Allarity Therapeutics, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, as of the end of the period covered by this report, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Act of 1934. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be included in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, relating to the Company, including our consolidated subsidiaries, and was made known to them by others within those entities, particularly during the period when this report was being prepared. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2022 because of the material weaknesses identified in our internal controls over financial reporting. Management’s Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. As of December 31, 2022, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). A material weakness is a control deficiency (within the meaning of Public Company Accounting Oversight Board (United States) Auditing Standard No. 5) or a combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Based on such assessment, management concluded that as of December 31, 2022, our internal control over financial reporting was not effective. Management has identified the following material weakness: In connection with the audit of our financial statements for the years ended December 31, 2022 and 2021, we identified material weaknesses in our internal controls over financial reporting because we did not have a formal process for period end financial closing and reporting, we historically had insufficient resources to conduct an effective monitoring and oversight function independent from our operations and we lack accounting resources and personnel to properly account for accounting transactions such as the issuance of warrants with a derivative liability component. In particular, the material weaknesses identified were: ● a lack of accounting resources required to fulfill US GAAP and SEC reporting requirements; 174 ● a lack of comprehensive US GAAP accounting policies and financial reporting procedures and personnel; ● a lack of adequate procedures and controls to appropriately account for accounting transactions including liability and the valuation allowance on the deferred tax asset relating to the net operating losses; and ● a lack of segregation of duties given the size of our finance and accounting team. We have implemented and are continuing to implement various measures to address the material weaknesses identified; these measures include: ● as of June 30, 2022, upon separation with our former Chief Financial Officer, our Director of Financial Reporting, a CPA (Illinois) in 2021 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. With this hire we are continuing to address our ongoing development of our comprehensive US GAAP accounting policies, financial reporting procedures and internal controls over financial reporting; ● retaining independent US GAAP consulting services to assist with the accounting treatment of complex financial instruments; and ● engaged an independent US based tax consulting firm. A significant deficiency is a control deficiency, or a combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with US GAAP such that there is more than a remote likelihood that a misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected by our employees. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of our annual or interim financial statements will not be prevented or detected by our employees. In response, we have begun the process of evaluating our internal control over financial reporting and to address the material weaknesses identified. We intend to continue to take steps to remediate the material weaknesses described above and further evolve our accounting processes, controls, and reviews. We plan to continue to assess our internal controls and procedures and intend to take further action as necessary or appropriate to address any other matters we identify or are brought to our attention. We believe we are making progress toward achieving the effectiveness of our internal controls and disclosure controls. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the material weaknesses in our internal controls over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness. We may also conclude that additional measures may be required to remediate the material weaknesses in our internal controls over financial reporting, which may necessitate further action. This Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding the effectiveness of the Company’s internal control over financial reporting, as such report is not required due to the Company’s status as a smaller reporting company. Change in Internal Control over Financial Reporting Except as discussed above, there have been no changes in the Company’s internal controls over financial reporting during the year ended December 31, 2022 other than as noted above, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENTS INSPECTIONS Not Applicable. 175 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors, Executive Officers and Significant Employees The following table and text set forth the names and ages of our current directors and executive officers as of February 1, 2023. The number of directors is fixed at five and is divided into three classes, Class I, Class II and Class III, with members of each class serving staggered three-year terms. There are currently four members on our Board of Director. Our directors receive compensation in the form of cash and equity grant for their services on the Board of Directors. Name Age Position(s) Executive Officers James G. Cullem, J.D. 54 Chief Executive Officer, Chief Business Officer, Senior Vice President, Corporate Development and Director Joan Brown 69 Chief Financial Officer and Director of Financial Reporting Thomas H. Jensen 44 Senior Vice President, Investor Relations and Director Steen Knudsen, Ph.D. 61 Chief Scientific Officer Marie Foegh, M.D. 80 Chief Medical Officer Non-Employee Directors David Roth, M.D . (1) 60 Director Gerald McLaughlin (2) 55 Director (1) Member of our compensation committee and nominating and corporate governance committee. (2) Chair of our audit committee, compensation committee and nominating and corporate governance committee. Business Experience Executives James G. Cullem, J.D. was appointed to the Board of Directors on July 7, 2022. Mr. Cullem has been our Interim Chief Executive Officer since June 2022, and our Chief Business Officer and Senior Vice President, Corporate Development since July 2021. Mr. Cullem is an experienced biotechnology executive and previously served as the Vice President, Corporate Development of our predecessor from August 2014 to September 2019. From 2017 to 2020, Mr. Cullem was the co-founder and a board member of 2X-Oncology, Inc. (later Oncology Venture US, Inc.), our subsidiary. From July 2014 to September 2018, he was the Vice President of Corporate Development of the Medical Prognosis Institute, an international precision medicine company with a mission to help find personalized cures for cancer. He brings 20+ years of diverse experience in life sciences organizational management, business development & licensing, intellectual property & technology transfer/commercialization, partnership creation/management, and strategic planning as a member of executive teams. During his tenure, Mr. Cullem has been responsible for the identification and acquisition of most of our lead clinical oncology assets, including big pharma therapeutics dovitinib (from Novartis) and stenoparib (from Eisai). He leads the company’s business development discussions as well as clinical program out-licensing and partnership negotiations, both in the U.S. and worldwide. Mr. Cullem has experience in designing and negotiating a broad span of life science deals, has founded and led several early-stage biotech companies, and is a catalyst for businesses taking the next step in the fields of precision medicine and predictive/companion diagnostics, novel drug targets, proteomics and genomics, and clinical-stage cancer therapeutic development. He holds a B.S. degree in Biochemistry from The University of California at Davis, a Juris Doctorate (JD) degree from The University of New Hampshire Franklin Pierce School of Law, specializing in patent & I.P. law, and is a registered patent attorney before the United States Patent & Trademark Office. Based on the above qualifications and Mr. Cullem’s extensive experience in business development within the life sciences industry, the Company believes that Mr. Cullem is well qualified to serve on our Board of Directors. 176 Joan Brown. Ms. Brown has been our Interim Chief Financial Officer since July 2022 and has served as our Director of Financial Reporting since September 21, 2021. From June 2016 to May 2021, Ms. Brown provided financial reporting services as a consultant to various publicly listed and private companies, including as our financial reporting consultant (contract) from September 2020 to April 2021. Ms. Brown’s consulting experience includes public company reporting in accordance with US GAAP and IFRS, SEC correspondence, tax compliance, and audit and operations support. From August 2018 to May 2019, Ms. Brown was a senior manager at MNP, LLP, Chartered Professional Accountants, a chartered accounting firm in Vancouver, B.C., Canada, where she was responsible for auditing Canadian and US publicly listed companies pursuant to the requirements of CPAB and PCAOB, respectively. From November 2014 to May 2016, Ms. Brown was a director of Prudential Supervision for the Financial Institutions Commission (FICOM) in Vancouver, B.C., Canada. Ms. Brown received her degree in Business Administration from Simon Fraser University in 1986, and is a Chartered Accountant in Canada (CPA, CA) (since 1998) and a Registered Certified Public Accountant licensed in the State of Illinois (since 2004). Thomas H. Jensen was appointed to the Board of Directors on July 7, 2022. Mr. Jensen has been our Senior Vice President, Investor Relations since July 2022, and was previously our Senior Vice President, Information Technology since July 2021, and the Senior Vice President, Information Technology of Allarity Therapeutics A/S, our predecessor, since June 2020. Since January 2006, Mr. Jensen has served as the Chief Technology Officer of the Medical Prognosis Institute. Mr. Jensen previously served as the Chief Technology Officer of our predecessor from 2004 to June 2020. Mr. Jensen co-founded Allarity Therapeutics A/S in 2004. Mr. Jensen also established and currently leads our laboratories in Denmark. Alongside nurturing our global laboratories, Mr. Jensen is instrumental in building our investor relations operations, securing operational financing, and fostering the business growth of Allarity Therapeutics. Amongst Mr. Jensen’s accolades are his inventions of molecular biological guidelines combined with techniques for high quality reproducible RNA extraction and downstream processing. This allows for high resolution analysis of cancer patients’ biopsies. Mr. Jensen’s inventions are an important foundation of the DRP ® -Drug Response Prediction platform. Mr. Jensen holds a Bachelor of Science degree in Biology from the Technical University of Denmark and conducted further studies in Biology at the University of Copenhagen. The Company believes that Mr. Jensen is well qualified to serve on our Board of Directors based on the above qualifications and his experience in investor relations, business operations and strong track record with the ongoing development of the Company. Steen Knudsen, Ph.D. has been our Chief Scientific Officer since July 2021. Dr. Knudsen is a co-founder of our predecessor Allarity Therapeutics A/S and the inventor of DRP ® , the Drug Response Prediction Platform, which is our core technology and companion diagnostics platform, and was the Chief Scientific Officer of Allarity Therapeutics A/S since 2006. Dr. Knudsen is also a former Professor of Systems Biology with extensive expertise in mathematics, bioinformatics, biotechnology, and systems biology. He co-founded our predecessor in 2004 and served as its CEO from 2004 to 2006. Dr. Knudsen also previously served as a member on our predecessor’s Board of Directors from 2016 to 2020. In addition, Dr. Knudsen also currently serves as the Chief Executive Officer of MPI, Inc., our operating subsidiary in the U.S. Dr. Knudsen holds an M.Sc. degree in Engineering from the Technical University of Denmark and a Ph.D. degree in Microbiology from the University of Copenhagen. He received Postdoctoral training in computational biology from Harvard Medical School. Marie Foegh, M.D. has been our Chief Medical Officer since July 2021. Dr. Foegh was the Chief Medical Officer of Allarity A/S, our predecessor, since January 2018, and previously served as Chief Medical Officer of our subsidiary, 2X-Oncology, Inc. (later Oncology Venture US, Inc.) from 2016 to 2018. Dr. Foegh brings thirty years of experience in the pharmaceutical and biotechnology industries to our senior management team and has a strong track record leading successful clinical development of therapeutics, including regulatory and medical affairs. She is also Adjunct Clinical Professor at Georgetown University, Department of Medicine and Adjunct Professor at New York Medical College, Department of Pharmacology. Dr. Foegh was the Chief Medical Officer and cofounder of Ell Imaging, LLC, an ultrasound device company, from 2014 to 2016. She serves as the Chair of the Board of Directors at the device company, Injecto A/S, since 2014. Dr. Foegh leads clinical development of our current precision medicine oncology pipeline, including our lead assets stenoparib, dovitinib, and IXEMPRA ® . Dr. Foegh previously led the successful development and regulatory approval of more than 10 novel drug products in the U.S. and U.K., within oncology, endocrinology and cardiology. Dr. Foegh has fluency in regulatory interactions with the FDA and EMEA, including INDs, NDAs, IDEs (for predictive biomarkers and/or companion diagnostics), and product issues. She also manages interactions with the oncology key opinion leaders including our Scientific Advisory Board. Dr. Foegh holds both a Medical Doctorate (M.D.) degree and a Doctorate of Science (Dr.Sc.) degree from Copenhagen University, Denmark, and is a member of the American College of Physicians (ACP), American Medical Association (AMA), the American Society of Clinical Oncology, and the American College of Obstetricians and Gynecologists (ACOG). 177 Non-Employee Directors David A. Roth, M.D. was appointed to the Board of Directors in July 2022. Dr. Roth is currently the Chief Medical Officer of Syros Pharmaceuticals, Inc. (Nasdaq: SYRS) since December 2015. Dr. Roth has served in numerous executive management positions, including as Chief Medical Officer, executive vice president and senior vice president with Infinity Pharmaceuticals, Inc., and as Vice President of Early Development and interim Co-head of Clinical Development with Pfizer Inc. in its oncology business unit. Prior to joining the pharmaceutical industry, Dr. Roth’s experience included over ten years in research and clinical practice as an academic hematologist, and he served on the full-time faculty at Harvard Medical School and Beth Israel Deaconess Medical Center in Boston. Dr. Roth completed his fellowship in Hematology and Oncology at the New England Medical Center in Boston, and his residency at the New England Deaconess Hospital in Boston. Dr. Roth received his Bachelor of Science degree from the Massachusetts Institute of Technology and his medical degree from Harvard Medical School in the Harvard-M.I.T. Division of Health Sciences and Technology. As an accomplished academic researcher and physician-scientist with more than 25 years of experience in corporate leadership positions in the biotechnology industry and academic clinical research and based on Dr. Roth’s strong track record of successful oncology and hematology drug development, including in areas of biomarker-directed targeted therapies, the Company believes Dr. Roth is qualified to serve on our Board of Directors. Gerald McLaughlin was appointed to the Board of Directors in October 2022 and has been our Chairman since January 2023. Mr. McLaughlin has extensive experience serving as a senior executive and board member in the biopharmaceutical industry, including financings, mergers & acquisitions, licensing, product development, commercialization, lifecycle management, and operations. Mr. McLaughlin is currently the chief executive officer and board member of Life Biosciences LLC, a biotechnology company, since 2021. Previously, Mr. McLaughlin was the President and CEO for Neos Therapeutics, Inc., a commercial stage pharmaceutical company from 2018 to 2021. He also served as president and CEO of AgeneBio, Inc., a clinical-stage biopharmaceutical company developing therapies for neurological and psychiatric diseases from 2014 to 2018. Mr. McLaughlin holds a B.A. in Economics from Dickinson College and an MBA from the Villanova School of Business. Based on the above qualifications and Mr. McLaughlin’s extensive experience in leading operational and executive management roles in the life sciences industry, the Company believes Mr. McLaughlin is well qualified to serve on our Board of Directors. Involvement in Certain Legal Proceedings To the best of our knowledge, during the past ten years, none of our directors or executive officers were involved in any of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. Family Relationships and Arrangements There are no family relationships among any of our directors or named executive officers. There are no arrangements or understandings with any other person under which our directors and officers was elected or appointed as a director or named executive officer. 178 Director Independence As required under the Nasdaq listing standards, a majority of the members of a listed company’s Board of Directors must qualify as “independent,” as affirmatively determined by the Board of Directors. Our Board of Directors consults with our legal counsel to ensure that its determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in Nasdaq listing standards, as in effect from time to time. Consistent with these considerations, after review of all relevant identified transactions or relationships between each of our directors, or any of his or her family members, and the Company, its senior management and its independent auditors, our Board of Directors affirmatively determined that all of our directors, except Messrs. Cullem and T. Jensen who are not considered independent because they are our executive officers, are independent directors as defined by Rule 5605(a)(2) of the Nasdaq Listing Rules. Role of the Board of Directors and Composition Our Board of Directors oversees and provides guidance for our business and affairs. Our Board of Directors oversees the development of our strategy and business planning process and management’s implementation of them and oversees management. Mr. McLaughlin serves as Chair of our Board of Directors. The primary responsibilities of our Board of Directors are to provide oversight, strategic guidance, counseling, and direction to our management. Our Board of Directors meets on a regular basis and additionally as required under the Nasdaq rules. In accordance with the terms of our Bylaws, subject to the rights of holders of any series of preferred stock, the Board of Directors may establish the authorized number of directors from time to time by resolution. The Board of Directors consists of four members and is divided into three classes, Class I, Class II and Class III, with members of each class serving staggered three-year terms. Our Board of Directors is divided into the following classes: ● Class I, consists of Mr. Jensen; ● Class II, consists of Dr. Roth and Mr. McLaughlin; and ● Class III, consists of Mr. Cullem. Board of Directors Leadership Structure The positions of Chairman of our Board of Directors and Chief Executive Officer are separated. The Chairman of our Board of Directors has authority, among other things, to call and preside over Board of Directors meetings, to set meeting agendas and to determine materials to be distributed to our directors. The Chairman has substantial ability to shape the work of our Board of Directors. We believe that separation of the positions of chairman and chief executive officer reinforces the independence of our Board of Directors in its oversight of our business and affairs. In addition, we believe that separation of the positions of chairman and chief executive officer creates an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of our Board of Directors to monitor whether management’s actions are in our best interests and in the best interests of our stockholders. As a result, we believe that having the positions of chairman and chief executive officer separated can enhance the effectiveness of our Board of Directors as a whole. 179 In addition, we have a separate chair for each committee of our Board of Directors. The chair of each committee is expected to report to our Board of Directors from time to time, or whenever so requested by our Board of Directors, on the activities of the committee he or she chairs in fulfilling its responsibilities as detailed in its respective charter or specify any shortcomings should that be the case. Board of Directors Diversity Our Board of Directors is committed to fostering a diversity of backgrounds and perspectives so that our Board of Directors positions our company for the future. The members of our Board of Directors represent a mix of ages, genders, races, ethnicities, geographies, cultures, and other perspectives that we believe expand our Board of Directors’ understanding of the needs and viewpoints of our partners, employees, stockholders, and other stakeholders. The matrix below provides certain information regarding the composition of our Board of Directors as of the date of this report. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Stock Market Rule 5605(f). Board of Directors Diversity Matrix Female Male Part I: Gender Identity Directors 0 4 Part II: Demographic Background African American or Black 0 0 White 0 4 Director Independence As required under the Nasdaq listing standards, a majority of the members of a listed company’s Board of Directors must qualify as “independent,” as affirmatively determined by the Board of Directors. Our Board of Directors consults with our legal counsel to ensure that its determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in Nasdaq listing standards, as in effect from time to time. Consistent with these considerations, after review of all relevant identified transactions or relationships between each of our directors, or any of his or her family members, and the Company, its senior management and its independent auditors, our Board of Directors affirmatively determined that all of our directors, except Messrs. Cullem and T. Jensen who are not considered independent because they are our executive officers, are independent directors as defined by Rule 5605(a)(2) of the Nasdaq Listing Rules. 2023 Change in Board of Directors On January 19, 2023, Mr. Moore and Ms. Maderis resigned as directors, including their positions on each committee on which they serve and, effective February 4, 2023, Mr. Soren Gade Jensen also resigned all of his board positions. The resignations by Messrs. Moore and Jensen, and Ms. Maderis are for personal reasons and not due to any disagreement with the Company’s management team or the Company’s Board on any matter relating to the operations, policies or practices of the Company or any issues regarding the Company’s accounting policies or practices. As a result of the resignations by Mr. Moore and Ms. Maderis, on January 19, 2023, the Board of the Company decreased the fixed number of authorized directors on the Board from seven to five. In addition, Mr. McLaughlin was appointed as chairperson of the Board and as a member of the Nominating Committee. Dr. Roth, was appointed as a member of the Compensation Committee and a member of the Nominating Committee. Board of Directors Committees Our Board of Directors has established an Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee comprised of the members identified below. The Board of Directors has also adopted charters for each of these committees, which comply with the applicable requirements of current SEC and Nasdaq rules. Copies of the charters for each committee are available at www.allarity.com . Our Board of Directors has determined that all committee members are independent under applicable Nasdaq and SEC rules for committee memberships. 180 Board of Directors Oversight of Risk One of the key functions of our Board of Directors is informed oversight of our risk management process. Our Board of Directors does not have a standing risk management committee, but rather administers this oversight function directly through the Board of Directors as a whole, as well as through various standing committees of our Board of Directors that address risks inherent in their respective areas of oversight. In particular, our Board of Directors is responsible for monitoring and assessing strategic risk exposure, and our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors compliance with legal and regulatory requirements and reviews our information technology and data security policies and practices and assesses cybersecurity related risks. The Nominating and Corporate Governance Committee monitors the effectiveness of our corporate governance practices, including oversight of processes and procedures designed to prevent illegal or improper conduct. The Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. Audit Committee The Audit Committee consists of Mr. McLaughlin whom the Board of Directors has determined satisfies the independence requirements under Nasdaq listing standards and Rule 10A-3(b)(1) of the Exchange Act. The chair of the Audit Committee is Dr. McLaughlin, who the Board of Directors has determined is an “Audit Committee financial expert” within the meaning of SEC regulations. Each member of the Audit Committee can read and understand fundamental financial statements in accordance with applicable requirements. In arriving at these determinations, the Board of Directors has examined each Audit Committee member’s scope of experience and the nature of their employment in the corporate finance sector. The primary purpose of the Audit Committee is to provide assistance to our Board of Directors in fulfilling the Board of Directors’ responsibility to our stockholders relating to our accounting and financial reporting practices, system of internal controls, the audit process, the quality and integrity of our financial reporting, and our process for monitoring compliance with laws and regulations and our code of conduct. Specific responsibilities of the Audit Committee are to: ● Appoint, compensate, and oversee the work of any independent auditor; ● Resolve any disagreements between management and the independent auditor regarding financial reporting; ● Pre-approve all audit and permitted non-audit services by the independent auditor; ● Retain independent counsel, independent registered accounting firm, or other advisors or consultants to advise and assist the Audit Committee in carrying out its duties, without needing to seek approval for the retention of such advisors or consultants from the Board of Directors, and determine the appropriate compensation for any such advisors or consultants retained by the Audit Committee; ● Seek any information it requires from our employees or any direct or indirect subsidiary of ours (each, a “Subsidiary”), all of whom are directed to cooperate with the Audit Committee’s requests, or external parties; ● Meet with any of our officers or employees (or officers or employees of any Subsidiary), our independent auditor or outside counsel, as necessary, or request that any such persons meet with any members of, or advisors or consultants to, the Audit Committee; and ● Oversee that management has established and maintained processes to assure our compliance with applicable laws, regulations and corporate policy. 181 Compensation Committee The Compensation Committee consists of Dr. Roth and Mr. McLaughlin. The chair of the Compensation Committee is Mr. McLaughlin. The Board of Directors has determined that each member of the Compensation Committee is independent under the Nasdaq listing standards and a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. The primary purpose of the Compensation Committee is to discharge the responsibilities of the Board of Directors relating to compensation of our directors and executive officers, to assist the Board of Directors in establishing appropriate incentive compensation and equity-based plans and to administer such plans, and to oversee the annual process of evaluation of the performance of our management. Specific responsibilities of the Compensation Committee are to: ● Establish a compensation policy for executive officers designed to (i) enhance our profitability and increase stockholder value, (ii) reward executive officers for their contribution to our growth and profitability, (iii) recognize individual initiative, leadership, achievement, and other contributions and (iv) provide competitive compensation that will attract and retain qualified executives. ● Subject to variation where appropriate, the compensation policy for executive officers shall include (i) base salary, which shall be set on an annual or other periodic basis, (ii) annual or other time or project based incentive compensation, which shall be awarded for the achievement of predetermined financial, project, research or other designated objectives applicable to us as a whole and of the executive officers individually and (iii) long-term incentive compensation in the forms of equity participation and other awards with the goal of aligning, where appropriate, the long-term interests of executive officers with those of our stockholders and otherwise encouraging the achievement of superior results over an extended time period. ● Review competitive practices and trends to determine the adequacy of the executive compensation program. ● Annually review and recommend to the Board of Directors corporate goals and objectives relevant to CEO compensation, evaluate the CEO’s performance in light of those goals and objectives, and recommend to the Board of Directors the CEO’s compensation levels based on this evaluation; the CEO may not be present during any deliberations or voting with respect to the CEO’s compensation. ● Annually review and approve compensation of our executive officers other than the CEO. ● Annually review and approve compensation of our directors, including with respect to any equity-based plan. ● As deemed necessary or appropriate, approve employment contracts, severance arrangements, change in control provisions and other agreements. ● Approve and administer cash incentives and deferred compensation plans for executive officers (including any modification to such plans) and oversight of performance objectives and funding for executive incentive plans. ● Approve and oversee reimbursement policies for directors and executive officers. ● Periodically review and make recommendations to the Board of Directors with respect to equity-based plans that are subject to approval by the Board of Directors. The Compensation Committee shall oversee our compliance with the requirement under Nasdaq rules that, with limited exceptions, stockholders approve equity compensation plans. Subject to such stockholder approval, or as otherwise required by the Exchange Act, or other applicable law, the Compensation Committee shall have the power to manage all equity-based plans. 182 ● If we are required by applicable Securities and Exchange Commission (“SEC”) rules to include a Compensation Discussion and Analysis (“CD&A”) in our SEC filings in the future, review the CD&A prepared by management, discuss the CD&A with management and, based on such review and discussions, recommend to the Board of Directors that the CD&A be included in our Annual Report on Form 10-K, proxy statement, or any other applicable filing as required by the SEC. ● Review all compensation policies and practices for all employees to determine whether such policies and practices create risks that are reasonably likely to have a material adverse effect on our business or financial condition. ● Recommend to the Board of Directors that our stockholders approve, on an advisory basis, the compensation of our named executive officers, as disclosed in our proxy statement, if such proposal will be contained in the proxy statement. ● Recommend to the Board of Directors the frequency of holding a vote on the compensation of our named executive officers, if such proposal will be contained in our proxy statement. ● Periodically review executive supplementary benefits and, as appropriate, our retirement, benefit, and special compensation programs involving significant cost. ● Make regular reports to the Board of Directors. ● Annually review and reassess the adequacy of the Compensation Committee Charter and recommend any proposed changes to the Board of Directors for approval. ● Annually evaluate its own performance. ● Oversee the annual process of performance evaluations of our management. ● Fulfill such other duties and responsibilities as may be assigned to the Compensation Committee, from time to time, by the Board of Directors and/or the Chairman of the Board of Directors. Nominating and Corporate Governance Committee The Nominating and Corporate Governance Committee consists of Dr. Roth and Mr. McLaughlin. The chair of the Nominating and Corporate Governance Committee is Mr. McLaughlin. The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is independent under the Nasdaq listing standards. The primary purpose of the Nominating and Corporate Governance Committee is (1) to assist the Board of Directors by identifying qualified candidates for director, and to recommend to the Board of Directors the director nominees for the next annual meeting of stockholders; (2) to lead the Board of Directors in its annual review of the Board of Directors’ performance; (3) to recommend to the Board of Directors director nominees for each Board of Directors committee; and (4) to develop and recommend to the Board of Directors our corporate governance guidelines. Specific responsibilities of the Nominating and Corporate Governance Committee are to: ● Evaluate the current composition, organization, and governance of the Board of Directors and its committees and make recommendations to the Board of Directors for approval. ● Annually review for each director and nominee, the experience, qualifications, attributes, or skills that contribute to the Board of Directors’ conclusion that the person should serve or continue to serve as one of our directors, as well as how the directors’ skills and background enable them to function well together as a Board of Directors. ● Determine desired member skills and attributes and conduct searches for prospective directors whose skills and attributes reflect those desired. Evaluate and propose nominees for election to the Board of Directors. At a minimum, nominees for service on the Board of Directors must meet the threshold requirements set forth in the Nominating and Corporate Governance Committee Policy Regarding Qualifications of Directors . Each nominee will be considered both on his or her individual merits and in relation to existing or other potential members of the Board of Directors, with a view to establishing a well-rounded, diverse, knowledgeable, and experienced Board of Directors. 183 ● Administer the annual Board of Directors’ performance evaluation process, including conducting surveys of director observations, suggestions, and preferences. ● Evaluate and make recommendations to the Board of Directors concerning the appointment of directors to Board of Directors’ committees, the selection of Board of Directors committee chairs, and proposal of the slate of directors for election to the Board of Directors. ● Consider bona fide candidates recommended by stockholders for nomination for election to the Board of Directors in accordance with Section 2.12 of our Bylaws. ● As necessary in the Nominating and Corporate Governance Committee’s judgment from time to time, retain and compensate third-party search firms to assist in identifying or evaluating potential nominees to the Board of Directors. ● Evaluate and recommend termination of membership of individual directors in accordance with the Board of Directors’ governance principles, for cause or for other appropriate reasons. ● Oversee the process of succession planning for the Chief Executive Officer and as warranted, other senior officers. ● Develop, adopt and oversee the implementation of a Code of Business Conduct and Ethics for all directors, executive officers and employees. ● Review and maintain oversight of matters relating to the independence of the Board of Directors and committee members, keeping in mind the independence standards of the Sarbanes-Oxley Act of 2002 and applicable Nasdaq rules. ● Oversee and assess the effectiveness of the relationship between the Board of Directors and our management. ● Form and delegate authority to subcommittees when appropriate, each subcommittee to consist of one or more members of the Nominating and Corporate Governance Committee. Any such subcommittee, to the extent provided in the resolutions of the Nominating and Corporate Governance Committee and to the extent not limited by applicable law, shall have and may exercise all the powers and authority of the nominating and corporate governance committee. ● Make regular reports to the Board of Directors concerning its activities. ● Annually review and reassess the adequacy of the Nominating and Corporate Governance charter and the appendices thereto and recommend any proposed changes to the Board of Directors for approval. ● Annually evaluate its own performance. ● Maintain appropriate records regarding its process of identifying and evaluating candidates for election to the Board of Directors. ● Fulfill such other duties and responsibilities as may be assigned to the Nominating and Corporate Governance Committee, from time to time, by the Board of Directors and/or the Chairman of the Board of Directors. 184 Director Qualifications In accordance with its charter, the Nominating and Corporate Governance Committee develops and recommends to our Board of Directors appropriate criteria, including desired qualifications, expertise, skills and characteristics, for selection of new directors and periodically reviews the criteria adopted by our Board of Directors and, if appropriate, recommends changes to such criteria. Board of Directors Diversity Our Board of Directors desires to seek members from diverse professional backgrounds who combine a strong professional reputation and knowledge of our business and industry with a reputation for integrity. Our Board of Directors does not have a formal policy with respect to diversity and inclusion but is in the process of establishing a policy on diversity. Diversity of experience, expertise and viewpoints is one of many factors the Nominating and Corporate Governance Committee considers when recommending director nominees to our Board of Directors. Further, our Board of Directors is committed to actively seeking highly qualified women and individuals from minority groups to include in the pool from which new candidates are selected. Our Board of Directors also seeks members that have experience in positions with a high degree of responsibility or are, or have been, leaders in the companies or institutions with which they are, or were, affiliated, but may seek other members with different backgrounds, based upon the contributions they can make to our company. We believe that our current board composition reflects our commitment to diversity in the areas of gender and professional background. Code of Conduct and Ethics Our Board of Directors has adopted a Code of Business Conduct and Ethics, or the Code of Conduct, applicable to all of our employees, executive officers and directors. We will provide any person, without charge, a copy of our Code of Conduct upon written request to Investor Relations, Allarity Therapeutics, Inc., 24 School Street, 2 nd Floor, Boston, Massachusetts 02108. The Code of Conduct is available at the Investors section of our website at www.allarity.com . Information contained on or accessible through this website is not a part of this report, and the inclusion of such website address in this report is an inactive textual reference only. Any amendments to the Code of Conduct, or any waivers of its requirements, are expected to be disclosed on its website to the extent required by applicable SEC and Nasdaq rules and requirements. Limitation on Liability and Indemnification of Directors and Officers Our Certificate of Incorporation limits a director’s liability to the fullest extent permitted under the DGCL. The DGCL provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability: ● for any breach of the director’s duty of loyalty to the corporation or its stockholders; ● for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; ● for unlawful payment of dividend or unlawful stock purchase or redemption pursuant to the provisions of Section 174 of the DGCL; and ● for any transaction from which the director derived an improper personal benefit. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of the directors will be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Delaware law and our bylaws provide that we will, in certain situations, indemnify our directors and officers and may indemnify other employees and other agents, to the fullest extent permitted by law. Any indemnified person is also entitled, subject to certain limitations, to advancement, direct payment, or reimbursement of reasonable expenses (including attorneys’ fees and disbursements) in advance of the final disposition of the proceeding. 185 In addition, we intend to enter into separate indemnification agreements with our directors and officers. These agreements, among other things, require us to indemnify our directors and officers for certain expenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by a director or officer in any action or proceeding arising out of their services as one of our directors or officers or any other company or enterprise to which the person provides services at our request. We anticipate maintaining a directors’ and officers’ insurance policy pursuant to which our directors and officers are insured against liability for actions taken in their capacities as directors and officers. We believe these provisions in the Certificate of Incorporation and bylaws and these indemnification agreements are necessary to attract and retain qualified persons as directors and officers. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or control persons, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Delinquent Section 16(a) Reports Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities, to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and Annual Reports concerning their ownership, of Common Stock and other of our equity securities on Forms 3, 4, and 5, respectively. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely on our review of Forms 3, 4 and 5 and amendments thereto filed electronically with the SEC during the most recent fiscal year, we believe that all reports required by Section 16(a) for transactions in the year ended December 31, 2022, were timely filed. ITEM 11. EXECUTIVE COMPENSATION Emerging Growth Company Status We are an “emerging growth company,” as defined in the JOBS Act. As an emerging growth company we will be exempt from certain requirements related to executive compensation, including the requirements to hold a nonbinding advisory vote on executive compensation and to provide information relating to the ratio of total compensation of our President and Chief Executive Officer to the median of the annual total compensation of all of its employees, each as required by the Investor Protection and Securities Reform Act of 2010, which is part of the Dodd-Frank Act. Overview The Compensation Committee of our Board of Directors assists in discharging our Board of Directors’ responsibilities regarding the compensation of our executive officers and of our Board of Directors members. The Compensation Committee is currently comprised of the following two non-employee members of our Board of Directors: Mr. Roth and Mr. McLaughlin. 2022 Named Executive Officer Compensation The table below shows the compensation awarded to or paid to or earned by our named executive officers for the years ended December 31, 2022 and 2021. Messrs. Carchedi and Knudsen resigned as officers of the Company in June 2022. Upon their departure, Mr. Cullem, our Chief Business Officer, was appointed to also serve as our Chief Executive Officer and Ms. Brown, our Director of Financial Reporting, was appointed to also serve as Chief Financial Officer. 186 Summary Compensation Table The following table provides information regarding total compensation awarded to, earned by, and paid to our named executive officers for services rendered to the Company in all capacities for the fiscal years ended December 31, 2022 and 2021. Name and Principal Position Year Salary* Bonus (1)* Option Awards (2)* All Other Compensation ($)* Total* Steve R. Carchedi, 2021 $ 427,083 $ 225,000 $ 3,796,636 $ 17,500 (4) $ 4,466,219 former Chief Executive Office (3) 2022 $ 281,310 $ — — $ 251,049 (5) $ 532,359 Jens E. Knudsen, 2021 $ 253,125 (6) $ 80,500 $ 249,718 — $ 583,343 former Chief Financial Officer (3) 2022 $ 194,013 $ — $ — $ 139,620 (7) $ 333,633 Marie Foegh, 2021 $ 291,600 $ 132,480 $ 866,188 — $ 1,290,268 Chief Medical Officer 2022 $ 340,309 $ — $ — — $ 340,309 James G. Cullem, 2021 $ 237,938 118,910 $ 1,474,234 — $ 1,831,082 Chief Executive Officer, Chief Business Officer (8) 2022 $ 343,410 $ — $ — — $ 343,410 Joan Brown 2021 $ 44,950 $ 9,600 $ — $ 62,000 (10) 116,550 Chief Financial Officer, Director of Financial Reporting (9) 2022 $ 180,000 $ — $ — — $ 180,000 * All compensation amounts are in full numbers and not presented in $1,000’s. (1) The bonuses reported in this column for 2021 consist of cash payments and were earned in 2021 and paid in 2022. (2) The amounts reported in this column represent the aggregate grant date fair value of service-based option grants awarded to the named executive officer during 2022 and 2021, calculated based on a Black Scholes model. Such grant date fair values do not consider any estimated forfeitures related to service-vesting conditions. This calculation assumes that the named executive officer will perform the requisite service for the award to vest in full as required by SEC rules. The assumptions used in calculating the grant date fair values of the equity awards reported in this column are set forth in Note 18 of the Audited Consolidated Financial Statements for the twelve months ended December 31, 2021, appearing in our Form 10-K. The amounts reported in this column reflect the accounting cost for these equity awards and do not correspond to the actual economic value that may be realized by named executive officers upon the vesting of the stock options, the exercise of the stock options or the sale of the securities underlying such stock options . (3) Resigned in June 2022. (4) Consists of life insurance premiums. (5) Consists of consulting fees, and severance payment of $233,549. (6) Mr. Knudsen was appointed as Chief Financial Officer in November 2020. Total compensation reflects pro-rata compensation since appointment in November 2020. (7) Consists of severance payment of $139,620. (8) Appointed as Chief Executive Officer in June 2022. (9) Appointed as Interim Chief Financial Officer in June 2022. (10) Consists of consulting fees. 187 Outstanding Equity Awards as of December 31, 2022 The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2022. Name Grant Date Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price (USD) Option Expiration Date James G. Cullem, 09/24/2019 28,191 — (2) — 13.30 09/21/2029 Chief Executive Officer, Chief Business Officer 11/24/2021 80,543 52,782 (1) 5.19 03/11/2026 Joan Brown — — — — — Chief Financial Officer, Director of Financial Reporting Marie Foegh Chief Medical Officer 11/24/2021 47,315 31,020 (1) — 5.19 11/23/2026 (1) This option vests as to 25% on November 24, 2021, the grant date, and the remaining 75% vests over 36 months. (2) This option vests 25% on grant, 25% 12 months from grant, 25% 18 months from grant and 25% 24 months from grant & balance on listing on the Nasdaq Stock Market. The Company listed on Nasdaq Stock Market on December 2021 resulting in the options becoming fully vested. Pension Benefits The Company maintains a 401(k) Plan for its full-time employees in the U.S. The 401(k) Plan allows employees of the Company to contribute up to the Internal Revenue Code prescribed maximum amount. Employees may elect to contribute from 1 to 100 percent of their annual compensation to the 401(k) Plan. The 401(k) Plan includes a 3% safe harbor contribution. Both employee and employer contributions vest immediately upon contribution. During fiscal year ended December 31, 2022, the Company did not make a contributions to the 401(k) Plan. Nonqualified Deferred Compensation Our named executive officers did not participate in, nor earn any benefits under, a nonqualified deferred compensation plan during the fiscal year ended December 31, 2022. 188 Employment Agreements and Arrangements As of the year ended December 31, 2022, we had an employment or consultancy agreement with each of the following named executive officers, Mr. Cullem, Ms. Foegh and Ms. Brown. The employment or consultancy agreement with each of the following individuals provides for the initial annual base salary as of December 31, 2022, current base salary and bonus set forth below. With the departure of Mr. Carchedi, the Board of Directors appointed James G. Cullem, the Company’s Chief Business Officer, to also serve as the interim Chief Executive Officer of the Company, effective as of June 29, 2022, and a director of the Company. In connection with Mr. Cullem’s new position as interim Chief Executive Officer, the Company increased his base salary from $270,250 to $350,000. In addition, with the departure of Mr. Knudsen, the Board of Directors appointed Joan Brown, the Company’s Director of Financial Reporting, to also serve as the interim Chief Financial Officer of the Company effective as of June 29, 2022. In connection with Ms. Brown’s additional position, the Company increased her salary from $160,000 to $200,000. Named Executive Officers and Position Annual Base Salary as of December 31, 2022 ($)* Proposed Annual Base Salary ($)* James G. Cullem, Chief Executive Officer, Chief Business Officer (1) $ 350,000 $ 425,000 (3) Joan Brown, Chief Financial Officer (2) Director of Financial Reporting $ 200,000 $ 250,000 (3) Marie Foegh, Chief Medical Officer $ 331,200 $ 331,200 * All compensation amounts are in full numbers and not presented in $1,000’s. (1) Appointed Chief Executive Officer in June 2022. (2) Appointed Chief Financial Officer in June 2022. (3) Proposed Annual Base Salary under employment agreements entered into in January 2023 (see below section titled “2023 Compensation Decisions” Named Executive Officer Discretionary Annual Bonus for 2022 Marie Foegh, Chief Medical Officer up to 40% of annual base salary James G. Cullem, Chief Executive Officer, Chief Business Officer up to 40% of annual base salary Joan Brown, Chief Financial Officer, Director of Financial Reporting up to 20% of annual base salary Material Terms of Employment Agreements During the fiscal year ended December 31, 2022, the Company had an employment agreement with the named executive officers. Unless otherwise indicated, the following material terms of employment agreements applied to all of the named executive officers. The employment agreements with each of the named executive officers provide for at-will employment and may be terminated in writing with 30 days prior written notice. The Chief Executive Officer may accelerate termination after notice; however, the employee will still be paid as if they worked the full 30 days. In the event of change of control (as defined below in the 2021 Equity Incentive Plan, or any other change in control of us similar in effect to that definition) the employment agreement provides for 12 months’ pay at the base salary. If the employment agreement is terminated voluntarily by an employee without good reason, by us for cause, or because of the employee’s incapacity, salary and benefits will cease at the effective date of termination. The named executive will have no duty to attempt to mitigate the severance pay amounts payable by us by seeking employment or otherwise, and no amounts earned from other employment shall reduce the amounts due. James G. Cullem . In the event the employment agreement with Mr. Cullem is terminated without cause by us or for good reason by Mr. Cullem, the employment agreement provides for severance payment equal to 8 months’ pay at the base salary rate. 189 Marie Foegh . In the event the employment agreement with Ms. Foegh is terminated without cause by us or for good reason by Ms. Foegh, the employment agreement provides for severance payment equal to 6 months’ pay at the base salary rate. Bonus and Annual Bonus Plan Our executive officers are entitled to bonuses subject to and pursuant to the terms of their respective employment or consultancy agreement. Other Benefits Our employees are eligible to participate in various employee benefit plans, including medical, dental, and vision care plans, flexible spending accounts for health and dependent care, life, accidental death and dismemberment, disability, and paid time off. As of January 1, 2023, the Company pays 100% for health, dental and vision care benefits. Employee Benefit Plans Equity-based compensation has been and will continue to be an important foundation in executive compensation packages as we believe it is important to maintain a strong link between executive incentives and the creation of stockholder value. We further believe that performance and equity-based compensation can be an important component of the total executive compensation package for maximizing stockholder value while, at the same time, attracting, motivating, and retaining high-quality executives. Formal guidelines for the allocations of cash and equity-based compensation have not yet been determined, but it is expected that the 2021 Equity Incentive Plan (“2021 Plan”) described below will be an important element of our compensation arrangements for both executive officers and directors. 2021 Equity Incentive Plan Our 2021 Plan became effective on December 20, 2021. It was approved by stockholders in connection with the Recapitalization Share Exchange. Our 2021 Plan authorizes the award of stock options, Restricted Stock Awards (“RSAs”), Stock Appreciation Rights (“SARs”), Restricted Stock Units (“RSUs”), cash awards, performance awards and stock bonus awards. We initially reserved 1,211,374 shares of our common stock under the 2021 Plan. The number of shares reserved for issuance under our 2021 Plan will increase 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 adjustment to increase on 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. 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. Except as specifically provided above, following the effective time of our Recapitalization Share Exchange, each Converted Option continues to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Compensatory Warrant immediately prior to the effective time. As of December 31, 2022, there was an option to purchase 676,949 shares of common stock issued and outstanding. In addition, the following shares will again be available for issuance pursuant to awards granted under our 2021 Plan: ● shares subject to options or SARs granted under our 2021 Plan that cease to be subject to the option or SAR for any reason other than exercise of the option or SAR; 190 ● shares subject to awards granted under our 2021 Plan that are subsequently forfeited or repurchased by us at the original issue price; ● shares subject to awards granted under our 2021 Plan that otherwise terminate without such shares being issued; ● shares subject to awards granted under our 2021 Plan that are surrendered, cancelled or exchanged for cash or a different award (or combination thereof); and ● shares subject to awards under our 2021 Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award. Purpose. The purpose of our 2021 Plan is to provide incentives to attract, retain, and motivate eligible persons whose present and potential contributions are important to the success of the Company, and any Parents, Subsidiaries, and Affiliates that exist now or in the future, by offering them an opportunity to participate in the Company’s future performance through the grant of Awards. Administration. Our 2021 Plan is expected to be administered by our Compensation Committee, all of the members of which are outside directors as defined under applicable federal tax laws, or by our Board of Directors acting in place of our Compensation Committee. Subject to the terms and conditions of the 2021 Plan, the Compensation Committee will have the authority, among other things, to select the persons to whom awards may be granted, construe and interpret our 2021 Plan as well as to determine the terms of such awards and prescribe, amend and rescind the rules and regulations relating to the plan or any award granted thereunder. The 2021 Plan provides that the Board of Directors or Compensation Committee may delegate its authority, including the authority to grant awards, to one or more executive officers to the extent permitted by applicable law, provided that awards granted to non-employee directors may only be determined by our Board of Directors. Eligibility. Our 2021 Plan provides for the grant of awards to our employees, directors, consultants, independent contractors and advisors. Options. The 2021 Plan provides for the grant of both incentive stock options intended to qualify under Section 422 of the Code, and non-statutory stock options to purchase shares of our common stock at a stated exercise price. Incentive stock options may only be granted to employees, including officers and directors who are also employees. The exercise price of stock options granted under the 2021 Plan must be at least equal to the fair market value of our common stock on the date of grant. Incentive stock options granted to an individual who holds, directly or by attribution, more than 10% of the total combined voting power of all classes of our capital stock must have an exercise price of at least 110% of the fair market value of our common stock on the date of grant. Subject to stock splits, dividends, recapitalizations, or similar events, no more than 7,009,980 shares may be issued pursuant to the exercise of incentive stock options granted under the 2021 Plan. Options may vest based on service or achievement of performance conditions. Our Compensation Committee may provide for options to be exercised only as they vest or to be immediately exercisable, with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. The maximum term of options granted under our 2021 Plan is 10 years from the date of grant, except that the maximum permitted term of incentive stock options granted to an individual who holds, directly or by attribution, more than 10% of the total combined voting power of all classes of our capital stock is five years from the date of grant. Restricted stock awards. An RSA is an offer by us to sell shares of our common stock subject to restrictions, which may lapse based on the satisfaction of service or achievement of performance conditions. The price, if any, of an RSA will be determined by the Compensation Committee. Holders of RSAs will have the right to vote and any dividends or stock distributions paid pursuant to unvested RSAs will be accrued and paid when the restrictions on such shares lapse. Unless otherwise determined by the Compensation Committee at the time of award, vesting will cease on the date the participant no longer provides services to us and unvested shares may be forfeited to or repurchased by us. 191 Stock appreciation rights. A SAR provides for a payment, in cash or shares of our common stock (up to a specified maximum of shares, if determined by our Compensation Committee), to the holder based upon the difference between the fair market value of our common stock on the date of exercise and a predetermined exercise price, multiplied by the number of shares. The exercise price of a SAR must be at least the fair market value of a share of our common stock on the date of grant. SARs may vest based on service or achievement of performance conditions and may not have a term that is longer than 10 years from the date of grant. Restricted stock units. RSUs represent the right to receive shares of our common stock at a specified date in the future and may be subject to vesting based on service or achievement of performance conditions. Payment of earned RSUs will be made as soon as practicable on a date determined at the time of grant, and may be settled in cash, shares of our common stock or a combination of both. No RSU may have a term that is longer than 10 years from the date of grant. Performance awards. Performance awards granted pursuant to the 2021 Plan may be in the form of a cash bonus, or an award of performance shares or performance units denominated in shares of our common stock that may be settled in cash, property or by issuance of those shares subject to the satisfaction or achievement of specified performance conditions. Stock bonus awards. A stock bonus award provides for payment in the form of cash, shares of our common stock or a combination thereof, based on the fair market value of shares subject to such award as determined by our Compensation Committee. The awards may be granted as consideration for services already rendered, or at the discretion of the Compensation Committee, may be subject to vesting restrictions based on continued service or performance conditions. Cash awards. A cash award is an award that is denominated in, or payable to an eligible participant solely in, cash. Dividend equivalents rights. Dividend equivalent rights may be granted at the discretion of our Compensation Committee and represent the right to receive the value of dividends, if any, paid by us in respect of the number of shares of our common stock underlying an award. Dividend equivalent rights will be subject to the same vesting or performance conditions as the underlying award and will be paid only at such time as the underlying award has become fully vested. Dividend equivalent rights may be settled in cash, shares or other property, or a combination thereof as determined by our Compensation Committee. Change of control. Our 2021 Plan provides that, in the event of a corporate transaction, as defined in the 2021 Plan, outstanding awards under our 2021 Plan shall be subject to the agreement evidencing the corporate transaction, any or all outstanding awards may be (a) continued by us, if we are the successor entity; (b) assumed or substituted by the successor corporation, or a parent or subsidiary of the successor corporation, for substantially equivalent awards (including, but not limited to, a payment in cash or the right to acquire the same consideration paid to the stockholders of the company pursuant to the corporate transaction); (c) substituted by the successor corporation of equivalent awards with substantially the same terms for such outstanding awards; (d) accelerated in full or in part as to the exercisability or vesting; (e) settled in the full value of such outstanding award in cash, cash equivalents, or securities of the successor entity (or its parent, if any) with a fair market value equal to the required amount, followed by the cancellation of such awards; or (f) cancelled for no consideration. If applicable, the number and kind of shares and exercise prices of awards being continued, assumed, or substituted shall be adjusted pursuant to the terms of the 2021 Plan. Adjustment. In the event of a change in the number of outstanding shares of our common stock without consideration by reason of a stock dividend, extraordinary dividend or distribution, recapitalization, stock split, reverse stock split, subdivision, combination, consolidation reclassification, spin-off or similar change in our capital structure, appropriate proportional adjustments will be made to the number and class of shares reserved for issuance under our 2021 Plan; the exercise prices, number and class of shares subject to outstanding options or SARs; the number and class of shares subject to other outstanding awards; and any applicable maximum award limits with respect to incentive stock options. 192 Exchange, repricing, and buyout of awards. Our Compensation Committee may, with the consent of the respective participants, issue new awards in exchange for the surrender and cancelation of any or all outstanding awards. Our Compensation Committee may also reduce the exercise price of options or SARs or buy an award previously granted with payment in cash, shares, or other consideration, in each case, subject to the terms of the 2021 Plan. Director compensation limits. No non-employee director may receive awards under our 2021 Plan with a grant date value that when combined with cash compensation received for his or her service as a director, exceeds $750,000 in a calendar year or $1,000,000 in the calendar year of his or her initial service. Clawback; transferability. All awards will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by our Board of Directors (or a committee thereof) or required by law during the term of service of the award holder, to the extent set forth in such policy or applicable agreement. Except in limited circumstances, awards granted under our 2021 Plan may generally not be transferred in any manner prior to vesting other than by will or by the laws of descent and distribution. Amendment and termination. Our Board of Directors may amend our 2021 Plan at any time, subject to stockholder approval as may be required. Our 2021 Plan will terminate 10 years from the date our Board of Directors adopts the plan unless it is terminated earlier by our Board of Directors. No termination or amendment of the 2021 Plan may adversely affect any then-outstanding award without the consent of the affected participant, except as is necessary to comply with applicable laws. Separation Agreements Effective as of June 29, 2022, Mr. Carchedi resigned from all positions in the Company and all positions of its subsidiaries, including his role of Chief Executive Officer and as a director of the Company. Pursuant to the terms set forth in a letter agreement dated June 24, 2022 (the “Carchedi Separation Agreement”), the termination of Mr. Carchedi’s employment and resignation from his positions are effective June 29, 2022 (the “Carchedi Separation Date”). Under the Carchedi Separation Agreement, Mr. Carchedi will be entitled to his final pay for wages earned through the Separation Date, plus accrued and unused vacation time. In addition, pursuant to the Carchedi Separation Agreement, the Company agreed to provide Mr. Carchedi with certain payments and benefits comprising of: (i) continued payments of his base salary for a certain time period and (ii) COBRA coverage for a certain number of months (“Carchedi Severance Benefits”). In exchange for the Carchedi Severance Benefits, among other things as set forth in the Carchedi Separation Agreement, Mr. Carchedi agreed to a release of claims in favor of the Company and to certain restrictive covenant obligations, and also reaffirmed his commitment to comply with his existing restrictive covenant obligations. In addition, as of the Carchedi Separation Date, Mr. Carchedi’s unvested options were terminated. Mr. Carchedi is entitled to exercise his vested options for a period of 90 days from the Carchedi Separation Date. Thereafter, all vested options will expire. Mr. Carchedi’s resignation as a director was not the result of any dispute or disagreement with the Company or the Company’s Board of Directors on any matter relating to the operations, policies or practices of the Company. Effective as of June 27, 2022, Mr. J. Knudsen resigned from all positions in the Company, and all positions of its subsidiaries, including his role of Chief Financial Officer of the Company. Pursuant to the terms set forth in a letter agreement dated June 25, 2022 (the “Knudsen Separation Agreement”), the termination of Mr. Knudsen’s employment and resignation from his positions are effective June 27, 2022 (the “Knudsen Separation Date”). Under the Knudsen Separation Agreement, Mr. Knudsen will be entitled to his final pay for wages earned through the Separation Date, plus accrued and unused vacation time. In addition, pursuant to the Knudsen Separation Agreement, the Company agreed to provide Mr. Knudsen with certain payments and benefits comprising of: (i) continued payments of his base salary for a certain time period, and (ii) COBRA coverage for a certain number of months (“Knudsen Severance Benefits”). In exchange for the Knudsen Severance Benefits, among other things as set forth in the Knudsen Separation Agreement, Mr. Knudsen agreed to a release of claims in favor of the Company and to certain restrictive covenant obligations, and also reaffirmed his commitment to comply with his existing restrictive covenant obligations. In addition, as of the Knudsen Separation Date, Mr. Knudsen’s unvested options were terminated. Mr. Knudsen is entitled to exercise his vested options for a period of 90 days from the Knudsen Separation Date. Thereafter, all vested options will expire. 193 2023 Compensation Decisions On January 12, 2023, upon the approval of the Compensation Committee of the Board, the Company entered into a new separate employment agreement with Mr. Cullem, our Chief Executive Officer (the “Cullem Employment Agreement”), and Ms. Brown, our Chief Financial Officer, the “Brown Employment Agreement” and together with Cullem Employment Agreement, the “New Employment Agreements”) in connection with the additional executive officer positions that they were appointed to in June 2022. The effectiveness of the New Employment Agreements are contingent upon the Company securing a new capital raise of at least $7 million dollars by or before February 15, 2023, unless the capital raise requires audited financial statements for the year ending December 31, 2022, then on or before April 30,2023 (a “New Financing”). In the event the New Financing does not occur, Mr. Cullum’s prior employment contract as Chief Business Officer of the Company and Ms. Brown’s employment contract as director of financial reporting of the Company will continue to remain in full force and effect. In the event the New Financing occurs, subject to the survival of any terms as reflected in the Employment agreement, the prior employment agreements will be superseded by the New Employment Agreements. Under their respective New Employment Agreements, Mr. Cullem and Ms. Brown will, among other things, be (i) entitled to participate in all of the Company’s employee benefit plans and programs as generally maintained and made available to its executive officers by the Company; (ii) eligible for grants of equity compensation as determined at the sole discretion of the Compensation Committee; (iii) entitled to certain severance and change of control benefits contingent upon such employee’s agreement to a general release of claims in favor of the Company following termination of employment; and (iv) entitled to reimbursement of expenses in the course and scope of authorized Company business. In addition, each respective employment agreement includes customary confidentiality and assignment of intellectual property obligations. Cullem Employment Agreement The Cullem Employment Agreement provides for an annual base salary of $425,000 (as of January 1, 2023), which, upon agreement by Mr. Cullem and the Board, Mr. Cullem may elect to receive up to $30,000 of such base salary in restricted stock grants in the Company. Any such restricted stock grants will be made quarterly, at the start of each calendar quarter, at the stock fair market value (“FMV”) on the 1st day of each calendar quarter. In addition, commencing with the calendar year 2023, Mr. Cullem will be eligible to receive an annual bonus representing up to 50% of Mr. Cullem’s base salary based on the achievement of individual and corporate performance targets, metrics and/or management-by-objectives to be determined and approved by the Company. The Board has the discretion to pay such annual bonus in restricted stock grants in lieu of cash, depending on the financial circumstances of the Company, at the FMV on the date of grant no later than March 1st of the grant year. In addition, subject to and concurrently with the closing of a New Financing, the Company agreed to grant Mr. Cullem the following stock options, which will have an exercise price equal to the FMV of the Company’s shares on the grant date and a term of 10 years, and be subject to the vesting schedule provided below: ● Stock options in the amount of 3.5% of the Company’s issued and outstanding shares of common stock immediately after such closing; provided, however, that such amount will not exceed 50% of the options available to be granted under the Company’s 2021 Equity Incentive Plan (the “Grant Limitation”). In addition, such grant will be subject to any shareholder approval required by law, regulation or applicable listing rule (the “Requisite Approval”) and will vest ratably over a 48-month period commencing July 1, 2022. ● Stock options for an additional 2.0% of the Company’s issued and outstanding shares of common stock immediately after the closing of such New Financing; provided however, that such grant will not exceed the Grant Limitation and such grant will be subject to any Requisite Approval. Such option grant will provide for 100% vesting upon the completion of a Phase 2 clinical trial involving the Company’s drug candidates, Stenoparib or Dovitinib, in combination with another drug or therapeutic candidate in ovarian cancer, renal cell carcinoma, or other indication or therapy determined by the Company’s Board. 194 In the event the stock options exceed the Grant Limitation, the Company agreed to seek shareholder approval at its next annual meeting to increase the number of options available under the Company’s 2021 Equity Incentive Plan in order to have sufficient options to cover the grants. In consideration of the grant of new options described above, upon grant of such options, all prior vested and unvested options previously granted to Mr. Cullem (under any prior employment agreement with the Company) will be deemed waived and forfeited by Mr. Cullem and null and void. In the event new stock options are not granted to Mr. Cullem under the Cullem Employment Agreement, all options (vested and unvested) previously granted under prior employment agreements with Company will remain in full force and effect. The Cullem Employment Agreement can be terminated, in writing with 30 days’ prior written notice, by the Company for or without Cause (as such term is defined in the Cullem Employment Agreement) and Mr. Cullem can resign with or without Good Reason (as such term is defined in the Cullem Employment Agreement). If Mr. Cullem is terminated without Cause or resigns with Good Reason or is terminated by the Company as a result of a Change-of-Control (as such term in defined in the Cullem Employment Agreement), the Company agreed to provide Mr. Cullem with severance pay in an amount equal to 12 months’ pay at Mr. Cullem’s final base salary rate, payable in the form of salary continuation. Such severance payments are conditioned upon Mr. Cullem’s execution and non-revocation of a general release of claims. Brown Employment Agreement The Brown Employment Agreement provides for an annual base salary of $250,000 (as of January 1, 2023). In addition, commencing with calendar year 2023, Mr. Brown will be eligible to receive an annual bonus representing up to 40% of Mr. Brown’s base salary based on the achievement of individual and corporate performance targets, metrics and/or management-by-objectives to be determined and approved by the Company. The Board has the discretion to pay such annual bonus in restricted stock grants in lieu of cash, depending on the financial circumstances of the Company, at the stock FMV on the date of grant no later than March 1st of the grant year. In addition, concurrently with the closing of a New Financing, the Company agreed to grant Ms. Brown stock options in the amount of 0.75% of the Company’s issued and outstanding shares of common stock immediately after the closing, which grant will be subject to any Requisite Approval and granted pursuant to the 2021 Equity Incentive Plan. The exercise price will be the FMV of Company’s shares on the date of grant. The stock options will vest ratably over a 48-month period commencing July 1, 2022, and have a term of 10 years. The Brown Employment Agreement can be terminated, in writing with 30 days’ prior written notice, by the Company for or without Cause (as such term is defined in the Brown Employment Agreement) and Ms. Brown can resign with or without Good Reason (as such term is defined in the Brown Employment Agreement). If Ms. Brown is terminated without Cause or resigns with Good Reason or is terminated by the Company as a result of Change-of-Control (as defined in the Brown Employment Agreement), the Company agreed to provide Ms. Brown with severance pay in an amount equal to five months’ pay at Ms. Brown’s final base salary rate, payable in the form of salary continuation. Such severance payments are conditioned upon Ms. Brown’s execution and non-revocation of a general release of claims. Non-Employee Director Compensation The following table sets forth information concerning the compensation of non-employee directors for services rendered for the year ended December 31, 2022. Mr. Carchedi, our former Chief Executive Officer, also previously served as our director before his resignation in June 2022, and Mr. Carchedi’s compensation as named executive officer is set forth above under “Summary Compensation Table.” Mr. Thomas Jensen, our Senior Vice President, Investor Relations and director, did not receive any compensation for his services on the Board. Name Fees Earned or Paid in Cash $* Option Awards (1)(2) $* Total $* Duncan Moore $ 91,250 $ - $ 91,250 Søren G. Jensen $ 56,750 (3) $ - $ 56,750 Gail Maderis $ 56,750 $ - $ 56,7500 David Roth $ 20,000 $ 29,440 $ 49,440 Gerald McLaughlin $ 12,500 $ 25,300 $ 37,800 * All compensation amounts are in full numbers and not presented in $1,000’s. (1) Amounts reported represent the aggregate grant date fair value of stock options granted to such non-employee directors and have been computed based on a Black Scholes model and excludes the effect of estimated forfeitures. The assumptions used in calculating the grant date fair values of the equity awards reported in this column are set forth below. The amounts reported in this column reflect the accounting cost for these equity awards and do not correspond to the actual economic value that may be realized by the directors upon the vesting of the stock options, the exercise of the stock options or the sale of the securities underlying such stock options. 195 The fair value of stock options granted in the period ended December 31, 2022, were estimated using the Black-Scholes option pricing model, based on the following assumptions: December 31, 2022 (unaudited) Exercise price $ 1.10 - 1.28 Share price $ 1.10 - 1.28 Risk-free interest 4.36 % Expected dividend yield (0 )% Contractual life (years) 5.0 Expected volatility 120.22 % (2) The table below lists the aggregate number of shares subject to option awards outstanding for each of the non-employee directors as of December 31, 2022. Name Number of Shares Subject to Outstanding Options Duncan Moore 41,994 Søren G. Jensen 26,242 Gail Maderis 26,242 David Roth 23,000 Gerald McLaughlin 23,000 Director Compensation Our non-employee directors are entitled to an annual director fee of $50,000. In addition, a director who serves as a lead independent director or chair or on a committee of the Board of Directors will receive the following additional annual fee: Position Annual Chair/Lead Fee Annual Member Fee Chairman of the Board of Directors or Lead Independent Director $ 30,000 $ — Audit Committee $ 15,000 $ 7,500 Compensation Committee $ 10,000 $ 5,000 Nominating and Corporate Governance Committee $ 8,000 $ 4,000 Annual fees may be paid in cash or equity at the option of the director. In addition, subject to discretion of the Board of Directors and recommendation of the Compensation Committee, new directors who join the Board of Directors may receive an initial grant of stock options to purchase 23,000 shares of common stock, subject to vesting of 1/36 per month over 36 months following the grant date and with the expiration date of five years from date of grant. In connection with the appointment of Dr. Roth and Mr. McLaughlin as independent directors of the Company, each received an annual retainer fee of $50,000, payable in cash. In addition, the Board of Directors granted Dr. Roth and Mr. McLaughlin options to purchase 23,000 shares of common stock at an exercise price of $1.28 and $1.10 per share, respectively, which options are 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. 196 ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table and accompanying footnotes set forth information regarding the beneficial ownership of our Common Stock, including shares issuable upon the exercise or conversion of securities that entitle the holders to obtain Common Stock upon exercise or conversion) as of the date of this report, or Record Date, by: ● each person who is known to be the beneficial owner of more than 5% of our Common Stock; ● each of our current executive officers and each of our current directors; and ● all of our executive officers and directors as a group. Under the rules and regulations of the SEC, a person is a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of the security, or “investment power,” which includes the power to dispose of or to direct the disposition of the security or has the right to acquire such powers within 60 days. The beneficial ownership of our Common Stock is based on 30,000,000 shares of Common Stock issued and outstanding as of the Record Date. As of the Record Date, there were 50,000 shares of Series C Preferred Stock outstanding which are not reflected in the columns relating to beneficial ownership of Common Stock below since as of such date no shares of Series C Preferred Stock are convertible into Common Stock because there were not convertible as of the Record Date. Unless otherwise noted in the footnotes to the following table, and subject to applicable community property laws, the persons and entities named in the table have sole voting and investment power with respect to their beneficially owned Common Stock. Additionally, in order to illustrate the outstanding voting power of the respective beneficial owners as of the Record Date, the following table does not reflect record or beneficial ownership of any shares of Common Stock issuable upon exercise of warrants, options, or convertible preferred stock, to the extent such securities are exercisable or convertible within 60 days of the Record Date since the Company does not have any shares of Common Stock authorized to issue upon exercise or conversion. Name of Beneficial Owner (1) Number of Common Stock Beneficially Owned Percentage of Class 5% and Greater Holders: 3i, L.P . (2) 2,992,551 9.98 % Directors and Executive Officers: James G. Cullem (3) - - Joan Brown - - Marie Foegh (4) 3,988 * Steen Knudsen (5) 124,977 * Thomas H. Jensen (6) 17,842 * David Roth (7) - - Gerald McLaughlin (8) - - All directors and executive officers as a group (7 individuals) 146,807 * * Less than 1% (1) Unless otherwise noted, the business address of each of the following entities or individuals is c/o Allarity Therapeutics, Inc., 24 School Street, 2nd Floor, Boston, MA 02108. (2) Based on Schedule 13G jointly filed by 3i, LP, 3i Management LLC and Maier J. Tarlow (the “Reporting Persons”) with the SEC on March 2, 2023, reflecting ownership of 2,992,551 shares of common stock. Interests excludes shares of Common Stock issuable pursuant to exercise of shares of Series A Preferred Stock and Warrant, subject to the beneficial ownership limitation of 9.99%. Also excludes shares of Common Stock issuable upon conversion of Series C Preferred Stock which are not exercisable within 60 days as of the Record Date. The principal business address of the Reporting Persons is 140 Broadway, 38th Floor, New York, NY 10005. 3i, L.P.’s principal business is that of a private investor. Maier Joshua Tarlow is the manager of 3i Management, LLC, the general partner of 3i, L.P., and has sole voting control and investment discretion over securities beneficially owned directly or indirectly by 3i Management, LLC and 3i, L.P. 197 (3) Excludes 119,842 shares of Common Stock issuable upon exercise of vested options within 60 days since the Company did not have any authorized shares of Common Stock available for issuance as of the Record Date. (4) Interests shown include 3,988 shares of Common Stock. Excludes 53,839 shares of Common Stock issuable upon exercise of vested options within 60 days since the Company did not have any authorized shares of Common Stock available for issuance as of the Record Date. (5) Interests shown include 124,977 shares of Common Stock. Excludes 53,839 shares of Common Stock issuable upon exercise of vested options within 60 days since the Company did not have any authorized shares of Common Stock available for issuance as of the Record Date. (6) Interests shown include 17,842 shares of Common Stock. Excludes 111,027 shares issuable upon exercise of vested options within 60 days since the Company did not have any authorized shares of Common Stock available for issuance as of the Record Date. (7) Excludes 5,750 shares of Common Stock issuable upon exercise of vested options within 60 days since the Company did not have any authorized shares of Common Stock available for issuance as of the Record Date. (8) Excludes 4,472 shares of Common Stock issuable upon exercise of vested options within 60 days since the Company did not have any authorized shares of Common Stock available for issuance as of the Record Date. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Transactions with Related Parties The Company did not enter into any related party transaction required to be disclosed under Item 404 of Regulation S-K. Related Person Transactions Policy We intend to adopt a written related person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration, and oversight of “related person transactions.” For purposes of policy only, a “related person transaction” is a transaction, arrangement, or relationship (or any series of similar transactions, arrangements or relationships) in which we or any of our subsidiaries are participants involving an amount, as long as we are a SEC smaller reporting company, that exceeds the lesser of (a) $120,000 or (b) 1% of the average of our total assets for the last two completed fiscal years, in which any “related person” has a material interest. Transactions involving compensation for services provided to us as an employee, consultant or director will not be considered related person transactions under this policy. A related person is any executive officer, director, nominee to become a director or a holder of more than 5% of any class of our voting securities (including our common stock), including any of their immediate family members and affiliates, including entities owned or controlled by such persons. Under the policy, the related person in question or, in the case of transactions with a holder of more than 5% of any class of our voting securities, an officer with knowledge of a proposed transaction, must present information regarding the proposed related person transaction to our audit committee (or, where review by our audit committee would be inappropriate, to another independent body of our Board of Directors) for review. To identify related person transactions in advance, we will rely on information supplied by our executive officers, directors and certain significant stockholders. In considering related person transactions, our audit committee will take into account the relevant available facts and circumstances, which may include, but are not limited to: ● the risks, costs, and benefits to us; ● the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated; ● the terms of the transaction; ● the availability of other sources for comparable services or products; ● the terms available to or from, as the case may be, unrelated third parties; and ● our audit committee will approve only those transactions that it determines are fair and in our best interests. 198 Director Independence A majority of our Board of Directors are independent directors, see the discussion above under the section “Item 10. Directors, Executive Officers and Corporate Governance–Director Independence.” ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES On September 9, 2022, our Audit Committee approved the engagement of Wolf & Company as our independent registered public accounting firm. Wolf & Company re-audited our financial statements for the year ended December 31, 2021, and audited our financial statements for the year ended December 31, 2022. Fees Paid to Principal Independent Registered Public Accounting Firm The aggregate fees billed by our current auditors Wolf & Company, P.C. and our former auditors Marcum LLP and PWC for the years ended December 31, 2022, and 2021 are as follows: 2022 2021 Audit fees (1) $ 1,135,616 $ 1,253,363 Tax fees (2) — 247,816 Audit related fees (3) 377,582 2,626 Total $ 1,513,198 $ 1,503,805 (1) 2021 Audit fees represent fees for professional services provided in connection with the audit of our annual financial statements and the review of our quarterly financial statements and. This information is presented as of the latest practicable date for this annual report. The audit fees for 2021 also include the services provided in reviewing our Registration Statement on Form S-1. (2) Our former auditor PwC provided us with tax advice and tax planning services as part of our reorganization completed on December 20, 2021, before we became a US domestic filer. (3) All other fees include fees billed by our independent auditors for products or services other than as described in the immediately preceding two categories including those services normally provided in connection with statutory or regulatory filings or engagements including comfort letters, consents and other services related to SEC matters. Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm Our audit committee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm, the scope of services provided by our independent registered public accounting firm and the fees for the services to be performed. These services may include audit services, audit-related services, tax services and other services. Pre-approval is detailed as to the service or category of services and is generally subject to a specific budget. Our independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by our independent registered public accounting firm in accordance with this preapproval, and the fees for the services performed to date. 199 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this annual report on Form 10-K: (1) Financial Statements The following financial statements of Allarity, and the Reports of Independent Registered Public Accounting Firms, are included at the end of this report beginning on page F-1: (2) Financial Statement Schedules All schedules have been omitted because the required information is included in the financial statements or notes thereto or because they are not required. (3) Exhibits The exhibits required by Item 601 of Regulation S-K are listed in subparagraph (b) below. (b) Exhibits: The following exhibits are filed as part of this Annual Report. Exhibit No Description 2.1 (e) Amended and Restated Plan of Reorganization and Asset Purchase Agreement by and among Allarity Therapeutics, Inc. a Delaware corporation, Allarity Acquisition Subsidiary, a Delaware corporation and Allarity Therapeutics A/S, an Aktieselskab organized under the laws of Denmark, dated as of September 23, 2021 3.1 (a) Certificate of Incorporation of Allarity Therapeutics, Inc. 3.2 (b) Certificate of Amendment to the Certificate of Incorporation of Allarity Therapeutics, Inc. 3.3 (c) Amended and Restated Bylaws of Allarity Therapeutics, Inc. 3.4 (m) Amendment No. 1 to Amended and Restated Bylaws of Allarity Therapeutics, Inc. 3.5 (g) Certificate of Designations of Allarity Therapeutics, Inc. relating to the Series A Convertible Preferred Stock 3.6 (q) Amendment to Certificate of Designation of the Series A Convertible Preferred Stock 3.7 (q) Certificate of Designation of the Series B Preferred Stock 3.8 (s) Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Redeemable Preferred Stock 3.9 (s) Certificate of Amendment to Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Redeemable Preferred Stock 4(vi) * Description of Capital Stock 4.1 (b) Specimen Common Stock Certificate of Allarity Therapeutics, Inc. 4.2 (a) Form of Warrant (3i LP) 10.1# (e) Allarity Therapeutics, Inc. 2021 Equity Incentive Plan 10.2† (a) Exclusive License Agreement between Oncology Venture A/S and Smerud Medical Research International As Dated as of June 26, 2020 10.3† (a) Amended and Restated License Agreement between Allarity Therapeutics A/S and LiPlasome Pharma ApS, dated January 2021 10.4† (a) Exclusive License Agreement between Oncology Venture, APS and 2-BBB Medicines BV, dated as of March 27, 2017 10.5† (c) Development, Option and License Agreement between Oncology Venture ApS and R-Pharm US Operating LLC, dated March 1, 2019 10.6† (c) Exclusive License Agreement between Oncology Venture, ApS and Eisai, Inc., dated as of July 6, 2017 10.7 † (c) License Agreement between Novartis Pharma Ag and Oncology Venture, ApS, dated April 6, 2018 10.8 + (a) Securities Purchase Agreement dated May 20, 2021 between Allarity Therapeutics, Inc. and 3i, LP 10.9 (a) Registration Rights Agreement dated May 20, 2021 between Allarity Therapeutics, Inc. and 3i, LP 10.10 † (a) Asset Purchase Agreement dated July 23, 2021 between Allarity Therapeutics A/S and Lantern Pharma Inc. 10.11 (c) First Amendment to the Exclusive License Agreement between Eisai and Allarity Therapeutics A/S dated December 20, 2020. 10.12 (d) Second Amendment to Exclusive License Agreement between Oncology Venture, ApS and Eisai, Inc. dated as of August 3, 2021. 10.13# (f) Employment Agreement by and between Allarity Therapeutics, Inc. and James G. Cullem 10.14# (f) Employment Agreement by and between Allarity Therapeutics, Inc. and Marie Foegh, M.D. 10.15 (h) Asset Purchase Agreement between Allarity Therapeutics, Inc. and Allarity Therapeutics A/S dated December 17, 2021 10.16 (k) Assignment and Assumption Agreement between Allarity Therapeutics, Inc. and Allarity A/S 10.17† (k) Exclusive License Agreement with Oncoheroes Bioscience, Inc. dated January 2, 2022 (Stenoparib) 10.18† (k) Exclusive License Agreement with Oncoheroes Bioscience, Inc. dated January 2, 2022 (Dovitnib) 200 10.19† (k) Amended and Restated License Agreement among Allarity Therapeutics Europe ApS, LiPlasome Pharma ApS, and Chosa ApS dated March 28, 2022 10.20† (k) Support Agreement between Allarity Therapeutics A/S and LiPlasome Pharma ApS, dated March 28, 2022 10.21 (i) First Amendment to License Agreement between Novartis Pharma Ag and Allarity Therapeutics Europe ApS 10.22 (i) Convertible Promissory Note 10.23 (j) Forbearance Agreement and Waiver 10.24 (l) First Amendment to Forbearance and Waiver dated June 6, 2022 10.25†# (o) Separation Agreement with Steve Carchedi 10.26†# (o) Separation Agreement with Jens Knudsen 10.27 (o) Second Amendment to Development Option & License Agreement 10.28† (p) Second Amendment to License Agreement 10.29 (q) Secured Note Purchase Agreement 10.30 (q) Form of Secured Promissory Note 10.31 (q) Security Agreement 10.32* Letter Agreement with 3i, LP 10.33# (r) Employment Agreement with James G. Cullem dated January 12, 2023 10.34# (r) Employment Agreement with Joan Brown dated January 12, 2023 10.35* Letter Agreement with 3i, LP dated January 23, 2023 10.36+ (s) Form of Securities Purchase Agreement – Series C Preferred Stock 10.37 (s) Form of Registration Rights Agreement 10.38 (s) Limited Waiver Agreement 16.1 (n) Letter from Marcum, LLP dated August 23, 2022, regarding Change in Independent Registered Public Accounting Firm 21.1* Subsidiaries of the Registrant 31.1* Certifications of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act 31.2* Certifications of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act 32.1* Certifications of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act 32.2* Certifications of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). (a) Incorporated by reference from the Registration Statement on Form S-4 filed with the SEC on August 20, 2021. (b) Incorporated by reference from Amendment No. 1 to Registration Statement on Form S-4 as refiled with the SEC on October 20, 2021. (c) Incorporated by reference from Amendment No. 2 to Registration Statement on Form S-4 as refiled with the SEC on October 20, 2021. (d) Incorporated by reference from Amendment No. 4 to Registration Statement on Form S-4 as filed with the SEC on November 2, 2021. (e) Incorporated by reference from Amendment No. 2 to Registration Statement on Form S-1 as filed with the SEC on December 6, 2021. (f) Incorporated by reference from Form 8-K as filed with the SEC on December 10, 2021. (g) Incorporated by reference from Form 8-K as filed with the SEC on December 20, 2021. (h) Incorporated by reference from Form 8-K filed with the SEC on December 22, 2021. (i) Incorporated by reference from Form 8-K filed with the SEC on April 18, 2022. (j) Incorporated by reference from Form 8-K filed with the SEC on May 6, 2022. (k) Incorporate by reference from Form 10-K filed with the SEC on May 17, 2022. (l) Incorporated by reference from Form 8-K filed with the SEC on June 10, 2022. (m) Incorporated by reference from Form 8-K filed with the SEC on July 11, 2022. (n) Incorporated by reference from Form 8-K filed with the SEC on August 12, 2022, as amended on August 24, 2022. (o) Incorporated by reference from Form 10-Q filed with the SEC on October 7, 2022. (p) Incorporated by reference from Form 8-K filed with the SEC on September 30, 2022. (q) Incorporated by reference from Form 8-K filed with the SEC on November 25, 2022. (r) Incorporated by reference from Form 8-K filed with the SEC on January 19, 2023. (s) Incorporated by reference from Form 8-K filed with the SEC on February 28, 2023. † Certain portions of this exhibit were be omitted because they are not material and would likely cause competitive harm to the registrant if disclosed. * Filed herewith. # Indicates management contract or compensatory plan or arrangement. + Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601. The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. ITEM 16. Form 10-K Summary None. 201 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and 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. By: /s/ James G. Cullem Name: James G. Cullem Title: Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ James G. Cullem Chief Executive Officer and Director March 10, 2023 James G. Cullem ( Principal Executive Officer ) /s/ Joan Brown Chief Financial Officer March 10, 2023 Joan Brown ( Principal Financial and Accounting Officer ) /s/ Gerald McLaughlin Chairman of the Board March 10, 2023 Gerald McLaughlin /s/ David A. Roth Director March 10, 2023 David A. Roth /s/ Thomas Jensen Director March 10, 2023 Thomas Jensen 202 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Pages Consolidated Financial Statements For the years ended December 31, 2022 and 2021 Report of Independent Registered Public Accounting Firm (PCAOB ID 392 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Loss F-4 Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) F-5 – F-6 Consolidated Statements of Cash Flows F-7 – F-8 Notes to Consolidated Financial Statements F-9 – F-51 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Allarity Therapeutics, Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Allarity Therapeutics, Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Emphasis of a Matter Regarding Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has recurring losses from operations and accumulated deficit that raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Wolf & Company, P.C. We have served as the Company’s auditor since 2022. Boston, MA March 9, 2023 F- 2 ALLARITY THERAPEUTICS, INC. CONSOLIDATED BALANCE SHEETS As of December 31, 2022 and 2021 (U.S. dollars in thousands, except for share and per share data) 2022 2021 ASSETS Current assets: Cash $ 2,029 $ 19,555 Other current assets 1,559 625 Prepaid expenses 591 36 Investment in Lantern Pharma Inc. stock — 350 Tax credit receivable 789 838 Total current assets 4,968 21,404 Non-current assets: Property, plant and equipment, net 21 8 Operating lease right of use assets 6 86 Intangible assets 9,549 28,135 Total assets $ 14,544 $ 49,633 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 6,251 $ 698 Accrued liabilities 1,904 8,590 Income taxes payable 41 60 Operating lease liabilities, current 8 98 Warrant liability 374 11,273 Convertible debt 2,644 — Total current liabilities 11,222 20,719 Non-current liabilities: Convertible promissory note and accrued interest, net of debt discount 1,083 979 Derivative liabilities 7,181 Operating lease liabilities, net of current portion — 9 Deferred tax 349 1,961 Total liabilities 12,654 30,849 Commitments and contingencies (Note 21) Redeemable preferred stock (500,000 shares authorized) Series A Convertible Preferred stock $ 0.0001 par value (20,000 shares designated) shares issued and outstanding at December 31, 2022 and 2021 were 13,586 and 19,800 , respectively 2,001 632 Series B Preferred stock $ 0.0001 par value ( 200,000 shares designated) shares issued at December 31, 2022 and 2021 were 190,786 and 0 , respectively 2 — Total redeemable preferred stock 2,003 632 Stockholders’ (deficit) equity Common stock, $ 0.0001 par value ( 30,000,000 shares authorized) shares issued and outstanding at December 31, 2022 and 2021 were 15,897,845 and 8,096,014 , respectively 2 1 Additional paid-in capital 83,156 85,243 Accumulated other comprehensive loss ( 721 ) ( 600 ) Accumulated deficit ( 82,550 ) ( 66,492 ) Total stockholders’ (deficit) equity ( 113 ) 18,152 Total liabilities, preferred stock and stockholders’ (deficit) equity $ 14,544 $ 49,633 See report of independent registered accounting firm and accompanying notes to consolidated financial statements. F- 3 ALLARITY THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS For the years ended December 31, 2022 and 2021 (U.S. dollars in thousands, except for share and per share data) 2022 2021 Operating expenses: Research and development $ 6,930 $ 14,196 Impairment of intangible assets 17,571 — General and administrative 9,962 12,360 Total operating expenses 34,463 26,556 Loss from operations ( 34,463 ) ( 26,556 ) Other income (expenses) Gain from the sale of IP 1,780 1,005 Interest income 30 — Interest expenses ( 223 ) ( 499 ) Finance costs — ( 1,347 ) Loss on investment ( 115 ) ( 495 ) Foreign currency transaction losses, net ( 913 ) ( 95 ) Change in fair value adjustment of derivative and warrant liabilities 17,125 2,087 Penalty on Series A Preferred stock liability ( 800 ) — Change in fair value of convertible debt — ( 474 ) Non-cash interest expense related to beneficial conversion feature of convertible debt — ( 141 ) Total other income, net 16,884 41 Net loss before tax recovery (expense) ( 17,579 ) ( 26,515 ) Income tax recovery (expense) 1,521 ( 133 ) Net loss ( 16,058 ) ( 26,648 ) Deemed dividend of 8 % on Preferred stock ( 1,572 ) — Cash obligations on converted Series A Preferred stock ( 3,421 ) — Net loss attributable to common stockholders $ ( 21,051 ) $ ( 26,648 ) Basic and diluted net loss per share applicable to common stockholders $ ( 2.21 ) $ ( 4.19 ) Basic and diluted weighted-average common shares outstanding 9,527,111 6,358,988 Net loss $ ( 16,058 ) $ ( 26,648 ) Other comprehensive loss, net of tax: Change in cumulative translation adjustment ( 121 ) ( 1,966 ) Change in fair value attributable to instrument specific credit risk — ( 9 ) Total comprehensive loss attributable to common shareholders $ ( 16,179 ) $ ( 28,623 ) See report of independent registered accounting firm and accompanying notes to consolidated financial statements. F- 4 ALLARITY THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) For the years ended December 31, 2022 and 2021 (U.S. dollars in thousands, except for share data) Series A Convertible Preferred Stock Common Stock Additional Paid in Accumulated Other Comprehensive Accumulated Total Stockholders’ Equity Shares Amount Shares Amount Capital Income (Loss) Deficit (Deficit) Balance, December 31, 2020 carried forward — $ — 4,252,021 $ 1 $ 62,907 $ 1,375 $ ( 39,844 ) $ 24,439 Units issued for cash 20,000 1,318 2,417,824 — 12,125 — — 12,125 Fair value of investor warrants (TO3) — — — — ( 2,000 ) — — ( 2,000 ) Warrants and options exercised for cash — — 295,537 — 2,972 — — 2,972 Units issued for share issuance costs — — 482,250 — 2,384 — — 2,384 Share issuance costs — ( 679 ) — — ( 2,475 ) — — ( 2,475 ) Convertible debt conversion and related beneficial conversion feature and settlement of accounts payable — — 628,192 — 2,880 — — 2,880 Stock based compensation — — — — 6,368 — — 6,368 Cumulative translation adjustment — — — — — ( 1,966 ) — ( 1,966 ) Fair value of instrument specific credit risk — — — — — ( 9 ) — ( 9 ) Conversion of preferred stock into common stock ( 200 ) ( 7 ) 20,190 — 7 — — 7 Reclassification of derivative liabilities related to converted preferred stock — — — — 75 — — 75 Net loss — — — — — — ( 26,648 ) ( 26,648 ) Balance, December 31, 2021 19,800 $ 632 8,096,014 $ 1 $ 85,243 $ ( 600 ) $ ( 66,492 ) $ 18,152 See report of independent registered accounting firm and accompanying notes to consolidated financial statements. F- 5 ALLARITY THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) For the years ended December 31, 2022 and 2021 (U.S. dollars in thousands, except for share data) Series A Convertible Preferred Stock Series B Preferred Stock Common Stock Additional Paid in Accumulated Other Comprehensive Accumulated Total Stockholders’ Equity Shares Amount Shares Amount Shares Amount Capital Loss Deficit (Deficit) Balance, December 31, 2021 carried forward 19,800 $ 632 — $ — 8,096,014 $ 1 $ 85,243 $ ( 600 ) $ ( 66,492 ) $ 18,152 Conversion of preferred stock into common stock ( 6,214 ) ( 203 ) — — 7,801,831 1 202 — — 203 Floor price liability — — — — ( 3,421 ) — — ( 3,421 ) Reclassification of derivative liabilities related to converted preferred stock — — — — — — 954 — — 954 Deemed dividend of 8 % on preferred stock 1,572 — — — — ( 1,572 ) — — ( 1,572 ) Series B preferred stock dividend — — 190,786 2 — — ( 2 ) — — ( 2 ) Stock based compensation — — — — — — 1,752 — — 1,752 Cumulative translation adjustment — — — — — — — ( 121 ) — ( 121 ) Net loss — — — — — — — — ( 16,058 ) ( 16,058 ) Balance, December 31, 2022 13,586 $ 2,001 190,786 $ 2 15,897,845 $ 2 $ 83,156 $ ( 721 ) $ ( 82,550 ) $ ( 113 ) See report of independent registered accounting firm and accompanying notes to consolidated financial statements. F- 6 ALLARITY THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2022 and 2021 (U.S. dollars in thousands) 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 16,058 ) $ ( 26,648 ) Adjustments to reconcile net loss to net cash used in operating activities: Gain from the sale of IP ( 1,780 ) ( 1,005 ) Depreciation and amortization 60 106 Intangible asset impairment 17,571 — Stock-based compensation 1,752 6,368 Non-cash interest expense 138 238 Non-cash finance expense — 1,347 Loss on investment 115 495 Unrealized foreign exchange loss 450 95 Loss on extinguishment of convertible debt — 141 Change in fair value adjustment of convertible debt — 474 Change in fair value of warrant and derivative liabilities ( 17,125 ) ( 2,087 ) Deferred income taxes ( 1,612 ) 20 Changes in operating assets and liabilities: Other current assets ( 1,077 ) ( 330 ) Prepaid expenses ( 618 ) 130 Accounts payable 6,207 ( 1,311 ) Accrued liabilities ( 4,722 ) 7,197 Income taxes payable ( 19 ) 8 Operating lease liability ( 99 ) ( 124 ) Net cash used in operating activities ( 16,817 ) ( 14,886 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of IP 809 1,005 Purchase of property and equipment ( 18 ) — Net cash provided by investing activities 791 1,005 CASH FLOWS FROM FINANCING ACTIVITIES: Line of credit — ( 84 ) Proceeds from common stock units and preferred stock issuance — 32,125 Proceeds from exercise of warrants and stock options for common stock — 2,765 Share issuance costs — ( 2,041 ) Cash paid in connection with conversion of Series A Preferred Stock ( 1,511 ) — Penalty on Series A Preferred Stock liability ( 800 ) — Proceeds from convertible loans 1,000 1,140 Loan proceeds — 2,858 Repayment of loan — ( 2,945 ) Net cash provided by (used in) financing activities ( 1,311 ) 33,818 Net increase (decrease) in cash ( 17,337 ) 19,937 Effect of exchange rate changes on cash ( 189 ) ( 680 ) Cash, beginning of year 19,555 298 Cash, end of year $ 2,029 $ 19,555 See report of independent registered accounting firm and accompanying notes to consolidated financial statements. F- 7 ALLARITY THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (cont.) For the years ended December 31, 2022 and 2021 (U.S. dollars in thousands) 2022 2021 Supplemental disclosure of cash flow information Cash paid for income taxes $ 12 $ 118 Cash paid for interest $ 85 $ 262 Supplemental disclosure of non-cash investing and financing activities: Offset of payable against receivable from sale of IP $ 971 $ — Conversion of floor price liability to convertible debt $ 1,667 $ — Conversion of convertible debt to common stock and settlement of accounts payable $ — $ 2,880 Conversion of derivative liability to common stock $ — $ 206 Conversion of Series A Convertible Preferred stock to equity $ 1,157 $ 7 Deemed 8 % dividend on Series A Preferred shares $ 1,572 $ — Series B Preferred share dividend $ 2 — Reclassification of derivative liabilities related to converted preferred stock $ 954 $ 75 Non-cash share issuance costs $ — $ 2,384 Right of use asset modification $ — $ 145 See report of independent registered accounting firm and accompanying notes to consolidated financial statements. F- 8 ALLARITY THERAPEUTICS, INC. NOTES TO FINANCIAL STATEMENTS For the years ended December 31, 2022 and 2021 (U.S. dollars in thousands, except for share and per share data and where otherwise noted) 1. Nature of the business (a) Reorganization Effective December 20, 2021, and in connection with the Plan of Reorganization and Asset Purchase Agreement, which was amended and restated on September 23, 2021, between Allarity Therapeutics, Inc. a Delaware corporation (the “Company”), Allarity Acquisition Subsidiary Inc., the Company’s wholly owned Delaware subsidiary (“Acquisition Sub”), and Allarity Therapeutics A/S, an Aktieselskab organized under the laws of Denmark (“Allarity A/S”), the Company completed an Asset Purchase Agreement with Acquisition Sub and Allarity A/S pursuant to which Allarity A/S sold, and Acquisition Sub purchased, all of Allarity A/S’ assets and certain specified liabilities in connection with Allarity A/S’ business for an aggregate purchase price of 8,075,824 shares of the Company’s common stock plus the assumption of specified liabilities. Thereafter, Allarity A/S is in the process of being dissolved and liquidated in accordance with Part 14 of Danish Companies Act. While the Company was the legal acquirer of Allarity A/S, for accounting purposes, the Merger is treated similarly to a reverse recapitalization, whereby Allarity A/S is deemed to be the accounting acquirer, and the historical financial statements of Allarity A/S became the historical financial statements of the Company upon the closing of the reorganization. Under this method of accounting, the Company was treated as the “acquired” company and Allarity A/S is treated as the acquirer for financial accounting purposes. Accordingly, for accounting purposes, the reorganization was treated as the equivalent of Allarity A/S issuing stock for the net assets of the Company accompanied by a recapitalization. Because the reorganization is a common control transaction the net assets and prior year financial statements were stated at historical cost, with no goodwill or other intangible assets recorded. In accordance with ASC 805, the legal capital of Allarity A/S has been retroactively adjusted to reflect the capital of the legal acquirer (accounting acquiree) the Company. (b) Principal Operations and Activities The Company’s principal operations are located at Venlighedsvej 1, 2970 Horsholm, Denmark. The Company’s United States operations are located at 24 School Street, 2 nd Floor, Boston, MA 02108, United States of America. The Company develops drugs for the personalized treatment of cancer using drug specific companion diagnostics (cDx) generated by its proprietary drug response predictor technology, DRP ® . Additionally, the Company, through its Danish subsidiary, Allarity Therapeutics Denmark ApS (formerly OV-SPV2ApS) (“Allarity Denmark,” or “OV-SPV2”), specializes in the research and development of anti-cancer drugs. (c) 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. (d) Going Concern The accompanying consolidated financial statements have been prepared on going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The accompanying consolidated 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. F- 9 1. Nature of the business (cont.) The Company expects its costs and expenses to increase as it continues to develop its product candidates and progress its current clinical programs and cost associated with being a public company. 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 evaluates 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 consolidated 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 consolidated financial statements, and (1) is probable that the plan will be effectively implemented within one year after the date the consolidated financial statements are issued, and (2) it is probable that the plan, when implemented will mitigate the relevant condition or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued. Certain elements of the Company’s operating plan to alleviate the conditions that raise substantial doubt are outside of the Company’s control and cannot be included in management’s evaluation under the requirements of ASC 205-40. Since inception, the Company has devoted substantially all its efforts to business planning, research and development, clinical expenses, recruiting management and technical staff, and securing funding via collaborations. The Company has historically funded its operations with proceeds received from its collaboration arrangements, sale of equity capital and proceeds from sales of convertible notes. The Company has incurred significant losses and has an accumulated deficit of $ 82.6 million as of December 31, 2022. Management expects to continue to generate operating losses in the foreseeable future, particularly as the Company advances its preclinical activities and clinical trials for its product candidates in development. The Company plans to seek 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 these endeavors. If the Company is unable to obtain funding, the Company could be forced to delay, reduce, or eliminate its research and development programs, or reduce product candidate expansion, which could adversely affect its business prospects. Currently, our cash is insufficient to fund our current operating plan and planned capital expenditures through December 2023 since our current cash reserves are only sufficient for the next 3 months. These conditions give rise to substantial doubt over the Company’s ability to continue as a going concern. (e) Impact of Covid-19 on our Business In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a pandemic and recommended containment and mitigation measures worldwide. The COVID-19 pandemic has been evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures. As a result of COVID-19, all the Company’s clinical trials experienced significant delays throughout the year ended December 31, 2020. The Company has been slowly ramping up its clinical trial sites in 2021. Management continues to closely monitor the impact of the COVID-19 pandemic on all aspects of the business, including how it will impact operations and the operations of customers, vendors, and business partners. The extent to which COVID-19 impacts the future business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, such as the continued duration of the outbreak, new information that may emerge concerning the severity or other strains of COVID-19 or the effectiveness of actions to contain COVID-19 or treat its impact, among others. If the Company or any of the third parties with which it engages, however, were to experience shutdowns or other business disruptions, the ability to conduct business in the manner and on the timelines presently planned could be materially and negatively affected, which could have a material adverse impact on business, results of operations and financial condition. The estimates of the impact on the Company’s business may change based on new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national, and international markets. Management has not identified any events which would result in any significant impairment losses in the carrying values of assets because of the pandemic and are not aware of any specific related event or circumstance that would require management to revise estimates reflected in these consolidated financial statements. F- 10 1. Nature of the business (cont.) (f) 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 not yet had an impact on our results of operations, however we expect it may have an impact on the costs of materials we purchase for our laboratory operations in Denmark, but we cannot predict the impact at this point in time. (g) Emerging Growth Companies Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has chosen not to make an election to opt out of new or revised accounting standards. 2. Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying consolidated financial statements have been prepared on an accrual basis of accounting, in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the ASC and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). As a result of the recapitalization share exchange (also described in Notes 1 and 3), to these consolidated financial statements, all outstanding shares, warrants, and options were exchanged on a 50:1 basis as of December 20, 2021, and accordingly, all share, warrant, option and per share disclosure in these consolidated financial statements has been retroactively adjusted to reflect the 50:1 reverse split unless otherwise stated. (b) Organization and Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Name Country of Incorporation Allarity Acquisition Subsidiary Inc. United States Allarity Therapeutics Europe ApS (formerly Oncology Venture Product Development ApS) Denmark Allarity Therapeutics Denmark ApS (formerly OV-SPV2 ApS) Denmark MPI Inc.* United States Oncology Venture US Inc.* United States *In the process of being dissolved because inactive. All intercompany transactions and balances, including unrealized profits from intercompany sales, have been eliminated upon consolidation. F- 11 2. Summary of Significant Accounting Policies (cont.) (c) Use of Estimates The preparation of consolidated 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. (d) 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 consolidated statements of changes in redeemable convertible preferred stock and stockholders’ equity as a component of accumulated other comprehensive loss. 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 income (loss) in the consolidated statements of operations and comprehensive loss as incurred. The Company recorded a foreign exchange translation loss of $ 121 and $ 1,966 and a fair value adjustment to instrument specific credit risk of $ 0 and ($ 9 ), included in accumulated other comprehensive loss for the years ended December 31, 2022 and 2021, respectively. (e) 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. (f) Cash Cash consists primarily of highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The Company had no cash equivalents or restricted cash on December 31, 2022 and 2021. F- 12 2. Summary of Significant Accounting Policies (cont.) (g) Property, plant and equipment Property, plant, and equipment are stated at cost, less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the estimated useful lives of the respective assets as follows: Estimated Useful Economic Life Leasehold property improvements Lesser of lease term or useful life Laboratory equipment 5 years Furniture and office equipment 3 years Upon retirement or sale, the cost of assets disposed of, and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in loss from operations. As of December 31, 2022 and 2021, there have been no significant asset retirements to date. Expenditures for repairs and maintenance that do not improve or extend the lives of the respective assets are charged to expense as incurred. (h) Grants Grants are recognized when the conditions for receipt are met and there is reasonable assurance that the grant will be received. Grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognized in profit or loss in the period in which they become receivable. (i) 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. (j) Business combinations Business combinations are accounted for in accordance with ASC Topic 805 “Business Combinations”. The total purchase price of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values as of the acquisition date. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, probabilities of success, discount rates, and asset lives, among other items. Assets acquired and liabilities assumed are recorded at their estimated fair values. F- 13 2. Summary of Significant Accounting Policies (cont.) (k) Acquired patents Acquired patents are measured in the balance sheet at the lower of cost less accumulated amortization and impairment charges, if any. The legal costs incurred to renew or extend the term of the acquired patents are expensed as incurred. Cost comprises the acquisition price and the depreciation period are estimated at approximately 5 years with no residual value. Depreciation methods, useful lives and residual values are reviewed every year. (l) 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 date 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 and $ 0 on its intangible assets in the years ended December 31, 2022 and 2021, respectively. (m) Fair value measurements of financial instruments The carrying value of the Company’s financial instruments of cash, other current assets, accounts payable and accrued liabilities, approximate their fair value due to their short-term nature. The Company’s other financial instruments include an equity investment, preferred shares, convertible debt, and warrant derivative liabilities. The equity investment is adjusted to fair market value at the end of every period based upon unadjusted quoted prices. The convertible debt and derivative liabilities that are freestanding equity-linked financial instruments are fair valued at the end of every period using level 3 inputs. F- 14 2. Summary of Significant Accounting Policies (cont.) Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following: ● Level 1 — defined as observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. ● Level 2 — defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and ● Level 3 — defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. (n) Segment and geographic information Operating segments are defined as components of a business for which separate discrete financial information is available for evaluation by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company and its chief operating decision maker, the Company’s Chief Executive Officer, view the Company’s operations and manage its business as a single operating segment. The Company operates in two geographic areas: Denmark and the United States. (o) Operating lease right-of-use assets The Company determines whether an arrangement contains a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and net of current portion of operating lease liabilities on our consolidated balance sheets. Lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company’s leases do not provide an implicit rate, an incremental borrowing rate is used based on the information available at the commencement date in determining the present value of lease payments. The Company does not include options to extend or terminate the lease term unless it is reasonably certain that the Company will exercise any such options. Rent expense is recognized under the operating leases on a straight-line basis. The Company’s facilities operating leases have lease and non-lease components to which the Company has elected to apply a practical expedient to account for all components as one single component. The Company does not recognize right-of-use assets or lease liabilities for short-term leases, which have a lease term of twelve months or less, and instead will recognize lease payments as expense on a straight-line basis over the lease term. F- 15 2. Summary of Significant Accounting Policies (cont.) (p) Revenue recognition The Company’s revenues are generated primarily through research and development services provided to pharmaceutical and biotechnology companies. The terms of these arrangements may include (i) the grant of intellectual property rights (IP licenses) to therapeutic drug candidates against specified targets, (ii) performing research and development services to optimize drug candidates, and (iii) the grant of options to obtain additional research and development services or licenses for additional targets, or to optimize product candidates, upon the payment of option fees. Research and development service revenue is recognized over time as services are rendered. Revenue generated from the grant of IP licenses is recognized when probable. The Company has not recognized revenue to the date of these financial statements. The Company has adopted ASC Topic 606—Revenue from Contracts with Customers (“ASC 606”). This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized under ASC 606, the Company performs the following steps: (i) identify the promised goods or services in the contract; (ii) determine whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. (q) Milestone and royalty revenue recognition Milestone payments: At the inception of each arrangement that includes research and development milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant cumulative revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. Royalties: For arrangements that include sales-based royalties, including milestone payments upon first commercial sales and milestone payments based on a level of sales, which are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements. F- 16 2. Summary of Significant Accounting Policies (cont.) (r) Research contract costs and accruals Research and development costs are expensed as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities, including salaries, share-based compensation and benefits, facilities costs and laboratory supplies, depreciation, amortization and impairment expense, manufacturing expenses and external costs of outside vendors engaged to conduct preclinical development activities and clinical trials. Typically, upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. As of December 31, 2022 and 2021, the Company has recorded milestone payment liabilities of $ 1,400 and $ 5,000 , respectively, as accrued liabilities. The Company has entered into various research and development contracts with companies in Europe, the United States, and other countries. 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. (s) Research and development incentives and receivable Denmark Tax Incentives Denmark allows loss making companies the opportunity to apply for a payment equal to the tax value ( 22 %) of negative taxable income related to R&D costs. The negative taxable income is calculated on the total negative income of the companies participating in the joint taxation. Tax payment according to this rule cannot exceed an amount of DKK 5.5 million, corresponding to a tax loss relating to R&D expenditure of DKK 25 million. The tax credit is recorded as tax receivable and other income within research and development expenses. In the years ended December 31, 2022 and 2021, the Company recorded $ 711 and $ 875 in tax credits respectively, thereby reducing research and development expenses. European Agency Grants The Company, through its subsidiaries in Denmark, from time-to-time receives reimbursements of certain research and development expenditures as part of a European agency’s research and development cost relief program. Management has assessed the Company’s research and development activities and expenditures to determine which activities and expenditures are likely to be eligible under the research and development incentive program described above. At each period end, management estimates the reimbursement available to the Company based on available information at the time. The Company records these research and development expense reimbursements as a reduction to research and development expenses in the consolidated statements of operations and comprehensive loss, as the research and development cost reimbursements are not dependent on the Company generating future taxable income, the Company’s ongoing tax status, or tax position. The Company recognizes a receivable for the research and development incentives when the relevant expenditure has been incurred, the associated conditions have been satisfied and there is reasonable assurance that the reimbursement will be received. During the years ended December 31, 2022 and 2021, respectively, the Company has not received or recorded government grants receivable. (t) Investments In accordance with ASC 321, the Company’s investments in equity securities are measured at readily determinable fair value (“RDFV”) in the balance sheet with changes in fair value recognized in net loss. For investments in equity securities that are traded in an active market, RDFV is equivalent to the market value at the balance sheet date and changes in fair value are recognized in other income (expenses). Investments in equity securities are classified as either current or long-term depending upon management’s intentions. F- 17 2. Summary of Significant Accounting Policies (cont.) (u) 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 Consolidated 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 (loss) on extinguishment. (v) 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. (w) 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 recorded as “Derivative liabilities” in the Consolidated Balance Sheets. (x) 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. F- 18 2. Summary of Significant Accounting Policies (cont.) The Company records the expense for option awards using either a graded or straight-line method. The Company accounts for forfeitures as they occur. For share-based awards granted to both employee and non-employee consultants, the measurement date for non-employee awards 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 all stock award modifications including when there is an exchange of original award for a new award. In the case of stock award modifications, the Company calculates for 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 and for the Employee Share Purchase Plan (the “ESPP”). The Black-Scholes model requires several assumptions, of which the most significant are the share price, expected volatility and the expected award term. Expected term of options granted is calculated using the simplified method being the average between the vesting period and the contractual term to the expected term of the options in effect at the time of grant. The Company has historically not paid dividends and has no foreseeable plans to pay dividends and, therefore, uses an expected dividend yield of zero in the option pricing model. The risk-free interest rate is based on the yield of U.S. treasury bonds with equivalent terms. The Company classifies share-based compensation expense in its Consolidated Statements of Operations and Comprehensive Loss in the same way the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified. (y) 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 Consolidated Statements of Operations and Comprehensive Loss. For the years ended December 31, 2022 and 2021, the Company’s other comprehensive loss was comprised of currency translation adjustments and fair value adjustments attributable to instrument specific credit risk. (z) 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 Consolidated Statements of Operations and Comprehensive Loss. F- 19 2. Summary of Significant Accounting Policies (cont.) (aa) Income taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined based on the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. The Company accounts for uncertainty the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not-to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that will more likely than not be realized upon ultimate settlement. Any provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits that are considered appropriate. The Company recognizes interest and penalties related to uncertain tax positions in other (income) expenses. (bb) Computation of loss per share Basic net loss per common share is determined by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common stock and common stock equivalents outstanding for the period. The Company adjusts net loss to arrive at the net loss attributable to common stockholders to reflect the amount of dividends accumulated during the period on the Company’s redeemable convertible preferred stock, if any. The treasury stock method is used to determine the dilutive effect of the Company’s stock option grants and warrants and the if-converted method is used to determine the dilutive effect of the Company’s redeemable convertible preferred stock and Convertible Notes. For the years ended December 31, 2022 and 2021, the Company had a net loss attributable to common stockholders, and as such, all outstanding stock options, shares of redeemable convertible preferred stock, and warrants were excluded from the calculation of diluted loss per share. Under the if-converted method, convertible instruments that are in the money, are assumed to have been converted as of the beginning of the period or when issued, if later. (cc) Recently adopted accounting pronouncements In May 2021, the FASB issued ASU No. 2021-04 — Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options — to clarify the accounting by issuers for modifications or exchanges of equity-classified written call options. The framework applies to freestanding written call options, such as warrants, that were and remain equity classified by the issuer after the modification and are not in the scope of another Codification Topic. The framework applies regardless of whether the modification is through an amendment to the existing terms or issuance of a replacement warrant. The effect of the modification of the warrant is measured as the difference in its fair value immediately before and after the modification. The effect is recognized in the same manner as if cash had been paid as consideration. Additionally, other modifications may need to be accounted for as a cost to the issuing entity based on the substance of the transaction. The Company is required to apply the amendments within this ASU prospectively to modifications or exchanges occurring on or after the effective date of the amendment. The Company adopted this ASU on January 1, 2022, with no significant impact on its consolidated financial statements and related disclosures. F- 20 2. Summary of Significant Accounting Policies (cont.) In November 2021, the FASB issued ASU 2021-10 — Government Assistance — Disclosures by Business Entities about Government Assistance — to require disclosures about transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model to increase transparency about (1) the types of transactions, (2) the accounting for the transactions, and (3) the effect of the transactions on an entity’s financial statements. The ASU is effective prospectively or retrospectively for annual periods beginning after December 15, 2021, with early adoption permitted. The Company adopted this ASU on January 1, 2022, with no significant impact on its consolidated financial statements and related disclosures. (dd) Recently issued accounting pronouncements Changes to GAAP are established by the FASB in the form of 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 consolidated financial position and results of operations. 3. Acquisition of the Assets and Liabilities of Allarity A/S As discussed in Note 1, on December 20, 2021 (the “Closing Date”), the Company closed the acquisition of Allarity A/S’ assets and business for the aggregate purchase price of 8,075,824 shares of the Company’s common stock plus the assumption of specified liabilities (the “Reorganization”). Pursuant to the Plan of Reorganization and Asset Purchase Agreement (the “Reorganization Agreement”), the aggregate consideration paid to stockholders of Allarity A/S at the Closing Date consisted of 8,075,824 shares of the Company’s common stock, par value $ 0.0001 per share (“Common Stock”). At the effective time of the reorganization and subject to the terms and conditions of the Reorganization Agreement, each share of Allarity A/S common stock, par value SEK $ 0.05 per share that was convertible into a share of Allarity A/S at a one-to-one ratio pursuant to the Allarity A/S certificate of incorporation, was converted into common stock equal to the exchange ratio. In each case, these share amounts were rounded down to the nearest whole number on a holder-by-holder basis and any fractional interest will be settled in cash. The “exchange ratio” means the quotient of the number of Allarity A/S ordinary shares outstanding in Allarity A/S divided by 50 or 0.02 shares of Delaware Common Stock for each Allarity A/S ordinary share issued and outstanding (as defined in the Reorganization Agreement), as of immediately prior to the effective time. At the effective time, each warrant (option) conferring the right to subscribe for Allarity A/S ordinary shares held by the officers, directors, employees and consultants (each, a “Compensatory Warrant”) that is outstanding immediately prior to the effective time, whether vested or unvested, was assumed by the Company and converted into an option (each, a “Converted Option”) to purchase a number of shares of Common Stock equal to the product (rounded to the nearest whole number) of (a) the number of ordinary shares of Allarity A/S subject to such Compensatory Warrant immediately prior to the effective time multiplied by (b) the exchange ratio of 50 to 1, at an exercise price per share (rounded up to the nearest whole cent) equal to (i) the exercise price per share of such Compensatory Warrant immediately prior to the effective time divided by (ii) the exchange ratio and then converted into U.S. dollars. As part of the reorganization, the Company is responsible for the liquidation expenses of Allarity A/S, which is estimated to be approximately $ 200 . 4. Other Current Assets The Company’s other current assets are comprised of the following: December 31, 2022 2021 Deposits $ 51 $ 53 Salary deposit 85 65 Value added tax (“VAT”) receivable 82 507 Deferred consulting costs 81 — Deferred Directors & Officers insurance expense 1,260 — $ 1,559 $ 625 F- 21 5. Investment The Company owned 43,898 common shares in Lantern Pharma Inc. (“Lantern Pharma”) because of a prior license agreement made with Lantern Pharma in 2017. During September 2020 Lantern Pharma became publicly listed. During July 2022, the Company sold its 43,898 common shares in Lantern Pharma in exchange for net proceeds of $ 235 and recognized a loss of $ 115 . December 31, 2022 2021 Opening balance $ 350 $ 845 Less receipt of sale proceeds, net ( 235 ) — Loss recognition ( 115 ) ( 495 ) Ending balance $ — $ 350 6. Operating lease right-of-use assets The facilities of the Company are leased under various operating lease agreements for periods ending no later than 2023. As of February 1, 2021, the Company entered into a new lease contract at its premises in Hoersholm, Denmark. Under the new lease contract, the leased premises were reduced by approximately 137 square meters and the contract period was reduced from an end date of December 31, 2023, to January 31, 2023, with an automatic 12-month renewal period after that date unless termination notice is given. The new lease contract was treated as a modification to the existing lease contract, and we remeasured the lease liability to reflect the modified terms and recognized a corresponding reduction to the ROU asset in the amount of $ 145 . The exercise of lease renewal options is at the Company’s sole discretion and is assessed as to whether to include any renewals in the lease term at inception. As of January 31, 2023, the Company’s Denmark lease contract ended and became open ended until terminated by either party. Accordingly, the monthly payments will be expensed on a straight-line-basis and not recognized as a right-of-use asset after January 31, 2023. The following table summarizes the presentation in our Consolidated Balance Sheets of our right of use assets: As of December 31, Balance sheet location 2022 2021 Assets: Operating lease assets $ 6 $ 86 Liabilities: Current operating lease liabilities $ 8 $ 98 Non-current operating lease liabilities — 9 $ 8 $ 107 Total lease costs and cash paid for the Company’s premises and virtual offices for the years ended December 31, 2022 and 2021, were $ 104 and $ 134 , respectively. 7. Intangible assets Intangible assets, impairment charges and adjustments are summarized as follows: IPR&D Assets December 31, 2022 2021 Opening balance $ 28,135 $ 30,491 Impairment recognized during the period ( 17,571 ) — Foreign translation adjustment ( 1,015 ) ( 2,356 ) Ending balance $ 9,549 $ 28,135 F- 22 7. Intangible assets (cont.) 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 $ 14,007 during the quarter ended March 31, 2022. During the quarter ended December 31, 2022, as a result 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 $ 3,564 . Individually material development projects in progress are as follows: The Company’s IPR&D assets have been classified as indefinite-lived intangible assets. Individually material development projects in progress are as follows: December 31, 2022 2021 Stenoparib $ 9,549 $ 25,407 Dovitinib — 2,728 Total $ 9,549 $ 28,135 8. Accrued liabilities The Company’s accrued liabilities are comprised of the following: December 31, 2022 2021 Development cost liability (Notes 16(a) and (b)) $ 964 $ 6,750 Payroll accruals 221 1,088 Accrued Board member fees 91 54 Accrued audit and legal 239 316 Other 389 382 $ 1,904 $ 8,590 9. Loan Effective March 22, 2021, the Company received a loan of up to approximately $ 2,900 , net of a 3 % loan origination fee of $ 87 , recorded as finance costs in the Consolidated Statement of Operations and Comprehensive Loss, bearing interest at 3 % per month, and due on June 23, 2021. In exchange for the loan, the Company committed to complete a rights offering and issue common shares. The rights offering was completed before June 23, 2021, as described in these consolidated financial statements. As of June 23, 2021, the loan balance of $ 2,945 and interest of $ 204 were repaid to the lender. 10. 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 $ 1,000 . The Promissory Note was re-issued pursuant to the First Amendment to License Agreement, with an effective date of March 30, 2022 (the “First Amendment”), entered into by and between the License Parties, which amended the License Agreement dated April 6, 2018 (the “Original Agreement”) previously entered into by the License Parties relating to the Compound (as defined in the Original Agreement). The First Amendment amends and restates Section 11.7 of the Original Agreement to add the revised Note to the list of enforceable claims in the second paragraph of Section 11.7 making the revised Note enforceable under New York law as a legal obligation of Allarity Denmark ApS (formerly OV-SPV2 ApS). All other provisions of the Original Agreement and Promissory Note were unchanged and remain in full force and effect. F- 23 10. Convertible promissory note and accrued interest, net (cont.) On April 6, 2018 (“Effective Date”), Allarity Europe and Novartis entered a license agreement whereby Novartis granted to Allarity Europe (a) an exclusive, royalty-bearing, sublicensable, assignable license under the Licensed Data (as defined in the License Agreement) and Product-Specific Patents (as defined in the License Agreement) and (b) a non-exclusive, royalty-bearing, sublicensable, assignable license under the Platform Patents (as defined in the License Agreement), in the case of (a) and (b) solely to develop and otherwise commercialize the Licensed Product (as defined in the License Agreement) in any and all field related to therapeutic and/or diagnostic uses related to cancer in humans worldwide and to manufacture the compound TKI258 (a.k.a. Dovitinib) for use in a Licensed Product as of the Effective Date. In consideration of the licenses and rights granted, Allarity Europe paid Novartis a one-time, non-refundable, non-creditable upfront payment consisting of $ 1,000 (“Upfront Payment”) and issued to Novartis a Promissory Note with an initial principal balance equal to $ 1,000 , which Allarity Europe caused its affiliate, Allarity Therapeutics Denmark ApS, to issue to Novartis. In accordance with the terms of the Promissory Note, all payments shall be applied first to accrued interest, and thereafter to principal. The outstanding principal amount of the Note, plus any accrued interest thereon, shall be due and payable on the earlier to occur of: (i) the 7th anniversary of the Effective Date; and (ii) an event of default (the “Maturity Date”). 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 5 % per annum. Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed. The entire outstanding principal balance of the Promissory Note and all accrued interest shall be fully due and payable on the Maturity Date. The Promissory Note is convertible upon an initial public offering (“IPO”) of Allarity Therapeutics Denmark ApS and allows Novartis a one-time right to exchange the Convertible Pro Allarity Therapeutics Denmark ApS Promissory Note for such number of equity securities of Allarity Therapeutics Denmark ApS equal to 3 % of outstanding equity securities, calculated on a fully diluted as-converted to common stock basis, held by all holders of equity securities of Allarity Therapeutics Denmark ApS immediately prior to the closing of the IPO. During the years ended December 31, 2022 and 2021, the Company recorded $ 106 and $ 99 , respectively, to interest expense and increased the convertible promissory note liability by the same amount. The roll forward of the Promissory Notes as of December 31, 2022 and 2021, is as follows: December 31, 2022 December 31, 2021 Convertible promissory note $ 1,000 $ 1,000 Less debt discount, opening ( 215 ) ( 263 ) Plus, accretion of debt discount, interest expense 53 48 Convertible promissory note, net of discount 838 785 Interest accretion, opening 194 143 Interest accrual, expense 51 51 Convertible promissory note – net, ending balance $ 1,083 $ 979 11. Convertible debt (a) 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 $ 1,667 as payment of $ 1,667 due to 3i, LP in Alternative Conversion Floor Amounts that began to accrue on July 14, 2022; and (2) a Note in the principal amount of $ 350 in exchange for cash. Effective December 30, 2022, the Company issued an additional Note in the principal amount of $ 650 in exchange for cash. F- 24 11. Convertible debt (cont.) Each 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 a security agreement (the “Security Agreement”). In addition, the Holder may exchange the Notes for the Company’s common stock 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 such promissory note. Lastly, each Note and interest earned thereon may be redeemed by the Company at its option at any time or the holder may demand redemption if a) 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 or b) there is an Event of Default (as defined in the Note agreement). Discounts to the principal amounts are included in the carrying value of the Notes and amortized to interest expense over the contractual term of the underlying debt. During 2022, the Company recorded a $ 34 debt discount upon issuance of the Notes related to legal fees paid that were capitalized as debt issuance costs. For the year ended December 31, 2022, interest expense on the Notes totaled $ 12 , comprised of $ 10 of contractual interest and $ 2 for the amortization of the debt discount. The roll forward of the Notes as of December 31, 2022, is as follows: Face value of the Notes $ 2,667 Debt discount, net ( 33 ) Carrying value of the Convertible Notes 2,634 Accrued interest 10 $ 2,644 (b) March 31, 2020 Convertible Debt (terminated December 20, 2021) On March 31, 2020, the Company, through its former parent company, Allarity A/S, entered into a twenty-four-month term agreement to issue up to $ 10,100 (SEK 100,000 ) to be funded in tranches of ten non-interest-bearing notes (“Notes”) convertible into new shares of the Company, each with a value of $ 1,010 (SEK 10,000 ), under the following terms: a) Fees payable include 5% of the $10,100 Commitment in 2 equal installments of $252, paid on the disbursement of each of the first and second Tranches; and a further 5% of the principal of the notes is to be deducted from the payment of each Tranche. b) The loan is due for repayment in full 12 months from the date of issuance; or immediately repayable in the event of default, a change of control or a material adverse event. The Investor may in its sole discretion decide to convert the Loan in full or in part (in multiples of $4 (SEK 25) in 1,000’s) into new shares. c) The Conversion Price of the Notes is 95% of the lowest closing volume weighted average price as reported by Bloomberg (“VWAP”) of the shares during the applicable pricing period preceding the conversion date. Conversion of the Loan Amount shall be made at a rate equal to the Conversion Price. The Conversion Price cannot be below par value. The number of new Shares issued by the Company to the Investor upon conversion of the Loan Amount shall be calculated as the Loan Amount divided by the Conversion Price. If the Conversion Price is equal to or less than $0.01 (DKK 0.05), the Investor will not be required to convert such Note. If the Investor (contrary to the clear intention in the Agreement) claims repayment of one or more Tranches and not to convert into Shares the Company shall be entitled to deduct the commitment fee in connection with the repayment. d) Default interest accrues on the overdue amount from the due date up to the date of actual payment at 8% per annum; calculated on a 360-day year and accrues and compounds on a daily basis. Prior to the Company’s share offering in June of 2021 the Company had issued and converted a total of four of the Notes, leaving six Notes available however, pursuant to the Company’s agreement with its June Rights Issue investors, this loan agreement was no longer utilized after the end of June 30, 2021. F- 25 11. Convertible debt (cont.) The Company accounted for the Notes issued under the fair value election whereby the financial instrument is initially measured at its issue-date estimated fair value and subsequently re-measured at estimated fair value on a recurring basis at each reporting date. The estimated fair value adjustment is presented as a single line item within other income (expense) in the accompanying consolidated statements of operations under the caption change in fair value of convertible debt and derivative liabilities. We determined the fair value of the Notes using a discounted cash flow valuation technique with a weighted average cost of capital of 15 %. The Company estimates the change in fair value attributable to the instrument specific credit risk of the Notes at 1 % under the fair value option and accordingly has recognized a recovery of $ 9 in other comprehensive income during the year ended December 31, 2021. Changes in fair value of convertible debt of ($ 474 ) and non-cash interest expense related to beneficial conversion feature of convertible debt of $ 141 have been recognized in the Company’s Consolidated Statements of Operations and Comprehensive loss in the year ended December 31, 2021. The roll forward of the Notes as of December 31, 2021, is as follows: Opening fair value balance $ 1,327 Convertible debt issued in the period 1,140 Change in fair value 474 Foreign exchange ( 116 ) Conversion of notes to common shares ( 2,825 ) Ending fair value balance $ — An effective interest rate determines the fair value of the Notes. The notes are unlisted and therefore, they are categorized as Level 3 in accordance with ASC 820. The Notes were fully converted to shares as of June 30, 2021, and concurrent with the Company’s reorganization on December 20 th , 2021, are no longer accessible to the Company. 12. Series A Preferred Stock and Common Stock Purchase Warrants (a) Series A Preferred Stock Terms On May 20, 2021, we entered into a Securities Purchase Agreement (the “SPA”) with 3i, LP, a Delaware limited partnership (“3i”) for the purchase and sale of 20,000 shares of our Series A Convertible Preferred Stock (the “Series A Preferred Stock”) for $ 1,000 per share for an aggregate purchase price of $ 20 million (the “PIPE Investment”) with accompanying common stock purchase warrants (the “3i Warrants”). On December 8, 2021, the Board adopted resolutions to create a series of 500,000 shares of preferred stock, par value $ 0.0001 , of which 20,000 shares were designated as Series A Preferred Stock. On December 14, 2021, we filed a Certificate of Designations (the “COD”) setting forth the rights, preferences, privileges and restrictions for 20,000 shares of Series A Preferred Stock. On December 20, 2021, we issued 20,000 shares of Series A Preferred Stock at $1,000 per share and a common stock purchase warrant to purchase 2,018,958 shares of common stock at an initial exercise price of $9.9061 to 3i for an aggregate purchase price of $20 million. All shares of capital stock including other classes of preferred stock are junior in rank to all Series A Preferred Stock with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company. 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) 125% of the Conversion Amount of such Series A Preferred Stock on the date of such payment and (B) the amount per share such holder would receive if such holder converted such Series A Preferred Stock into common stock immediately prior to the date of such payment, and will be entitled to convert into shares of common stock at an initial fixed conversion price of $9.9061 per share, subject to a beneficial ownership limitation of 4.99% which can be adjusted to a beneficial ownership limitation of 9.99% upon 61 days’ prior written notice. F- 26 12. Series A Preferred Stock and Common Stock Purchase Warrants (cont.) (a) Series A Preferred Stock Terms (cont.) Under the terms of the COD, the initial fixed conversion price of the Series A Preferred Stock is $ 9.9061 , subject to adjustment. In the event that (i) the average of the VWAP of the Company’s shares for each of the five trading days immediately preceding the date of delivery is less than the fixed conversion price of $9.9061 (a “Price Failure”), or (ii) the sum of (x) the aggregate daily dollar trading volume (as reported on Bloomberg) of our common stock on Nasdaq during the 10 trading day period ending on the trading day immediately preceding such date of determination, divided by (y) 10, is less than $1,500 (a “Volume Maximum Failure”), each share of Series A Preferred Stock is entitled to convert at a price equal to 90% of the sum of the two lowest VWAPs during the 10 trading day period immediately preceding the date of delivery divided by two (the “90% Conversion Price”), but not less than the Floor Price (as defined in the COD), or, at the time of such Price Failure or Volume Maximum Failure, the sum of the average daily U.S. Dollar volume for our common stock during the 10 days previous to conversion divided by 10 is less than $2 million then each share of Series A Preferred Stock is entitled to convert at the lower of the fixed conversion price or a price equal to 80% of the sum of the two lowest VWAPs during the 10 trading day period immediately preceding delivery divided by two (the “80% Conversion Price”), but not less than the Floor Price (such 80% Conversion Price or 90% Conversion Price, as the case may be, the “Alternate Conversion Price”). In addition, the COD and the Warrant provides for an adjustment to the conversion price and exercise of the Warrant in the event of a “new issuance” of our common stock, or common stock equivalents, at a price less than the applicable conversion price of the Series A Preferred Stock or exercise price of the Warrant. The adjustment is a “full ratchet” adjustment in the conversion price of the Series A Preferred Stock and the exercise price of the Warrant equal to the lower of the new issuance price or the then existing conversion price of the Series A Preferred Stock or exercise price of Warrant, with few exceptions required to redeem the shares we were unable to deliver at a price equal to the highest closing price of our common stock during the time between the failure to deliver shares of our common stock and the redemption date. If certain defined “triggering events” defined in the COD occur, such as a breach of the Registration Rights Agreement (specifically the Company’s Form S-1 as filed on SEC Edgar on September 13, 2021 and subsequently amended), suspension of trading, 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 Warrant is exercised, failure to declare and pay to any holder any dividend on any dividend date, or upon a “bankruptcy triggering event” (as defined in the COD), then we may be required to redeem the Series A Preferred Stock for cash in the amount of up to a minimum of 125 % of their Conversion Amount (as defined in the COD). In addition, if 30 days after our common stock commences trading on the Nasdaq Stock Market the sum of the average daily dollar volume for the 10 days previous to conversion divided by 10 is less than $ 2.5 million, then the Series A Preferred Stock will be entitled to a one-time dividend equal to an 8 % increase in the stated value of the Series A Preferred Stock, or an $ 80 dollar increase per share in stated value, resulting in a stated value of $ 1,080 per Series A Preferred Stock. Additionally, if any of the triggering events are not addressed on a timely basis, we could be liable to pay an 18 % per annum dividend. If the Company experiences a “Change of Control” (as defined in the COD), the Company may also be required to redeem the Preferred Shares for cash at a minimum of 125 % of their Conversion Amount. Holders of Series A Preferred Stock will have no voting rights, except as required by law and as expressly provided in the COD. (b) Amendments to Series A Convertible Preferred Stock i. Voting Rights On November 22, 2022, the Company amended Section 12 of the Certificate of Designation of Series A Convertible Preferred Stock to provide for voting rights. Subject to a 9.99 % beneficial ownership limitation, the holders of Series A Preferred Stock shall have 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 $ 9.906 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 Convertible Preferred Stock. The voting rights described above shall expire on February 28, 2023, and thereafter holders of preferred stock shall not have voting rights except as required by law. F- 27 12. Series A Preferred Stock and Common Stock Purchase Warrants (cont.) ii. Conversion Price Adjustment for Series A Preferred Stock 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. (c) 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 18 % per annum dividend will start to accrue on the stated value of all outstanding Preferred Shares and will continue to accrue until the Triggering Event has been cured. The accrued dividend is added to the stated value prior to the Dividend Payment Date and paid in cash on the first trading day of the Company’s next fiscal quarter. A “Late Charge” in the amount of 18 % per annum will accrue on any amounts due to be paid to holders of the Preferred Shares if not paid when due, including payments that may be owed under Section (e) of the Registration Rights Agreement (“RRA”). 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 125 % of the stated value of the Preferred Shares. Concurrently, under the provisions of the PIPE Warrant, if elected by 3i, the Company would be obligated to redeem the PIPE Warrant for the Black Sholes Triggering Event Value as defined in the warrant agreement. 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 2 % of 3i’s “Purchase Price” as defined in the Securities Purchase Agreement which is approximately 2 % of $ 20 million, or $ 400 and will continue to accrue at 2 % every 30 days thereafter. Additionally, a late charge of 2 % per month will accrue on any payments that are not paid when due. The Registration Delay Payments will stop accruing when the post-effective amendment is declared effective by the SEC at which time the registration statement and its prospectus will again be available for the resale of common stock. 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 $ 539 paid upon execution of the Forbearance Agreement and Waiver, and so long as the Company pays the Registration Delay Payments that become due and payable under the RRA after the execution of the Forbearance Agreement and Waiver, 3i has agreed to forbear exercising any rights or remedies that it may have under the COD that arises as a result of a Triggering Event under Section 5(a)(ii) of the COD and Section 4(c)(ii) of the PIPE Warrant until the earlier to occur of (i) the date immediately prior to the date of occurrence of a Bankruptcy Triggering Event, (ii) the date of occurrence of any other Triggering Event under Section 5(a) of the COD (excluding any Triggering Event arising solely as a result of Section 5(a)(ii) of the COD and Section 4(c)(ii) of the PIPE Warrant), (iii) the time of any breach by the Company under the Forbearance Agreement and Waiver, (iv) the Resale Availability Date as defined therein and (v) June 4, 2022 (such period, the “Forbearance Period”). Provided that the Company is not in breach of its obligations under Forbearance Agreement and Waiver, effective as of the Trading Day immediately following the date the Company cures the Triggering Event under Section 5(a)(ii) of the COD, 3i agrees to waive any rights or remedies that it may have under the COD that arises as a result of a Triggering Event under Section 5(a) of the COD and Section 4(c)(ii) of the PIPE Warrant that may have arisen prior to the date of the Forbearance Agreement and Waiver. F- 28 12. Series A Preferred Stock and Common Stock Purchase Warrants (cont.) (c) Series A Preferred Stock Triggering Event (cont.) On June 6, 2022, the Company entered into that certain First Amendment to the Forbearance Agreement and Waiver with 3i, (the “Amendment”) to extend the forbearance period date under subsection 5 of Section 2 of the Forbearance Agreement and Waiver dated April 27, 2022 (the “Original Agreement”) from June 4, 2022, to June 20, 2022. In addition, the parties agreed that the forbearance period of June 20, 2022 may also be extended for an additional 15 days to July 5, 2022, provided that, on June 20, 2022 the Company will remove the restrictive legend on 441,005 shares of common stock of the Company issued in connection with the conversion of certain shares of Series A Preferred Stock (“Conversion Shares”) by 3i pursuant to the conversion notice dated May 2, 2022, and 3i is able to sell the Conversion Shares free of restrictions (including volume restrictions) pursuant to SEC Rule 144(b)(1)(i) (the “Legend Removal”). The Original Agreement was entered into by the Company and 3i because of a delay under the Registration Rights Agreement dated May 20, 2021. Under the Original Agreement, in exchange for certain consideration, 3i agreed to forbear exercising any rights or remedies that it may have had under the COD in connection with certain Triggering Events (as described therein) until the earlier to occur of (i) the date immediately prior to the date of occurrence of a Bankruptcy Triggering Event, (ii) the date of occurrence of any other Triggering Event under Section 5(a) of the COD (excluding any Triggering Event arising solely as a result of Section 5(a)(ii) of the COD and Section 4(c)(ii) of the Warrant), (iii) the time of any breach by the Company under the Forbearance Agreement and Waiver, (iv) the Resale Availability Date as defined therein and (v) June 4, 2022 (such period, the “Original Forbearance Period”). As a result of the Amendment, the June 4, 2022, date has been amended to June 20, 2022, with the option to extend to July 5, 2022, subject to the Legend Removal. ( d) 3i Warrant Terms Concurrently with the issuance of our Series A Preferred Stock, the Company issued warrants to purchase 2,018,958 shares of the Company’s common stock at an exercise price of $ 9.9061 per share, subject to adjustments (“3i Warrants”). The material terms of the 3i Warrants are as follows: (i) The warrants have a term of three years and expire on December 20, 2024; (ii) The exercise of the warrants are subject to a beneficial ownership limitation of 4.99% which can be adjusted to a beneficial ownership limitation of 9.99% upon 61 days’ prior written notice ; (iii) The exercise price and the number of 3i Warrant shares issuable upon the exercise of the 3i Warrants are subject to adjustment, as follows: o In the event of a stock dividend, stock split or stock combination recapitalization or other similar transaction involving the Company’s common stock the exercise price will be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event; o If the Company sells or issues any shares of common stock, options, or convertible securities at an exercise price less than a price equal to the Warrant exercise price in effect immediately prior to such sale (a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the exercise price then in effect shall be reduced to an amount equal to the new issuance price; o Simultaneously with any adjustment to the exercise price, the number of 3i Warrant shares that may be purchased upon exercise of the 3i Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate exercise price payable hereunder for the adjusted number of 3i Warrant shares shall be the same as the aggregate exercise price in effect immediately prior to such adjustment (without regard to any limitations on exercise) and; o Voluntary adjustment for the Company to any amount and for any period deemed appropriate by the board of directors of the Company. F- 29 12. Series A Preferred Stock and Common Stock Purchase Warrants (cont.) ( d) 3i Warrant Terms (cont.) (iv) In the event of either the Company consolidating or merging with or into another entity (the “Fundamental Transaction”), the sale or assignment of substantially all of the Company’s subsidiaries, or a Triggering Event (as defined in the COD), the holder is entitled to require the Company to pay the holder an amount in cash equal to the Black-Scholes value of the 3i Warrants on or prior to the later of the second trading after the date of request for payment and the date of consummation of the Fundamental Transaction; or at any time after the occurrence of the Triggering Event. (e) 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 is not met because a settlement contingency is not indexed to the Company’s stock. Therefore, the redemption feature (derivative liability) has been 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 13(a). Subsequent to December 9, 2022, because of the agreed conversion price adjustment (see Note 12(b) ii.), 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. iii. 3i Warrants The 3i Warrants were identified as a freestanding financial instrument and meet the criteria for derivative liability classification, initially measured at fair value. Subsequent changes in fair value are recognized through earnings for as long as the contracts continue to be classified as a liability. The measurement of fair value is determined utilizing an appropriate valuation model considering all relevant assumptions current at the date of issuance and at each reporting period (i.e., share price, exercise price, term, volatility, risk-free rate and expected dividend rate). F- 30 12. Series A Preferred Stock and Common Stock Purchase Warrants (cont.) (f) Series A Preferred Stock Conversions i. Year ended December 31, 2022 During the year ended December 31, 2022, 3i exercised its option to convert 6,214 shares of Series A Preferred stock for 7,801,831 shares of common stock. As of December 31, 2022, we had 13,586 shares of Series A Preferred Stock issued and outstanding. The fair value of the derivative liability associated with the Series A Preferred Stock converted during the year ended December 31, 2022, as determined by Monte Carlo simulations, was $ 954 . Because the latest nine conversions in the period January 1, 2022, through December 9, 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, $ 1,511 (paid in cash prior to June 30, 2022); ii. During the three months ended September 30, 2022, $ 1,646 (See Note 11(a)); iii. On December 9, 2022, we issued 121,018 shares of Common Stock to the Investor upon the conversion of 222 Conversion Shares and recorded a floor price liability of $ 264 . Additionally, because the Company’s average daily dollar volume of stock trading was less than $ 2.5 million during a ten-day period in January 2022, the Company has recorded a one-time deemed dividend of 8 % in the amount of $ 1,572 on preferred stock converted between February 1, 2022 and March 31, 2022 and the balance of Series A Preferred Stock outstanding as at March 31, 2022 as an increase to the value of the Series A Preferred Stock and a reduction of additional paid in capital. In addition, under the terms of the Registration Rights Agreement (“RRA”), during the period January 1, 2022, through December 31, 2022, the Company has also paid 3i an additional $ 800 in Registration Delay Payments. 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 (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. ii. Year ended December 31, 2021 On December 21, 2021, when 3i exercised its option to convert 200 shares of Series A Preferred Stock for 20,190 shares of our common stock, the Company determined the fair value was unchanged from the December 20, 2021 fair value, and accordingly reclassified $ 75 from the Series A Preferred Stock Conversion feature to additional paid-in capital. As of December 31, 2021, the Company recognized a fair value remeasurement adjustment of the carrying amount resulting in a $ 154 decrease in fair value of the derivative liability and a corresponding change in fair value of derivative liability in the Consolidated Statement of Operations and Comprehensive Loss. F- 31 12. Series A Preferred Stock and Common Stock Purchase Warrants (cont.) The accounting for the Series A Preferred Stock and Warrants is illustrated in the table below: Consolidated Balance Sheets Consolidated Statement of Operations & Comprehensive Loss Warrant liability Series A Preferred Derivative Liability Series A Convertible Preferred Stock – Mezzanine Additional paid-in capital Finance Costs Fair value adjustment to derivative and warrant liabilities Subscription proceeds received on December 20, 2021 $ 11,273 $ 7,409 $ 1,318 $ — $ — $ — Costs allocated and expensed — — ( 680 ) — 877 — December 21, 2021 conversion of 200 Series A Preferred Stock — ( 74 ) ( 6 ) 80 — — Fair value adjustment at December 31, 2021 — ( 154 ) — — — ( 154 ) Balance, December 31, 2021 $ 11,273 $ 7,181 $ 632 $ 80 $ 877 $ ( 154 ) Consolidated Balance Sheets Consolidated Statement of Operations & Comprehensive Loss Warrant liability Series A Preferred Derivative Liability* Series A Convertible Preferred Stock – Mezzanine Equity Share Capital Additional paid-in capital Accrued Liabilities Fair value adjustment to derivative and warrant liabilities Balances, December 31, 2021 $ 11,273 $ 7,181 $ 632 — $ 80 — $ ( 154 ) Conversion of 6,214 shares of Series A Preferred Stock into common stock — — ( 203 ) 1 202 — — Reclassification of derivative liability relating to converted Series A Preferred stock — ( 954 ) — — 954 — — Floor price adjustment on conversion of shares of Series A Preferred stock — — — — ( 3,421 ) 265 — 8 % deemed dividend on Preferred Stock — — 1,572 ( 1,572 ) — — Fair value adjustment ( 10,899 ) ( 6,227 ) — — 1 — 17,125 Balances, December 31, 2022 $ 374 $ — $ 2,001 $ 1 $ ( 3,756 ) $ 265 $ 17,125 * Valuation of the Series A Preferred Derivative Liability is discussed in Note 12 (e) ii. F- 32 13. Derivative Liabilities (a) Continuity of Warrant Liability and Derivative Liabilities The derivative liabilities are measured at fair value at each reporting period and the reconciliation of changes in fair value in the years ended December 31, 2022, and 2021, is presented in the following tables: 3i Warrants 3i Fund Series A Redemption Feature Issued December 20, 2021 Balance as of January 1, 2022 $ 11,273 $ 7,181 Change in fair value ( 10,899 ) ( 6,227 ) Amount transferred to Equity — ( 954 ) Balance as of December 31, 2022 $ 374 $ — Fair value per 3i Warrant / Series A Preferred share issuable at period end $ 0.19 $ — Settlement Warrants for the termination of the Financing Facility T02 Warrants T03 Warrants 3i Warrants 3i Fund Series A Redemption Feature Grant date February 23, 2020 Warrants issued December 2019 Warrants issued June 2021 Issued December 20, 2021 Balance as of January 1, 2021 $ 102 $ 47 $ — $ — $ — Issued during the period — — 2,000 11,273 7,409 Change in fair value ( 94 ) ( 45 ) ( 1,794 ) — ( 153 ) Amount transferred to Equity — — ( 206 ) — ( 75 ) Translation effect ( 8 ) ( 2 ) — — — Balance as of December 31, 2021 $ — $ — $ — $ 11,273 $ 7,181 Fair value per warrant / Series A Preferred share issuable at period end $ — $ — $ — $ 5.58 $ 363.0 (b) Series A Preferred Stock Conversion Feature – Valuation Inputs The following inputs were used for the Series A Preferred Stock conversions recorded in the year ended December 31, 2022 and the fair value of the Series A Preferred Derivative liability determined at September 30, 2022 and December 31, 2021: January 1, 2022 – September 30, 2022* December 31, 2021 Initial exercise price $ 9.05 - $ 9.91 $ 9.91 Stock price on valuation date $ 1.10 - $ 10.75 $ 10.37 Risk-free rate 1.03 % - 4.23 % 0.96 % Time to exercise (years) 2.22 - 2.96 2.97 Equity volatility 70 % - 114 % 70 % Probability of volume failure 93 % - 99 % 92 % Rounded 10-day average daily volume (in 1,000’s) $ 297 - $ 873 $ 908 * The agreed conversion price adjustment (see Note 12 (b) ii.) resulted in the Series A Preferred liability value derivative being valued at zero at December 9, 2022. Therefore, there were no conversions subsequent to September 30, 2022, which impacted the Series A derivative liability. F- 33 13. Derivative Liabilities (cont.) (c) 3i Warrants – Valuation Inputs On 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 $ 374 . On December 31, 2021, the Company utilized Monte Carlo simulations models to estimate the fair value of the 3i Warrants to be approximately $ 11,273 . The 3i Warrants were valued at December 31, 2022 and 2021, using the following inputs: December 31, 2022 December 31, 2021 Initial exercise price $ 9.91 $ 9.91 Stock price on valuation date $ 0.29 $ 10.50 Risk-free rate 4.33 % 0.91 % Expected life of the 3i Warrant to convert (years) 1.97 3.0 Rounded annual volatility 131 % 73 % Timing of liquidity event March 15, 2023 Q3 2022 – Q2 2023 Expected probability of event 100 % 90 % (d) Investor Warrants The exercise price of our investor warrants which were issued by Allarity A/S, described below is denominated in SEK; however, the functional currency of Allarity A/S is DKK. Consequently, the value of the proceeds on exercise is not fixed and will vary based on foreign exchange rate movements. The investor warrants, when issued other than as compensation for goods and services are therefore a derivative for accounting purposes and are required to be recognized as a derivative liability and measured at fair value at each reporting period. Any changes in fair value from period to period are recorded as non-cash gain or loss in the Consolidated Statements of Operations and Comprehensive Loss. Upon exercise, the holders pay the Company the respective exercise price for each investor warrant exercised in exchange for one common share of the Company and the fair value at the date of exercise and the associated non-cash liability will be reclassified to share capital. The non-cash liability associated with any investor warrants that expire unexercised is recorded as a gain in the consolidated statements of comprehensive loss. There are no circumstances in which the Company would be required to pay any cash upon exercise or expiry of the investor warrants. In connection with subscriptions of units in the rights issues carried out: i. October — December 2019, 1,006,822 investor warrants (“TO2 warrants”) were granted to investors. All Warrants were vested as of the grant date. A warrant gives the right, during a fixed period to subscribe for one common share in the Company for $ 34.50 per common share. The final exercise period for the warrants of series TO2 took place from September 1 up to and including September 15, 2021. Any TO2 warrants unexercised after September 13, 2021, expired without compensation or payment of any kind to the warrant holders. During the year ended December 31, 2021, a total of 176 warrants of series TO2 were exercised for total proceeds of $ 6 ; and ii. in June 2021, 2,417,824 investor warrants (“TO3 Warrants”) were granted to investors and 482,250 TO3 warrants have been granted to underwriters as a non-cash consideration of the share issuance cost amounting $ 2,384 . All TO3 Warrants were vested as of the grant date and were exercisable for $ 10 per common shares. In accordance with the terms of the Company’s outstanding TO3 Warrants, on August 26, 2021, the Company’s Board of Directors set an extraordinary and final exercise period for the Company’s TO3 Warrants, starting on August 30, 2021, and ending on September 13, 2021. Any TO3 Warrants unexercised after September 13, 2021, expired without compensation or payment of any kind to the warrant holders. During the year ended December 31, 2021, 274,386 TO3 Warrants were exercised for total proceeds of $2,679 and the balance expired unexercised on September 13, 2021. F- 34 13. Derivative Liabilities (cont.) The table below summarizes the number of investor warrants that were outstanding, their weighted average exercise price as of December 31, 2021, as well as the movements during the year. Shares Weighted Average Exercise Price Outstanding at January 1, 2020 1,086,759 $ 36.0 Granted 2,900,074 $ 10.0 Exercised ( 274,562 ) $ 10.0 Expired ( 3,712,271 ) $ 17.0 Outstanding at December 31, 2021 — $ — Exercisable at December 31, 2021 — $ — There were no investor warrants issued or outstanding during the year ended December 31, 2022. The fair value of the Company’s TO3 warrant liabilities, which all expired as of September 13, 2021, were estimated based upon Monte Carlo simulations under different market conditions, as scheduled below, resulting in a probability weighted value of the TO3 warrants of $ 2,000 at June 24, 2021, at the grant date. Warrants exercised on September 13, 2021, were re-valued at $ 206 using a Black-Scholes model with the assumptions noted below. June 24, 2021 August 30, 2021 Exercise price $ 10.05 $ 9.86 Stock price $ 5.50 $ 10.61 Risk-free interest ( 0.55 )% ( 0.50 )% Expected dividend yield ( 0 )% ( 0 )% Contractual life (years) 1.81 0.04 Expected volatility 106.5 % 104 % (e) Financing Facility Effective November 29, 2018, the Company established a convertible debt facility (the “Facility”) for funding of up to SEK 200 million to be funded in up to 20 tranches of SEK 10 million each over a 24-month term and bearing interest at 2 % per annum. Five of the tranches receivable under the Facility were at the discretion of the investor and the Facility was convertible into shares and warrants at 50 % of the nominal amount of the notes. The Company evaluated the terms of the Financing Facility in accordance with ASC 815-40-15 and ASC 815-40-25 and determined that the instrument is a derivative. Accordingly, the accounting treatment is the same as that described for Investor Warrants in Note 13(b) above. On June 3, 2019, the Company settled one of the five tranches with a cash payment of $ 673 and in February 2020 the balance of the committed tranches was settled by receipt of $ 1,000 from the investor in cash, in exchange for a subscription of 186,600 common shares in the Company (“Settlement Shares”) valued at $ 2,500 and the issuance of 79,937 investor warrants (“Settlement Warrants”) valued at $ 625 as of the February 23, 2020, grant date. All Settlement Warrants immediately vested on the grant date, were exercisable at $ 20 per common share and expired unexercised as of December 12, 2021. F- 35 13. Derivative Liabilities (cont.) The fair value of the Company’s Settlement Warrant derivative liabilities, which all expired as of December 31, 2021, were estimated initially and on a quarterly basis using the Black-Scholes option pricing model and based on the following assumptions: Settlement Warrants for the termination of the Financing Facility Grant date February 23, 2020 Exercise price $ 17.0 Share price $ 13.5 Risk-free interest ( 0.38 )% Expected dividend yield ( 0 )% Contractual life (years) 3.00 Expected volatility 104.10 % 14. Stockholders’ Equity (a) Stockholders’ Equity i. Capital structure As a result of the recapitalization share exchange described in Notes 1 and 4, to these consolidated financial statements, all outstanding shares, warrants and options were exchanged on a 50:1 basis as of December 20, 2021, and accordingly, all share, warrant, option and per share disclosure in these consolidated financial statements has been retroactively adjusted to reflect the 50:1 reverse split unless otherwise stated. Our authorized capital stock consists of 30,000,000 shares of common stock, par value $ 0.0001 per share, and 500,000 shares of preferred stock, par value $ 0.0001 per share, of which 20,000 shares of preferred stock, have been designated Series A Preferred Stock and 200,000 have been designated as Series B Preferred Stock (see note 14(a)ii.). Our Certificate of Incorporation authorizes our board of directors to establish one or more series of preferred stock (including convertible preferred stock). Our board of directors may determine, with respect to any series of preferred stock, the powers including preferences and relative participations, optional or other special rights, and the qualifications, limitations, or restrictions thereof, of that series. As of December 31, 2022 and 2021, the Company’s total issued, and outstanding common shares were 15,897,845 and 8,096,014 , respectively, with a par value of $ 0.0001 . The shares are fully paid in. The shares are not divided into classes, and no shares enjoy special rights. ii. 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”). Following is a summary of the terms of the Series B Preferred Stock: a. The number of shares designated as Series B Preferred Stock is 200,000 ; b. The holders of Series B Preferred Stock shall not be entitled to receive dividends of any kind; c. Each outstanding share of Series B Preferred Stock shall have 400 votes per share; The Series B Preferred Stock shall rank senior to the Common Stock, but junior to the Series A Preferred stock, as to any distribution of assets upon a liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily; F- 36 14. Stockholders’ Equity (cont.) All shares of Series B Preferred Stock that are not present in person or by proxy through the presence of such holder’s shares of Common Stock or Series A Preferred Stock, in person or by proxy, at any meeting of stockholders held to vote on the Reverse Stock Split, the Share Increase Proposal and the Adjournment Proposal as of immediately prior to the opening of the polls at such meeting (the “Initial Redemption Time”) shall automatically be redeemed by the Company at the Initial Redemption Time without further action on the part of the Company or the holder thereof (the “Initial Redemption”); Any outstanding shares of Series B Preferred Stock that have not been redeemed pursuant to an Initial Redemption shall be redeemed in whole, but not in part, (i) if such redemption is ordered by the Board of Directors in its sole discretion, automatically and effective on such time and date specified by the Board of Directors in its sole discretion or (ii) automatically upon the approval by the Company’s stockholders of the Reverse Stock Split and the Share Increase Proposal at any meeting of stockholders held for the purpose of voting on such proposals; and Each share of Series B Preferred Stock redeemed in any Redemption shall be redeemed in consideration for the right to receive an amount equal to $0.01 in cash for each one whole share of Series B Preferred Stock as of the applicable Redemption Time. iii. 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. Effective February 3, 2023, the Company redeemed 190,786 shares of Series B Preferred stock in exchange for $0.01 per share. iv. Share issuances During the year ended December 31, 2022, the Company issued 7,801,831 common shares valued at $1,156 gross and ($2,265) net of the $3,421 floor price adjustments upon the conversion of 6,214 shares of Series A Preferred Stock. During the year ended December 31, 2021, the Company recorded a total of $ 2,475 in share issuance costs and issued: (a) 295,537 common shares valued at $2,972 upon the exercise of common stock purchase warrants and stock options and the receipt of $2,765 in cash; (b) Units consisting of 2,417,824 common shares and 2,417,824 common share purchase warrants for $5 per unit; valued at $12,125 in exchange for $12,125 in cash, and 482,250 common shares and 482,250 common share purchase units valued at $2,384 in consideration for services. The attached warrants are exercisable for $10 each with an original expiration date of April 15, 2023, subsequently amended to September 13, 2021 (Note 14(b) iii); (c) 628,192 common shares valued at $2,880 upon conversion of debt and payment of accounts payable; and (d) 20,190 common shares valued at $82 upon the conversion of 200 Series A Preferred shares. 15. Share-based payments Share based payments in the legal form of stock options (“options”) and/or warrants have been granted to members of the executive management, members of the board of directors, employees, and external consultants. F- 37 15. Share-based payments (cont.) 2021 Equity Incentive Plan Our 2021 Equity Incentive Plan became effective on December 20, 2021. It was approved by shareholders in connection with the Recapitalization Share Exchange. Our 2021 Plan authorizes the award of stock options, Restricted Stock Awards (“RSAs”), Stock Appreciation Rights (“SARs”), Restricted Stock Units (“RSUs”), cash awards, performance awards and stock bonus awards. We have initially reserved 1,211,374 shares of our common stock under the 2021 Plan. The number of shares reserved for issuance under our 2021 Plan will increase 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. On November 24, 2021, the Board of Directors approved an equity-settled stock option plan which provides employees, officers, and directors an option to purchase a total of 869,828 common shares of the Company at prices of between $ 5.19 and $ 10.17 . Employee warrants were granted with 25 % vesting upon grant and the 75 % balance vesting over 36 months until November 24, 2024, provided they remain within the Company’s employment. Director warrants were granted with a vesting period of 48 months. Vested warrants are exercisable over a fixed period from the grant date up to and including November 23, 2026. During the year ended December 31, 2022, a total of 388,017 of these stock options were forfeited. Additional Executive Plan Effective September 15, 2019, the Company established an option compensation plan to grant the CEO a right to subscribe a total of two percent of the then outstanding shares of the Company on a fully diluted basis upon completion of twenty-four months of continuous employment. A total of 156,025 options were granted effective September 15, 2021, and became fully vested on that date. The options have been valued at $ 1,004 with the Black-Scholes model using an expected volatility of 97.88 %; expected life of 5 years; risk free interest rate of ( 0.46 %); an expected dividend yield of 0 %; and an exercise price of $ 8.75 . Vested warrants are exercisable for a fixed period from September 15, 2021, until November 23, 2026. During the year ended December 31, 2022, 156,025 options were forfeited. Warrant plan #7 On December 18, 2020, the Board of Directors approved an equity-settled stock option plan which provides an employee and a member of the executive management of the Group with the option to purchase 67,791 common shares of the Company at market price on the date of grant. Warrants were granted with monthly vesting over 36 months until September 1, 2022, respectively October 1, 2023, provided they remain within the Company’s employment. During the year ended December 31, 2021, the vesting terms were accelerated and upon the Company’s listing on Nasdaq the options of the member of executive management became fully vested. Accordingly, a total of 28,191 options exercisable at $ 13.30 per share became completely vested as of December 20, 2021. Vested options are exercisable over a fixed period of 10 years from the grant date. Warrant plan #6 In October 2019, the Board of Directors approved an equity-settled stock option plan which provides board of directors and members of the executive management of the Company the option to purchase 112,764 common shares of the Company at market price on the date of grant. During 2020, a total of 27,017 of the options were forfeited on the termination of a member of executive management. Options were granted with a three-year vesting term, providing non-termination of employment. During the year ended December 31, 2021, the vesting terms were accelerated and upon the Company’s listing on Nasdaq the balance of 70,477 of the options exercisable at $ 12.09 became fully vested as of December 20, 2021. Vested options are exercisable over a fixed period of 10 years from grant date. F- 38 15. Share-based payments (cont.) Warrant plan #5 On February 24, 2017, the Board of Directors approved an equity-settled stock option plan which provides board of directors and members of the executive management of the Group with the option to purchase 13,924 common shares of the Company at market price on the date of grant. Warrants were granted with either immediate vesting, or monthly vesting over 36 months until July 1, 2019, provided the recipient remains within the Group’s employment. Vested warrants are exercisable over a fixed period from grant date up to and including July 1, 2021. Warrant plan #4 On February 18, 2016, the Board of Directors approved an equity-settled stock option plan, which provides key management personnel with the option to purchase 12,676 common shares of the Company at market price on the date of grant. Warrants were granted with monthly vesting over 36 months from July 1, 2016, until July 1, 2019, provided the recipient remains within the Group’s employment. Vested warrants are exercisable over a fixed period from grant date up to and including July 1, 2021. Warrant plan #3 On December 17, 2014, the Board of Directors approved an equity-settled stock option plan, which provides key management personnel with the option to purchase 570,000 common shares of the Company at market price on the date of grant. Warrants were granted with 50 % immediately vesting upon grant, 25 % vesting on December 17, 2015, and 25 % vesting on July 3, 2016, provided the recipient remains within the Group’s employment. Vested warrants are exercisable over a fixed period from grant date up to and including July 1, 2021. Warrant plans #1 - #6 and 2021 Stock Option Plan Effective July 1, 2021, a total of 45,805 previously issued and outstanding options expired unexercised. All share-based payment warrants and stock option plans During the years ended December 31, 2022 and 2021, the total charge to profit or loss amounted to $ 1,752 and $ 6,368 , respectively of which $ 1,156 and $ 4,203 , respectively, are recognized as general and administrative expenses and $ 596 is recognized as research and development expenses. As of December 31, 2022, total unrecognized compensation cost relating to unvested options granted was $ 1,003 and is expected to be realized over a period of 2.6 years. The Company will issue shares upon exercise of options from shares reserved under the plans. The table below summarizes the number of options that were outstanding, their weighted average exercise price and contractual term as of December 31, 2022, as well as the movements during the period. Number of Shares Weighted Average Exercise Price Weighted Average Contractual Term (in years) Balance on January 1, 2022 1,174,992 $ 6.8 4.91 Granted 46,000 1.2 — Forfeited ( 544,042 ) 7.3 — Outstanding as of December 31, 2022 676,949 6.55 4.14 Options exercisable at December 31, 2022 380,119 6.46 4.24 F- 39 15. Share-based payments (cont.) A total of 544,042 stock options were forfeited, and no options expired or were exercised in the year ended December 31, 2022. The intrinsic value of all stock options outstanding at December 31, 2022 was $ 0 . The weighted average exercise price for options outstanding at the end of 2022 is $ 6.55 . The weighted average grant date fair value per share of options granted in 2022 and 2021 was $ 1.19 and $ 10.25 , respectively. The total fair value of options vested during the years December 31, 2022 and 2021, was $ 1,328 and $ 4,223 , respectively. The estimate of the grant date fair value of each option issued is based on a Black-Scholes model. The assumptions used in our valuations are summarized as follows: For the Years ended December 31, 2022 2021 Expected volatility 105.85 % - 120.22 % 80.6 % - 97.9 % Weighted average share price $ 1.19 $ 6.63 Expected life (in years) 5 5 - 9.8 Expected dividend yield 0 % 0 % Risk-free interest rate 3.05% - 4.09 % (0.45)% - (0.46) % Expected Term — The expected term is based upon the historical exercise patterns of options. Expected Volatility — Was determined based upon the expected term of the options which is based upon the historical exercise patterns of options. Risk-Free Interest Rate — The risk-free interest rate is based on the 5 years government bond yield rate of Denmark at the date of grant maturities approximately equal to the options’ expected term. Dividend Rate — The expected dividend is zero as the Company has not paid nor does it anticipate paying any dividends on its common stock in the foreseeable future. Fair Value of Common Stock — The quoted prices of the Company’s common stock is used to estimate the fair value of the share-based awards at grant date. 16. License and Development Agreements (a) License Agreement with Novartis for Dovitinib We hold the exclusive worldwide rights to all therapeutic and/or diagnostic uses related to cancer in humans for dovitinib from Novartis pursuant to a license agreement. Pursuant to the agreement, we are solely responsible for the development of dovitinib during the term of the agreement. On September 27, 2022, Allarity Therapeutics Europe Aps (“Allarity Europe”), a wholly-owned subsidiary of the Company, entered into a Second Amendment to License Agreement (the “Second Amendment”) with Novartis Pharma AG, a company organized under the laws of Switzerland (“Novartis”), which amended the terms of the License Agreement dated April 6, 2018 (the “Original Agreement”), as amended by that certain First Amendment to License Agreement effective as of March 30, 2022 (“Amendment” and together with the Original Agreement, the “Agreement”) 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 $ 500 (paid on or about December 25, 2022), in addition to the $ 5,000 which is included in accounts payable at September 30, 2022, and originally expensed in the year ended December 31, 2021. The Second Amendment became effective upon receipt by Novartis of the first portion of the Outstanding Milestone Payment ($ 1,000 ), which was paid on or about September 28, 2022. As of December 31, 2022, the Company has an outstanding milestone payment of $ 4 million due to Novartis recorded in accounts payable. F- 40 16. License and Development Agreements (cont.) 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 $ 26,500 . Development Milestone Payments Pursuant to the agreement, we have agreed to make milestone payments to Novartis in connection with the development of dovitinib by us or our affiliates, or by a third-party (a “Program Acquirer”) that assumes control of the dovitinib development program from us corresponding to: (i) upon enrollment of half of the patients required in a Phase 2 clinical trials in certain countries in accordance with agreed upon protocols; (ii) Upon dosing of the first patient in the first Phase 3 clinical trial; (iii) upon submission of the first NDA with the FDA; (iv) submission of an MAA to the EMA or any other Regulatory Authority in certain countries; (v) upon receipt of the first authorization by the FDA to market and sell a licensed product; and (vi) upon receipt of a MAA (including a respective pricing and reimbursement approval) for a licensed product in one or more specified European countries. Royalty Payments In addition to the milestone payments described above, we have agreed to pay Novartis royalties based on annual incremental sales of product derived from dovitinib in an amount between 5 % and 10 % of annual sales of between $ 0 and $ 250 million, between 6 % and 13 % of annual sales between $ 250 million and $ 500 million, between 7 % and 13 % of annual sales between $ 500 million and $ 750 million, and between 13 % and 15 % of annual sales in excess of $ 750 million. We are obligated to pay royalties under the agreement on a country-by-country and product-by-product basis for a period that commences with the first commercial sale of a product until the later of (i) the expiration of the last to expire valid claim of any licensed patent covering such licensed product in such country; or, (ii) the expiration of regulatory-based exclusivity for such licensed product in such country or (iii) the 10 year anniversary of the date of first commercial sale of such licensed product in such country. However, the agreement may be sooner terminated without cause by us upon 120 days prior written notice, or upon written notice of a material breach of the agreement by Novartis that is not cured within 30 days. Novartis also has the right to terminate the agreement upon written notice of a material breach of the agreement by us that is not cured within 30 days or if we file for bankruptcy. (b) License Agreement with Eisai for Stenoparib We hold the exclusive worldwide rights to all preventative, therapeutic and/or diagnostic uses related to cancer in humans and by amendment to the agreement on December 11, 2020, viral infections in humans (including, but not limited to, coronaviruses) for stenoparib from Eisai, Inc. (“Eisai”) pursuant to a license agreement. Pursuant to the license agreement, we are solely responsible for the development of stenoparib during the term of the agreement. The agreement also provides for a joint development committee consisting of six members, three appointed by us and three appointed by Eisai. One of our members of the joint development committee is designated chair of the committee and has the power to break any deadlock in decisions by the committee that must be made by a majority vote with each representative having one vote. The purpose of the committee is to implement and oversee development activities for stenoparib pursuant to the clinical development plan, serving as a forum for exchanging data, information and development strategy. F- 41 16. License and Development Agreements (cont.) Effective July 12, 2022, the Company’s July 6, 2017 Exclusive License Agreement with Eisai Inc. (the “Third Amendment”), the terms of the original exclusive license were further amended in order to (1) further postpone the due date of the Extension Payment and extend the deadline for the Company’s successful completion of its first Phase 1b or Phase 2 clinical trial for Stenoparib (the “Product”) beyond December 31, 2022; and (2) amend terms related to Eisai’s right of termination of development. In consideration of the extended timeframe, and the Company not achieving the minimum patient enrollment, by July 1, 2022, set out in the Second Amendment, the Company is obligated to pay Eisai an extension payment as follows: (i) $100 within 10 days of the execution of the Third Amendment (paid during the period ended September 30, 2022); and (ii) $900 on or before April 1, 2023 (recognized as a milestone expense in the year ended December 31, 2022, and recorded as an accrued development cost liability at December 31, 2022). Once the extension payment is paid in full, the Company shall 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 this Agreement in its entirety, in its sole discretion on at least 120 days prior written notice. Development Milestone Payments Pursuant to the agreement, we have agreed to make milestone payments to Eisai in connection with the development of stenoparib by us or our affiliates, or by a third-party Program Acquirer that assumes control of the stenoparib development program from us corresponding to: (i) successful completion of a Phase 2 clinical trial; (ii) Upon dosing of the first patient in the first Phase 3 clinical trial; (iii) upon submission of the first NDA with the FDA; (iv) submission of an MAA to the EMA; (v) submission of an NDA to the MHLW in Japan; (vi) upon receipt of authorization by the FDA to market and sell a licensed product; (vii) upon receipt of approval of an MAA by the EMA for a licensed product; and (viii) upon receipt of approval by the MHLW in Japan for a licensed product. If all milestones have been achieved, we may be obligated to pay Eisai up to a maximum of $ 94 million. In addition, we have agreed to pay Eisai a one-time sales milestone payment in the amount of $ 50 million the first time our annual sales of licensed product is $ 1 billion or more. Royalty Payments In addition to the milestone payments described above, we have agreed to pay Eisai royalties based on annual incremental sales of product derived from stenoparib in an amount between 5 % and 10 % of annual sales of between $ 0 and $ 100 million, between 6 % and 10 % of annual sales between $ 100 million and $ 250 million, between 7 % and 11 % of annual sales between $ 250 million and $ 500 million, and between 11 % and 15 % of annual sales in excess of $ 500 million. We are obligated to pay royalties under the agreement on a country-by-country and product-by-product basis for a period that commences with the first commercial sale of a product until the later of (i) the expiration of the last to expire valid claim of any licensed patent covering such licensed product in such country; or, (ii) the expiration of regulatory-based exclusivity for such licensed product in such country or (iii) the 15 year anniversary of the date of first commercial sale of such licensed product in such country. However, the agreement may be terminated sooner without cause by us upon 120 days prior written notice, or upon written notice of a material breach of the agreement by Eisai that is not cured within 90 days (30 days for a payment default). Eisai also has the right to terminate the agreement upon written notice of a material breach of the agreement by us that is not cured within 90 days (30 days for a payment default) or if we file for bankruptcy. By an amendment effective as of August 3, 2021, and executed by Eisai on August 23, 2021, Eisai also has the right to terminate the agreement if we do not complete a Phase 2 clinical trial before December 31, 2022, unless we elect to pay a $ 1,000 (one million dollar) extension payment (“Extension Payment”). Notwithstanding the foregoing, in the event we fail to enroll and dose at least 30 patients with the first dose of cancer drug in the ongoing Phase 2 Ovarian Cancer Clinical Trial by July 1, 2022, then the Extension Payment will be due and payable in fully by July 30, 2022. In addition, if we fail to achieve successful completion of first Phase 2 Clinical Trial prior to December 31, 2022, and do not elect to pay the Extension Payment then Eisai may terminate the agreement in its sole discretion pursuant to the terms of the amendment. F- 42 16. License and Development Agreements (cont.) Option to Reacquire Rights to Stenoparib For the period commencing with enrollment of the first five patients in a Phase 2 clinical trial pursuant to the clinical development plan and ending 90 days following successful completion of such Phase 2 clinical trial, Eisai has the option to reacquire our licensed rights to develop stenoparib for a purchase price equal to the fair market value of our rights, giving effect to the stage of development of stenoparib that we have completed under the agreement. We commenced a Phase 2 clinical trial April 15, 2019, and as of the date of these consolidated financial statements, Eisai has not indicated an intention to exercise its repurchase option. (c) Development, Option and License Agreement with R-Pharm for IXEMPRA® On March 1, 2019, the Company entered into an option to in-license the rights to any and all therapeutic and/or diagnostic uses in humans for IXEMPRA ® in the European Union (Great Britain but excluding Switzerland and Lichtenstein) (the “Territory”) from R-Pharm U.S. Operating, LLC (“R-Pharm”), pursuant to a Development, Option and License Agreement (the “Option”). By an amendment to the agreement dated August 4, 2022, for no consideration, the term of the option will expire on September 1, 2023, if not exercised by us before then. The agreement provides a right of extension, should we elect, for an additional $ 250 thousand. As a condition to the exercise of the Option, we are required to offer R-Pharm a right to re-acquire the licensed rights from us on terms to be mutually agreed upon, including the payment to us of the fair market value of the licensed rights. Pursuant to the Option, we are solely responsible for the development of IXEMPRA ® during the term of the Option within the Territory. The agreement also provides for a joint development committee consisting of four members, two appointed by us and two appointed by R-Pharm. Decisions by the committee that must be made by a unanimous consent of the parties, with us having the tie breaking vote on matters involving our DRP Biomarker, patient selection in the mBC clinical trial and the commercialization plan and R-Pharm having the tie breaking vote on all other matters. The purpose of the committee is to implement and oversee development activities for IXEMPRA ® pursuant to the clinical development plan, serves as a forum for exchanging data, information, and development strategy. Development Milestone Payments Pursuant to the agreement, once we have exercised the Option, we have agreed to make milestone payments to R-Pharm in connection with the development of IXEMPRA ® by us or our affiliates, or by a third-party Program Acquirer that assumes control of the IXEMPRA ® development program from us corresponding to: (i) upon receipt of regulatory approval for the Product for the treatment of the first indication in the first country in the Territory; and (ii) upon receipt of regulatory approval for the Product for the treatment of each additional indication in the first country in the Territory for each such additional indication. If all milestones have been achieved, and assuming only one additional indication in the second milestone is achieved, we may be obligated to pay R-Pharm up to a maximum of $ 12.5 million. Royalty Payments In addition to the milestone payments described above, once we have exercised the Option, we have agreed to pay R-Pharm royalties based on annual incremental sales of product derived from IXEMPRA ® in an amount between 5 % and 8 % of annual sales of between $ 0 and $ 30 million, and between 8 % and 12 % of annual sales over $ 30 million. After the Option is exercised, we would be obligated to pay royalties under the agreement on a country-by-country and product-by-product basis for a period that commences with the first commercial sale of a product until the later of (i) the expiration of the last to expire valid claim of any licensed patent covering such licensed product in such country; or, (ii) the expiration of regulatory-based exclusivity for such licensed product in such country or (iii) the seven year anniversary of the date of first commercial sale of such licensed product in such country. However, the agreement may be sooner terminated without cause by us upon 90 days prior written notice, or upon written notice of a material breach of the agreement by R-Pharm that is not cured within 90 days (30 days for a payment default). R-Pharm also has the right to terminate the agreement upon written notice of a material breach of the agreement by us that is not cured within 90 days (30 days for a payment default) or if we file for bankruptcy. F- 43 16. License and Development Agreements (cont.) (d) Development costs and Out-License Agreement with Smerud In June of 2020 (the “June 2020 Out-License Agreement”), as amended March 28, 2022 (the “Amended License Agreement”), the Company out-licensed its secondary LiPlaCis ® and 2X-111 programs to Smerud Medical Research International, the Company’s long-time CRO partner in Europe, for further Phase 2 clinical development of each program together with its DRP ® companion diagnostic. Pursuant to the terms of the Amended License Agreement, Chosa ApS, a company organized under the laws of Denmark (“Chosa”), replaced us as the exclusive licensee to the LiPlaCis ® technology. In addition, we also granted Chosa an exclusive, royalty-free, transferable and sublicensable license for (i) our DRP ® Companion Diagnostics that are specific for Cisplatin or LiPlaCis ® (a liposomal formulation of Cisplatin) for the research and development of LiPlaCis ® products, and (ii) the use of any and all know-how and intellectual property rights owned by us for Chosa’s use of our DRP ® Companion Diagnostics that are specific for Cisplatin or LiPlaCis ® (a liposomal formulation of Cisplatin) for the development and commercialization of LiPlaCis ® products, as contemplated in the Amended License Agreement. LiPlaCis Support Agreement with Smerud, Chosa and LiPlasome On March 28, 2022, concurrent with the entry into the Amended License Agreement, we entered into the LiPlaCis Support Agreement with Allarity Europe, Smerud, Chosa and LiPlasome (the “Support Agreement”). Pursuant to the terms of the Support Agreement, we agreed (i) to pay to LiPlasome a certain percentage of the Commercialization Proceeds received from Smerud by way of debt cancellation relating to prior work on LiPlaCis ® by Smerud, which obligation was to be satisfied by the payment of USD $338 (2,273 thousand DKK) to LiPlasome upon execution of the Support Agreement, (ii) to equally share the milestone payments under the terms of the License Agreement, pursuant to which it was contemplated that upon the achievement of all the milestones, our pro rata share of the Milestone Payments would be up to $3.5 million, (iii) to amend and restate the Original License Agreement, and (iv) to terminate the 2020 Sublicense Agreement as contemplated by the parties pursuant to the terms of the Support Agreement. Development costs 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 $ 1,264 , which has been accrued as of December 31, 2021, as payable to Smerud. However, effective March 28, 2022, the Company terminated its LiPlasome rights through the following agreements: A Letter Agreement between Chosa Oncology Ltd. (England), Chosa ApS (Denmark) (collectively “Chosa”), Smerud, and the Company, which references the following agreements: Development costs 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 $ 1,309 liability to Smerud and the Company’s agreement to pay $ 338 to LiPlasome. Consequently, in 2022, the Company recorded a balance due to LiPlasome of $ 338 in accrued liabilities (paid on April 1, 2022) and recorded other income of $ 971 which was recognized as a gain on sale of IP. 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 2022 Sublicense Agreement is terminated in its entirety. F- 44 16. License and Development Agreements (cont.) (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. The Company 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: i. A one-time upfront payment of $250 and $100 for stenoparib and dovitinib respectively, within 5 business days after January 2, 2022 ($350 received as of April 4, 2022) and recorded in other income as a gain on sale of IP; and ii. two milestone payments of $1 million 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 the Company 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 $1 million on closing of the transaction, and additional amounts: (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; (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. In addition to the sale of our inventory of Irofulven API and Data to Lantern Pharma, we also granted Lantern Pharma a non-exclusive, worldwide license to use our putative Irofulven DRP ® companion diagnostic to advance the development and commercialization of Irofulven and other Illudins (sesquiterpenes with anti-tumor properties produced by some mushrooms). We have also agreed not to engage in any drug development program for Illudins or any of its analogues or any use thereof for a period of five years. Effective March 18, 2022, pursuant to clause (i) the inventory was recertified with a longer shelf life and as of March 31, 2022, and we received $ 459 which was recorded in other income as a gain on sale of IP. F- 45 17. Tax The reconciliation of the statutory rate to the effective tax rate is as follows: Reconciliation of effective tax rate: 2022 2021 Tax computed on the loss before tax at a tax rate of 21.0 % for the years ended December 31, 2022 and 2021 $ ( 3,692 ) $ ( 5,568 ) Foreign rate differential ( 260 ) ( 210 ) Non-deductible expenses, share-based payments — 523 Non-deductible expenses, other 1 905 Tax value of derivative warrants ( 3,597 ) ( 438 ) Special tax deduction on research and development expenses ( 754 ) ( 464 ) Loss offset to research and development incentive 609 682 Other adjustments 1 60 Adjustment of tax concerning previous years ( 871 ) 134 Change in valuation allowance 7,044 4,322 Transaction costs — 187 Effective tax rate $ ( 1,521 ) $ 133 The components of net loss before income taxes were as follows: Year ended December 31, 2022 2021 Denmark $ ( 25,336 ) $ ( 21,250 ) Sweden ( 3 ) ( 11 ) United States 7,760 ( 5,254 ) $ ( 17,579 ) $ ( 26,515 ) The components of the provision for income taxes from operations were as follows: Year ended December 31, 2022 2021 Current: Denmark $ — $ — Sweden — 44 United States — 69 Total — 113 Deferred: Denmark ( 1,521 ) 20 Sweden — — United States — — Total ( 1,521 ) 20 $ ( 1,521 ) $ 133 F- 46 17. Tax (cont.) Deferred tax comprises: 2022 2021 Property, plant and equipment $ 20 $ 21 Intangible assets ( 1,160 ) ( 5,198 ) Stock compensation 1,152 815 Other accruals ( 44 ) ( 47 ) Net operating losses 12,981 9,095 Total deferred tax 12,949 4,686 Valuation allowance ( 13,298 ) ( 6,647 ) Net deferred tax liabilities $ ( 349 ) $ ( 1,961 ) Tax on profit/loss for the year: 2022 2021 Current income tax (benefit) expense $ — $ 88 Change in deferred tax ( 1,521 ) 20 Adjustment of tax concerning previous years — 25 Tax (benefit) expense $ ( 1,521 ) $ 133 Tax losses carried forward of approximately $ 59.6 million can be carried forward indefinitely. Deferred tax has been provided corresponding to the statutory tax rate applied. The statute of limitations for re-assessment of tax returns in Denmark is three years and five years for transfer pricing. As of December 31, 2022, the tax years that remain subject to examination by the major tax jurisdictions, under the statute of limitations, are from the year ended December 31, 2017, forward. The Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities. 18. Related parties During the year ended December 31, 2022, a Director of the Company was paid $ 269 in fees as a consultant. During the year ended December 31, 2021, a member of the Company’s Board of Directors participated in the June 2021 rights offering and purchased a total of 11,336 shares for $ 84 and a consultant was paid a total of $ 93 in fees. 19. Basic and diluted net loss per share Basic and diluted net loss per share attributable to common shareholders was as follows: Years Ended December 31, 2022 2021 Numerator: Net loss attributable to common shareholders $ ( 21,052 ) $ ( 26,648 ) Denominator: Weighted average common shares outstanding – basic and diluted 9,527,111 6,358,988 Net loss per share attributable to common shareholders – basic and diluted $ ( 2.21 ) $ ( 4.19 ) The Company’s potentially dilutive securities, which include warrants and shares issuable upon conversion of convertible debt, have been excluded from the computation of diluted net loss per share attributable to common shareholders as the effect would be to reduce the net loss per share attributable to common shareholders. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common shareholders for the periods indicated because including them would have had an anti-dilutive effect: F- 47 19. Basic and diluted net loss per share (cont.) As of December 31, 2022 2021 Warrants and stock options 2,695,907 3,193,950 Series A Convertible Preferred stock 7,406,057 1,997,982 Convertible debt* 9,071,430 — 19,173,394 5,191,932 * Estimated based on $ 2,667 at $ 0.1825 per share. 20. Financial Instruments The following tables present information about the Company’s financial instruments measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values: Fair Value Measurements as of December 31, 2022, Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ — $ ( 374 ) $ ( 374 ) $ — $ — $ ( 374 ) $ ( 374 ) Fair Value Measurements as of December 31, 2021, Using: Level 1 Level 2 Level 3 Total Assets: Investment $ 350 $ — $ — $ 350 Liabilities: Warrant liability $ — $ — $ ( 11,273 ) $ ( 11,273 ) Series A Convertible Preferred Stock Redemption Feature — — ( 7,181 ) ( 7,181 ) $ — $ — $ ( 18,454 ) $ ( 18,454 ) Methods used to estimate the fair values of our financial instruments, not disclosed elsewhere in these consolidated 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. Accordingly, our investment is considered a Level 1 financial asset. 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 years ended December 31, 2022 or 2021. F- 48 20. Financial Instruments (cont.) During the years ended December 31, 2022 and 2021, the Company used Monte Carlo simulation models to measure the fair value of the Series A Preferred Stock redemption feature at $ 0 and $ 7,181 , respectively. During the year ended December 31, 2022, the Company utilized the reset strike options Type 2 model by Espen Garder Haug and Black-Scholes Merton models to measure the fair value of the warrant liability at $ 374 . On December 31, 2021, the Company used the Black-Scholes Merton model to measure the fair value of the warrant liability at $ 11,273 . All changes in fair value were recorded in the Consolidated Statements of Operation and Comprehensive Loss during the corresponding period. Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. During the years ended December 31, 2022 and 2021, the Company’s stock price decreased from its initial valuation. As the stock price decreases for each of the related derivative instruments, the value to the holder of the instrument generally decreases. Stock price is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. 21. Commitments and Contingencies License Agreement with 2-BBB Medicines B.V. for Stenoparib (“2X-111”) On March 27, 2017, we in-licensed the exclusive worldwide rights to the central nervous system (“CNS”) and/or cerebrocardiovascular drug application, including the (preventive) treatment of peripheral effects of agents causing CNS disease or symptoms, including cancer, for 2X-111 from 2-BBB Medicines B.V. (“2-BBB”) pursuant to a license agreement. Upon execution of the agreement, we paid 2-BBB a one-time, non-refundable, non-creditable payment of $ 500 . Pursuant to the agreement, we are solely responsible for the development of 2X-111 during the term of the agreement. Development and Sales Milestone Payments Pursuant to the agreement, we have agreed to make milestone payments to 2-BBB in connection with the development of 2X-111 by us or our affiliates, or by a third-party (a “Program Acquirer”) that assumes control of the 2X-111 development program from us corresponding to: (i) upon enrollment of the first ten patients required in a Phase 2 clinical trial; (ii) upon the successful completion of a Phase 2 clinical trial; (iii) upon dosing of the first patient in the first Phase 3 clinical trial; (iv) upon submission of the first NDA with the FDA; (v) submission of an MAA to the EMA in the European Union; (vi) upon submission of an NDA in the first of either China or India; (vii) upon receipt of the first authorization by the FDA to market and sell a licensed product; (viii) upon receipt of a MAA for a licensed product in the European Union; and (ix) upon receipt of regulatory approval in the first of either China or India. If all development milestones have been achieved, we may be obligated to pay 2-BBB up to a maximum of $27.75 million which could increase to $55.5 million if 2-BBB successfully expands the field of our license agreement to include all preventative, therapeutic and/or diagnostic uses related to cancer in humans. In addition to the development milestones described above, we have agreed to make a mid-level seven figure one-time payment upon our sales of a licensed product reaching $500 million annually and a low eight figure payment upon the first and second time our sales of a licensed product reaches $1 Billion annual. If all sales milestones have been achieved, we would be obligated to pay 2-BBB up to a maximum of $22.5 million which could increase to $45 million if 2-BBB successfully expands the field of our license agreement to include all preventative, therapeutic and/or diagnostic uses related to cancer in humans. F- 49 21. Commitments and Contingencies (cont.) Royalty Payments In addition to the milestone payments described above, we have agreed to pay 2-BBB royalties based on annual incremental sales of product derived from 2X-111 in an amount between 5% and 10% of annual sales of between $0 and $100 million, between 6% and 13% of annual sales between $100 million and $250 million, and between 7% and 13% of annual sales in excess of $250 million. We are obligated to pay royalties under the agreement on a product-by-product and country-by-country basis, from the period of time commencing on the first commercial sale of any product in such country and expiring upon the latest of (a) the expiration of the last valid claim of a patent within (i) the 2-BBB intellectual property and/or (ii) the joint intellectual property in such country (if, but only if, such joint intellectual property arose from activities under the clinical development plan), or (b) the 10 th anniversary of the date of first commercial sale of such product in such country. However, the agreement may be sooner terminated without cause by us upon 120 days prior written notice, or upon written notice of a material breach of the agreement by 2-BBB that is not cured within 90 days. 2-BBB also has the right to terminate the agreement upon written notice of a material breach of the agreement by us that is not cured within 90 days (30 days for a payment default) or if we file for bankruptcy. 2-BBB also has the right to terminate the agreement in the event we challenge a 2-BBB patent and we have the right to terminate the agreement upon 30 days’ notice for specified safety reasons. 22. Subsequent Events (a) Redemption of Series B Preferred Stock Upon conclusion of the 2023 Annual Meeting of Stockholders on February 3, 2023, all of the 190,786 shares of Series B Preferred Stock outstanding 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. (b) Series A Preferred Stock Conversions Subsequent to December 31, 2022, pursuant to the exercise of conversion by the 3i, we issued 14,102,155 shares of Common Stock to the 3i 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 these financial statements, we had 10,650 shares of Series A Preferred Stock issued and outstanding. As of the date of this report, we have no shares of common stock available for issuance. (c) Modification to Conversion Price of Series A Preferred Stock On January 23, 2023, the Company and 3i, LP amended the letter agreement entered into on December 9, 2022, to provide that the modification of the term Conversion Price (as defined therein) will be in effect until terminated by the Company and 3i, LP. (d) Request for documents from the SEC In January 2023, the Company received a letter to produce documents from the SEC and 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 disclosures relating to 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. We do not know when the SEC’s investigation will be concluded or what action, if any, might be taken in the future by the SEC or its 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. (e) Establishment 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 C Preferred Stock has 620 votes and is subject to certain redemption rights and voting limitations. F- 50 On February 28, 2023, the Company 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 (“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 “Offering”). The 50,000 shares of Series C Preferred Stock (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 Trading Days immediately preceding the Conversion Date (as defined in the COD) or such other date of determination, subject to adjustment (the “Conversion Price”). In no event will the Conversion Price be 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. 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 Securities and Exchange Commission (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 2.0 % of 3i’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 Offering, the Company and 3i entered into a limited waiver agreement (the “Waiver”) pursuant to which 3i 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 agreements with 3i. (f) 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, or as otherwise set forth in the Company’s notice and proxy statement for the Special Meeting. 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. F- 51