Item 5. Market for Registrant’s Common Equity
ITEM
5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
for Common Stock
Our
common stock is listed on Nasdaq Global Market under the symbol “ALLR.” Prior to the consummation of the Recapitalization
Share Exchange on December 20, 2021, Allarity Therapeutics A/S ordinary shares were listed on the Nasdaq First North Growth Market: Stockholm
under the symbol “ALLR:ST.”
Holders
of Record of Common Stock
As of the date of this report,
we had 2 stockholders of record for our common stock. The foregoing number of stockholders of record does not include an unknown number
of stockholders who hold their stock in “street name.”
Dividend
Policy
On November 22, 2022, our Board
declared a dividend of Series B Preferred Stock to the stockholders of record of common stock and Series A Preferred Stock as of December
5, 2022 (the “Record Date”). On the Record Date, each share of common stock outstanding received 0.016 of a share of Series
B Preferred Stock and each share of Series A Preferred Stock outstanding received 1.744 shares of Series B Preferred Stock. We issued
an aggregate of 190,786 shares of Series B Preferred Stock, which were redeemed on February 3, 2023.
We
do not anticipate declaring or paying, in the foreseeable future, any cash dividends on our common stock. We intend to retain all available
funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends
in the foreseeable future. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion
of our Board of Directors and will depend on then-existing conditions, including our financial condition, operating results, contractual
restrictions, capital requirements, business prospects and other factors our Board of Directors may deem relevant.
Recent
Sales of Unregistered Securities
From January 1, 2022 to December
31, 2022, pursuant to a series of exercise of conversion of Series A Preferred Stock by 3i, LP, we issued a total of 7,801,831 shares
of common stock to 3i, LP upon the conversion of 6,214 shares of Series A Preferred Stock based on a conversion price ranging from $0.22
to $9.91. No proceeds were received by the Company upon such conversion. Subsequent to December 31, 2022, pursuant to the exercise of
conversion by the 3i, LP, we issued 14,102,155 shares of Common Stock to the 3i, LP upon the conversion of 2,936 shares of Series A Preferred
Stock based on a conversion price ranging from $0.18 to $0.26. No proceeds were received by the Company upon such conversion. As of the
date of this report, we had 10,650 shares of Series A Preferred Stock issued and outstanding.
On
February 28, 2023, we entered into a Securities Purchase Agreement (the “SPA”) with 3i, L.P. for the purchase and sale of
50,000 shares of Series C Convertible Redeemable Preferred Stock, par value of $0.0001 per share (the “Series C Preferred Stock”),
at a purchase price of $24.00 per share, for a subscription receivable in the aggregate amount equal to the total purchase price of $1.2
million (the “Series C Offering”). The 50,000 shares of Series C Preferred Stock (the “Shares”) are convertible
into shares of the Company’s common stock, $0.0001 per share subject to the terms of the COD.
In July 2022, in connection
with the appointment of Dr. Roth as our independent director, we granted him options to purchase 23,000 shares of common stock at an exercise
price of $1.28 per share, subject to vesting of 1/36 per month over 36 months following the grant date. The expiration date for the options
is five years from date of grant.
In October 2022, in connection
with the appointment of Mr. McLaughlin as our independent director, we granted him options to purchase 23,000 shares of common stock at
an exercise price of $1.10 per share, subject to vesting of 1/36 per month over 36 months following the grant date. The expiration date
for the options is five years from date of grant.
The
offers, sales, and issuances of the option to Dr. Roth and Mr. McLaughlin, and the Series C Offering 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. The conversions of Series A Preferred Stock into common stock
were exempt pursuant to Section 3(a)(9).
157
Equity
Compensation Plan Information
The
following table provides certain information with respect to our equity compensation plans in effect as of December 31, 2022:
Number of
securities
to be
issued upon
exercise of
outstanding
options, and
settlement of
RSUs
(a)
Weighted-
average exercise
price of
outstanding
options, and
issuance price
of RSUs
(b)
Number of
securities
remaining
available for
future issuance
under equity
compensation plans (excluding
securities
reflected in
column a)
(c)
Equity compensation plans approved by security holders (1)
630,949
$ 6.55
-
Equity compensation plans approved by security holders (2)
46,000
1,165,364 (2)
Total
676,949
$ 6.55
1,165,374 (2)
(1)
Upon
the closing of the Recapitalization Share Exchange and as of December 31, 2021, we had converted compensatory options to purchase
ordinary shares of Allarity Therapeutics A/S to options to purchase 1,174,992 shares of our common stock. Such shares
were assumed under the 2021 Plan but are excluded from the number of reserved shares described in footnote 2 below.
(2)
Consists of 1,211,374 shares of our common stock initially reserved under the 2021 Equity Incentive Plan (“2021 Plan”). The number of shares reserved for issuance under our 2021 Plan increases automatically on January 1 of each of 2022 through 2031 by the number of shares equal to the lesser of 5% of the aggregate number of outstanding shares of our common stock as of the immediately preceding December 31, or a number as may be determined by our Board of Directors. There was no increase for January 1, 2022. Our Board of Directors approved an increase of 5% of the outstanding shares of common stock at December 30, 2022, or 794,892 shares, effective as of January 1, 2023. As a result, as of January 1, 2023, there was a total of 2,006,266 shares of common stock reserved under the 2021 Plan, of which 1,960,266 were available for issuance.
ITEM
6 – [RESERVED]
ITEM
7. - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis provide information which our management believes is relevant to an assessment and understanding of
Allarity consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial
condition and results of operations together with our audited consolidated financial statements and notes thereto included elsewhere
in this report. In addition to historical financial information, this discussion contains forward-looking statements based upon our current
expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this report. Unless
otherwise indicated or the context otherwise requires, references in this Management’s Discussion and Analysis of Financial Condition
and Results of Operations section to “Allarity,” “we,” “us,” “our,” and other similar
terms refer to Allarity Therapeutics, Inc. and its consolidated subsidiaries.
We
caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made.
We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements
to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that
may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
Overview
We are a pharmaceutical company
focused on discovering and developing highly targeted anti-cancer drug candidates. Using 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 tyrosine kinase inhibitor (TKI) dovitinib, the poly-ADP-ribose
polymerase (PARP) inhibitor stenoparib, and the microtubule inhibitor agent IXEMPRA.
158
Recent
Corporate Developments
Bridge
Loan
On
November 22, 2022, the Company entered into a Secured Note Purchase Agreement with 3i, LP (the “Secured Note Purchase Agreement”)
for a bridge loan to extend the Company’s cash runaway beyond December 31, 2022, in order to provide the Company with more time
to complete the process of amending its Certificate of Incorporation to increase it authorized share capital and proposed reverse stock
split to facilitate additional capital investments (the “Bridge Loan”). Under the Secured Note Purchase Agreement, the Company
has authorized the sale and issuance of three 3i Promissory Notes, with the first note in an aggregate principal amount of $350,000 to
be issued at closing (which loan was received in November 2022); the second note in the principal amount of $1,666,640 to be issued at
closing 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, that began to accrue on July 14, 2022; and the third note in an aggregate principal amount of $650,000 with respect to
a new loan to be funded upon the Company filing a registration statement with SEC in connection with a registered offering. As of December
31, 2022, all of the notes have been issued and are outstanding. Each 3i Promissory Note matures on January 1, 2024, carries an interest
rate of 5% per annum, and is secured by all of the Company’s assets pursuant to the Security Agreement. In addition, 3i, LP may
exchange the 3i Promissory Notes for the Company’s common stock, or other equity security, at an exchange price equal to the lowest
price per share of the equity security sold to other purchasers, rounded down to the nearest whole share, if the Company concludes a future
equity financing prior to the maturity date or other repayment of the 3i Promissory Notes. In addition, each 3i Promissory Note and interest
earned thereon may be redeemed by the Company at its option or the holder may demand redemption if the Company obtains gross proceeds
of at least $5 million in a financing in an amount of up to 35% of the gross proceeds of the financing.
Amendment
to the Certificate of Designation of Series A Preferred Stock
On
November 22, 2022, the Company amended Section 12 of the Certificate of Designation of Series A Preferred Stock to provide for voting
rights. Subject to a 9.99% beneficial ownership limitation, the holders of Series A Preferred Stock were granted the right to vote on
all matters presented to the stockholders for approval together with the shares of common stock, voting together as a single class, on
an “as converted” basis using the “Conversion Price” (initially $9.9061 per share before any adjustment) (rounded
down to the nearest whole number and using the record date for determining the stockholders of the Company eligible to vote on such matters),
except as required by law (including without limitation, the DGCL) or as otherwise expressly provided in the Company’s Certificate
of Incorporation or the Certificate of Designations of Series A Preferred Stock. The voting rights described above expired on February
28, 2023.
Modification to Conversion Price of Series
A Preferred Stock
On
December 9, 2022, the Company and 3i, LP, the holder of outstanding shares of Series A Preferred Stock, entered into a letter agreement
which provided that pursuant to Section 8(g) of the Certificate of Designations, the parties agreed that the Conversion Price (as defined
in such Certificate of Designations) was modified to mean the lower of: (i) the Closing Sale Price (as defined in the Certificate of
Designations) on the trading date immediately preceding the Conversion Date (as defined in the 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 Certificate of Designations) through and inclusive of January 19, 2023. On January 23, 2023, the
Company and 3i, LP amended the Letter Agreement to provide the term Conversion Price will be in effect until terminated by the Company
and 3i, LP.
Establishment
of Series B Preferred Stock
On
November 22, 2022, the Company’s Board of Directors established the Series B Preferred Stock, par value $0.0001 per share (“Series
B Preferred Stock”). Each share of Series B Preferred Stock has 400 votes and is subject to certain redemption rights and voting
limitations. See description in exhibit titled “ Description of Capital Stock – Series B Preferred Stock. ”
Issuance
of Series B Preferred Stock Dividend
Effective December 5, 2022,
the Company issued a stock dividend to be distributed as follows to stockholders of record as of close of business on December 5, 2022:
(i) 0.016 shares of Series B Preferred Stock for each outstanding share of common stock; and (ii) 1.744 shares of Series B Preferred Stock
for each outstanding share of Series A Preferred Stock. An aggregate of 190,786 shares of Series B Preferred Stock were issued as a stock
dividend.
159
Annual
Stockholder Meeting and Redemption of Series B Preferred Stock
On February 3, 2023, we held
our previously adjourned annual meeting of stockholders (the “Annual Meeting”). Nine proposals were submitted to our stockholders
for a vote at the Annual Meeting including a proposal to increase the number of authorized shares and a proposal to effect a reverse stock
split. Upon conclusion of the Annual Meeting, all of the 190,786 shares of Series B Preferred Stock were automatically redeemed, with
the holders of the Series B Preferred Stock only having a right to receive the purchase price for the redemption, which was $0.01 per
share of Series B Preferred Stock. In addition, the proposals to increase the number of authorized shares and to effect a reverse stock
split did not pass by the requisite shareholder vote at the Annual Meeting. In light of our financing needs and our obligations to 3i,
L.P., as holder of the Series A Preferred Stock and PIPE Warrant, we conducted a private placement offering pursuant to which we issued
50,000 shares of Series C Preferred Stock.
Establishment
of Series C Preferred Stock and Sale of 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 50,000 shares of its authorized and unissued preferred stock
as Series C Preferred Stock with a stated value of $27.00 per share. On February 28, 2023, the Company filed a Certificate of Amendment
to the Series C COD (the “COD Amendment”) to clarify the terms of conversion price and floor price based on definitions provided
in the Series C COD (the COD Amendment, together with the Series C COD, the “COD”). Each share of Series B Preferred Stock
has 620 votes and is subject to certain redemption rights and voting limitations. See description in exhibit titled “ Description
of Capital Stock - Series C Preferred Stock. ”
On
February 28, 2023, we entered into a Securities Purchase Agreement (the “SPA”) with 3i, L.P. for the purchase and sale of
50,000 shares of Series C Convertible Redeemable Preferred Stock, par value of $0.0001 per share of Series C Preferred Stock at a purchase
price of $24.00 per share, for a subscription receivable in the aggregate amount equal to the total purchase price of $1.2 million (the
“Series C Offering”). The Shares are convertible into shares of the Company’s common stock, subject to the terms of
the COD. The conversion price for the Series C Preferred Stock is initially equal the lower of: (i) $0.182, which is the official closing
price of the Common Stock on the Nasdaq Global Market (as reflected on Nasdaq.com) on the Trading Day (as defined in the COD) immediately
preceding the Original Issuance Date (as defined in the COD); and (ii) the lower of: (x) the official closing price of the Common Stock
on the Nasdaq Global Market (as reflected on Nasdaq.com) on the Trading Day immediately preceding the Conversion Date or such other date
of determination; and (y) the average of the official closing prices of the Common Stock on the Nasdaq Global Market (as reflected on
Nasdaq.com) for the five (5) Trading Days immediately preceding the Conversion Date (as defined in the COD) or such other date of determination,
subject to adjustment herein (the “Conversion Price”), with the Conversion Price being no less than $0.0370 (the “Floor
Price”). 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.
160
In connection with the Series
C Offering, concurrently with the SPA, the Company entered into a registration rights agreement with 3i, L.P. (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 we fail 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 2.0% of 3i, L.P.’s subscription amount of the Shares pursuant to the
SPA. In addition, if we fail to pay any partial liquidated damages in full within seven days after the date payment, we will have to pay
interest at a rate of 18.0% per annum, accruing daily from the date such partial liquidated damages are due until such amounts, plus all
such interest thereon, are paid in full. The Company has also agreed to pay all fees and expenses incident to the performance of the RRA,
except for any broker or similar commissions. In connection with the Series C Offering, the Company and 3i, L.P. entered into a limited
waiver agreement pursuant to which 3i, L.P. confirmed that the sale and issuance of the Shares will not give rise to any, or trigger any,
rights of termination, defaults, amendment, anti-dilution or similar adjustments, acceleration or cancellation under the existing agreements
with 3i, L.P.
Special
Meeting of Stockholders
Pursuant to a proxy statement
filed with the SEC on or about March 6, 2023 (the “Proxy Statement”), the Company will be holding a Special Meeting of Stockholders
(the “Special Meeting”) virtually online on March 20, 2023. Stockholders of record of our outstanding shares of Common Stock
and Series C Preferred Stock on March 3, 2023 (the “Record Date”) will be entitled to notice of, and to vote at, the Special
Meeting and any adjournments, continuations or postponements thereof that may take place At the Special Meeting, the stockholders of Common
Stock and Series C Preferred Stock will be voting on the following proposals: (1) to approve an amendment to our Certificate of Incorporation,
as amended, to increase the number of authorized shares from 30,500,000 to 750,500,000, and to increase the number of our common stock
from 30,000,000 to 750,000,000, in substantially the form attached to the Proxy Statement as Appendix A (the “Share Increase Proposal”);
and (2) to approve an amendment to our Certificate of Incorporation, as amended, in substantially the form attached to the Proxy Statement
as Appendix B, to, at the discretion of the Board of Directors of the Company (the “Board”), effect a reverse stock split
with respect to the Company’s issued and outstanding common stock, par value $0.0001 per share, at a ratio between 1-for-20 and
1-for-35 (the “Range”), with the ratio within such Range to be determined at the discretion of the Board (the “Reverse
Stock Split Proposal”) and included in a public announcement. Under the terms of the Series C Preferred Stock, the holders thereof
may only vote on Proposal 1 (Share Increase Proposal) and Proposal 2 (Reverse Stock Split Proposal) and for no other matters. Each holder
of one share of Series C Preferred Stock is entitled to 620 votes representing 31,000,000 votes in the aggregate assuming 50,000 shares
of Series C Preferred Stock is outstanding.
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.
Impacts
of COVID-19 on our Business
In
March 2020, the World Health Organization declared COVID-19 a global pandemic. COVID-19 has had an impact on our operations as it
caused some unexpected delays in our clinical program activities as clinical trials were delayed. Management is unable to estimate the
future financial effects, if any, to our business as a result of COVID-19 because of the high level of uncertainties and unpredictable
outcomes of this disease.
We
are continuing to evaluate the impact of COVID-19 pandemic on our business and are taking proactive measures to protect the health and
safety of our employees, as well as to maintain business continuity. Based on guidance issued by federal, state, and local authorities,
we transitioned to a remote work model for our employees, effective March 16, 2020. During the 2022 restrictions due to COVID-19 have
lifted significantly and as a result, our Danish employees have returned to work. Our North American employees are continuing to work
remotely. We will continue to closely monitor and seek to comply with guidance from governmental authorities and adjust our activities
as appropriate. The COVID-19 pandemic has not directly impacted our supply chains to date however, there is a threat of potential ongoing
delays in our clinical trials due to backup at ethical committees and staff shortages causing delays at processing the trials at the
investigator sites resulting in delayed and slow patient enrollment.
161
The
ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the
full extent of potential delays or impacts on our business, our clinical trial, healthcare systems or the global economy. However, these
effects could harm our operations, and we will continue to monitor the COVID-19 situation closely.
Impact
of the Russia-Ukraine War
There
have been immense flows of refugees to Europe and Denmark is ready to facilitate and to accept refugees from the Ukraine. It is far too
early to estimate how many migrants Denmark will facilitate, but immigration officials have begun preparing to accept Ukrainian refugees. Being
a North Atlantic Treaty Organization (NATO) member, Denmark will strengthen its own national preparedness as well as that of the NATO
defense alliance. The Ukraine crisis has become a new a destabilizing factor in the Danish and global economy. It dampens growth and
increases inflation at a time when inflation and capacity utilization is already high. While the Danish economy is generally robust and
able to handle new challenges, and it is expected to enter a pause in growth. However, there are risks of a fall in activity in the Danish
economy in general. To date the war has not yet had a direct impact on our results of operations, however our costs for clinical supply
in both the United States and Europe have increase by 5% to 10% due to inflation.
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 securities.
Since our inception of our
predecessor, Allarity Therapeutics A/S, we have incurred losses and have an accumulated deficit of $82.6 million as of December 31, 2022.
Our net losses were $16.1 million and $26.6 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022,
our cash deposits of $2.0 million were determined to be insufficient to fund our current operating plan and planned capital expenditures
for the next twelve months. 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.
162
Components
of Operating Expenses
Research
and Development Expenses
Research
and development expenses include:
●
expenses
incurred under agreements with third-party contract organizations, and consultants;
●
costs
related to production of drug substance, including fees paid to contract manufacturers;
●
laboratory
and vendor expenses related to the execution of preclinical trials; and
●
employee-related
expenses, which include salaries, benefits and stock-based compensation.
We
expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized
based on an evaluation of the progress to completion of specific tasks and estimates of services performed using information and data
provided to us by our vendors and third-party service providers. Non-refundable advance payments for goods or services to be received
in future periods for use in research and development activities are deferred and accounted for as prepaid expenses. The prepayments
are then expensed as the related goods are delivered and as services are performed.
To
date, most of these expenses have been incurred to advance our lead drug 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 because 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
Comparison
of years ended December 31, 2022 and 2021
The
following table summarizes our results of operations for the years ended December 31, 2022 and 2021:
For the years ended
December
31,
Increase/
2022
2021
(Decrease)
(In thousands)
Operating expenses:
Research and development
$ 6,930
$ 14,196
$ (7,266 )
Impairment of intangible assets
17,571
—
17,571
General and administrative
9,962
12,360
(2,398 )
Total operating costs and expenses
34,463
26,556
7,907
Loss from operations:
$ (34,463 )
$ (26,556 )
$ (7,907 )
163
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 years
ended December 31, 2022 and 2021, is provided below.
For
the year ended
December 31,
Increase/
2022
2021
(Decrease)
(In
thousands)
Research
study expenses
$
1,847
$
2,329
$
(482)
Tax
credit
(711)
(875
)
164
Milestone
payments
1,417
5,000
(3,583)
Manufacturing
& supplies
350
1,105
(755)
Contractors
1,778
2,765
(987)
Patents
268
273
(5)
Staffing
1,915
3,429
(1,514)
Amortization
60
103
(43)
Other
6
67
(61)
$
6,930
$
14,196
$
(7,266)
For
the year ended December 31, 2022, versus December 31, 2021:
The
decrease of $7.3 million in research and development cost was primarily due to decreases in milestone payments of $3.6 million, staffing
costs of $1.5 million, contractor costs of $1.0 million, research study expenses of $480 thousand, other of $61 thousand, amortization
of $43 thousand and patents of $5 thousand, offset by a $164 thousand decrease in tax credits.
Overall, the decrease in research
and development costs in the year ended December 31, 2022, was because during the year ended December 31, 2021, our research and development
activity increased as activity in the clinical trials came back to a pre-pandemic level. Also, we incurred a 2021 milestone payment of
$5 million due to Novartis because of the NDA filing; and manufacturing & supplies, and contractor costs were higher in 2021 because
of preparation of our NDA filing for Dovitinib. Milestone expenses fluctuate depending upon our contracts as described in our financial
statement notes. Staffing costs decreased in 2022 primarily because stock option grants and bonuses were higher in 2021.
Impairment
of Intangible Assets
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 16%, and recognized an impairment charge of $14.0 million during the quarter ended March
31, 2022. During the quarter ended December 31, 2022, because of continued downward pressure on the Company’s common stock, we performed
a further impairment assessment on the Company’s individual intangible asset utilizing a discounted cash flow model with a WACC
of 26% and recognized a further impairment charge of $3.6 million.
164
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. Legal costs incurred in connection with patents
are accounted for as general and administrative expenses. 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 because of operating as a public company, including
expenses related to compliance with the rules and regulations of the SEC, Nasdaq, additional insurance expenses, investor relations activities
and other administrative and professional services.
General and administrative
expenses decreased by $2.4 million for the year ended December 31, 2022, compared to the year ended December 31, 2021. The decrease was
primarily due to decreased staffing costs of $3.8 million, listings expenses of $485 thousand, and other administrative costs of $168
thousand; offset by increases in insurance costs of $1.5 million, financial consultants’ fees of $245 thousand, audit and legal
fees of $224 thousand, communications expenses of $43 thousand and premises expenses of $2 thousand. Staffing costs decreased primarily
because of reduced stock option costs. Insurance costs were higher in 2022 because we incurred a full year of directors’ and officers’
insurance expenses versus one month in 2021. Listings expenses decreased in 2022 versus 2021 because our initial costs of listing on Nasdaq
in the U.S. in 2021 were higher than maintenance costs in 2022.
Other
Income (Expenses)
Other
income (expense) of $16.9 million recognized in the year ended December 31, 2022, consisted primarily of a $17.1 million fair value adjustment
of derivative and warrant liabilities, $1.8 million of other income received in connection with the sale of intangible IP assets, and
$30 thousand of interest income, offset by ($913) thousand in net foreign exchange losses, ($800) thousand penalty on our Series A preferred
stock liability, loss on investment of ($115) thousand, and ($223) thousand in interest expenses.
Other
income (expense) of $41 thousand recognized in the year ended December 31, 2021, consisted primarily of a $2.1 million fair value
adjustment to warrants and derivative liabilities, and $1.0 million in other income received in connection with our sale of intangible
IP assets to Lantern Pharma, offset by ($1.3) million in finance expenses, ($499) thousand in interest expenses, ($495) thousand in loss
on our equity investment in Lantern Pharma, Inc., a ($474) thousand change in fair value of convertible debt, a ($141) thousand loss
on extinguishment of convertible debt, and net foreign exchange losses of ($95) thousand.
Changes in the fair value
of our derivative and warrant liabilities and convertible debt are measured using level 3 inputs as described in our consolidated financial
statements.
Income
taxes
During the years ended December
31, 2022 and 2021, we recognized $1.5 million and ($133) thousand in income tax recovery (expense) respectively.
Liquidity,
Capital Resources and Plan of Operations
Since our inception through
December 31, 2022, our operations have been financed primarily by the sale of preferred stock, convertible promissory notes, and the sale
and issuance of our ordinary shares. As of December 31, 2022, we had $2.0 million in cash, and an accumulated deficit of $82.6 million.
In
the year ended December 31, 2022, we received $1.0 million in proceeds from convertible debt. We also paid $1.5 million in cash on the
conversion of Series A preferred shares as well as $800 thousand in penalties on the Series A preferred share liability. Our investing
activities included the receipt of $809 thousand on the sale of IP and expenditures of $18 thousand on the purchase of property and equipment.
In
the year ended December 31, 2021, we received $20.0 million in gross proceeds from the issuance of Series A preferred stock, $14.9 million
in gross proceeds from the issuance of shares, and $1.1 million in proceeds from convertible debt. We also received and repaid a bridge
loan of $2.9 million, and we received $1.0 million in proceeds from the sale of IP.
165
Our
primary use of cash is to fund operating expenses, which consist of research and development as well as regulatory expenses related to
our most advanced therapeutic 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 December 31, 2022, the Company’s cash deposits of $2.0 million were determined to be insufficient to fund its current operating
plan and planned capital expenditures for at least the next 12 months. We estimate that as of the date of this filing, our cash reserves
are sufficient for approximately 3 months. 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. 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 when needed would have a negative impact on its
business, results of operations and financial condition and its ability to develop its product candidates.
Cash
Flows
The
following table summarizes our cash flows for the years indicated:
(In
thousands)
Year Ended
December 31,
2022
Year Ended
December 31,
2021
Net Cash used in operating activities
$ (16,817 )
$ (14,886 )
Net Cash provided by investing activities
791
1,005
Net Cash (used in) provided by financing activities
(1,311 )
33,818
Net (decrease) increase in cash
$ (17,337 )
$ 19,937
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Operating
Activities
During
the year ended December 31, 2022, cash used in operating activities of $16.8 million was attributable to a net loss of $16.1 million,
$400 thousand in net non-cash charges, and a $300 thousand change in net operating assets and liabilities.
The
non-cash charges consisted of intangible asset impairment of $17.6 million, stock-based compensation of $1.7 million, non-cash interest
of $138 thousand, loss on investment of $115 thousand, depreciation and amortization of $60 thousand, and unrealized loss on foreign
currency of $450 thousand, offset by a $17.1 million fair value adjustment to derivative liabilities, a $1.8 million gain from the sale
of IP and deferred tax benefit of $1.6 million. The change in operating assets and liabilities of $300 thousand was primarily due to
a $4.7 million decrease in accrued liabilities, an increase in prepaid expenses of $618 thousand, a decrease in income taxes payable
of $19 thousand, a $1.1 million increase in other current assets, and a decrease in operating lease liability of $99 thousand, offset
by a $6.2 million increase in accounts payable.
During the year ended December
31, 2021, cash used in operating activities of $14.9 million was attributable to a net loss of $26.6 million, offset by $6.9 million
in net non-cash charges and a $5.6 million change in net operating assets and liabilities.
The
non-cash charges consisted of stock-based compensation of $6.4 million, deferred tax expense of $20 thousand, non-cash interest of $238
thousand, loss on investment of $495 thousand, non-cash finance costs of $1.3 million, an increase in fair value adjustment of convertible
debt of $474 thousand, loss on extinguishment of convertible debt of $141 thousand, depreciation and amortization of $106 thousand, and
loss on foreign currency of $95 thousand, offset by a $2.1 million fair value adjustment to derivative liabilities and $1.0 million gain
from the sale of IP. The change in operating assets and liabilities of $5.6 million was primarily due to a $7.2 million increase in accrued
liabilities, a decrease in prepaid expenses of $130 thousand, and a decrease in income taxes receivable of $8 thousand, offset by a $1.3
million decrease in accounts payable, a $330 thousand increase in other current assets, and a decrease in operating lease liability of
$124 thousand.
Investing
Activities
During
the year ended December 31, 2022, the Company received $809 thousand in proceeds from the sale of IP and invested $18 thousand in property
and equipment.
During
the year ended December 31, 2021, the Company received $1.0 million in proceeds from the sale of IP.
Financing
Activities
During
the year ended December 31, 2022, cash used by financing activities of $1.3 million consisted of $1.0 million in proceeds from the issuance
of convertible debt offset by $1.5 million in cash paid on the conversion of Series A preferred shares and $800 thousand in penalties
on the Series A preferred share liability.
During
the year ended December 31, 2021, cash provided by financing activities of $33.8 million was related to proceeds of $20 million from
the sale of Series A preferred stock, $14.9 million from common stock issuance, and convertible loan proceeds of $1.1 million, offset
by $1.6 million in Series A preferred stock issuance costs, $484 thousand in share issuance costs, and $84 thousand repayment of our
line of credit. We also received and repaid $2.9 million in loan funding during the year ended December 31, 2021.
167
Contractual
Obligations and Commitments
The
following table summarizes our commitments and contractual obligations as of December 31, 2022:
Payments Due By Period
Total
Less than 1 Year
1 – 3 Years
3 – 5 Years
More than 5 Years
(In thousands)
Milestone payments
$ 4,900
$ 4,900
$ —
$ —
$ —
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.
Operating
Capital and Capital Expenditure Requirements
We
believe that our existing cash and cash equivalents as of the date of this report, based on our anticipated expenditures and commitments
for the next twelve months including contractual obligations for milestone payments, will not enable us to fund our operating expenses
and capital expenditure requirements for at least twelve (12) months from the date of this report. Our estimate as to how long we expect
our cash to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available
capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause
us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.
In November 2022, we entered
into a Secured Note Purchase Agreement with 3i, LP for a bridge loan to extend our cash runaway beyond December 31, 2022, in order to
provide us with more time to complete the process of amending its Certificate of Incorporation to increase our authorized share capital
and proposed reverse stock split to facilitate additional capital investments (the “Bridge Loan”). Under the Secured Note
Purchase Agreement, we authorized the sale and issuance of three promissory notes, with the first note in an aggregate principal amount
of $350,000 to be issued at closing, which was received in November 2022; the second note in the principal amount of $1,666,640 to be
issued at closing and which represents the payment of $1,666,640 due to 3i, LP in Alternative Conversion Floor Amounts, as defined in
the Series A Certificate of Designations, that began to accrue on July 14, 2022; and the third note in an aggregate principal amount of
$650,000 with respect to a new loan to be funded upon our filing of a registration statement with SEC in connection with a registered
offering. As of January 28, 2023, all of the notes have been issued and are outstanding.
On February 3, 2023, we held
our previously adjourned annual meeting of stockholders (the “Annual Meeting”). Nine proposals were submitted to our stockholders
for a vote at the Annual Meeting including a proposal to increase the number of authorized shares and a proposal to effect a reverse stock
split. Such proposals did not pass by the requisite stockholder vote at the Annual Meeting. In light of our financing needs and our obligations
to 3i, L.P. as holder of the Series A Preferred Stock and PIPE Warrant, we conducted the a private placement offering for the purchase
and sale of 50,000 shares of Series C Preferred Stock, par value of $0.0001 per share at a purchase price of $24.00 per share, for a subscription
receivable in the aggregate amount equal to the total purchase price of $1.2 million. The proceeds were used to fund operating expenses.
168
As
discussed before, we do not have sufficient cash to support our anticipated expenditures and commitments and the Company is seeking capital
to support its current and planned operations.
No assurances can be given
that any ongoing discussions will be successful or that we will be able to raise additional capital on favorable terms, or at all. Our
failure to raise capital or enter into other such arrangements when needed would have a negative impact on our business, results of operations
and financial condition and our ability to maintain current operations and develop our product candidates which in turn may force us to
seek protection under the U.S. bankruptcy laws. We are actively exploring raising capital through equity and debt financing which may
require collateralizing debt financing with our assets. However, if the share increase and/or reverse stock split proposals are not approved
by the required stockholder vote, we will be limited in the ways we can raise additional capital.
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.
169
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 audited condensed consolidated financial statements for
the years ended December 31, 2022, and 2021, which have been prepared in accordance with U.S. GAAP. 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 consolidated financial statements and the reported amounts of revenues
and expenses during the reporting years. Significant estimates and assumptions reflected in these consolidated financial statements include,
but are not limited to, the fair value of the Series A preferred shares, warrants, convertible debt 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 consolidated financial statements. Actual results could differ from those estimates or
assumptions.
While our significant accounting
policies are described in the notes to our consolidated financial statements for the years ended December 31, 2022, and 2021, we believe
that the following critical accounting policies are most important to understanding and evaluating our reported financial results.
Use
of Estimates
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 consolidated financial statements
and the reported amounts of revenues and expenses during the reporting years. Significant estimates and assumptions reflected in these
consolidated financial statements include, but are not limited to, the fair value of the Series A preferred shares, warrants, convertible
debt, 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 consolidated financial
statements. Actual results could differ from those estimates or assumptions.
Acquired in-process research and development
(IPR&D)
Acquired IPR&D represents
the fair value assigned to research and development assets that the Company acquired as part of a business combination and have not been
completed at the acquisition date. The fair value of IPR&D acquired in a business combination is recorded on the consolidated balance
sheets at the acquisition-date fair value and is determined by estimating the costs to develop the technology into commercially viable
products, estimating the resulting revenue from the projects, and discounting the projected net cash flows to present value. IPR&D
is not amortized, but rather is reviewed for impairment on an annual basis or more frequently if indicators of impairment are present,
until the project is completed, abandoned, or transferred to a third-party. Management assesses its acquired IPR&D for impairment
at year end as well as when events and circumstances indicate there is a potential impairment. Significant quantitative indicators considered
are the Company’s market capitalization, market share, length of remaining clinical trials, and projected revenue per treatment.
The projected discounted cash flow models used to estimate the fair value of partnered assets and cost approach model used to estimate
proprietary assets as part of the Company’s IPR&D reflect significant assumptions regarding the estimates a market participant
would make to evaluate a drug development asset, including the following:
●
Estimates of obsolescence of development expenditure;
●
Probability of successfully completing clinical trials and obtaining regulatory approval;
●
Estimates of future cash flows from potential milestone payments and royalties related to out-licensed product sales; and
●
A discount rate reflecting the Company’s weighted average cost of capital and specific risk inherent in the underlying assets.
Once brought into use, intangible
assets are amortized over their estimated useful economic lives using the economic consumption method if anticipated future revenues can
be reasonably estimated. The straight-line method is used when revenues cannot be reasonably estimated. The Company has recorded impairment
losses of $17,571 on its intangible assets in the year ended December 31, 2022.
Research
contract costs and accruals
The
Company has entered into various research and development contracts with companies both inside and outside of the United States.
These agreements are generally cancellable, and related payments are recorded as research and development expenses as incurred. The Company
records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes
progress of the studies or trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments
and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s
estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.
170
Convertible
debt instruments
The
Company follows ASC 480-10, Distinguishing Liabilities from Equity in its evaluation of the accounting for a hybrid
instrument. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share
that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be
classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely
or predominantly on any one of the following: (a) a fixed monetary amount known at inception; (b) variations in something other than
the fair value of the issuer’s equity shares; or (c) variations inversely related to changes in the fair value of the issuer’s
equity shares. Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives and are carried as a
liability at fair value at each balance sheet date with remeasurements reported in change on fair value expense in the accompanying Statements
of Operations and Comprehensive Loss.
Additionally,
the Company accounts for certain convertible debt (“Convertible Notes”) issued under the fair value option election of ASC
825, Financial Instruments wherein the financial instrument is initially measured at its issue-date estimated fair value and
then subsequently re-measured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value adjustment
is recognized as other income (expense) in the accompanying consolidated statements of operations and the portion of the fair value adjustment
attributed to a change in the instrument-specific credit risk is recognized as a component of other comprehensive loss. Convertible Notes
are settled with shares at fair value of the stock issued with any differences recorded to other income (expense), as a gain or (loss)
on extinguishment.
Warrants
When the Company issues warrants
it evaluates the proper balance sheet classification to determine classification as either equity or as a derivative liability on the
consolidated balance sheets. In accordance with ASC 815-40, Derivatives and Hedging-Contracts in the Entity’s Own Equity (“ASC
815-40”), the Company classifies a warrant as equity so long as it is “indexed to the Company’s equity” and several
specific conditions for equity classification are met. A warrant is not considered indexed to the Company’s equity, in general,
when it contains certain types of exercise contingencies or adjustments to exercise price. If a warrant is not indexed to the Company’s
equity or it has net cash settlement that results in the warrants to be accounted for under ASC 480, Distinguishing Liabilities from Equity,
or ASC 815-40, it is classified as a derivative liability, which is carried on the Consolidated Balance Sheet at fair value with any changes
in its fair value recognized immediately in the Consolidated Statement of Operations and Comprehensive Loss. As of December 31, 2022 and
2021, the Company had warrants outstanding for share-based compensation that were classified as equity, and outstanding investor warrants
that were classified as derivative liabilities and classified as “Warrant liabilities” in the Consolidated Balance Sheets.
Derivative financial instruments
The
Company does not use derivative instruments to hedge exposures to interest rate, market, or foreign currency risks. The Company evaluates
all its financial instruments to determine if such instruments contain features that qualify as embedded derivatives. Embedded derivatives
must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions
surrounding the bifurcation of embedded derivatives depends on the nature of the host contract. Bifurcated embedded derivatives are recognized
at fair value, with changes in fair value recognized in the Consolidated Statements of Operations and Comprehensive Loss each reporting
period. Bifurcated embedded derivatives are classified as “Derivative liabilities” in the Consolidated Balance Sheets.
Share-based
compensation
The
Company accounts for share-based compensation in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”).
ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant. The value of the portion of
the award that is ultimately expected to vest is recognized as an expense over the requisite service period in the Company’s consolidated
statements of operations and comprehensive loss.
171
The
Company records the expense for option awards using either a graded or straight-line vesting method. The Company accounts for forfeitures
as they occur. For share-based awards granted to employees, directors and non-employee consultants, the measurement date is the date
of grant. The compensation expense is then recognized over the requisite service period, which is the vesting period of the respective
award.
The
Company reviews stock award modifications when there is an exchange of original award for a new award. The Company calculates the incremental
fair value based on the difference between the fair value of the modified award and the fair value of the original award immediately
before it was modified. The Company immediately recognizes the incremental value as compensation cost for vested awards and recognizes,
on a prospective basis over the remaining requisite service period, the sum of the incremental compensation cost and any remaining unrecognized
compensation cost for the original award on the modification date.
The
fair value of stock options (“options”) on the grant date is estimated using the Black-Scholes option-pricing model using
the single-option approach. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions, including
the option’s expected term and the price volatility of the underlying stock, to determine the fair value of the award. The Company
applies the Black-Scholes model as it believes it is the most appropriate fair value method for all equity awards.
Recently
Issued Accounting Pronouncements
See
the sections titled “ Recently adopted accounting pronouncements” in Note 2 (cc) and “Recently issued
accounting pronouncements ” in Note 2 (dd) to the Company’s consolidated financial statements for the year ended
December 31, 2022, appearing elsewhere herein.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The
Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required
under this item.