Allarity Therapeutics, Inc. 10-Q

Item 1. Financial Statements . ALLARITY THERAPEUTICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands, except for share and per share data) March 31, December 31, 2024 2023 (Unaudited) ASSETS Current assets: Cash $ 312 $ 166 Other current assets 110 209 Prepaid expenses 542 781 Tax credit receivable 1,331 815 Total current assets 2,295 1,971 Non-current assets: Property, plant and equipment, net 18 20 Intangible assets 9,656 9,871 Total assets $ 11,969 $ 11,862 LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY Current liabilities: Accounts payable $ 11,058 $ 8,416 Accrued liabilities 1,553 1,309 Warrant derivative liability 2,664 3,083 Income taxes payable 43 59 Convertible promissory notes and accrued interest, net of debt discount 2,690 1,300 Total current liabilities 18,008 14,167 Non-current liabilities: Deferred tax 432 446 Total liabilities 18,440 14,613 Commitments and contingencies (Note 16) Stockholders’ (deficit) equity Series A Preferred stock $ 0.0001 par value ( 20,000 shares designated) shares issued and outstanding at March 31, 2024 and December 31, 2023 were 1,215 and 1,417 , respectively (liquidation preference of $ 4.36 at March 31, 2024) 1,510 1,742 Common stock, $ 0.0001 par value ( 750,000,000 shares authorized, at March 31, 2024 and December 31, 2023); shares issued and outstanding at March 31, 2024 and December 31, 2023 were 342,774 and 294,347 , respectively — — Additional paid-in capital 90,699 90,369 Accumulated other comprehensive loss ( 386 ) ( 411 ) Accumulated deficit ( 98,294 ) ( 94,451 ) Total stockholders’ deficit ( 6,471 ) ( 2,751 ) Total liabilities, preferred stock and stockholders’ (deficit) equity $ 11,969 $ 11,862 See accompanying notes to condensed consolidated financial statements. 1 ALLARITY THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (U.S. dollars in thousands, except for share and per share data) Three months ended March 31, 2024 2023 Operating expenses: Research and development $ 2,170 $ 1,427 General and administrative 2,070 2,241 Total operating expenses 4,240 3,668 Loss from operations ( 4,240 ) ( 3,668 ) Other income (expenses) Interest income — 4 Interest expense ( 102 ) ( 92 ) Foreign exchange gains 76 95 Change in fair value adjustment of derivative and warrant liabilities 419 309 Net other income 393 316 Net loss for the period before tax benefit ( 3,847 ) ( 3,352 ) Income tax benefit 4 — Net loss ( 3,843 ) ( 3,352 ) Deemed dividend of 5% on Series C Convertible Preferred stock — ( 4 ) Gain on extinguishment of Series A Convertible Preferred stock 191 — Deemed dividend on Series A Convertible Preferred stock ( 228 ) — Net loss attributable to common stockholders $ ( 3,880 ) $ ( 3,356 ) Basic and diluted net loss per common stock $ ( 22.14 ) $ ( 6,356.06 ) Weighted-average number of common stock outstanding, basic and diluted 175,266 528 Other comprehensive loss, net of tax: Net loss $ ( 3,843 ) $ ( 3,352 ) Change in cumulative translation adjustment 25 84 Total comprehensive loss attributable to common stockholders $ ( 3,818 ) $ ( 3,268 ) See accompanying notes to condensed consolidated financial statements. 2 ALLARITY THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) For the three months ended March 31, 2024 and 2023 (Unaudited) (U.S. dollars in thousands, except for share data) Series A Preferred Stock Series B Preferred Stock Series C Convertible Preferred Stock Series A Preferred Stock Common Stock Additional Paid in Accumulated Other Comprehensive Accumulated Total Stockholders’ Equity Number Value Number Value Number Value Number Value Number Value Capital Loss Deficit (Deficit) Balance, December 31, 2022 13,586 $ 2,001 190,786 $ 2 — $ — — — 568 $ — $ 83,158 $ ( 721 ) $ ( 82,550 ) $ ( 113 ) Issuance of Series C Convertible Preferred Stock, net — — — — 50,000 1,160 — — — — — — — — Deemed dividend of 5 % and accretion of Series C Convertible Preferred Stock to redemption value — — — — — 167 — — — — ( 167 ) — — ( 167 ) Round up of common shares issued as a result of 1-for-35 and 1-for-40 reverse stock splits — — — — — — — — 15 — — — — — Conversion of Preferred Stock into common stock, net ( 3,838 ) ( 565 ) — — — — 902 — 565 — — 565 Redemption of Series B Preferred Stock ( 190,786 ) ( 2 ) — — — — 2 — — 2 Stock based compensation (recoveries) — — — — — — — — — — ( 121 ) — — ( 121 ) Currency translation adjustment — — — — — — — — — — — 84 — 84 Loss for the period — — — — — — — — — — — — ( 3,352 ) ( 3,352 ) Balance, March 31, 2023 9,748 $ 1,436 — $ — 50,000 $ 1,327 — $ — 1,485 $ — $ 83,437 $ ( 637 ) $ ( 85,902 ) $ ( 3,102 ) See accompanying notes to condensed consolidated financial statements. 3 Series A Convertible Preferred Stock Common Stock Additional Paid in Accumulated Other Comprehensive Accumulated Total Stockholders’ Equity Number Value, net Number Value Capital Loss Deficit (Deficit) Balance, December 31, 2023 1,417 $ 1,742 294,390 $ — $ 90,369 $ ( 411 ) $ ( 94,451 ) $ ( 2,751 ) Conversion of preferred stock into common stock, net ( 202 ) ( 269 ) 27,092 — 269 — — — Extinguishment of preferred stock — ( 191 ) — 191 — — — Deemed dividend on preferred stock — 228 — ( 228 ) — — — Shares issued for compensation — — 14,500 — 90 — — 90 Sale of common shares, net — — 6,792 — 40 — — 40 Stock based compensation (recoveries) — — — — ( 32 ) — — ( 32 ) Currency translation adjustment — — — — — 25 25 Loss for the period — — — — — — ( 3,843 ) ( 3,843 ) Balance, March 31, 2024 1,215 $ 1,510 342,774 $ — $ 90,699 $ ( 386 ) $ ( 98,294 ) $ ( 6,471 ) See accompanying notes to condensed consolidated financial statements. 4 ALLARITY THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (U.S. dollars in thousands) Three months ended March 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss for the period $ ( 3,843 ) $ ( 3,352 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2 10 Stock-based compensation (recoveries) ( 121 ) ( 121 ) Unrealized foreign exchange gain ( 76 ) ( 87 ) Non-cash finance expense — 4 Non-cash interest 96 83 Change in fair value adjustment of warrant and derivative liabilities ( 419 ) ( 309 ) Deferred income taxes ( 14 ) — Changes in operating assets and liabilities: Other current assets 99 ( 19 ) Tax credit receivable ( 516 ) ( 23 ) Prepaid expenses 239 ( 6 ) Accounts payable 2,838 198 Accrued liabilities 244 434 Income taxes payable ( 16 ) ( 5 ) Operating lease liability — ( 8 ) Net cash used in operating activities ( 1,487 ) ( 3,201 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from convertible promissory notes and accrued interest, net of discount 1,340 — Net proceeds from sale of common shares 40 — Proceeds from Series C Convertible Preferred Stock issuance, net of costs — 1,160 Redemption of Series B Preferred Stock — ( 2 ) Net cash provided by financing activities 1,380 1,158 Net decrease in cash ( 107 ) ( 2,043 ) Effect of exchange rate changes on cash 253 309 Cash, beginning of period 166 2,029 Cash, end of period $ 312 $ 295 Supplemental information Cash paid for income taxes — 6 Cash paid for interest — 9 Supplemental disclosure of non-cash investing and financing activities: Conversion of Series A Convertible Preferred stock to equity, net 269 565 Deemed dividend on Series A Convertible Preferred Stock ( 228 ) — Gain on extinguishment of Series A Convertible Preferred Stock 191 — Deemed 5% dividend on Series C Convertible Preferred Stock — ( 4 ) Accretion of Series C Preferred shares to redemption value — ( 163 ) Stock issued in conjunction with consulting agreement 90 — See accompanying notes to condensed consolidated financial statements. 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the three months ended March 31, 2024 and March 31, 2023 (UNAUDITED) (U.S. dollars in thousands, except for share and per share data and where otherwise noted) 1. Organization, Principal Activities and Basis of Presentation Allarity Therapeutics, Inc. and Subsidiaries (the “Company”) is a clinical stage pharmaceutical company that develops drugs for the personalized treatment of cancer using drug specific companion diagnostics generated by its proprietary drug response predictor technology, DRP ® . Additionally, the Company, through its Danish subsidiary, Allarity Denmark (previously Oncology Venture ApS), specializes in the research and development of anti-cancer drugs. The Company’s principal operations are located at Venlighedsvej 1, 2970 Horsholm, Denmark. The Company’s business address in the Unites States is located at 24 School Street, 2 nd Floor, Boston, MA 02108. (a) Reverse Stock Split On April 9, 2024, the Company effected a 1-for-20 reverse stock split of the shares of its Common Stock (the “Reverse Stock Split”). All historical share and per share amounts reflected throughout the Financial Statements (as defined below in 1(b)) and these notes to the financial statements have been adjusted to reflect the Reverse Stock Split. See Note 10(a). (b) Liquidity and Going Concern The accompanying unaudited condensed interim consolidated financial statements (the “Financial Statements”) have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Financial Statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. Pursuant to the requirements of Accounting Standard Codification (ASC) 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date of the Financial Statements, and (1) is probable that the plan will be effectively implemented within one year after the date the financial statements are issued, and (2) it is probable that the plan, when implemented, will mitigate the relevant condition or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued. Certain elements of the Company’s operating plan to alleviate the conditions that raise substantial doubt are outside of the Company’s control and cannot be included in management’s evaluation under the requirements of ASC 205-40. Since inception, the Company has devoted substantially all its efforts to business planning, research and development, clinical expenses, recruiting management and technical staff, and securing funding via collaborations. The Company has historically funded its operations with proceeds received from its collaboration arrangements, sale of equity capital and proceeds from sales of convertible notes. The Company has incurred significant losses and has an accumulated deficit of $ 98.3 million as of March 31, 2024. As of March 31, 2024, the Company’s cash of $ 312 is insufficient to fund the Company’s current operating plan and planned capital expenditures for the next 12 months. These conditions give rise to substantial doubt over the Company’s ability to continue as a going concern. Management’s plans to mitigate the conditions or events that raise substantial doubt include additional funding through public equity, private equity, debt financing, collaboration partnerships or other sources. 6 On March 19, 2024, the Company entered into an At-The-Market Issuance Sales Agreement with Ascendiant Capital Markets, LLC to sell shares of the Company’s Common Stock, with aggregate gross sales proceeds of up to $ 22 million, from time to time, through an “at-the-market” equity offering program (the “ATM Offering”). As of March 31, 2024, the Company has up to approximately $ 21.29 million remaining in aggregate gross proceeds that can be issued through the ATM Offering. In light of the Company’s cash position as of the date of this Quarterly Report, the Company does not have sufficient funds for its current operations and planned capital expenditures. As discussed above, the Company intends to seek capital through sale of its securities or other sources. There are no assurances, however, that the Company will be successful in raising additional working capital, or if it is able to raise additional working capital, it may be unable to do so on commercially favorable terms. The Company’s failure to raise capital or enter into other such capital raising arrangements if and when needed would have a negative impact on its business, results of operations and financial condition and its ability to develop its product candidates. Although management continues to pursue its funding plans, there is no assurance that the Company will be successful in obtaining sufficient funding to fund continuing operations on terms acceptable to the Company, if at all. Accordingly, based upon cash on hand at March 31, 2024, the Company does not have sufficient funds to finance its operations for at least twelve months from March 31, 2024 and therefore has concluded that substantial doubt exists about the Company’s ability to continue as a going concern. (c) Basis of Presentation The Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as established by the Financial Accounting Standards Board (the “FASB”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Financial Statements contain all normal and recurring adjustments necessary to state fairly the consolidated balance sheet, results of operations and comprehensive loss, statements of changes in redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows of the Company for the interim periods presented. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the current fiscal year ending December 31, 2024. The financial data presented herein do not include all disclosures required by U.S. GAAP and should be read in conjunction with the audited consolidated financial statements and accompanying notes as of and for the fiscal years ended December 31, 2023 and 2022, thereto included in the Company’s Annual Report on Form 10-K, as amended (the “Form 10-K”) initially filed with the SEC on March 8, 2024. The preparation of the Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The results of operations and cash flows for the interim periods included in the Financial Statements are not necessarily indicative of the results to be expected for any future period or the entire fiscal year. (d) Risks and Uncertainties The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel and collaboration partners, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations, and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. Even if the Company’s research and development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. 7 2. Summary of Significant Accounting Policies There have been no new or material changes to the significant accounting policies discussed in the Form 10-K, that are of significance, or potential significance, to the Company. (a) Organization and Principles of Consolidation The 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.* (1) United States * Wholly-owned subsidiary of Allarity Acquisition Subsidiary, Inc. (1) In the process of being dissolved because inactive. All intercompany transactions and balances, including unrealized profits from intercompany sales, have been eliminated upon consolidation. ( b ) Use of Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting years. Significant estimates and assumptions reflected in the Financial Statements include, but are not limited to, the fair value of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, warrants, convertible debt, convertible promissory note, and the accrual for research and development expenses, fair values of acquired intangible assets and impairment review of those assets, share based compensation expense, and income tax uncertainties and valuation allowances. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Estimates are periodically reviewed considering reasonable changes in circumstances, facts, and experience. Changes in estimates are recorded in the period in which they become known and if material, their effects are disclosed in the notes to the financial statements. Actual results could differ from those estimates or assumptions. (c) Foreign currency and currency translation The functional currency is the currency of the primary economic environment in which an entity’s operations are conducted. The Company and its subsidiaries operate mainly in Denmark and the United States. The functional currencies of the Company’s subsidiaries are their local currency. The Company’s reporting currency is the U.S. dollar. The Company translates the assets and liabilities of its Denmark subsidiaries into the U.S. dollar at the exchange rate in effect on the balance sheet date. Revenues and expenses are translated at the average exchange rate in effect during each monthly period. Unrealized translation gains and losses are recorded as a cumulative translation adjustment, which is included in the condensed consolidated statements of changes in redeemable convertible preferred stock and stockholders’ equity (deficit) as a component of accumulated other comprehensive loss. 8 Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured into the functional currency at rates of exchange prevailing at the balance sheet dates. Non-monetary assets and liabilities denominated in foreign currencies are re-measured into the functional currency at the exchange rates prevailing at the date of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net loss for the respective periods. Adjustments that arise from exchange rate translations are included in other comprehensive loss in the condensed consolidated statements of operations and comprehensive loss as incurred. Adjustments that arise from exchange rate translations are included in other comprehensive loss in the consolidated statements of operations and comprehensive loss as incurred. The Company recorded a foreign exchange translation gain of $ 25 and $ 84 , included in accumulated other comprehensive loss for the three month periods ended March 31, 2024 and 2023, respectively. (d) Concentrations of credit risk and of significant suppliers Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash. The Company maintains its cash in financial institutions in amounts that could exceed government-insured limits. The Company does not believe it is subject to additional credit risks beyond those normally associated with commercial banking relationships. The Company has not experienced losses on its cash accounts and management believes, based upon the quality of the financial institutions, that the credit risk regarding these deposits is not significant. The Company is dependent on third-party manufacturers to supply products for research and development activities in its programs. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply its requirements for supplies and raw materials related to these programs. These programs could be adversely affected by a significant interruption in these manufacturing services or the availability of raw materials. (e) Cash Cash consists primarily of highly liquid investments with original maturities of three months or less at date of purchase to be cash equivalents. (f) Accumulated other comprehensive loss Accumulated other comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with shareholders. The Company records unrealized gains and losses related to foreign currency translation and instrument specific credit risk as components of other accumulated comprehensive loss in the condensed consolidated statements of operations and comprehensive loss. During the three months ended March 31, 2024, and 2023, the Company’s other comprehensive gain was comprised of currency translation adjustments. (g) Contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. At each reporting date, the Company evaluates whether a potential loss amount or a potential loss range is probable and reasonably estimable under the provisions of the authoritative guidelines that address accounting for contingencies. The Company expenses costs as incurred in relation to such legal proceedings as general and administrative expense within the condensed consolidated statements of operations and comprehensive loss. 9 (h) Reclassification During the three months ended March 31, 2023, we have reclassified financing costs of $ 9 from other income and expenses to general and administrative expenses with no net impact upon our operating results or cash flows for either the current or prior periods. (i) Recently Issued Accounting Pronouncements Changes to U.S. GAAP are established by the FASB in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. All other ASUs issued through the date of the Financial Statements were assessed and determined not to be applicable or are expected to have minimal impact on the Company’s condensed consolidated financial position and results of operations. 3. Intangible assets During the three months ended March 31, 2024, because of continuing downward pressure on the Company’s shares of Common Stock, the Company performed an impairment assessment with a WACC of 26 % and determined that no further impairment of the Company’s intangible assets is required as of March 31, 2024. The Company’s IPR&D assets have been classified as indefinite-lived intangible assets. The Company’s individual material development project in progress, Stenoparib, is recorded at $ 9,656 and $ 9,871 on March 31, 2024, and December 31, 2023, respectively. 4. Accrued liabilities The Company’s accrued liabilities are comprised of the following: March 31, 2024 December 31, 2023 Development cost liability $ 658 $ 114 Accrued interest on milestone liabilities 147 101 Accrued audit and legal 65 425 Payroll accruals 393 398 Accrued consulting fees 150 150 Accrued Board member and scientific advisory fees 140 60 Other — 61 $ 1,553 $ 1,309 5. Convertible promissory note due to Novartis On January 26, 2024, we received a termination notice from Novartis Pharma AG, a company organized under the laws of Switzerland (“Novartis”) due to a material breach of that certain license agreement dated April 6, 2018, as amended to date (the “License Agreement”). Accordingly, under the terms of the License Agreement, the Company ceased all development and commercialization activities with respect to all licensed products, all rights and licenses granted by Novartis to the Company reverted to Novartis; and all liabilities due to Novartis became immediately due and payable inclusive of interest which is continuing to accrue at 5% per annum. As of March 31, 2024, the liability is recorded as a current liability on the Company’s condensed unaudited consolidated balance sheets as follows: $ 3,600 in accounts payable, $ 1,317 convertible promissory notes and accrued interest, net of debt discount, and $ 147 in accrued liabilities. 10 6. Convertible senior promissory notes due to 3i, LP (3i”) (a) 3i Convertible Senior Promissory Notes (2024) (collectively the “2024 Notes”) During the three months ended March 31, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”), as amended, with 3i, pursuant to which three senior convertible promissory notes were issued as follows: i. On January 18, 2024, in an aggregate principal amount of $ 440 due on January 18, 2025, and with a set conversion price of $ 8.95 per share, for an aggregate purchase price of $ 400 , representing an approximate 10 % original issue discount (the “First Note”). ii. On February 13, 2024, in an aggregate principal amount of $ 440 due on February 13, 2025, and with a set conversion price of $ 8.10 per share, for an aggregate purchase price of $ 400 , representing an approximately 10 % original issue discount (the “Second Note”). iii. On March 14, 2024, in an aggregate principal amount of $ 660 due on March 14, 2025, and with a set conversion price of $ 7.00 per share, for an aggregate purchase price of $ 600 , representing an approximately 10 % original issue discount (the “Third Note”). The Company agreed to use the net proceeds from the sale of the 2024 Notes, among other things, for accounts payable and for working capital purposes. Unless the transaction documents state otherwise, the Company may not prepay any portion of the principal amount of the 2024 Notes without 3i’s prior written consent. The Company evaluated the terms of the 2024 Notes as required pursuant to ASC 570, 480, 815 and ASU 2020-06, and concluded the 2024 Notes will be recorded at $ 1,340 , net of share issuance costs of $ 40 , and accreted to redemption value of $ 440 on January 18, 2025, $ 440 on February 13, 2025, and $ 660 on March 14, 2025, using the effective interest method. The total debt discount of $ 140 and costs of $ 60 of the 2024 Notes are being amortized to interest expense over the one year term of each tranche of the debt. As of March 31, 2024, we have recorded $ 37 as interest expense. The balance outstanding at March 31, 2024 is $ 1,377 . See Note 17(a) iii. The Company agreed to pay interest to 3i on the aggregate unconverted and then outstanding principal amount of the 2024 Notes at the rate of 8 % per annum with interest payments commencing one month after the initial receipt of net proceeds. The interest on each of the 2024 Notes is payable in cash or, at the 3i’s option, in shares of our Common Stock, at the 90 % of the lowest VWAP during the previous ten trading days that is immediately prior to the interest payment dates. Under the terms of the 2024 Notes, 3i has the exclusive right to choose whether to receive interest payments in cash or as shares of our Common Stock. Conversion of the 2024 Notes The Company has committed to keeping enough of its authorized but unissued shares of Common Stock available exclusively for conversion of the 2024 Notes. The number of shares to be issued upon conversion of the 2024 Notes will be calculated by dividing the outstanding principal amount of the respective 2024 Notes to be converted by their respective conversion prices as described above. The conversion prices of the 2024 Notes are subject to adjustment to equal the price of subsequent equity sales. 3i’s ownership percentage of our shares of Common Stock is limited to no more than 4.99 %, as determined according to Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and its accompanying rules. Additionally, the Company cannot issue shares of its Common Stock in relation to the 2024 Notes transaction, including shares due upon the 2024 Notes conversion or otherwise, that exceed 19.99 % of its total outstanding shares of Common Stock, unless otherwise permitted by the 2024 Notes and related documents. Redemption Subject to the provisions of the 2024 Notes, if, at any time while the 2024 Notes are outstanding, the Company engages in one or more subsequent financings, 3i may require us to first use up to 100 % of the gross proceeds of such financing to redeem all or a portion of the 2024 Notes at 105 %. However, if the Company were to raise capital in the ATM Offering, 3i may request up to 20 % of the proceeds to redeem the Series A Convertible Preferred Stock (the “Series A Preferred Stock”) at the stated value. 11 Events of Default The 2024 Notes include customary event of default provisions and provide for a mandatory default provision. Upon the occurrence of an event of default, 3i may require the Company to pay in cash the “Mandatory Default Amount” which is defined in the 2024 Notes to mean the sum of (a) the greater of (i) the outstanding principal amount of the First Note, the Second Note and the Third Note, plus all accrued and unpaid interest thereon, divided by the lesser of (i) $ 8.95 in the case of the First Note, $ 8.10 in the case of the Second Note, and $ 7.00 in the case of the Third Note, or (ii) 85 % of the average of the three lowest VWAPs during the 10 trading days ending on the trading day that is immediately prior to the applicable date the Mandatory Default Amount is either (A) demanded or otherwise due or (B) paid in full, whichever has a lower conversion price, multiplied by the highest closing price for the Company’s shares of Common Stock on the trading market during the period beginning on the date of first occurrence of the event of default and ending on the date the Mandatory Default Amount is paid in full, or (ii) 130 % of the sum of the outstanding principal amount of the First and Second Note, plus accrued and unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of the First Note, the Second Note and the Third Note. Negative Covenants While any of the 2024 Notes are outstanding, without prior written consent from 3i and holders of at least 50.01 % of the outstanding 2024 Notes, the Company is restricted from (i) incurring any debt exceeding $ 250 in total; (ii) creating any liens on their property, except for permitted ones; (iii) making amendments to their charter documents that adversely affect 3i’s rights; (iv) repurchasing the Company’s shares of Common Stock or equivalents, except under specific conditions related to conversion shares under the Second Note and equity incentives for departing officers and directors, capped at $ 50 in total; (v) repurchasing or acquiring any indebtedness other than the First Note and the Second Note, unless it is done pro-rata; (vi) paying cash dividends or distributions on their equity securities; (vii) engaging in transactions with any affiliates or related parties, unless permitted by the SPA; and (viii) entering into agreements related to the above restrictions. Registration Rights The Company agreed to register with the SEC the resale of its shares of the Common Stock issuable upon conversion of the 2024 Notes pursuant to the SPA. We agreed to reimburse 3i of reasonable attorneys’ fees and expenses incurred by 3i for significant work in connection with the closings contemplated in the SPA. The SPA also provides for indemnification of 3i if it incurs losses, liabilities, obligations, claims, contingencies, damages, costs and expenses related to, among other things, a breach by us of any of our representations, warranties or covenants under the SPA. (b) 3i Convertible Secured Promissory Notes (2023) On November 22, 2022, the Company entered into a Secured Note Purchase Agreement (“Purchase Agreement”) with 3i, whereby the Company authorized the sale and issuance of three Secured Promissory Notes (each a “Note” and collectively, the “Notes”). Effective November 28, 2022, the Company issued: (1) a Note in the principal amount of $ 1,667 as payment of $ 1,667 due to 3i in Alternative Conversion Floor Amounts (as defined in the Notes) 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. Each Note matured on January 1, 2024 , carried an interest rate of 5 % per annum, and was 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 shares of 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 three months ended March 31, 2023, interest expense totaled $ 43 , comprised of $ 33 for contractual interest and $ 10 for the amortization of the debt discount. The 3i Convertible Secured Promissory Notes were paid in full and cancelled on April 21, 2023. 12 7. Preferred Stock A. Series A Convertible Preferred Stock and Common Stock Purchase Warrants (a) Amendments to Series A Convertible Preferred Stock i. Determination of Conversion Price Adjustments for Series A Preferred Stock On December 9, 2022, the Company and 3i entered into a letter agreement (the “2022 Letter Agreement”) which provided that pursuant to Section 8(g) of the Company’s Certificate of Designations for the Series A Preferred Stock (the “COD”), the Company and 3i agreed that the Conversion Price (as defined in the COD) was modified to mean the lower of: (i) the Closing Sale Price (as defined in the COD) on the trading date immediately preceding the Conversion Date (as defined in the COD) and (ii) the average Closing Sale Price (as defined in the COD) of the common stock for the five trading days immediately preceding the Conversion Date (as defined in the COD), for the Trading Days (as defined in the COD) through and inclusive of January 19, 2023. Any conversion which occurs shall be voluntary at the election of 3i, which shall evidence its election as to the Series A Preferred Stock being converted in writing on a conversion notice setting forth the then Minimum Price (as defined in the COD). Management determined that the adjustment made to the Conversion Price is not a modification of the COD which allows for adjustments to the Conversion Price (as defined in the COD) at any time by the Company and the other terms of the COD remained unchanged. On January 23, 2023, the Company and 3i amended the 2022 Letter Agreement, to provide that the modification of the term Series A Preferred Stock Conversion Price (the “Series A Preferred Stock Conversion Price”) to mean the lower of: (i) the Closing Sale Price (as defined in the COD) on the trading date immediately preceding the Conversion Date (as defined in the COD and (ii) the average Closing Sale Price (as defined in the COD) of the Company’s shares of Common Stock for the five trading days immediately preceding the Conversion Date (as defined in the COD), for the Trading Days (as defined in the COD) will be in effect until terminated by the Company and 3i. ii. Modification to Conversion Price of Series A Preferred Stock and 3i Exchange Warrants On January 14, 2024, pursuant to the terms of the First Note, the Company modified the conversion price of the 3i Exchange Warrants from $ 20.00 to $ 8.95 , thereby increasing the number of Exchange Warrants outstanding from 220,361 at December 31, 2023 to 492,317 outstanding at January 14, 2024. Also on January 14, 2024, the conversion price of the outstanding 1,417 shares of Series A Preferred Stock was revised from $ 20.00 to $ 8.95 . The Company filed the Fifth Certificate of Amendment to Amended and Restated COD (the “Fifth Amendment”) with the Secretary of State of the State of Delaware to reflect the new conversion price of the Series A Preferred Stock of $ 8.95 . As of January 14, 2024, the Company used the Black-Scholes option pricing model to determine the fair value of the 1,417 Series A Preferred Stock outstanding at $ 1,970 versus their carrying value of $ 1,742 . Accordingly, the Company has recorded a deemed dividend of $ 228 as at January 14, 2024. At a stated value of $ 1,080 for each share of Series A Preferred Stock, the revised price of $ 8.95 per share results in the 1,417 shares being convertible into 170,952 shares of Common Stock as of January 14, 2024. On February 13, 2024, pursuant to the terms of the Second Note, the Company modified the conversion price of the 3i Exchange Warrants from $ 8.95 to $ 8.10 and thereby increased the number of Exchange Warrants outstanding from 492,317 on January 18, 2024, to 544,101 on February 13, 2024. The Company filed the Sixth Certificate of Amendment to Amended and Restated COD (the “Sixth Amendment”) with the Secretary of State of the State of Delaware to reflect the new conversion price of the Series A Preferred Stock of $ 8.10 . As of February 14, 2024, the Company used the Black-Scholes option pricing model to determine the fair value of the then 1,296 Series A Preferred Stock outstanding and concluded there was a gain on extinguishment of $ 122 . At a stated value of $ 1,080 for each share of Series A Preferred Stock, the revised price of $ 8.10 per share results in the 1,296 shares being convertible into 493,573 shares of Common Stock. 13 On March 14, 2024, pursuant to the terms of the Third Note, the Company modified the conversion price of the 3i Exchange Warrants from $ 8.10 to $ 7.00 and thereby increased the number of Exchange Warrants outstanding from 544,101 on February 13, 2024, to 829,423 on March 14, 2024. The Company filed the Seventh Certificate of Amendment to Amended and Restated COD (the “Seventh Amendment”) with the Secretary of State of the State of Delaware to reflect the new conversion price of the Series A Preferred Stock of $ 7.00 . As of March 14, 2024, the Company used the Black-Scholes option pricing model to determine the fair value of the then 1,296 Series A Preferred Stock outstanding and concluded there was a gain on extinguishment of $ 69 . At a stated value of $ 1,080 for each share of Series A Preferred Stock, the revised price of $ 7.00 per share results in the 1,215 shares being convertible into 535,286 shares of Common Stock. (b) Accounting i. Series A Preferred Stock As a result of fair value adjustments during the three month period ended March 31, 2024, the Company recognized a deemed dividend of $ 228 and an extinguishment gain of $ 191 on our outstanding Series A Preferred Stock. Inputs used in the Black-Scholes valuation models utilized to fair value the modifications to the Series A Preferred Stock during the three month period ended March 31, 2024, are as follows: January 14, 2024 February 14, 2024 March 14, 2024 Initial exercise price $ 20.00 $ 8.95 $ 8.10 Stock price on valuation date $ 8.95 $ 8.10 $ 7.10 Risk-free rate 4.82 % 5.05 % 5.10 % Term (in years) 0.25 0.17 0.08 Rounded annual volatility 145 % 122 % 130 % 14 iii. 3i Warrants The 3i Warrants were identified as a freestanding financial instrument and meet the criteria for derivative liability classification, initially measured at fair value. Subsequent changes in fair value are recognized through earnings for as long as the contracts continue to be classified as a liability. The measurement of fair value is determined utilizing an appropriate valuation model considering all relevant assumptions current at the date of issuance and at each reporting period (i.e., share price, exercise price, term, volatility, risk-free rate and expected dividend rate). (c) Series A Preferred Stock Conversions i. Three month period ended March 31, 2024 During the three month period ended March 31, 2024, 3i exercised its option to convert 202 shares of Series A Preferred Stock for 27,092 shares of common stock at the fair value of $ 269 . As of March 31, 2024, we had 1,215 shares of Series A Preferred Stock issued and outstanding. See Note 17(a) i. ii. Three month period ended March 31, 2023 During the three month period ended March 31, 2023, 3i exercised its option to convert 3,838 shares of Series A Preferred Stock for 902 shares of common stock at the fair value of $ 565 . As of March 31, 2023, we had 9,748 shares of Series A Preferred Stock issued and outstanding. 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 3i Exchange Warrant liability Series A Preferred Stock Common Stock Additional paid-in capital Fair value adjustment to derivative and warrant liabilities Balances at December 31, 2023 $ 820 $ 1,742 $ — $ ( 7,208 ) $ — Conversion of 202 Series A Preferred Stock, net — ( 269 ) — 269 — Extinguishment of Series A Preferred Stock ( 191 ) 191 Deemed dividend on January 14, 2024, modification — 228 — ( 228 ) — Fair value adjustment at March 31, 2024 736 — — — ( 736 ) $ 1,556 $ 1,510 $ — $ ( 6,976 ) $ ( 736 ) 15 Consolidated Balance Sheets Consolidated Statement of Operations & Comprehensive Loss 3i Exchange Warrant liability Series A Convertible Preferred Stock – Mezzanine Equity Common Stock Additional paid-in capital Fair value adjustment to derivative and warrant liabilities Balances at December 31, 2022 $ 374 $ 2,001 $ — $ ( 3,756 ) $ — Conversion of 3,838 Series A Preferred Stock, net — ( 575 ) — 575 — Fair value adjustment at March 31, 2023 ( 309 ) — — — 309 $ 65 $ 1,426 $ — $ ( 3,181 ) $ 309 B. Series C Convertible Preferred Stock On February 28, 2023, the Company entered into a Securities Purchase Agreement (the “2023 SPA”) with 3i for the purchase and sale of 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 “Series C 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 Series C Certificate of Designation (“Series C COD”). The Company evaluated the terms of the Series C Preferred Stock as required pursuant to ASC 570, 480, 815 and ASU 2020-06, and concluded the Series C Preferred Stock will be recorded at fair value of $ 1,200 , net of share issuance costs of $ 40 , and accreted to redemption value of $ 1,485 on April 21, 2023, using the effective interest method. The Company will also accrue dividends of 5 %. The roll forward of the Series C Preferred Stock as of March 31, 2023, is as follows: March 31, 2023 Series C Preferred Stock, cash received $ 1,200 Less debt discount, opening ( 40 ) Plus, 5 % dividend and accretion 167 Series C Preferred Stock – net, ending balance $ 1,327 Effective April 21, 2023, all of the 50,000 shares of Series C Preferred stock were exchanged for Series A Preferred Stock. 16 8. Derivative Liabilities (a) Continuity of Common Share Purchase Warrant and 3i Warrant Derivative Liabilities The Common Share Purchase Warrants, comprised of the April 2023, July 2023 and September 2023 Inducement Warrants, and 3i Exchange Warrant derivative liabilities are measured at fair value at each reporting period and the reconciliation of changes in fair value the year ended December 31, 2023, and for the three month period ended March 31, 2024, is presented in the following tables: Common Share Purchase Warrants 3i Exchange Warrants Balance as of January 1, 2023 $ — $ 374 Issuance date fair value of April, July & September 2023 Common share purchase warrants 15,161 — Modifications to fair value upon exercise 592 — Change in fair value adjustment of derivative and warrant liabilities ( 11,911 ) 1,477 Amount transferred to Equity ( 1,579 ) ( 1,031 ) Balance as of December 31, 2023 $ 2,263 $ 820 Fair value per Common warrant / 3i Warrant / issuable at period end $ 8.82 $ 3.80 Common Share Purchase Warrants 3i Exchange Warrants Balance as of January 1, 2024 $ 2,263 $ 820 Change in fair value adjustment of derivative and warrant liabilities ( 1,155 ) 736 Balance as of March 31, 2024 $ 1,108 $ 1,556 Fair value per Common warrant / 3i Warrant / issuable at period end $ 4.32 $ 2.40 (b) Common Share Purchase Warrants – Valuation Inputs On March 31, 2024, the Company used the Black-Scholes Merton model to estimate the fair value of the Common Share Purchase Warrants derivative liability at $ 1,108 , using the following inputs: April 2023 Warrants July 2023 Warrants September 2023 Inducement Warrants Initial exercise price $ 20.00 $ 20.00 $ 20.00 Stock price on valuation date $ 6.02 $ 6.02 $ 6.02 Risk-free rate 4.19 % 4.19 % 4.13 % Term (in years) 4.28 4.28 4.95 Rounded annual volatility 123 % 123 % 121 % 17 (c) 3i Warrants – Valuation Inputs On March 31, 2024 and 2023, the Company utilized the reset strike options Type 2 model by Espen Garder Haug and Black-Scholes Merton models to estimate the fair value of the 3i Warrants to be approximately $ 65 and $ 2,265 , respectively. The 3i Warrants were valued at March 31, 2024 and 2023, using the following inputs: March 31, 2024 March 31, 2023 Initial exercise price $ 0.35 $ 9.91 Stock price on valuation date $ 0.30 $ 1.68 Risk-free rate 5.09 % 4.13 % Expected life of the Warrant to convert (years) 0.72 1.73 Rounded annual volatility 136 % 175 % Timing of liquidity event 6/30/2024 6/30/2023 Expected probability of event 10 % 90 % The shares of Series A Preferred Stock converted in the three-month periods ended March 31, 2024 and 2023, were recorded at $ 269 and $ 565 , respectively. 9. Stockholders’ Equity (a) Amendment to Certificate of Incorporation – Reverse Stock Split On April 4, 2024, the Company filed a Fifth Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State to effect a 1-for-20 share consolidation of our shares of Common Stock effective as of April 9, 2024 (“Share Consolidation”). No fractional shares were issued in connection with the Share Consolidation. If, as a result of the Share Consolidation, a stockholder would otherwise have been entitled to a fractional share, each fractional share was rounded up to the next whole number. The Share Consolidation resulted in a reduction of our outstanding shares of Common Stock as of March 31, 2024, from 6,854,604 to 342,774 . The par value of our authorized stock remained unchanged at $ 0.0001 . As of the date of the Financial Statements all references to our Common Stock have been retrospectively adjusted to reflect the one for 20 shares, unless otherwise noted. The Company is authorized to issue 750,500,000 shares, consisting of (i) 750,000,000 shares of Common Stock, par value $ 0.0001 per share, and (ii) 500,000 shares of Preferred Stock, par value of $0.0001 per share. (b) Share issuances i. Three month period ended March 31, 2024 During the three month period ended March 31, 2024, (a) 3i exercised its option to convert 202 shares of Series A Preferred Stock for 27,092 shares of Common Stock at the fair value of $ 269 . As of March 31, 2024, we had 1,215 shares of Series A Preferred Stock issued and outstanding. See Note 17(a) i; (b) The Company issued 14,500 shares of Common Stock valued at $ 90 to James G. Cullem (the Company’s former CEO) in exchange for consulting services; and (c) Pursuant to the terms of an ATM Offering, the Company issued and sold 6,792 shares of Common Stock in exchange for $ 40 in cash. i. Three month period ended March 31, 2023 During the three months ended March 31, 2023, the Company issued 902 shares of Common Stock valued at $ 565 , as a result of the conversion of 3,838 shares of Series A Preferred Stock. 18 10. Stock-based payment plan and stock-based payments Amended and Restated 2021 Equity Incentive Plan (the “Plan”) During the three months ended March 31, 2024, pursuant to approval by the Company’s Board of Directors, the Company has amended and restated the Plan as follows: i. Number of shares available: increased the number of shares reserved and available for grant and issuance pursuant to the Plan to 108,416 Shares, plus an amount derived by the difference between 15 % of the Company’s issued and outstanding shares of Common Stock issued in the Company’s Recapitalization Share Exchange covered by the Company’s registration statement on Form S-4 (SEC File No. 333-258968) and 108,416 Shares. For the sake of clarity, the initial number of Shares reserved and available for grant as of the date of adoption of the Plan by the Board is an amount equal to 15 % of the Company’s issued and outstanding shares of Common Stock issued in the Company’s Recapitalization Share Exchange covered by the Company’s registration statement on Form S-4 (SEC File No. 333-258968). ii. Automatic Share Reserve Increase: The number of Shares available for grant and issuance under the Plan will be increased on January 1 st of each of 2022 through 2031, by the lesser of (a) 5 % of the number of shares of all classes of the Company’s common stock issued and outstanding on each December 31 immediately prior to the date of increase or (b) such number of Shares determined by the Board. Stock-based payments During the three months ended March 31, 2024, total stock-based payment (recoveries) / expenses recorded in the condensed consolidated statement of operations and comprehensive loss were ($ 32 ), of which ($ 21 ) and ($ 11 ) are recognized as general and administrative and research and development recoveries, respectively. During the three months ended March 31, 2023, total stock-based payment (recoveries) / expenses recorded in the condensed consolidated statement of operations and comprehensive loss were ($ 121 ), of which ($ 82 ) and ($ 39 ) are recognized as general and administrative and research and development recoveries, respectively. Total compensation cost for non-vested warrants as at March 31, 2024, is $ 32 and is expected to be realized through the end of December 31, 2024. During the three-month periods ended March 31, 2024, and 2023, no options were granted. A summary of stock option activity under the Company’s stock option plans during the three-month period ended March 31, 2024, is presented below: Options Outstanding Number of Shares Weighted Average Exercise Price Share Weighted Average Life (in years) Outstanding December 31, 2023 19 $ 157,520 3.16 Cancelled or expired ( 5 ) 186,504 — Outstanding as of March 31, 2024 14 $ 104,354 2.81 Options exercisable at March 31, 2024 13 $ 27,006 2.81 19 11. License and Development Agreements (a) License Agreement with Novartis for Dovitinib On January 26, 2024, we received a termination notice from Novartis due to a material breach of the License Agreement. Accordingly, under the terms of the License Agreement, the Company ceased all development and commercialization activities with respect to all licensed products, all rights and licenses granted by Novartis to the Company reverted to Novartis; and all liabilities due to Novartis became immediately due and payable inclusive of interest which is continuing to accrue at 5 % per annum. As of March 31, 2024, the liability is recorded as a current liability on the Company’s condensed unaudited consolidated balance sheets as follows: $ 3,600 in accounts payable, $ 1,317 convertible promissory notes and accrued interest, net of debt discount, and $ 147 in accrued liabilities. (b) License Agreement with Eisai Inc. for Stenoparib The Company holds the exclusive worldwide rights to all preventative, therapeutic and/or diagnostic uses related to cancer in humans and by amendment to the agreement on December 11, 2020, viral infections in humans (including, but not limited to, coronaviruses) for Stenoparib from Eisai, Inc. (“Eisai”) pursuant to a license agreement (the “Eisai License Agreement”). Pursuant to the Eisai License Agreement, the Company is solely responsible for the development of Stenoparib during the term of the Eisai License Agreement. Eisai License Agreement also provides for a joint development committee consisting of six members, three appointed by us and three appointed by Eisai. One of the Company’s members of the joint development committee is designated chair of the committee and has the power to break any deadlock in decisions by the committee that must be made by a majority vote with each representative having one vote. The purpose of the committee is to implement and oversee development activities for Stenoparib pursuant to the clinical development plan, serving as a forum for exchanging data, information and development strategy. Effective July 12, 2022, the Company’s July 6, 2017 Exclusive License Agreement with Eisai Inc. (the “Third Amendment”), the terms of the original exclusive license were further amended in order to (1) further postpone the due date of the extension payment and extend the deadline for the Company’s successful completion of its first Phase 1b or Phase 2 clinical trial for Stenoparib beyond December 31, 2022; and (2) amend terms related to Eisai’s right of termination of development. On May 26, 2023, the Company and Eisai entered into a fourth amendment to the Exclusive License Agreement with an effective date of May 16, 2023, to postpone the extension payment, restructure the payment schedule and extend the deadline to complete enrollment in a further Phase 1b or Phase 2 Clinical Trial for the Stenoparib. The Company agreed to pay Eisai in periodic payments as follows: (i) $ 100 , which has been paid; (ii) $50 within 10 days of execution of the fourth amendment, which has been paid; (iii) $ 100 upon completion of a capital raise, which has been paid; and (iv) $ 850 on or before March 1, 2024. On February 26, 2024, in exchange for an additional $ 150 , paid as of May 1, 2024, the Company and Eisai entered into a fifth amendment to the Exclusive License Agreement to postpone the payment of $ 850 until the completion of a ten million dollar financing, expected to be completed before the end of May 2024, but in no event later than September 1, 2024. Development Milestone Payments The Company has agreed to make milestone payments to Eisai in connection with the development of Stenoparib by the Company or its affiliates, or by a third-party program acquirer that assumes control of the Stenoparib development program from the Company corresponding to: (i) successful completion of a Phase 2 clinical trial; (ii) upon dosing of the first patient in the first Phase 3 clinical trial; (iii) upon submission of the first NDA with the FDA; (iv) submission of an MAA to the EMA; (v) submission of an NDA to the MHLW in Japan; (vi) upon receipt of authorization by the FDA to market and sell a licensed product; (vii) upon receipt of approval of an MAA by the EMA for a licensed product; and (viii) upon receipt of approval by the MHLW in Japan for a licensed product. If all milestones have been achieved, the Company may be obligated to pay Eisai up to a maximum of $ 94 million. In addition, the Company has agreed to pay Eisai a one-time sales milestone payment in the amount of $ 50 million the first time the Company’s annual sales of licensed product is $ 1 billion or more. 20 Royalty Payments In addition to the milestone payments described above, the Company has agreed to pay Eisai royalties based on annual incremental sales of product derived from Stenoparib in an amount between 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. The Company is obligated to pay royalties under the agreement on a country-by-country and product-by-product basis for a period that commences with the first commercial sale of a product until the later of (i) the expiration of the last to expire valid claim of any licensed patent covering such licensed product in such country; or, (ii) the expiration of regulatory-based exclusivity for such licensed product in such country or (iii) the 15 year anniversary of the date of first commercial sale of such licensed product in such country. However, the agreement may be terminated sooner without cause by the Company upon 120 days prior written notice, or upon written notice of a material breach of the agreement by Eisai that is not cured within 90 days (30 days for a payment default). Eisai also has the right to terminate the agreement upon written notice of a material breach of the agreement by the Company that is not cured within 90 days (30 days for a payment default) or if the Company files for bankruptcy. By an amendment effective as of August 3, 2021, and executed by Eisai on August 23, 2021, Eisai also has the right to terminate the agreement if the Company does not complete a Phase 2 clinical trial before December 31, 2022, unless we elect to pay a $ 1,000 extension payment (the “Extension Payment”). Notwithstanding the foregoing, in the event the Company fails 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 the Company fails to achieve successful completion of first Phase 2 Clinical Trial prior to December 31, 2022, and does not elect to pay the Extension Payment then Eisai may terminate the agreement in its sole discretion pursuant to the terms of the amendment. Option to Reacquire Rights to Stenoparib For the period commencing with enrollment of the first five patients in a Phase 2 clinical trial pursuant to the clinical development plan and ending 90 days following successful completion of such Phase 2 clinical trial, Eisai has the option to reacquire our licensed rights to develop Stenoparib for a purchase price equal to the fair market value of our rights, giving effect to the stage of development of Stenoparib that we have completed under the agreement. The Company commenced a Phase 2 clinical trial April 15, 2019, and as of the date of the Financial Statements, Eisai has not indicated an intention to exercise its repurchase option. (c) Development, Option and License Agreement with R-Pharm for IXEMPRA® On March 1, 2019, the Company entered into an option to in-license the rights to any and all therapeutic and/or diagnostic uses in humans for IXEMPRA ® in the European Union (Great Britain but excluding Switzerland and Lichtenstein) (the “Territory”) from R-Pharm U.S. Operating, LLC (“R-Pharm”), pursuant to a Development, Option and License Agreement (the “Option”). By an amendment to the agreement dated August 4, 2022, for no consideration, the Option will expire on September 1, 2023, if not exercised by the Company before then. The Option provides a right of extension, should we elect, for an additional $ 250 . As of the date of this Quarterly Report, the Company has not extended the option with R-Pharm. 21 12. Related party During the three month periods March 31, 2024 and 2023, a director of the Company was paid $ 125 and $ 45 respectively, in fees as a consultant. 13. Loss per share of common stock Basic loss per share is derived by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, of the potential exercise or conversion of securities, such as warrants and stock options, which would result in the issuance of incremental shares of common stock unless such effect is anti-dilutive. In calculating the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remained the same for both calculations because when a net loss exists, dilutive shares are not included in the calculation. Potentially dilutive securities outstanding, as determined by the latest applicable conversion price, that have been excluded from diluted loss per share due to being anti-dilutive include the following: March 31, March 31, 2024 2023 Warrants and stock options 886,104 94 Series A Convertible Preferred stock 535,286 190 Series C Convertible Preferred stock — 48 Convertible debt 213,549 1,984 1,634,939 2,316 14. 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 March 31, 2024, Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ — $ ( 1,107 ) $ ( 1,107 ) Derivative warrant liability — — ( 1,556 ) ( 1,556 ) $ — $ — $ ( 2,663 ) $ ( 2,663 ) Fair Value Measurements as of December 31, 2023, Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ — $ ( 2,263 ) $ ( 2,263 ) Derivative warrant liability — — ( 820 ) ( 820 ) $ — $ — $ ( 3,083 ) $ ( 3,083 ) Methods used to estimate the fair values of our financial instruments, not disclosed elsewhere in the Financial Statements, are as follows: When available, the Company’s marketable securities are valued using quoted prices for identical instruments in active markets. If the Company is unable to value its marketable securities using quoted prices for identical instruments in active markets, the Company values its investments using broker reports that utilize quoted market prices for comparable instruments. The Company has no financial assets or liabilities measured using Level 2 inputs. Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. 22 The Company recognizes its derivative liabilities as Level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using terms in the notes that are subject to volatility and market price of the underlying shares of Common Stock. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company’s policy is to recognize transfers into and out of levels within the fair value hierarchy at the date the actual event or change in circumstances that caused the transfer occurs. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. There were no transfers between Level 1 or Level 2 during the three-month periods ended March 31, 2024 and 2023. 15. Income Taxes The effective tax rate for the three-month periods ended March 31, 2024 and 2023, was not impacted by unbenefited losses. 16. Commitments and Contingencies (a) SEC Request In January 2023, the Company received a request to produce documents from the SEC that stated that the staff of the SEC is conducting an investigation known as “ In the Matter of Allarity Therapeutics, Inc. ” to determine if violations of the federal securities laws have occurred. The documents requested appear to focus on submissions, communications, and meetings with the FDA regarding our NDA for Dovitinib or Dovitinib-DRP. The SEC letter also stated that investigation is a fact-finding inquiry and does not mean that that the SEC has concluded that the Company or anyone else has violated the laws. As a result of the disclosure of the SEC request, The Nasdaq Stock Market LLC (“Nasdaq”) staff has also requested us to provide them with the information requested by the SEC in which the Company is complying. (b) Nasdaq Delisting Notifications 23 On February 1, 2024, the Company attended a de-listing appeal hearing with Nasdaq, and on March 12, 2024, the Company received a response from Nasdaq granting the Company’s request to continue its listing on Nasdaq subject to the requirement that on or before April 24, 2024, the Company shall demonstrate compliance with the Bid Price and on Equity Rules. On April 27, 2024, we received a confirmation from Nasdaq that the Company has regained compliance with the minimum bid price requirement in Listing Rule 5550(a)(2) (the “Bid Price Rule”), as required by the Hearing Panel’s (“Panel”) decision of March 12, 2024. As a result of the capital raise under the ATM Offering, the Company has communicated to Nasdaq its belief that it has achieved compliance with the Equity Rules, subject to a confirmation from Nasdaq. 17. Subsequent Events For the Financial Statements, and for the three months then ended, the Company evaluated subsequent events through the date on which the Financial Statements were issued. All subsequent events not disclosed elsewhere in this Quarterly Report are disclosed below. (a) 3i LP Transactions During the period April 1, 2024, through May 6, 2024, 3i: i. converted 1,215 Series A Preferred Stock for 452,131 shares of Common Stock at prices of between $ 1.15 and $ 7.00 per share (as of the date of the Financial Statements, all Series A Preferred Stock have been converted and there are no outstanding shares of Series A Preferred Stock); ii. converted 252,272 Exchange Warrants on a cashless basis for 84,712 shares of Common Stock at $ 2.30 per share of Common Stock on April 12, 2024, and 3,432,366 Exchange Warrants on a cashless basis for 2,274,938 shares of Common Stock at $ 1.15 per share of Common Stock (as of the date of the Financial Statements, there are no outstanding Exchange Warrants); and iii. completely redeemed the 2024 Notes and interest for cash in the amount of $ 1,747 , inclusive of $ 1,540 principal and $ 207 interest. (b) Amended and Restated COD of Series A Convertible Preferred Stock and Warrant Adjustments During the period April 1, 2024, through May 2, 2024, the Company has amended the conversion prices of the Series A Convertible Preferred Stock, the Exchange Warrants and the 2024 Notes to equal the current last sale price of its shares of Common Stock of $ 1.15 as of May 1, 2024. 24 (c) ATM Offering – Sales During the period April 1, 2024 through May 13, 2024, the Company has sold 14,352,186 shares of its Common Stock for net proceeds of $ 20,610 . ( d) Pro-forma Balance Sheet (unaudited) The following pro forma unaudited condensed consolidated balance sheet is provided to illustrate the impact of all subsequent event transactions described in the foregoing subsequent events disclosure, as if they had occurred at March 31, 2024. As of March 31, 2024 (UNAUDITED) (In thousands, except share data) Actual Pro Forma ASSETS Cash $ 312 $ 19,135 Total other current assets 1,983 1,983 Total non-current assets 9,674 9,674 Total assets $ 11,969 $ 30,792 LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT) Total current liabilities $ 18,008 $ 14,071 Total non-current liabilities 432 432 Total liabilities 18,440 14,503 Shareholders equity (deficit) Total Redeemable preferred stock 1,689 — Additional paid-in capital 90,520 Accumulated other comprehensive loss ( 386 ) ( 386 ) Accumulated deficit ( 98,294 ) ( 97,659 ) Total Stockholders’ (deficit) equity ( 6,471 ) 16,289 Total liabilities and stockholders’ equity (deficit) $ 11,969 $ 30,792 25