net of debt discount | ||||||||
| Operating lease liabilities, current | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Convertible promissory note and accrued interest, net of debt discount | ||||||||
| Deferred tax | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 16) | ||||||||
| Redeemable preferred stock (500,000 shares authorized) | ||||||||
| Series A Preferred Stock $ | ||||||||
| Series B Preferred Stock $ | ||||||||
| Series C Convertible Preferred stock $ | ||||||||
| Total redeemable preferred stock | ||||||||
| 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 September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| Impairment of intangible assets | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Income from sale of IP | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on investment | ( | ) | ( | ) | ||||||||||||
| Foreign exchange losses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Fair value of New September Warrants | ( | ) | ( | ) | ||||||||||||
| Fair value of modification to April & July 2023 Warrants | ( | ) | ( | ) | ||||||||||||
| Change in fair value adjustment of derivative and warrant liabilities | ||||||||||||||||
| Penalty on Series A Preferred Stock liability | ( | ) | ||||||||||||||
| Net other income (loss) | ( | ) | ( | ) | ||||||||||||
| Net loss for the period before tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax benefit (expense) | ( | ) | ||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Cash payable on converted Series A Preferred Stock | ( | ) | ( | ) | ||||||||||||
| Deemed dividends on Series A Preferred Stock | ( | ) | ( | ) | ( | ) | ||||||||||
| Deemed dividend on Series C Preferred Stock | ( | ) | ||||||||||||||
| Cash paid on converted Series A Preferred Stock | ( | ) | ||||||||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Other comprehensive loss, net of tax: | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Change in cumulative translation adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 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 PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
(U.S. dollars in thousands, except for share data)
| Series
A Preferred Stock | Common Stock | Additional Paid in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Number | Value, net | Number | Value | Capital | Loss | Deficit | Equity | |||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Conversion of preferred stock into common stock, net | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Deemed dividend of | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Stock based compensation | — | — | ||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Loss for the period | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Conversion of preferred stock into common stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Floor price liability | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Reclassification of derivative liabilities related to converted preferred stock | — | — | ||||||||||||||||||||||||||||||
| Stock based compensation, net | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Conversion of preferred stock into common stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Floor price liability | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Reclassification of derivative liabilities related to converted preferred stock | — | — | ||||||||||||||||||||||||||||||
| Stock based compensation | — | — | ||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
| 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 Series A 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.
4
| 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) | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net, April 2023 Financing | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Round up of common shares issued as a result of | — | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Fair value of April Warrants allocated to liabilities, net of financing costs | — | — | — | — | — | — | — | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Conversion of Series A Preferred Stock into common stock | ( | ) | ( | ) | — | — | — | — | ( | ) | ( | ) | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Deemed dividends on Series C Preferred Stock | — | — | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Elimination of Series A redemption rights | ( | ) | ( | ) | — | — | — | ( | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series A Preferred Stock as repayment of debt | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Redemption of Series A Preferred Stock for cancellation of debt | — | — | — | — | — | — | ( | ) | ( | ) | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Exchange of Series C Preferred stock for Series A Preferred stock | — | — | — | — | ( | ) | ( | ) | — | — | ( | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
5
| 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) | |||||||||||||||||||||||||||||||||||||||||||
| July 10, 2023 modification of Series A Preferred stock | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net July 2023 financing | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of July Warrants allocated to liabilities, net of financing costs | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Redemption of Series A shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| September 2023 warrants exercised on inducement, net | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Obligation to issue shares as a result of September 2023 warrant inducement | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of warrants exercised on September warrant inducement | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| September 2023 modification of Series A Preferred shares | — | — | — | — | — | — | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | — | — | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
6
ALLARITY
THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars in thousands)
| Nine
months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss for the period | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Gain on the sale of IP | ( | ) | ||||||
| Penalty on Series A Preferred stock liability | ||||||||
| Depreciation and amortization | ||||||||
| Intangible asset impairment | ||||||||
| Stock-based compensation | ||||||||
| Unrealized foreign exchange loss | ||||||||
| Non-cash finance expense | ||||||||
| Non-cash interest | ||||||||
| Fair value of New September Warrants | ||||||||
| Fair value of modification to April & July 2023 warrants | ||||||||
| Loss on investment | ||||||||
| 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 INVESTING ACTIVITIES: | ||||||||
| Proceeds from the sale of IP | ||||||||
| Net cash provided by investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from Series C Convertible Preferred Stock issuance, net | ||||||||
| Proceeds from 3i promissory notes | ||||||||
| Repayment of 3i debt | ( | ) | ||||||
| Net proceeds from common stock and pre-funded warrant issuance | ||||||||
| Net proceeds from warrants exercised in conjunction with price & warrant inducement | ||||||||
| Redemption of Series A Preferred Stock | ( | ) | ||||||
| Redemption of Series B Preferred Stock | ( | ) | ||||||
| Cash paid in connection with conversion of Series A Preferred Stock | ( | ) | ||||||
| Penalty on Series A Preferred Stock liability | ( | ) | ||||||
| Net cash provided by (used in) 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: | ||||||||
| Offset of payable against receivable from sale of IP | ||||||||
| Conversion of Series A Redeemable Preferred Stock to equity | ||||||||
| Issuance of Series A Preferred Stock in Exchange for Series C Preferred Stock | ||||||||
| Issuance of Series A Preferred Stock to extinguish 3i Promissory Note | ||||||||
| Deemed dividend on elimination of Series A redemption rights | ||||||||
| Deemed dividend on exchange of Series C Preferred stock for Series A Preferred stock | ||||||||
| Deemed dividend on redemption of Series A Preferred Stock | ||||||||
| Deemed dividends on Series A Preferred Stock | ||||||||
| Deemed dividend on Series C Convertible Preferred Stock, and accretion of Series C Preferred shares to redemption value | ||||||||
See accompanying notes to condensed consolidated financial statements.
7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2023 and 2022
(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 Splits |
On June 28, 2023, and on March 24, 2023, the Company effected a 1-for-40 reverse stock split and a 1-for-35 reverse stock split respectively of the shares of common stock of the Company (collectively, the “Reverse Stock Splits”). 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 both of the Reverse Stock Splits. 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 accompanying 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 these financial statements, and (1) is probable that the plan will be effectively implemented within
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.
8
Considering the Company’s cash position as of November 14, 2023, 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 the 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 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.
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 the issuance date of these financial statements the Company does not have sufficient funds to finance its operations for at least twelve months from the issuance date and therefore has concluded that substantial doubt exists about the Company’s ability to continue as a going concern.
(c) Basis of Presentation
The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “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 accompanying 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 and nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected for the current year ending December 31, 2023. 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 year ended December 31, 2022, thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2023.
The preparation of these 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 these financial statements are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.
9
(d) 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.* | ||
| Oncology Venture US Inc.* |
*
All intercompany transactions and balances, including unrealized profits from intercompany sales, have been eliminated upon consolidation.
(e) 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.
2. Summary of Significant Accounting Policies
(a) Use of Estimates and Assumptions
The preparation of financial statements in conformity with 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 these financial statements include, but are not limited to, the fair value of the Series A, Series B, and 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.
(b) 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.
10
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.
(c) 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.
(d) Cash
Cash consists primarily of highly liquid investments with original maturities of three months or less at date of purchase to be cash equivalents. The Company had no cash equivalents or restricted cash on September 30, 2023, and December 31, 2022.
(e) Impairment of long-lived assets
Long-lived assets consist of property, plant and equipment, and intangible assets. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. An impairment loss would be recognized as a loss from operations when estimated undiscounted future cash flows expected to result from the use of an asset group or the estimated return on investment are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flow or return on investment calculations.
(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 September 30, 2023 and 2022, the Company recorded accumulated foreign currency translation
losses of ($
(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.
11
(h) Recently Issued Accounting Pronouncements
Changes to 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 these 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. Other Current Assets
| September 30, 2023 | December 31, 2022 | |||||||
| Deposits | $ | $ | ||||||
| Salary deposit | ||||||||
| Value added tax (“VAT”) receivable | ||||||||
| Deferred manufacturing costs | ||||||||
| Deferred consulting costs | ||||||||
| Deferred Directors & Officers insurance expense | ||||||||
| $ | $ | |||||||
4. Intangible assets
During the nine-month period ended September 30, 2023, because of continuing downward pressure on the Company’s common stock, we performed an impairment assessment and determined that no further impairment of our intangible assets is required as of September 30, 2023.
As a result of both the Company’s
February 15, 2022, receipt of a Refusal to File (“RTF”) from the U.S. Food and Drug Administration regarding the Company’s
new drug application (“NDA”) for Dovitinib, and the current depressed state of the Company’s stock price, the Company
has performed an impairment assessment on its individual intangible assets utilizing a discounted cash flow model with a weighted average
cost of capital (“WACC”) of
The Company’s IPR&D
assets have been classified as indefinite-lived intangible assets. Our individual material development project in progress, Stenoparib,
is recorded at $
5. Accrued liabilities
| September 30, 2023 | December 31, 2022 | |||||||
| Development cost liabilities (Notes 16(a) and (b)) | $ | $ | ||||||
| Accrued consulting fees | ||||||||
| Payroll accruals | ||||||||
| Accrued Board member fees | ||||||||
| Accrued audit and legal | ||||||||
| Other | ||||||||
| $ | $ | |||||||
12
6. Convertible promissory note and accrued interest, net
On April 12, 2022, Allarity
Denmark re-issued a Convertible Promissory Note (the “Promissory Note”) to Novartis Pharma AG, a company organized under the
laws of Switzerland (“Novartis,” and together with Allarity Therapeutics Europe ApS (“Allarity Europe”), the “License
Parties”) in the principal amount of $
The Promissory Note pays simple interest on the outstanding principal
amount from the date until payment in full, which interest shall be payable at the rate of
| September 30, 2023 | December 31, 2022 | |||||||
| Convertible promissory note | $ | $ | ||||||
| Less debt discount, opening | ( | ) | ( | ) | ||||
| Plus, accretion of debt discount, interest expense | ||||||||
| Convertible promissory note, net of discount | ||||||||
| Interest accretion, opening | ||||||||
| Interest accrual, expense | ||||||||
| Convertible promissory note – net, ending balance | $ | $ | ||||||
7. Convertible debt
3i, LP Convertible Secured Promissory Notes
On
November 22, 2022, the Company entered into a Secured Note Purchase Agreement (“Purchase Agreement”) with 3i, LP (“Holder”,
or “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 $
On
April 19, 2023, 3i, provided the Company with a loan for $
13
On
April 20, 2023, the Company entered into a Cancellation of Debt Agreement with 3i, which became effective as of the April Offering Closing.
Upon the closing, pursuant to the terms of the Cancellation of Debt Agreement, all of the Company’s outstanding indebtedness under
the Notes (as defined therein) and the Alternative Conversion Amount (as defined therein) due by the Company to 3i were paid in full.
Accordingly, any and all obligations in connection therewith were extinguished without any additional further action on the part of 3i
upon payment of $
On
June 29, 2023, the Company entered into a Secured Note Purchase Agreement with 3i, (the “June 2023 Purchase Agreement”),
pursuant to which, on June 30, 2023, 3i purchased a secured promissory note for a principal amount of $
| September 30, 2023 | December 31, 2022 | |||||||
| Secured promissory notes | $ | $ | ||||||
| Less debt discount, opening | ( | ) | ( | ) | ||||
| Plus, accretion of debt discount, interest expense | ||||||||
| Carrying value of the Notes | ||||||||
| Interest accretion, opening | ||||||||
| Interest accrual, expense | ||||||||
| $ | $ | |||||||
| Less: repayment April 10, 2023 | ( | ) | ||||||
| Plus: June 2023 Promissory Note proceeds and interest | ||||||||
| Less: July 10, 2023 repayment | ( | ) | — | |||||
| Secured promissory note, ending balance | $ | — | $ | |||||
8. Preferred Stock
| A. | Series A Preferred Stock and Common Stock Purchase Warrants |
(a) Amendments to Series A Preferred Stock
On
November 22, 2022, the Company amended Section 12 of the Certificate of Designation of Series A Convertible Preferred Stock (“Series
A Preferred Stock”) to provide for voting rights. Subject to a
On December 9, 2022, the Company and 3i entered into a letter agreement which provided that pursuant to Section 8(g) of the Certificate of Designations for the Series A Preferred Stock, the parties agreed that the Conversion Price was modified to mean the lower of: (i) the Closing Sale Price on the trading date immediately preceding the Conversion Date and (ii) the average Closing Sale Price of the common stock for the five trading days immediately preceding the Conversion Date, for the Trading Days through and inclusive of January 19, 2023. Any conversion which occurs shall be voluntary at the election of the Holder, which shall evidence its election as to the Series A being converted in writing on a conversion notice setting forth the then Minimum Price. 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 at any time by the Company and the other terms of the Certificate of Designations remained unchanged.
14
On January 23, 2023, we and 3i amended the letter agreement entered into on December 8, 2022, to provide that the modification of the term Series A Preferred Stock Conversion Price (“Series A Preferred Stock Conversion Price”) to mean the lower of: (i) the Closing Sale Price (as defined in the Certificate of Designations of Series A Preferred Stock (“Series A Certificate of Designations”)) on the trading date immediately preceding the Conversion Date (as defined in the Series A Certificate of Designations and (ii) the average Closing Sale Price of the common stock for the five trading days immediately preceding the Conversion Date, for the Trading Days (as defined in the Series A Certificate of Designations) will be in effect until terminated by us and 3i.
On
April 20, 2023, the Company also entered into a Cancellation of Debt Agreement as described in Note 7. Pursuant to such agreement,
On
April 21, 2023, in connection with the transactions contemplated under the Exchange Agreement, the Company filed an Amended and Restated
Certificate of Designations of Series A Convertible Preferred Stock of the Company (the “Amended and Restated Series A COD”) with
the Delaware Secretary of State. The Amended and Restated Series A COD eliminates the Series A Preferred Stock redemption right and
dividend (except for certain exceptions as specified therein), and provides for the conversion of Series A Preferred Stock into Common
Stock at a conversion price equal to the price for a share of Common Stock sold in the April Offering, $
On May 30, 2023, the Company filed an amendment to the Amended and Restated Certificate of Designations for the Series A Preferred Stock with the Delaware Secretary of State (the “Amended COD”) to amend the voting rights of the Series A Preferred Stock which among other things provided additional voting rights to the Series A Preferred Stock.
15
Under
the Amended COD, holders of the Series A Preferred Stock have the following voting rights:
In addition, among other things, the Reverse Stock Split Proposal, the effectuation of the June Reverse Stock Split, and the amendment to the Company’s Certificate of Incorporation, are subject to the consent by the holders of a majority of the then outstanding shares of Series A Preferred Stock. Such consent was received on June 27, 2023.
The
Series A Preferred Stock has a liquidation preference equal to an amount per Series A Preferred Stock equal to the sum of (i) the Black
Scholes Value (as defined in the Warrants, which was sold concurrent with the Series A Preferred Stock) with respect to the outstanding
portion of all Warrants held by such holder (without regard to any limitations on the exercise thereof) as of the date of such event and
(ii) the greater of (A)
If
certain defined “triggering events” defined in the Series A COD, as amended and restated and further amended, occur, or our
failure to convert the Series A Preferred Stock into Common Stock when a conversion right is exercised, failure to issue our Common Stock
when the Exchange Warrant is exercised, failure to declare and pay to any holder any dividend on any dividend date, then we may be required
to pay a dividend on the stated value on the Series A Preferred Stock in the amount of
On
June 6, 2023, 3i and the Company entered into a separate limited waiver and amendment agreement whereby 3i (“3i Waiver Agreement”)
agreed to waive certain rights granted under a Series A Preferred Stock securities purchase agreement dated December 20, 2021, the Exchange
Agreement, and the securities purchase agreement related to the April Offering in exchange for, among other things, amending the conversion
price of the Series A Preferred Stock to equal the public offering price of the shares of Common Stock in the July Offering. Upon the
consummation of the July Offering, the conversion price of the Series A Preferred Stock was reduced to $
In connection with the September
2023 Inducement Letter and the transactions contemplated therein, the Company and 3i, LP entered into a limited waiver agreement (the
“Waiver”) pursuant to which 3i, LP agreed to allow the filing of the Resale Registration Statement not otherwise permitted
under certain agreements with 3i, LP. In consideration of entering in the Waiver, the Company agreed to amend the “Conversion Price”
of the Series A Convertible Preferred Stock to equal $
16
(b) Series A Preferred Stock Triggering Event
As more specifically discussed below, a “Triggering Event” under the COD occurred on April 29, 2022, under Section 5(a)(ii) of the COD, which would have resulted in the following unless 3i, agreed to forebear and/or waive its rights under the COD:
1. An
2. A “Triggering Event
Redemption Right” will commence and remain open for a period of 20 trading days from the later of the date either the Triggering
Event is cured or the receipt by 3i of the Triggering Event Notice. Under the Triggering Event Redemption Right, if elected by the holder
of the Preferred Shares, the Company would be obligated to redeem all or a portion of the Preferred Shares for a minimum of
3. A “Registration Delay
Payment” will accrue on April 22, 2022 (the expiration of the Allowable Grace Period under the RRA) in the amount of
As a result of the Company’s
delay in filing its periodic reports with the SEC in 2022, a “triggering event” under Section 5(a)(ii) of the Original Series
A COD, occurred on or about April 29, 2022, and because of the delay the Company was obligated to pay (i) registration delay payments
under the RRA, (ii) additional amounts under the Original Series A COD, and (iii) legal fees incurred in the preparation of the Forbearance
Agreement and Waiver to 3i in an aggregate amount of $
On May 4, 2022, the Company
and 3i entered into a Forbearance Agreement and Waiver, dated April 27, 2022, wherein 3i confirmed that no Triggering Event as defined
under the COD has occurred prior to April 27, 2022, that a Triggering Event under Section 5(a)(ii) will and has occurred on April 29,
2022, and that in consideration for the Registration Delay Payments the Company is obligated to pay under the RRA, and additional amounts
the Company is obligated to pay under the COD and 3i’s legal fees incurred in the preparation of the Forbearance Agreement and Waiver
in the aggregate of $
17
(c) 3i Warrants
Effective April 21, 2023,
pursuant to the terms of a Exchange Agreement, the PIPE Warrant was exchanged for an Exchange Warrant representing a right to acquire
Effective July 10, 2023, upon
the closing of the July Offering, the number of shares exercisable under the Exchange Warrant and the exercise price was adjusted to
Effective September 14, 2023,
the date of the September Induced Warrant offering, the number of shares exercisable under the Exchange Warrant and the exercise price
was adjusted to
(d) Accounting
| i. | Series A Preferred Stock |
The Company evaluated the Series A Preferred Stock under ASC 480-10 to determine whether it represents an obligation that would require the Company to classify the instrument as a liability and determined that the Series A Preferred Stock is not a liability pursuant to ASC 480-10. Management then evaluated the instrument pursuant to ASC 815 and determined that because the holders of the Series A Preferred Stock may be entitled to receive cash, the Series A Preferred stock should be recorded as mezzanine equity given the cash redemption right that is within the holder’s control.
Generally, preferred stock that are currently redeemable should be adjusted to their redemption amount at each balance sheet date. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value when redemption becomes probable to occur.
Through December 9, 2022, the derivative scope exception under ASC 815 was not met because a settlement contingency was not indexed to the Company’s stock. Therefore, the redemption feature (derivative liability) was bifurcated from the Series A Preferred Stock and recorded as a derivative liability. The fair value of the Series A Preferred Stock Redemption Feature (the “Redemption Feature”) derivative is the difference between the fair value of the Series A Preferred Stock with the Redemption Feature and the Series A Preferred Stock without the Redemption Feature. The Series A Preferred Stock Redemption Feature has been valued with a Monte Carlo Simulation model, using the inputs as described in Note 9(b).
Subsequent to December 9,
2022, because of the agreed conversion price adjustment, although bifurcation of the conversion feature is still required, the value of
the derivative has been determined to be immaterial since the conversion price will always be at market. Additionally, because the Series
A redemption terms were amended to be entirely within the Company’s control, they have now been classified as permanent equity.
Management has fair valued the Series A Preferred Stock prior to and after its modification and because the change in fair value was greater
than
As of April 21, 2023, the
Company used the Black-Scholes option pricing model to determine the fair value of the
18
As of July 10, 2023, the Company
used the Black-Scholes option pricing model to determine the fair value of the
As of September 14, 2023,
the Company used the Black-Scholes option pricing model to determine the fair value of the
Series A Preferred September 14, | Series A Preferred July 10, | |||||||
| Number of shares valued | ||||||||
| Stock Price | $ | $ | ||||||
| Exercise price pre-modification | $ | $ | ||||||
| Exercise price post-modification | $ | $ | ||||||
| Risk fee rate | % | % | ||||||
| Dividend | % | % | ||||||
| Volatility | % | % | ||||||
| Original Series A Preferred Shares | Debt Settled for Series A Preferred Shares | Series C Preferred Shares Exchanged for Series A Preferred Shares | ||||||||||
| Number of shares valued | ||||||||||||
| Stock Price at April 21, 2023 post 40 to 1 split | $ | $ | $ | |||||||||
| Exercise price | $ | $ | $ | |||||||||
| Risk fee rate | % | % | % | |||||||||
| Dividend | % | % | % | |||||||||
| Expected liquidity event | ||||||||||||
| Volatility | % | % | % | |||||||||
| ii. | 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).
(f) Series A Preferred Stock Conversions
| i. | Nine month period ended September 30, 2023 |
During the nine month period
ended September 30, 2023, 3i exercised its option to convert
19
| ii. | Nine month period ended September 30, 2022 |
Between January 1, 2022, and
September 30, 2022, a total of
Because the latest eight conversions in the nine-month period ended September 30, 2022, were completed at less than the agreed floor price, we recorded a floor price liability and recognized a corresponding reduction of additional paid in capital, as follows:
| i. | During the six months ended June 30, 2022, $ | |
| ii. | During the three months ended September 30, 2022, $ |
Additionally, because the
Company’s average daily dollar volume of stock trading was less than $
| Consolidated Balance Sheets | Consolidated Statement of Operations & Comprehensive Loss | |||||||||||||||||||
| Warrant liability | Series A Convertible Preferred Stock – Mezzanine Equity | Series A Preferred Stock | Additional paid-in capital | Fair value adjustment to derivative and warrant liabilities | ||||||||||||||||
| Balances at December 31, 2022 | $ | $ | $ | — | $ | ( | ) | $ | — | |||||||||||
| Conversion of | ( | ) | ||||||||||||||||||
| Fair value adjustment | ( | ) | ||||||||||||||||||
| Balances, March 31, 2023 | ( | ) | ||||||||||||||||||
| Conversion of | ( | ) | ( | ) | ||||||||||||||||
| Elimination of redemption rights on Series A Preferred stock; deemed dividend of $ | ( | ) | ( | ) | ||||||||||||||||
| Redemption of | ( | ) | ||||||||||||||||||
| Issuance of | ||||||||||||||||||||
| Exchange of | ( | ) | ||||||||||||||||||
| Fair value adjustment | ( | ) | ||||||||||||||||||
| Balances, June 30, 2023 | $ | ( | ) | ( | ) | |||||||||||||||
| July 10, 2023 modification | ( | ) | ||||||||||||||||||
| Redemption of | ( | ) | ( | ) | ||||||||||||||||
| September 14, 2023 modification | ( | ) | ||||||||||||||||||
| Fair value adjustment | ( | ) | ||||||||||||||||||
| Balances, September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||
20
| Consolidated Balance Sheets | Consolidated Statement of Operations & Comprehensive Loss | |||||||||||||||||||||||
| Warrant liability | Series A Preferred Derivative Liability | Series A Convertible Preferred Stock – Mezzanine Equity | Additional paid-in capital | Accrued Liabilities | Fair value adjustment to derivative and warrant liabilities | |||||||||||||||||||
| Balances at December 31, 2021 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Conversion of | ( | ) | ( | ) | ||||||||||||||||||||
| ( | ) | |||||||||||||||||||||||
| Fair value adjustment at March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||
| ( | ) | |||||||||||||||||||||||
| Conversion of | ( | ) | ( | ) | ||||||||||||||||||||
| Floor price adjustment on conversion of | ( | ) | ||||||||||||||||||||||
| Cash payment of accrued liabilities | ( | ) | ||||||||||||||||||||||
| Fair value adjustment | ( | ) | ( | ) | ||||||||||||||||||||
| Balances, June 30, 2022 | ( | ) | ||||||||||||||||||||||
| Conversion of | ( | ) | ( | ) | ||||||||||||||||||||
| Floor price adjustment on conversion of | ( | ) | ||||||||||||||||||||||
| Fair value adjustment | ( | ) | ||||||||||||||||||||||
| Balances, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
| B. | Series C Convertible Preferred Stock |
On February 28, 2023, the
Company entered into a Securities Purchase Agreement (the “SPA”) with 3i, L.P. for the purchase and sale of
21
In the event that the Conversion Price on a Conversion Date would have been less than the applicable Floor Price if not for the immediately preceding sentence, then on any such Conversion Date the Company will pay the Holder an amount in cash, to be delivered by wire transfer out of funds legally and immediately available therefor pursuant to wire instructions delivered to the Company by the Holder in writing, equal to the product obtained by multiplying (A) the higher of (I) the highest price that the Common Stock trades at on the Trading Day immediately preceding such Conversion Date and (II) the applicable Conversion Price and (B) the difference obtained by subtracting (I) the number of shares of Common Stock delivered (or to be delivered) to the Holder on the applicable Share Delivery Date with respect to such conversion of Series C Preferred Stock from (II) the quotient obtained by dividing (x) the applicable Conversion Amount that the Holder has elected to be the subject of the applicable conversion of Series C Preferred Stock, by (y) the applicable Conversion Price without giving effect to clause (x) of such definition. The Offering closed on February 28, 2023.
In connection with the Offering,
concurrently with the SPA, the Company entered into a registration rights agreement with 3i (the “RRA”) pursuant to which
the Company is required to file a registration statement with the SEC to register for resale the shares of Common Stock that are issued
upon the potential conversion of the Shares. Under the terms of the RRA, if the Company fails to file an Initial Registration Statement
(as defined in the RRA) on or prior to its Filing Date (as defined in the RRA), or fail to maintain the effectiveness of the registration
statement beyond defined allowable grace periods set forth in the RRA, we will incur certain registration delay payments, in cash and
as partial liquidated damages and not as a penalty, equal to
The Company has treated the
exchange of Series C Preferred Stock for Series A Preferred Stock as an extinguishment as there has been a fundamental change in the nature
of the instrument and has applied the derecognition accounting model in ASC 260-10-S99-2. Accordingly, the Company has recognized the
difference between (1) the fair value of the consideration transferred to the holders of the preferred shares of $
| September 30, 2023 | ||||
| Series C Preferred Stock, cash received | $ | |||
| Less debt discount, opening | ( | ) | ||
| Plus, | ||||
| Exchange of Series C Preferred stock for Series A Preferred stock | ( | ) | ||
| Series C Preferred Stock – net, ending balance | $ | |||
22
9. Derivative Liabilities
(a) Continuity of 3i Warrant Liability and Series A Redemption Feature Derivative Liabilities
| 3i Warrants | 3i Fund Series A Redemption Feature | |||||||
| Issued December 20, 2021 | ||||||||
| Balance as of January 1, 2022 | $ | $ | ||||||
| Change in fair value | ( | ) | ( | ) | ||||
| Amount transferred to Equity | ( | ) | ||||||
| Balance as of December 31, 2022 | $ | $ | ||||||
| Fair value per 3i Warrant / Series A Preferred Stock issuable at period end | $ | $ | ||||||
| Balance as of January 1, 2023 | $ | $ | ||||||
| Change in fair value in the nine months ended September 30, 2023 | ||||||||
| Balance as of September 30, 2023 | $ | $ | ||||||
| Fair value per 3i Warrant / Series A Preferred Stock issuable at period end | $ | $ | ||||||
(b) 3i Warrants – Valuation Inputs
On September 30, 2023, and
December 31, 2022, 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 $
| September 30, 2023 | December 31, 2022 | |||||||
| 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 | % | % | ||||||
10. Stockholders’ Equity
(a) Amendments to Certificate of Incorporation and Reverse Stock Splits
On
March 20, 2023, an amendment to Allarity Therapeutics, Inc.’s Certificate of Incorporation, as amended (the “Certificate
of Incorporation”), to increase the number of authorized shares from
23
As
a result of the filing of the Certificate of Amendment, the Company is authorized to issue
On
June 23, 2023, 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 board, effect a reverse stock split with respect
to our issued and outstanding Common Stock at a ratio between 1-for-15 and 1-for-50 (the “June Reverse Stock Split Proposal”).
Upon stockholder approval, the Board of Directors determined a ratio of 1-for-40 for the reverse stock split (the “June Reverse
Stock Split”). On June 28, 2023, the Company filed a Fourth Certificate of Amendment of the Certificate of Incorporation to effect
the June Reverse Stock Split on June 28 2023 (the “June Share Consolidation”). No fractional shares were issued in connection
with the June Share Consolidation. If, as a result of the June 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 June Share Consolidation resulted in a reduction
of our outstanding shares of Common Stock from
As of the date of these financial statements all references to our common stock have been retrospectively adjusted to reflect both the March Share Consolidation and the June Share Consolidation (the “Share Consolidations”), unless otherwise noted.
(b) Redemption of Series B Preferred Stock
Upon conclusion of the 2023
Annual Meeting of Stockholders on February 3, 2023, all the
(c) Series C Preferred Stock
On February 24, 2023, the
Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Redeemable Preferred Stock (the
“Series C COD”) with the Delaware Secretary of State designating
Pursuant to the terms of a
Modification and Exchange Agreement dated April 20, 2023, by and between 3i and the Company, effective April 21, 2023, 3i exchanged
(d) Common Share, Pre-Funded Warrant and Common Share Purchase Warrant issuances
During the three months ended September 30, 2023, the Company:
i. issued
24
ii. entered into an Inducement
Letter dated September 14, 2023 (the “Inducement Letter”) with each of Armistice Capital Master Fund Ltd. and Sabby Volatility
Warrant Master Fund, Ltd. (“September Investors”) who were the holders of existing common stock purchase warrants issued (i)
in the April Offering (the “April Warrants”) and (ii) in the July Offering (the “July Warrants” and together with
the April Warrants, the “Existing Warrants”). Pursuant to the Inducement Letter, the September Investors agreed to exercise
for cash their respective Existing Warrants to purchase an aggregate of up to
(e) April 2023, July 2023 and September 2023 Common Warrants
Subject to certain ownership
limitations, the April 2023 Common Warrants are exercisable immediately from the date of issuance. The April 2023 Common Warrants have
an exercise price of $
Pursuant
to a securities purchase agreement entered into with certain investors in the April Offering, we agreed that for a period of 90 days from
the close of the April Offering, that we would not issue, enter into any agreement to issue or announce the issuance or proposed issuance
of any shares of Common Stock or securities convertible or exercisable into Common Stock or file a registration statement with the SEC
to register our securities, subject to certain exceptions. The investors to the securities purchase agreement in the April Offering, excluding
3i, have agreed to waive that provision and permit the July offering of our Common Stock, pre-funded warrants and common warrants (“Offering
Waiver”) in exchange for (i) the repricing of the exercise price of the April 2023 Common Warrant to the exercise price of the common
warrant offered in the July Offering if the exercise price of the common warrant is lower than the then-current April 2023 Common Warrant
exercise price; and (ii) extending the termination date of the April 2023 Common Warrant to the date of termination of the common warrants
offered in the July Offering As a result of the July Offering, investors to the securities purchase agreement in the April Offering, excluding
3i, had the exercise price of their April 2023 Common Warrant reduced to $
25
Management
considered the September, July and April Common Warrants, which do not represent outstanding shares, and determined that they contain
certain contingent redemption features, outside of the Company’s control and at the election of the Holder, which may require the
Company to repurchase the July and April Common Warrants or Warrant Shares in exchange for cash (i.e., puttable) in an amount as defined
in the Warrant Agreements. The Company concluded that the September, July and April Common Warrants represent liabilities under ASC 480.
Accordingly, the September, July and April Common Warrants have been recorded at their fair value of $
On
September 14, 2023, the exercise prices of the July and April Common Warrants were reduced to $
As of September 30, 2023,
we used the Black-Scholes option pricing model to fair value the outstanding September, July, and April Common share purchase warrants
of
| September 30, 2023 | September 14, 2023 | July 10, 2023 | April 21, 2023 | |||||||||||||
| Initial exercise price | $ | $ | $ | $ | ||||||||||||
| Stock price on valuation date | $ | $ | $ | $ | ||||||||||||
| Risk-free rate | % | % | % | % | ||||||||||||
| Term of Warrant (in years) | ||||||||||||||||
| Rounded annual volatility | % | % | % | % | ||||||||||||
During the nine months ended
September 30, 2023, the Company issued
(f) During the three and nine months ended September 30, 2022
During the three months ended
September 30, 2022, the Company issued
During the nine months ended
September 30, 2022, the Company issued
26
11. Stock-based payments
During the three months ended
September 30, 2023, the total stock-based payment expense recorded in the condensed consolidated statement of operations and comprehensive
loss was $
| Options Outstanding | ||||||||||||
| Number of Shares | Weighted Average Exercise Price Share | Weighted Average Life (in years) | ||||||||||
| Outstanding December 31, 2022 | $ | |||||||||||
| Cancelled or expired | ( | ) | — | |||||||||
| Outstanding as of September 30, 2023 | $ | |||||||||||
| Options exercisable at September 30, 2023 | $ | |||||||||||
12. Segments
The Company is domiciled in
the United States of America and its operations are in Denmark and operates as
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, from 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.
| Three- and Nine-month period ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Warrants and stock options | ||||||||
| Series A Preferred Stock | ||||||||
27
14. Financial Instruments
| Fair Value Measurements as of September 30, 2023, Using: | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| Derivative warrant liability | $ | $ | ( | ) | $ | ( | ) | |||||||||
| $ | $ | $ | ( | ) | $ | ( | ) | |||||||||
| Fair Value Measurements as of December 31, 2022, Using: | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative warrant liability | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| $ | $ | $ | ( | ) | $ | ( | ) | |||||||||
Methods used to estimate the fair values of our financial instruments, not disclosed elsewhere in these financial statements, are as follows:
When available, our marketable securities are valued using quoted prices for identical instruments in active markets. If we are unable to value our marketable securities using quoted prices for identical instruments in active markets, we value our investments using broker reports that utilize quoted market prices for comparable instruments. We have 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.
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 common stock of the Company.
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 nine-month periods ended September 30, 2023 and 2022.
15. Income Taxes
The effective tax rate for
the three and nine-month periods ended September 30, 2022, was impacted by unbenefited losses. Specifically, the impairment charge of
approximately $
28
16. Commitments and Contingencies
(a) Second Amendment to License Agreement with Novartis for Dovitinib
On September 27, 2022, Allarity
Europe, entered into a Second Amendment to License Agreement with Novartis, which amended the terms of the Original Agreement, as amended
by that certain First Amendment to License Agreement effective as of March 30, 2022 and that certain Promissory Note dated April 6, 2018,
which was re-issued by Allarity Therapeutics Denmark ApS, a subsidiary of Allarity Europe, in favor of Novartis on March 30, 2022, to
modify the terms and timing of the Outstanding Milestone Payment (as defined in the Second Amendment), including an increase in such milestone
payment by $
Under Clause 7.2 of the Original Agreement, the Company agreed to pay Novartis a milestone payment in one lump sum (“Third Milestone Payment”) upon submission of the first NDA with the FDA for a Licensed Product in the United States (the “Third Milestone”). The Second Amendment restructured the terms of the Third Milestone Payment to an installment plan (with the final installment due in 2023), allowing the Company more time to make the Third Milestone Payment.
In addition, the Second Amendment
amended (1) Clause 1.1 of the Agreement to include the definitions of Financing Transaction, Phase 1 Clinical Trial and Phase 1b/2 Clinical
Trial, (2) Clause 2.1 of the Agreement to clarify that the Company would not be permitted to sublicense any rights granted to the Company
prior to completion of a Phase II Clinical Trial without the prior written consent of Novartis, and (3) Clause 7.3 to provide for the
acceleration of certain milestone payments in the event the Company enters into a Financing Transaction (as defined in the Second Amendment).
If all milestones under the Second Amendment are achieved, the Company may be obligated to pay Novartis up to a maximum of $
(b) Notice of Breach From Novartis Pharma AG
Pursuant to the agreement
with Novartis, through our wholly-owned subsidiary Allarity Europe, we have the exclusive global right to use dovitinib for the treatment
of cancers. Under the terms of the license agreement, we are required to make certain milestone payments, including a payment of $
(c) Stenoparib Exclusive License Agreement with Eisai Inc.
The Company previously entered
into an Exclusive License Agreement with Eisai effective July 12, 2022 (the “Exclusive License Agreement”). In consideration
for extension of certain deadlines and payment obligations, the Company has entered into several amendments to the Exclusive License Agreement.
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 “Product”).
29
(d) Development costs and Out-License Agreement with Smerud
Under the terms of the June
2020 Sublicense agreement (the “2020 Sublicense Agreement”) between the Company and Smerud Medical Research International
AS (Norway) (“Smerud”), the Company is liable for development costs incurred by Smerud in the approximate amount of $
A Letter Agreement between Chosa Oncology Ltd. (England), Chosa ApS (Denmark) (collectively “Chosa”), Smerud, and Allarity Therapeutics, Inc. (US) which references the following agreements:
| a. | The 2022 Amended and Restated License Agreement between LiPlasome Pharma Aps (Denmark) (“LiPlasome”), Chosa, and the Company’s subsidiary Allarity Therapeutics ApS, which amended the original February 15, 2016 LiPlasome License Agreement (as amended January 27, 2021), whereby Chosa replaced the Company as licensee of LiPlasome in exchange for Smerud’s cancellation of the Company’s $ |
| b. | The LiPlacis Support Agreement between Allarity Therapeutics Europe, Smerud, Chosa and LiPlasome. Terms of the Support Agreement provide that each of Smerud and the Company agreed that the 2020 Sublicense Agreement is terminated in its entirety. |
(e) Oncoheroes
Effective January 2, 2022, the Company entered into an Exclusive License Agreement with Oncoheroes Biosciences Inc. (the “Oncoheroes Agreement”) to grant Oncoheroes an exclusive royalty-bearing global license to both dovitinib and stenoparib in pediatric cancers. Oncoheroes will take responsibility for pediatric cancer clinical development activities for both clinical-stage therapeutics. Allarity will support Oncoheroes’ pediatric clinical trials by providing clinical-grade drug inventory at cost and by facilitating DRP® companion diagnostic screening of pediatric patients for each drug. Under the licenses, Oncoheroes will receive commercialization rights for pediatric cancers, subject to the Company’s first buy-back option for each program, and the Company will receive an upfront license fee and regulatory milestones for each program, specifically one for dovitinib and one for stenoparib, as follows:
| ii. | two milestone payments of $1,000 each due and payable upon receipt of regulatory approval of a product in the United States, and of a product in Europe, respectively. |
Pursuant to the Oncoheroes Agreement Allarity is also entitled to tiered royalties on aggregate net product sales (“Sales”) of between 7% and 12% on net sales of products as follows: 7% on Sales less than $100 million; 10% on Sales of greater than $100 million and less than $200 million; and 12% on Sales greater than $200 million.
(f) Lantern Pharma, Inc. – Irofulven Agreement
On July 23, 2021, we entered
into an Asset Purchase Agreement with Lantern Pharma, Inc. relating to our inventory of Irofulven active pharmaceutical ingredients, our
clinical research data relating to Irofulven developed by us during the drug development program under the May 2015 Drug License and Development
Agreement for Irofulven and terminated our obligation to further advance the development of Irofulven under the May 2015 agreement. Under
the Asset Purchase Agreement, Lantern Pharma agreed to pay us $
| (i) | when the inventory of Irofulven API is recertified with a longer shelf life; |
| (ii) | upon the initiation of treatment of the first patient in an investigator-led “compassionate use” ERCC2/3 mutation subgroup study using Irofulven in certain agreed upon investigators; |
30
| (iii) | upon the initiation of treatment of the first patient within twenty-four months after the closing of the transaction in any human clinical trial of Irofulven initiated by Lantern Pharma; and | |
| (iv) | upon the initiation of treatment of the second patient within an agreed upon time period after the closing of the transaction in any human clinical trial of Irofulven initiated by Lantern Pharma. |
Effective March 18, 2022,
pursuant to clause (i) the inventory was recertified with a longer shelf life and as of March 31, 2022, we received $
(g) SEC Request
In January 2023, we 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 we 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 we are complying.
(h) Nasdaq Notifications and Appeal Hearing
As previously disclosed on
Form 8-K filed with the SEC on October 14, 2022, we received a letter from Nasdaq Listing Qualifications on October 12, 2022 notifying
us that the Company’s stockholders’ equity as reported in its Quarterly Report on Form 10-Q for the period ended June 30,
2022 (the “June Form 10-Q”), did not satisfy the continued listing requirement under Nasdaq Listing Rule 5450(b)(1)(A) for
The Nasdaq Global Market, which requires that a listed company’s stockholders’ equity be at least $
On April 11, 2023, we received notification from the Nasdaq Listing Qualifications staff that it determined that the Company did not meet the terms of the extension. Specifically, the Company did not complete its proposed transactions and was unable to file a Form 8-K by the April 10, 2023, deadline evidencing compliance with Nasdaq Listing Rule 5450(b)(1)(A). As a result, the Company’s securities were to be delisted from The Nasdaq Global Market unless the Company appealed the Nasdaq Listing Qualifications staff’s decision. The Company filed a notice of appeal and on May 18, 2023, the Company presented its appeal before the Nasdaq hearings panel.
Subsequent to the May 18,
2023 hearing, on May 23, 2023, we received notification from the Nasdaq Listing Qualifications staff that stated because we did not comply
with Nasdaq Listing Rule 5450(a)(1) regarding a bid price of $
31
On June 6, 2023, we received
a letter from the Nasdaq hearings panel that granted the Company’s request for continued listing on the Nasdaq Stock Market LLC
until July 1, 2023 and the Company’s transfer to The Nasdaq Capital Market, subject to the following conditions: (1) on or before
July 1, 2023, the Company shall demonstrate compliance with Nasdaq Listing Rule 5450(b)(1) dealing with primary equity securities listed
on the Global Market, and on or before July 1, 2023, the Company shall demonstrate compliance with Nasdaq Listing Rule 5450(a)(1) dealing
with a minimum bid of $
On June 14, 2023, we received
a clarification letter from Nasdaq granting the Company’s request for continued listing on The Nasdaq Capital Market and transfer
to The Nasdaq Capital Market subject to the following: (1) on or before July 10, 2023, the Company would need to demonstrate compliance
with Listing Rule 5550(a)(2); and (2) on or before July 14, 2023, the Company would need to demonstrate compliance with Listing Rule 5550(b).
As further discussed below, on June 28, 2023, we received notification from Nasdaq Listing Qualifications that because we transferred
to The Nasdaq Capital Market, we regained compliance with Listing Rule 5550(a)(5) because our Market Value of Publicly Held Shares (“MVPHS”)
has been $
On July 14, 2023, the Company received a letter from Nasdaq confirming that the Company has regained compliance with the bid price and equity concerns, as required by the Nasdaq hearings panel decision dated June 6, 2023, as amended. Under the July 14, 2023, letter, the Company is subject to a panel monitor for a period of one year from the July 14, 2023, letter pursuant to Nasdaq Listing Rule 5815(d)(4)(B).
On August 3, 2023, we received a letter from Nasdaq confirming that based on the information regarding the appointment of Mr. Joseph Vazzano, Dr. Laura Benjamin, and Mr. Robert Oliver to the Company’s Board of Directors and the appointment of Mr. Vazzano and Mr. Oliver to the audit committee, Nasdaq has determined that the Company complies with the independent director and audit committee requirements for continued listing set forth in Listing Rules 5605(b)(1) and 5605(c)(2), respectively, and that the matter was now closed.
On
October 27, 2023, we received notification from Nasdaq that it has determined that the bid price of our Common Stock has closed at less
than $
In that regard, unless we requested an appeal of such determination, trading of our Common Stock would have been suspended at the opening of business on November 7, 2023, and a Form 25-NSE would have been filed with the SEC which would have removed our Common Stock from listing and registration on The Nasdaq Stock Market. We requested an appear for such determination and have received a hearing date of February 1, 2024.
(i) Shareholder Letter
On May 31, 2023, we received a letter from an attorney purportedly representing a shareholder of the Company questioning certain information contained in our preliminary proxy statement for our Special Meeting and questioning our ability under Delaware law to amend the Original Series A COD to provide for voting rights to the holders thereof without seeking approval from the holders of our Common Stock. We have clarified any perceived inconsistent statements regarding voting procedures for the matters to be voted upon at the Special Meeting in our definitive proxy statement filed with the SEC, and believe that, contractually, we are authorized to provide for voting rights to the holders of the Series A Preferred Stock without seeking approval by the holders of our Common Stock.
17. Subsequent Events
For its financial statements
as of September 30, 2023, and for the three months then ended, the Company evaluated subsequent events through the date on which those
financial statements were issued. In November 2023, the Company issued
32
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and plan of operations together with our condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from the plans, intentions, expectations and other forward-looking statements included in the discussion below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those factors discussed in the section titled “Risk Factors” of our Annual Report on Form 10-K, filed with the SEC on March 13, 2023.
Overview
We are a pharmaceutical company focused on discovering and developing highly targeted anti-cancer drug candidates. Through the use of its Drug Response Predictor (DRP®) platform, the Company identifies the value in drug assets that have otherwise been discontinued by identifying patient populations where these drugs are active. The Company’s three lead drug candidates are: the pan-tyrosine kinase inhibitor (pan-TKI) dovitinib, the poly-ADP-ribose polymerase (PARP) inhibitor stenoparib, and the microtubule inhibitor agent IXEMPRA.
Recent Developments
Subsequent to our quarterly period ended September 30, 2023, we entered into a series of transactions, certain events occurred and we received notifications discussed below. The transactions or events or notifications discussed below, are discussed in more detail in the Current Reports on Form 8-K filed by us with the SEC and incorporated by reference. See section titled “Incorporation of Certain Information By Reference.”
July Offering
On July 10, 2023, we closed a public offering of 357,223 shares of our Common Stock, pre-funded warrants to purchase up to 2,087,222 shares of common stock (the “July Pre-Funded Warrants”), and common warrants to purchase up to 2,444,445 shares of Common Stock (the “2023 July Common Warrants”) at an effective combined purchase price of $4.50 per share and related common stock purchase warrants for aggregate gross proceeds of approximately $11 million, before deducting placement agent fees and offering expenses payable by the Company (“July Offering”). The securities in the July Offering were registered pursuant to the registration statement on Form S-1, as amended (File No. 333-272469). The purchase price of each July Pre-Funded Warrant and 2023 July Common Warrant was equal to $4.50 less the $0.001 per share exercise price of each Pre-Funded Warrant. Such securities were sold pursuant to a securities purchase agreement with the purchaser signatory thereto or pursuant to the prospectus which was part of an effective registration statement on Form S-1 filed with the SEC. The July Pre-Funded Warrants and Common Warrants were immediately separable and were issued separately in the July Offering. Each July Pre-Funded Warrant is exercisable for one share of Common Stock. Pursuant to a securities purchase agreement entered into with certain investors in the July Offering, we agreed that for a period of 90 days from the close of the July Offering, we would not issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or securities convertible or exercisable into Common Stock or file a registration statement with the SEC to register our securities, subject to certain exceptions. In addition, we agreed that for a period of the 6 month anniversary of the July Offering closing date, we would not effect or enter into an agreement to effect any issuance of shares of Common Stock or Common Stock Equivalents (as defined in the securities purchase agreement) involving a Variable Rate Transaction.
Warrant Exercise and Inducement Letter
In September 2023, we entered into the Inducement Letter dated September 14, 2023 (the “Inducement Letter”) with each of Armistice Capital Master Fund Ltd. and Sabby Volatility Warrant Master Fund, Ltd. (“September Investors”) who were the holders of existing common stock purchase warrants issued (i) in the public offering of our securities in April 2023 (the “April Warrants”) and (ii) in the July Offering (the “July Warrants” and together with the April Warrants, the “Existing Warrants”). Pursuant to the Inducement Letter, the September Investors agreed to exercise for cash their respective Existing Warrants to purchase an aggregate of up to 2,438,889 shares of the Company’s Common Stock (the “Existing Warrant Shares”), at a reduced exercise price of $1.00 per share, in consideration for the Company’s agreement to issue a new unregistered common stock purchase warrant to purchase up to a number of shares of Common Stock equal to 200% of the number of Existing Warrant Shares issued, or the Inducement Warrants, pursuant to each Existing Warrant exercise (the “Inducement Warrant Shares”), exercisable for 5 years and six months from the issue date, at an exercise price of $1.00, subject to adjustment. Upon execution of the Inducement Letter by each of the September Investors Company issued the Inducement Warrants to the September Investors pursuant to a private placement (the “September Private Placement”). As of November 13, 2023, the Company received an aggregate of $1,876,578 from the exercise of certain Existing Warrants by the September Investors, which includes the pre-payment of $266,000 shares of Common Stock issuable upon exercise of 266,000 Existing Warrants.
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We also agreed to file a registration statement on Form S-3 (or other appropriate form if we are not then Form S-3 eligible) providing for the resale of the Inducement Warrant Shares issuable upon the exercise of the Inducement Warrants (the “Resale Registration Statement”), on or before October 15, 2023, and to use commercially reasonable efforts to have such Resale Registration Statement declared effective by the SEC within 90 days following the date of the issuance of the Inducement Warrants and to keep the Resale Registration Statement effective at all times until no holder of the Inducement Warrants owns any Inducement Warrants or Inducement Warrant Shares. The Resale Registration Statement for the resale of up to 4,877,778 shares of Common Stock was filed on October 10, 2023, and became effective on October 19, 2023.
We also granted liquidated damages to the September Investors in the event that we fail to (i) provide current public information required under Rule 144(c) (a “Public Information Failure”) or (ii) obtain Stockholder Approval, if required, as defined in the letter agreement (a “Stockholder Approval Failure”), and the September Investors are unable to sell their Inducement Warrant Shares. In either event, or both events, we will be required to pay the September Investors an amount in cash equal to 1.5% of the aggregate exercise price of the Inducement Warrants held by the Holder on the day of a Public Information Failure and/or Stockholder Approval Failure and on every 30th day (prorated for periods totaling less than 30 days) thereafter until the Public Information Failure and Stockholder Approval Failure are cured.
In addition, to comply with certain Nasdaq listing maintenance requirements, the Company also agreed to amend all Existing Warrants such that the exercise price of such warrants is equal to $1.00 regardless of whether the holder thereof signed the Inducement Letter or exercised the Existing Warrants pursuant to the Inducement Letter. As a result, all of the exercise price of the outstanding July Warrants and April Warrants were reduced to $1.00.
Transactions with 3i, LP
On May 20, 2021, we entered into a Securities Purchase Agreement (“SPA”) and related agreements with 3i, LP, a Delaware limited partnership, or 3i, LP, pursuant to which 3i, LP purchased 20,000 shares of our Series A Convertible Preferred Stock (“Series A Preferred Stock”) and a warrant to purchase up to 1,443 shares of our Common Stock at an exercise price of $13,868 (the “PIPE Warrant”) per share for an aggregate purchase price of $20 million. Simultaneously with the execution of the SPA, we also entered into a Registration Rights Agreement with 3i, LP wherein we agreed to register a number of shares of our Common Stock equal to the maximum number of shares of our Common Stock that could be issued upon conversion of such shares of Series A Preferred Stock and exercise of the PIPE Warrant (the “Warrant Shares”), which was subsequently amended to include an agreement by the Company to register up 125% of the Warrant Shares (the “Registration Rights Agreement”). Concurrent with the closing of the Recapitalization Share Exchange, on December 21, 2021, we closed on the transactions contemplated by the SPA and issued 20,000 shares of Series A Preferred Stock and the PIPE Warrant.
On April 19, 2023, 3i, LP, the sole former holder of our Series C Convertible Redeemable Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”) and outstanding secured promissory notes, and sole holder of our Series A Preferred Stock, provided the Company with a loan for $350,000, evidenced by a Secured Promissory Note dated April 19, 2023 (the “April Note”), which required a mandatory conversion of the principal into 486 shares of Series A Preferred Stock (the “Note Conversion Shares”) subject to and upon the closing of the public offering of our securities in April 2023 (the “April Offering”). Upon such closing, the Note Conversion Shares were issued to 3i, LP and the April Note was cancelled.
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On April 20, 2023, the Company entered into a certain Modification and Exchange Agreement, as amended on May 26, 2023 (the “Exchange Agreement”) with 3i, LP pursuant to which the parties agreed to, among other things, (i) amend and restate the Certificate of Designations of Series A Preferred Stock then in effect (“Series A COD”), which among other things, eliminates the Series A Preferred Stock redemption right and dividend (except for certain exceptions as specified in the Series A COD), and provides for the conversion of Series A Preferred Stock into Common Stock at a conversion price of $30.00 which is equal to the price for a share of Common Stock sold in the April Offering, (ii) exchange 50,000 shares of Series C Preferred Stock (the “Series C Shares”) beneficially owned by 3i, LP for 5,577 shares of Series A Preferred Stock (the “Exchange Shares”), (iii) exchange the PIPE Warrant held by 3i, LP for a new warrant which originally reflected an exercise price of $30.00 and a right to acquire 315,085 shares of Common Stock, and was further adjusted in connection with the July Offering (as defined below) to reflect an exercise price of $4.50 and a right to acquire 2,100,565 shares of Common Stock, subject to adjustments (the “Exchange Warrant”). On April 21, 2023, the closing of the transactions contemplated by the Exchange Agreement occurred and the contemplated Exchange Warrant and the Exchange Shares were issued to 3i, LP, and the PIPE Warrant and the Series C Shares were cancelled. Under the Exchange Agreement, we agreed that so long as any holder of Series A Preferred Stock beneficially owns any shares of Series A Preferred Stock, the Company will not, without the prior written consent of certain holders of Series A Preferred Stock, issue any Series A Preferred Stock. The Company agreed that neither the Company nor any of its subsidiaries would issue, offer, sell, grant any option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any equity security or any equity-linked or related security (including, without limitation, any “equity security” except for the April Offering (any such issuance, offer, sale, grant, disposition or announcement (whether occurring during certain restricted period or at any time thereafter). On October 13, 2023, 3i, LP granted a waiver to permit a proposed offering.
In addition, the Company entered into a Cancellation of Debt Agreement dated April 20, 2023 (the “Cancellation of Debt Agreement”), which became effective as of April 21, 2023. Upon the closing of the April Offering, pursuant to the terms of the Cancellation of Debt Agreement, all of the Company’s outstanding indebtedness under the following four secured promissory notes issued pursuant to Secured Note Purchase Agreement dated November 22, 2022 between the Company and 3i, LP (collectively the “3i Promissory Notes”) were paid in full: the first note was for an aggregate principal amount of $350,000 (which purchase price was paid in form of cash and was received in November 2022); the second note was for the principal amount of $1,666,640 and which represents the payment of $1,666,640 due to 3i, LP in Alternative Conversion Floor Amounts, as defined in the Certificate of Designations of Series A Preferred Stock filed with the Delaware Secretary of State in December 2021 (the “Original Series A COD”), that began to accrue on July 14, 2022; the third note was for an aggregate principal amount of $650,000 which purchase price was paid in cash on December 30, 2022; and the fourth note was for the aggregate principal amount of $350,000 (which purchase price was paid in cash on April 11, 2023) and the Alternative Conversion Amount (as defined in the Cancellation of Debt Agreement ) due by the Company to 3i, LP. Accordingly, any and all obligations in connection therewith were extinguished without any additional further action on the part of 3i, LP upon payment of $3,347,583 in cash from a portion of the proceeds from the April Offering. In addition, pursuant to such agreement, 1,550 shares of Series A Preferred Stock (the “Redemption Shares”) beneficially owned by 3i, LP were redeemed in full for a purchase price of $1,652,416, which redemption price was paid in cash from the portion of the proceeds from the closing of the April Offering.
The Company also entered into a first amendment to the Registration Rights Agreement, which became effective upon the closing of the April Offering to amend certain defined terms under the RRA to include the Exchange Shares, the shares of Common Stock issuable upon exercise of the Exchange Warrants (the “Exchange Warrant Shares”) and the Note Conversion Shares (the “Amended RRA”).
On June 6, 2023, 3i, LP and the Company entered into a separate limited waiver and amendment agreement whereby 3i, LP (“3i Waiver Agreement”) agreed to waive certain rights granted under a Series A Preferred Stock securities purchase agreement dated December 20, 2021, the Exchange Agreement and the securities purchase agreement related to the April Offering in exchange for (i) amending the conversion price of the Series A Preferred Stock to equal the public offering price of the shares of Common Stock in the July Offering if the public offering price of the shares of Common Stock in the July Offering is lower than the then-current conversion price of the Series A Preferred Stock; (ii) participating in the July Offering, at its option, under the same terms and conditions as other investors, of which proceeds from 3i, LP’s participation were agreed to be used to redeem a portion of shares of Series A Preferred Stock 3i, LP received from the Exchange Agreement; and (iii) (1) the repricing of the exercise price of the April 2023 Common Warrants to the exercise price of the common warrant offered in the July Offering if the exercise price of the common warrant is lower than the then-current exercise price of the April 2023 Common Warrants; and (2) extending the termination date of the April 2023 Common Warrants to the date of termination of the common warrants offered in the July Offering. As a result of the 3i Waiver Agreement, upon the consummation of the July Offering, the conversion price of the Series A Preferred Stock was reduced to $4.50 and the exercise price of 3i, LP’s April 2023 Common Warrant was reduced to $4.50 per share and the exercise period extended to July 10, 2028.
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On June 29, 2023, the Company entered into a Secured Note Purchase Agreement with 3i (the “June 2023 Purchase Agreement”), pursuant to which, on June 30, 2023, 3i LP purchased a secured promissory note for a principal amount of $350,000 (the “3i June Promissory Note”). Such note matures on July 31, 2023, and carries an interest rate of 5% per annum, and is secured by all of the Company’s assets pursuant to that certain security agreement dated June 29, 2023 (the “Security Agreement”). Under the 3i June Promissory Note, the outstanding obligations thereunder, including accrued interest, will be paid in full from the gross proceeds of our next financing (the “Next Financing”); provided, however, that if the gross proceeds from the Next Financing are insufficient to settle the payment of the outstanding principal balance of the 3i June Promissory Note, together with all accrued interest thereon, in full, then the Company will instead be obligated to convert all of the unpaid principal balance of the note, together with all accrued interest thereon, into 486 shares of Series A Preferred Stock (the “Repayment Shares”). In connection with the Repayment Shares, the June 2023 Purchase Agreement provides that if the closing sale price of the shares of Common Stock of the trading day immediately prior to the execution of the June 2023 Purchase Agreement (the “Current Closing Price”) is lower than the initial conversion price of $30.00 as set forth in the Series A COD, then the conversion price of Series A Preferred Stock will be reduced to the Current Closing Price, pursuant to the voluntary adjustment provision of Section 8 of the Series A COD (“Downward Adjustment to Conversion Price”) and the Company agreed to file a second certificate of amendment to the Series A COD with the Delaware Secretary of State to amend the Series A COD to reflect the Downward Adjustment to Conversion Price (“Second Certificate of Amendment”). Based on the closing price of the shares of Common Stock on June 28, 2023, the Downward Adjustment to Conversion Price is equal to $8.00 per share. As contemplated by the June 2023 Purchase Agreement, the Company filed the Second Certificate of Amendment with the Delaware Secretary of State on June 30, 2023. From the proceeds of the July Offering, on July 10, 2023, the Company redeemed the 3i June Promissory Note for $350,886 in cash. As a result of the payment, the 3i June Promissory Note was paid in full on July 10, 2023.
From the proceeds of the July Offering, on July 10, 2023, the Company redeemed (i) 4,630 shares of Series A Preferred Stock held by 3i, LP, for $5,000,400 in cash, and (ii) the 3i June Promissory Note (as defined above) for $350,886 in cash.
In connection with the Inducement Letter and the transactions contemplated therein, the Company and 3i, LP entered into a limited waiver agreement (the “Waiver”) pursuant to which 3i, LP agreed to allow the filing of the Resale Registration Statement not otherwise permitted under certain agreements with 3i, LP. In consideration of entering in the Waiver, the Company agreed to amend the “Conversion Price” of the Series A Convertible Preferred Stock to equal $1.00 as soon as practicable. On September 22, 2023, the Company filed the Fourth Certificate of Amendment to Amended and Restated Certificate of Designations of Series A Convertible Preferred Stock (“Fourth Amendment”) with the Secretary of State of the State of Delaware to reflect the new conversion price of the Series A Preferred Stock of $1.00. In addition, as a result of the Inducement Warrants, pursuant to the terms of the Exchange Warrant, in September 2023 the number of shares exercisable and the exercise price of the Exchange Warrant was adjusted to 9,452,667 shares of Common Stock and $1.00 per share, respectively.
Nasdaq Notifications
On July 14, 2023, the Company received a letter from Nasdaq confirming that the Company has regained compliance with the bid price and equity concerns, as required by the Nasdaq hearings panel decision dated June 6, 2023, as amended. Under the July 14, 2023, letter, the Company will be subject to a panel monitor for a period of one year from the July 14, 2023, letter pursuant to Nasdaq Listing Rule 5815(d)(4)(B).
On October 27, 2023, the Company received notification from the Nasdaq Listing Qualifications staff that it determined that the bid price of our Common Stock had closed at less than $1 per share over the previous 30 consecutive business days, and, as a result, it did not comply with Listing Rule 5550(a)(2) (the “Rule”). Further, the staff also noted that we effected a 1:35 reverse stock split on March 24, 2023, and a 1:40 reverse stock split on June 28, 2023. Because we effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, we will not be afforded a 180-calendar day period to demonstrate compliance with the Rule pursuant to Listing Rule 5810(c)(3)(A)(iv). In that regard, unless the Company requested an appeal from such determination, trading of the Company’s Common Stock would have been suspended at the opening of business on November 7, 2023, and a Form 25-NSE would have been filed with the Securities and Exchange Commission which would have removed the Company’s Common Stock from listing and registration on The Nasdaq Stock Market. The Company requested an appeal for such determination and was given a hearing date of February 1, 2024. During the appeal period, the Company’s Common Stock will continue to be listed on The Nasdaq Stock Market.
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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.
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 our inception. Our net losses were $10.2 million and $13.2 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, we had an accumulated deficit of $92.7 million and cash of $1,399 million. 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; |
| ● | 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. |
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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 drug candidates, dovitinib, stenoparib, and IXEMPRA®.
We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our drug candidates, as our drug candidates advance into later stages of development, and 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 Stock Market, additional insurance expenses, investor relations activities and other administrative and professional services.
Results of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited) (in thousands, except where otherwise noted)
The following table summarizes our results of operations for the three and nine months ended September 30, 2023 and 2022:
| For the three months ended September 30, | Increase/ | For the nine months ended September 30, | Increase/ | |||||||||||||||||||||
| 2023 | 2022 | (Decrease) | 2023 | 2022 | (Decrease) | |||||||||||||||||||
| Operating costs and expenses: | ||||||||||||||||||||||||
| Research and development | $ | 1,948 | $ | 3,004 | $ | (1,056 | ) | $ | 4,480 | $ | 5,989 | $ | (1,509 | ) | ||||||||||
| Impairment of intangible assets | — | — | — | — | 14,007 | (14,007 | ) | |||||||||||||||||
| General and administrative | 2,478 | 1,558 | 920 | 7,770 | 7,717 | 53 | ||||||||||||||||||
| Total operating costs and expenses | 4,426 | 4,562 | (136 | ) | 12,250 | 27,713 | (15,463 | ) | ||||||||||||||||
| Loss from operations: | $ | (4,426 | ) | $ | (4,562 | ) | $ | 136 | $ | (12,250 | ) | $ | (27,713 | ) | $ | 15,463 | ||||||||
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Research and Development Expenses
We currently do not track our research and development costs by product candidate. A breakdown by nature of type of expense for the three and nine months ended September 30, 2023 and 2022, is provided below.
| For the three months ended September 30, | Increase/ | For the nine months ended September 30, | Increase/ | |||||||||||||||||||||
| 2023 | 2022 | (Decrease) | 2023 | 2022 | (Decrease) | |||||||||||||||||||
| Research study expenses | $ | 595 | $ | 464 | $ | 131 | $ | 1,907 | $ | 1,504 | $ | 403 | ||||||||||||
| Tax credit | (55 | ) | (133 | ) | 78 | (800 | ) | (723 | ) | (77 | ) | |||||||||||||
| Manufacturing & supplies | 849 | 151 | 698 | 1,796 | 312 | 1,484 | ||||||||||||||||||
| Milestone payments | 100 | 1,400 | (1,300 | ) | 150 | 1,400 | (1,250 | ) | ||||||||||||||||
| Contractors | 288 | 410 | (122 | ) | 789 | 1,509 | (720 | ) | ||||||||||||||||
| Patents | 17 | 191 | (174 | ) | 18 | 252 | (234 | ) | ||||||||||||||||
| Staffing | 131 | 500 | (369 | ) | 570 | 1,683 | (1,113 | ) | ||||||||||||||||
| Amortization | 9 | 20 | (11 | ) | 28 | 58 | (30 | ) | ||||||||||||||||
| Other | 14 | 1 | 13 | 22 | (6 | ) | 28 | |||||||||||||||||
| $ | 1,948 | $ | 3,004 | $ | (1,056 | ) | $ | 4,480 | $ | 5,989 | $ | (1,509 | ) | |||||||||||
For the three months ended September 30, 2023, compared to September 30, 2022
The decrease of $1,056 in research and development expenses was primarily because milestone payments decreased by $1,300, staffing expenses decreased by $369, patent expenses decreased by $174, consultant expenses decreased by $122, and amortization expense decreased by $11. Decreased expenses were offset by increases in manufacturing and supplies expenses of $698, increased research study costs of $131 and other expenses of $13. Tax credits which offset expenses have decreased by $78.
For the nine months ended September 30, 2023, compared to September 30, 2022
The decrease of $1,509 in research and development expenses was primarily because milestone payments decreased by $1,250, staffing expenses decreased by $1,113, patent expenses decreased by $234, consultant expenses decreased by $720, and amortization expense decreased by $30. Decreased expenses were offset by increases in manufacturing and supplies expenses of $1,484, increased research study costs of $403 and other expenses of $28. Tax credits which offset expenses have increased by $77.
Impairment of Intangible Assets
As a result of both the Company’s February 15, 2022, receipt of a RTF from the U.S. Food and Drug Administration regarding the Company’s NDA for Dovitinib, and the current depressed state of the Company’s stock price, the Company has performed an impairment assessment on its individual intangible assets utilizing a discounted cash flow model and recognized an impairment charge of $14.0 million during the nine months ended September 30, 2022.
General and Administrative Expenses
For the three months ended September 30, 2023, compared to September 30, 2022
General and administrative expenses increased by $920 for the three months ended September 30, 2023, compared to September 30, 2022. The increase was primarily due to increased finance expenses of $734, legal expenses of $139, insurance expenses of $105, communications expenses of $69, premises expenses of $28 and listings expenses of $10; offset by decreases in staffing expenses of $89 and other expenses of $76. Staffing costs have decreased because of cost-cutting measures, and stock-based compensation costs have decreased because of stock option forfeitures of recently resigned directors.
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For the nine months ended September 30, 2023, compared to September 30, 2022
General and administrative expenses have increased by $53 for the nine months ended September 30, 2023, compared to September 30, 2022. The increase was primarily due to increased finance expenses of $1,121, communications expenses of $114, insurance expenses of $72, financial consultant expenses of $104, and premises expenses of $84; offset by decreased legal expenses of $261, listings expenses of $33, staffing expenses of $1,093 and other expenses of $55. Variances in expenses are as noted in the three-month period ended September 30, 2023.
Other Income (Expenses), Net
For the three months ended September 30, 2023, compared to September 30, 2022
| For the three months ended September 30, | Increase/ | For the nine months ended September 30, | Increase/ | |||||||||||||||||||||
| 2023 | 2022 | (Decrease) | 2023 | 2022 | (Decrease) | |||||||||||||||||||
| Other (expenses) income: | ||||||||||||||||||||||||
| Gain from the sale of IP | $ | — | $ | — | $ | — | $ | — | $ | 1,780 | $ | (1,780 | ) | |||||||||||
| Interest income | 12 | 14 | (2 | ) | 19 | 19 | — | |||||||||||||||||
| Interest expenses | (34 | ) | (35 | ) | 1 | (268 | ) | (107 | ) | (161 | ) | |||||||||||||
| Gain (loss) on investment | — | (45 | ) | 45 | — | (115 | ) | 115 | ||||||||||||||||
| Foreign exchange gains (losses), net | (156 | ) | (406 | ) | 250 | (87 | ) | (944 | ) | 857 | ||||||||||||||
| Fair value of New September Warrants | (4,189 | ) | — | (4,189 | ) | (4,189 | ) | — | (4,189 | ) | ||||||||||||||
| Fair value of modification to April & July 2023 warrants | (591 | ) | — | (591 | ) | (591 | ) | — | (591 | ) | ||||||||||||||
| Change in fair value adjustment of derivative and warrant liabilities | 4,937 | 2 | 4,935 | 7,187 | 13,442 | (6,255 | ) | |||||||||||||||||
| Penalty on 3i Fund liability | — | — | — | — | (800 | ) | 800 | |||||||||||||||||
| Net other income (expenses): | $ | (21 | ) | $ | (470 | ) | $ | 449 | $ | 2,071 | $ | 13,275 | $ | (11,204 | ) | |||||||||
Other income (expense) of ($21) recognized in the three months ended September 30, 2023, consisted primarily of a $4,937 change in fair value adjustment to derivative and warrant liabilities, ($4,189) fair value of New September Warrants, ($591) fair value of the modification to April and July 2023 warrants, foreign exchange losses of ($156), and interest expenses of ($34), offset by interest income of $12.
Other income (expense) of ($470) recognized in the three months ended September 30, 2022, consisted primarily of interest income of $14, and a $2 change in fair value adjustment to derivative and warrant liabilities, offset by foreign exchange losses of ($406), loss on investment of ($45), and interest expense of ($35).
For the nine months ended September 30, 2023, and September 30, 2022
Other income (expense) of $2,071 recognized in the nine months ended September 30, 2023, consisted primarily of a $7,187 change in fair value adjustment to derivative and warrant liabilities and interest income of $19; offset by ($4,189) fair value of New September Warrants, ($591) fair value of the modification to April and July 2023 warrants, interest expense of ($268), and foreign exchange losses of ($87).
Other income (expense) of $13,275 recognized in the nine months ended September 30, 2022, consisted primarily of a $13,442 fair value adjustment to derivative and warrant liabilities, income of $1,780 from the gain on sale of IP, and interest income of $19, offset by ($944) in foreign exchange losses, ($107) in interest expenses, ($115) loss on investment and a ($800) penalty on our 3i Fund liability.
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 September 30, 2023, our operations have been financed primarily by the sale of convertible promissory notes and the sale and issuance of our securities. As of September 30, 2023, we had $1,399 in cash, and an accumulated deficit of $92.7 million. We had a working capital deficit of $11.4 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 therapeutic drug candidate, dovitinib, and clinical programs for stenoparib and IXEMPRA®, 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 September 30, 2023, the Company’s cash deposits of $1,399 were determined to be insufficient to fund its current operating plan and planned capital expenditures for the next month. We believe that our existing cash and cash equivalents as of November 14, 2023, 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 the twelve months from the date of this Report. These conditions give rise to substantial doubt over the Company’s ability to continue as a going concern.
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.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash flows used in operating activities | $ | (11,073 | ) | $ | (14,371 | ) | ||
| Net cash flows provided by investing activities | — | 809 | ||||||
| Net cash flows provided by (used in) financing activities | 10,473 | (2,311 | ) | |||||
| Effect of foreign exchange rates on cash | (30 | ) | 264 | |||||
| Net (decrease) increase in cash | $ | (630 | ) | $ | (15,609 | ) | ||
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Operating Activities
For the nine months ended September 30, 2023, net cash used in operating activities was approximately $11.1 million compared to approximately $14.4 million for the nine months ended September 30, 2022. The $3.3 million decrease in net cash used in operating activities was primarily the result of a decreased loss of $3.0 million, and a increase in non-cash expenses of $0.8 million, offset by an increase in net cash provided by operating assets and liabilities of $1.1 million.
Investing Activities
In the nine months ended September 30, 2023, there were no cash flows from investing activities. In the nine months ended September 30, 2022, we received $809 thousand from financing activities associated with the sale of IP.
Financing Activities
For the nine months ended September 30, 2023, net cash provided by financing activities was approximately $10.5 million compared to approximately $2.3 million used in the nine months ended September 30, 2022. The increase in net cash provided by investing activities was primarily due to the receipt of $18,615 in net proceeds from the sale of common stock and exercise of pre-funded and common warrants, $1,160 in net proceeds from the issuance of Series C Preferred stock, and $1,050 from the issuance of promissory notes, offset by $3,698 in repayment of debt, including promissory notes, $5,000 on the redemption of Series A Preferred stock, and $1,652 on the conversion of Series A Preferred stock.
In the nine months ended September 30, 2022, we incurred a $2.3 million financing cost as a result of a $1.5 million floor price adjustment on converted Series A Preferred Stock. We also paid an $800 Registration Delay Penalty on our Series A Preferred stock.
Operating Capital and Capital Expenditure Requirements
As of September 30, 2023, we had a cash position of $1,399. We believe that our existing cash and cash equivalents as of the date of this Report, 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 Report. These conditions give rise to substantial doubt over the Company’s ability to continue as a going concern. 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.
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 and nine months ended September 30, 2023 and 2022, and our audited consolidated financial statements for the year ended December 31, 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.
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Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, 2022, included in our Form 10-K for the year ended December 31, 2022, filed on March 13, 2023, and there have been no significant changes to our significant accounting policies during the nine months ended September 30, 2023. 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(dd) to the Company’s consolidated financial statements for the year ended December 31, 2022, appearing in the Company’s 10-K filed with the SEC on March 13, 2023; and in Note 2(h) to the Company’s unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2023 and 2022.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a Smaller Reporting Company, we are exempt from the requirements of Item 3.
Item 4. Controls and Procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As discussed below, we believe we have remediated the material weaknesses in our internal controls and procedures previously identified. Based on the evaluation of our disclosure controls and procedures as of September 30, 2023, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls were effective.
Changes in Internal Control Over Financial Reporting
As of September 30, 2023, management believes that the material weaknesses in our internal control over financial reporting previously identified have been remediated by the following measures taken by the Company:
| ● | as of June 30, 2022, our Director of Financial Reporting, a CPA (Illinois) who is experienced with public company reporting and is conversant in US GAAP and SEC accounting issues, was promoted to Interim Chief Financial Officer. Effective January 1, 2023, our Interim Chief Financial Officer was promoted to our full time Chief Financial Officer. |
| ● | retained and successfully utilized independent US GAAP consulting services to assist with the accounting treatment of complex financial instruments; and |
| ● | engaged and successfully utilized an independent US based tax consulting firm. |
We plan to continue to assess our internal controls and control procedures and intend to take further action as necessary or appropriate to address any other matters we identify or are brought to our attention.
Except as discussed above, there have been no changes in the Company’s internal controls over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s 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.
An investment in our common stock involves a high degree of risk. You should carefully consider the risks set forth in the section captioned “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 13, 2023, before making an investment decision. If any of the risks occur, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should read the section captioned “Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this Report.
Risks Related to Our Business
We are in default under our license agreement with Novartis
Pursuant to a license agreement with Novartis and our wholly-owned subsidiary Allarity Therapeutics Europe ApS dated April 6, 2018, we have the we have the exclusive global right to use dovitinib for the treatment of cancers. Under the terms of the license agreement, we were required to make certain milestone payments, including a payment of $1,500,000 which was due on April 1, 2023. We did not make that milestone payment, and on April 4, 2023, we received notice from Novartis stating that Allarity Therapeutics Europe ApS is in breach of the license agreement and had 30 days from April 4, 2023, to cure. Subsequent to our April Offering, at the end of April 2023, we made a payment of $100,000 and on August 11, 2023, we made a further payment of $300,000 to Novartis. We are currently working with Novartis on an alternate payment structure. However, no assurance can be given that Novartis will accept an alternative payment structure and if we fail to make the milestone payments, Novartis does not agree to an alternative payment structure or we are otherwise in breach of the license agreement, we may lose our right to use dovitinib which will adversely affect our ability to conduct our clinical trials and to achieve our business objectives and adversely affect our financial results.
We have insufficient cash to continue our operations, our continued operations are dependent on us raising capital and these conditions give rise to substantial doubt over the Company’s ability continue as a going concern
As of September 30, 2023, we had $1.399 million in cash, and an accumulated deficit of $92.7 million. We had a working capital deficit of $11.4 million. As of November 14, 2023, our cash position has been determined to be insufficient to fund the Company’s operations for longer than approximately two months from such date. Further, we believe that our existing cash and cash equivalents as of the date of this filing, 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 the twelve months from the date of this Report. These conditions give rise to substantial doubt over the Company’s ability to continue as a going concern. We will need to raise additional capital after to support our operations and execute our business plan. We will be required to pursue sources of additional capital through various means, including debt or equity financing. Any new securities that we may issue in the future may be sold on terms more favorable for our new investors than the terms on which our stockholders acquired our securities. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other convertible securities that will have additional dilutive effects.
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We cannot assure that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us and may cause existing shareholders both book value and ownership dilution. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition and results of operations. Our ability to obtain needed financing may be impaired by such factors as the weakness of capital markets, and the fact that we have not been profitable, which could impact the availability and cost of future financings. If the amount of capital we are able to raise from financing activities is not sufficient to satisfy our capital needs, we may have to reduce our operations accordingly.
We are delinquent in our payment to Eisai
In consideration for extension of certain deadlines and payment obligations, the Company entered in several amendments to an Exclusive License Agreement with Eisai. 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, under which the Company agreed to pay Eisai in periodic payments as follows: (i) $100,000; (ii) $50,000 within 10 days of execution of the fourth amendment; (iii) $100,000 upon completion of a capital raise (of which items (i) and (iii) have been paid): and (iv) $850,000 on or before March 1, 2024. Under the Exclusive License Agreement, the Company will have until April 1, 2024, to complete enrollment in a further Phase 1b or Phase 2 Clinical Trial of the Product. If the Company has not achieved successful completion of a further Phase 1b or Phase 2 Clinical Trial of the Product prior to April 1, 2024, Eisai may terminate the Agreement in its entirety, in its sole discretion on at least 120 days prior written notice. In light of our financial condition and dependence on financing for our operations, we may be unable to meet the payment requirements under the fourth amendment and we may lose our right to use Stenoparib, which will adversely affect our ability to conduct our clinical trials and to achieve our business objectives and adversely affect our financial results.
Risks Related to Owning our Securities
We are not in compliance with The Nasdaq Capital Market continued listing requirements and if we do not regain compliance and otherwise comply with the other listing requirements our Common Stock will be delisted.
The listing of our Common Stock on The Nasdaq Capital Market is contingent on our compliance with The Nasdaq Capital Market’s conditions for continued listing. On April 20, 2022, we received notice from the Nasdaq Listing Qualifications stating that because we had not yet filed our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Form 10-K”) by its due date, we were no longer in compliance with the listing requirement which requires listed companies to timely file all required periodic financial reports with the SEC. On May 17, 2022, we filed our Form 10-K with the SEC. Subsequent to the filing of the Form 10-K, we were late in filing our Form 10-Q for the quarterly periods ended March 31, 2022, and June 30, 2022.
On October 12, 2022, we received a letter from Nasdaq Listing Qualifications notifying us that the Company’s stockholders’ equity as reported in its Quarterly Report on Form 10-Q for the period ended June 30, 2022 (the “June Form 10-Q”), did not satisfy the continued listing requirement under Nasdaq Listing Rule 5450(b)(1)(A) for The Nasdaq Global Market, which requires that a listed company’s stockholders’ equity be at least $10.0 million. As reported on the June Form 10-Q, the Company’s stockholders’ equity as of June 30, 2022 was approximately $8.0 million. Pursuant to the letter, we were required to submit a plan to regain compliance with Nasdaq Listing Rule 5450(b)(1)(A) by November 26, 2022. After discussions with the Nasdaq Listing Qualifications staff, on December 12, 2022, we filed a plan to regain and demonstrate long-term Nasdaq Listing Qualifications compliance including seeking to phase-down to The Nasdaq Capital Market. On December 21, 2022, we received notification from the Nasdaq Listing Qualifications staff that they have granted us an extension of time until April 10, 2023, to regain and evidence compliance with Nasdaq Listing Rule 5450(b)(1)(A). On April 11, 2023, we received notification from the Nasdaq Listing Qualifications staff that it has determined that the Company did not meet the terms of the extension. Specifically, the Company did not complete its proposed transactions and was unable to file a Form 8-K by the April 10, 2023 deadline, evidencing compliance with Nasdaq Listing Rule 5450(b)(1)(A), and, as a result, the staff notification indicated that Company’s Common Stock would be delisted from The Nasdaq Global Market. In that regard, unless the Company requests an appeal of such determination by April 18, 2023, trading of the Company’s Common Stock would be suspended at the opening of business on April 20, 2023, and a Form 25-NSE would be filed with the SEC which would remove the Company’s Common Stock from listing and registration on The Nasdaq Stock Market LLC. The Company requested an appeal for such determination, and on May 18, 2023, the Company had its appeal hearing before the Nasdaq hearings panel.
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On November 21, 2022, the Company received written notice from Nasdaq Listing Qualifications indicating that the Company is not in compliance with the minimum bid price requirement of $1.00 per share under the Nasdaq Listing Rules. Based on the closing bid price of the Company’s listed securities for the last 30 consecutive business days from October 10, 2022, to November 18, 2022, the Company no longer met the minimum bid price requirement set forth in Listing Rule 5550(a)(2). Under Nasdaq Listing Rules, we were provided with a compliance period of 180 calendar days, or until May 22, 2023, to regain compliance under the Nasdaq Listing Rules. In the event we do not regain compliance by May 22, 2023, we may be eligible for additional time to regain compliance. On March 24, 2023, we effected the 1-for-35 share consolidation of our Common Stock in order to attempt to meet the minimum bid requirement of $1.00 per share. On May 23, 2023, we received a letter from the staff of Nasdaq Regulation that the Company did not regain compliance of the minimum bid price requirement of $1.00 by May 22, 2023, and as a result, the Nasdaq hearings panel would consider this matter in their decision regarding the Company’s continued listing on The Nasdaq Global Market. On June 23, 2023, we held the Special Meeting of our stockholders to consider the adoption of an amendment to our certificate of incorporation to effect a reverse stock split within a range of 15 for 1 to 50 for 1 with the exact ratio to be determined by the Board and approved by the holder of our Series A Preferred Stock and we have informed the Nasdaq hearings panel of our Special Meeting. On June 23, 2023, at the Special Meeting, the June Reverse Stock Split Proposal was approved by the stockholders of the Company and subsequently the Board determined a fixed ratio of 40 for 1. The June Share Consolidation was effectuated on June 28, 2023.
On December 20, 2022, we received a written notice from Nasdaq Listing Qualifications indicating that we were not in compliance with the minimum MVPHS of $5,000,000 requirement under the Nasdaq Listing Rules Based on our MVPHS for the thirty-one (31) consecutive business days from November 4, 2022, to December 19, 2022, we no longer met the minimum MVPHS requirement set forth in Listing Rule 5450(b)(1)(C). Under Nasdaq Listing Rules, we were provided with a compliance period of 180 calendar days, or until June 19, 2023, to regain compliance. To regain compliance under Nasdaq Listing Rules, our MVPHS had to close at $5,000,000 for a minimum of ten (10) consecutive business days. On June 28, 2023, we received notification from Nasdaq Listing Qualifications that because we transferred to The Nasdaq Capital Market, we have regained compliance with Listing Rule 5550(a)(5) because our MVPHS has been $1,000,000 or greater for at least 10 consecutive business days.
On June 6, 2023, we received a letter from the Nasdaq hearings panel that granted the Company’s request for continued listing on the Nasdaq Stock Market LLC until July 1, 2023 and the Company’s transfer to The Nasdaq Capital Market, subject to the following conditions: (1) on or before July 1, 2023, the Company demonstrates compliance with Nasdaq Listing Rule 5450(b)(1) dealing with primary equity securities listed on the Global Market, and on or before July 1, 2023, the Company demonstrates compliance with Nasdaq Listing Rule 5450(a)(1) dealing with a minimum bid of $1.00 per share. On June 14, 2023, we received a clarification letter from Nasdaq granting the Company’s request for continued listing on The Nasdaq Capital Market and transfer to The Nasdaq Capital Market, subject to the following: (1) on or before July 10, 2023, the Company demonstrates compliance with Listing Rule 5550(a)(2); and (2) on or before July 14, 2023, the Company demonstrates compliance with Listing Rule 5550(b).
On July 14, 2023, the Company received a letter from Nasdaq confirming that the Company has regained compliance with the bid price and equity concerns, as required by the Nasdaq hearings panel decision dated June 6, 2023, as amended. The Company is subject to a panel monitor for a period of one year from the July 14, 2023, letter pursuant to Nasdaq Listing Rule 5815(d)(4)(B), which includes continued compliance with the stockholders’ equity requirement and other continued listing requirements. Failure to meet the stockholders’ equity requirement of $2,500,000 would result in immediate delisting, subject to the Company’s right to appeal. As of June 30, 2023, the Company had a stockholders’ deficit of $723,000. Subsequent to June 30, 2023, on July 10, 2023, the Company completed a public offering of common stock or pre-funded warrants and warrants to purchase common stock raising gross proceeds of approximately $11 million. After giving effect to the July 10, 2023, public offering, the Company’s stockholders’ equity as of June 30, 2023, on a pro forma basis, was $4.355 million. As of September 30, 2023, the Company had a stockholders’ deficit and will need to raise capital in order to meet Nasdaq’s stockholders’ equity requirement.
On October 27, 2023, we received notification from Nasdaq that it has determined that the bid price of our Common Stock had closed at less than $1 per share over the previous 30 consecutive business days, and, as a result, did not comply with Listing Rule 5550(a)(2). Further, Nasdaq also noted that we effected a 1:35 reverse stock split on March 24, 2023, and an 1:40 reverse stock split on June 28, 2023. Because we effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, we will not be afforded a 180-calendar day period to demonstrate compliance with the Listing Rule 5550(a)(2) pursuant to Listing Rule 5810(c)(3)(A)(iv).
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In that regard, unless we requested an appeal from such determination, trading of our Common Stock would have been suspended at the opening of business on November 7, 2023, and a Form 25-NSE would have been filed with the SEC which would have removed our Common Stock from listing and registration on The Nasdaq Stock Market. We filed a notice of appeal and received a hearing date of February 1, 2024. During such appeal, our Common Stock will continue to be listed on The Nasdaq Capital Market.
If we fail to meet any other Nasdaq listing requirements and do not regain compliance, we may be subject to delisting by Nasdaq. In the event our Common Stock is no longer listed for trading on Nasdaq, our trading volume and share price may decrease and you may have a difficult time selling your shares of Common Stock. In addition, we may experience difficulties in raising capital which could materially adversely affect our operations and financial results. Further, delisting from Nasdaq markets could also have other negative effects, including potential loss of confidence by partners, lenders, suppliers, and employees. Finally, delisting could make it harder for you and the Company to sell the securities and hard for us to raise capital.
We have granted certain rights to certain holders of our securities which limits our ability to raise funds from the sale of our securities, and trigger adjustments t to certain outstanding warrants.
Holders of our shares of Series A Preferred Stock, Existing Warrants, Inducement Warrants and Exchange Warrant have certain rights that limit our ability to raise funds from the sale of our securities. Under the Exchange Agreement, subject to certain exceptions, we agreed that so long as any holder of Series A Preferred Stock beneficially owns any shares of Series A Preferred Stock, the Company will not, without the prior written consent of certain holders of Series A Preferred Stock, issue any Series A Preferred Stock. The Company also agreed that neither the Company nor any of its subsidiaries would issue, offer, sell, grant any option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any equity security or any equity-linked or related security (including, without limitation, any “equity security” except for the April Offering (any such issuance, offer, sale, grant, disposition or announcement (whether occurring during certain restricted period or at any time thereafter). Therefore, so long as there are any shares of Series A Preferred Stock outstanding we must receive the consent of the required holder of the Series A Preferred Stock prior to undertaking any offering. In addition, in connection with the Inducement Warrants and the July Offering, we are prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its subsidiaries of shares of Common Stock or Common Stock equivalents (or a combination of units thereof) involving a Variable Rate Transaction until January 10, 2024.
Furthermore, under the terms of the Exchange Warrant, if we sell securities below the exercise price of the respective warrant, then the exercise price of the Exchange warrant is subject to an adjustment based on the purchase price of the securities. The exercise of such securities based on the downward adjusted exercise price or conversion price will result in issuance of additional securities and additional dilution to our stockholders.
Future sales, or the perception of future sales, by us or our stockholders in the public market could cause the market price for our Common Stock to decline.
The sale of shares of our Common Stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult for our stockholders to sell our Common Stock or for us to sell equity securities in the future at a time and at a price that it deems appropriate.
As of November 1, 2023, we had (i) 1,417 shares of Series A Preferred Stock outstanding that can be converted into up to 1,530,360 shares of Common Stock based upon a conversion price of $1.00 and stated value of $1,080, subject to adjustment, (ii) 2,095,867 shares of Common Stock issuable upon exercise of warrants to purchase shares of Common Stock at an exercise price of $1.00 per share which were issued in a public offering that closed in April 2023 and July 2023; (iii) 9,452,667 shares of Common Stock issuable upon exercise of a warrant to purchase Common Stock at an exercise price of $1.00 per share issued pursuant to a Modification and Exchange Agreement dated April 20, 2023, as amended, and (iv) 4,877,778 shares of Common Stock issuable upon exercise of warrants to purchase shares of Common Stock at an exercise price of $1.00 per share issued to the September Investors. The holder of the Series A Preferred Stock, and holders of our warrants may convert, exercise or exchange their securities into shares of Common Stock which sales thereof could adversely affect the market price of shares of our Common Stock, and dilute stockholders ownership of our Common Stock.
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We received a request for documents from the SEC in the investigation known as “In the Matter of Allarity Therapeutics, Inc.,” and, separately, a letter from Nasdaq, regarding the same matter, the consequences of which are unknown.
In January 2023, we 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 staff has requested us to provide them with the information requested by the SEC. We are providing the information requested by the SEC and Nasdaq staff.
We do not know when the SEC’s or Nasdaq’s investigation will be concluded or what action, if any, might be taken in the future by the SEC, Nasdaq or their staff as a result of the matters that are the subject to its investigation or what impact, if any, the cost of continuing to respond to inquiries might have on our financial position or results of operations. We have not established any provision for losses in respect of this matter. In addition, complying with any such future requests by the SEC or Nasdaq for documents or testimony would distract the time and attention of our officers and directors or divert our resources away from ongoing business matters. This investigation may result in significant legal expenses, the diversion of management’s attention from our business, could cause damage to our business and reputation, and could subject us to a wide range of remedies, including enforcement actions by the SEC or delisting proceedings by Nasdaq. There can be no assurance that any final resolution of this or any similar matters will not have a material adverse effect on our financial condition or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Pursuant to the terms of the Inducement Letter dated September 14, 2023 with each of Armistice Capital Master Fund Ltd. and Sabby Volatility Warrant Master Fund, Ltd., or the September Investors, who were holders of existing common stock purchase warrants issued in the April Offering and July Offering, or the Existing Warrants, we agreed to issue common stock purchase warrant to purchase up to a number of shares of Common Stock equal to 200% of the number of shares of common stock underlying the Existing Warrants, which in the aggregate represents 4,877,778 shares of Common Stock, or the Inducement Warrants, as an inducement for the September Investors to exercise their respective Existing Warrants at a reduced exercise price of $1.00. The Inducement Warrants exercisable for 5 years and six months from the issue date, at an exercise price of $1.00, subject to adjustment. The Common Stock underlying the Inducement Warrants were registered on a registration statement on Form S-3, which became effective on October 19, 2023.
The offer, sale, and issuance of the Inducement Warrants were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
48
Item 6. Exhibits
The following exhibits are filed as part of this Report.
| (a) | Incorporated by reference from Form 8-K filed with the SEC on July 11, 2023 |
| (b) | Incorporated by reference to the Company’s Form 8-K filed on September 27, 2023. |
| (c) | Incorporated by reference from Amendment No. 1 to Registration Statement on Form S-1 filed with the SEC on June 30, 2023. |
| (d) | Incorporated by reference from Form 8-K filed with the SEC on September 15, 2023. |
| * | Filed herewith. |
49
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., A Delaware Corporation | |||
| Date: November 14, 2023 | By: | /s/ James G. Cullem | |
| Name: | James G. Cullem | ||
| Title: | Chief Executive Officer (Principal Executive Officer) | ||
| Date: November 14, 2023 | By: | /s/ Joan Brown | |
| Name: | Joan Brown | ||
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | ||
50
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
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, James G. Cullem, 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(s) 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)) 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; and |
| 5. | The registrant's other certifying officer(s) 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: November 14, 2023 | By: | /s/ James G. Cullem | |
| Name: | James G. Cullem | ||
| Title: | Chief Executive Officer and Director (Principal Executive Officer) | ||
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
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 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(s) 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)) 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; and |
| 5. | The registrant's other certifying officer(s) 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: November 14, 2023 | By: | /s/ Joan Brown | |
| Name: | Joan Brown | ||
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | ||
EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Allarity Therapeutics, Inc. (the “Company”) hereby certifies, to his knowledge, that:
1. The accompanying Quarterly Report on Form 10-Q for the Company for the fiscal quarter ended September 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, 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: November 14, 2023 | By: | /s/ James G. Cullem | |
| Name: | James G. Cullem | ||
| Title: | Chief Executive Officer and Director (Principal Executive Officer) | ||
EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Allarity Therapeutics, Inc. (the “Company”) hereby certifies, to her knowledge, that:
1. The accompanying Quarterly Report on Form 10-Q for the Company for the fiscal quarter ended September 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, 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: November 14, 2023 | By: | /s/ Joan Brown | |
| Name: | Joan Brown | ||
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | ||