What changed in this filing

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Item 1. Financial Statements

2025-05-09 compared with 2024-11-14 · 241 added, 669 removed, 334 unchanged (73% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

dollars in thousands, except for share and per share data)

September 30,

(in thousands, except for share and per share data*)

Current assets

1 unchanged sentence

$ 25,201 $ 19,533

Receivables from ATM sales

Restricted cash

Other current assets

2 unchanged sentences

Total current assets

29,422 22,341

Non-current assets:

Property, plant and equipment, net

Intangible assets

$ 29,730 $ 22,650

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

1 unchanged sentence

$ 4,347 $ 4,182

Accrued liabilities

Accrued expenses and other current liabilities

Warrant derivative liability

2 unchanged sentences

Total current liabilities

11,061 10,839

Total liabilities

11,061 10,839

Commitments and contingencies (Note 11)

Stockholders’ equity (deficit)

Series A Preferred stock $ 0.0001 par value ( 500,000 and 20,000 shares designated at September 30, 2024 and December 31, 2023, respectively) shares issued and outstanding at September 30, 2024 and December 31, 2023 were 0 and 1,417 , respectively

Common stock, $ 0.0001 par value ( 250,000,000 and 750,000,000 shares authorized, at September 30, 2024 and December 31, 2023, respectively);

shares issued and outstanding at September 30, 2024 and December 31, 2023 were 2,759,070 and 9,812 , respectively

Stockholders’ equity

Common stock, $ 0.0001 par value ( 250,000,000 shares authorized);

17,021,970 and 7,302,797 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital

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( 121,698 ) ( 118,966 )

Total stockholders’ equity (deficit)

Total stockholders’ equity

18,669 11,811

Total liabilities and stockholders’ equity (deficit)

Total liabilities and stockholders’ equity

$ 29,730 $ 22,650

* All common share data has been retroactively adjusted to effect reverse stock splits in 2024 (See Note 1).

See accompanying notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

dollars in thousands, except for share and per share data)

(in thousands, except for share and per share data*)

Three Months Ended

Nine Months Ended

September 30,

Operating expenses:

Research and development

Impairment of intangible assets

$ 1,403 $ 2,170

General and administrative

1 unchanged sentence

Loss from operations

( 3,036 ) ( 4,240 )

Other income (expense):

1 unchanged sentence

Interest expense

Foreign exchange (losses) gains

Fair value of New September Warrants

Fair value of modification to April & July 2023 Warrants

( 57 ) ( 102 )

Foreign exchange gains

Change in fair value of derivative and warrant liabilities

Total other income (expense)

Net loss before tax benefit

Total other income, net

Loss before income tax benefit

( 2,732 ) ( 3,847 )

Income tax benefit

Deemed dividend on Series A Preferred Stock

Deemed dividend on Series A Convertible Preferred Stock

( 2,732 ) ( 3,843 )

Gain on extinguishment of Series A Convertible Preferred Stock

Deemed dividend on Series C Preferred Stock

Deemed dividend on Series A Convertible Preferred Stock

Net loss attributable to common stockholders

Basic and diluted net loss per common stock

Weighted-average number of common stock outstanding, basic and diluted

Other comprehensive loss, net of tax

$ ( 2,732 ) $ ( 3,880 )

Net loss per common share, basic and diluted

$ ( 0.25 ) $ ( 664.16 )

Weighted average common shares outstanding, basic and diluted

11,146,922 5,842

Other comprehensive loss

$ ( 2,732 ) $ ( 3,843 )

Change in cumulative translation adjustment

Total comprehensive loss attributable to common stockholders

Total comprehensive loss

$ ( 3,008 ) $ ( 3,818 )

* All common share data has been retroactively adjusted to effect reverse stock splits in 2024 (See Note 1).

See accompanying notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE STOCKHOLDERS ’ EQUITY (DEFICIT)

For the three and nine months ended September 30, 2024 and 2023

dollars in thousands, except for share data)

For the three months ended March 31, 2025 and 2024

(in thousands, except for share data*)

Stockholders’

Preferred Stock

Comprehensive

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1,417 $ 1,742 9,812 $ — 90,369 $ ( 411 ) ( 94,451 ) $ ( 2,751 )

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

— — — — — — — — 1 — — — — —

Conversion of Preferred Stock into common stock, net

( 202 ) ( 269 ) 904 — 269 — — —

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 — $ — 50 $ — $ 83,437 $ ( 637 ) $ ( 85,902 ) $ ( 3,102 )

Issuance of common stock, net, April 2023 Financing

— — — — — — — — 416 — 6,815 — — 6,815

Round up of common shares issued as a result of 1-for-40 reverse stock split

— — — — — — — — 1 — — — — —

Fair value of April Warrants allocated to liabilities, net of financing costs

— — — — — — — — — — ( 3,772 ) — — ( 3,772 )

Conversion of Series A Preferred Stock into common stock

( 5,509 ) ( 812 ) — — — — ( 2,705 ) ( 2,522 ) 374 — 3,334 — — 812

Deemed dividends on Series C Preferred Stock

— — — — — 119 — — — — ( 119 ) — — ( 119 )

Elimination of Series A redemption rights

( 4,239 ) ( 624 ) — — — — 4,239 3,952 — — ( 3,328 ) — — 624

Issuance of Series A Preferred Stock as repayment of debt

— — — — — — 486 453 — — — — — 453

Redemption of Series A Preferred Stock for cancellation of debt

— — — — — — ( 1,550 ) ( 1,445 ) — — ( 207 ) — — ( 1,652 )

Exchange of Series C Preferred stock for Series A Preferred stock

— — — — ( 50,000 ) ( 1,446 ) 5,577 5,199 — — ( 3,752 ) — — 1,447

Stock based compensation

— — — — — — — — — — 180 — — 180

Currency translation adjustment

— — — — — — — — — — — ( 29 ) — ( 29 )

Loss for the period

— — — — — — — — — — — — ( 2,380 ) ( 2,380 )

Balance, June 30, 2023

— $ — — $ — — $ — 6,047 $ 5,637 841 $ — $ 82,588 $ ( 666 ) $ ( 88,282 ) $ ( 723 )

July 10, 2023 modification of Series A Preferred stock

— — — — — — — 206 — — ( 206 ) — — —

Issuance of common stock, net July 2023 financing

— — — — — — — — 4,075 — 10,080 — — 10,080

Fair value of July Warrants allocated to liabilities, net of financing costs

— — — — — — — — — — ( 6,254 ) — — ( 6,254 )

Redemption of Series A shares

— — — — — — ( 4,630 ) ( 4,474 ) 2,063 — ( 526 ) — — ( 5,000 )

Common share adjustment as a result of stock splits

Extinguishment of preferred stock

— ( 191 ) — — 191 — — —

September 2023 warrants exercised on inducement, net

Deemed dividend on preferred stock

— 228 — — ( 228 ) — — —

Obligation to issue shares as a result of September 2023 warrant inducement

Shares issued for compensation

— — 484 — 90 — — 90

Fair value of warrants exercised on September warrant inducement

Sale of common shares, net

— — 227 — 40 — — 40

September 2023 modification of Series A Preferred shares

Reverse split (1-for-30) rounding adjustment

— — ( 1 ) — — — — —

Stock based compensation

Stock-based compensation (recoveries)

— — — — ( 32 ) — — ( 32 )

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— — — — — — ( 3,843 ) ( 3,843 )

Balance, September 30, 2023

Balance, March 31, 2024

1,215 $ 1,510 11,426 $ — 90,699 $ ( 386 ) ( 98,294 ) $ ( 6,471 )

Series A Convertible

Stockholders’

Preferred Stock

Comprehensive

Balance, December 31, 2024

Conversion of preferred stock into common stock, net

Extinguishment of preferred stock

Deemed dividend on preferred stock

Shares issued for compensation

Stock-based compensation

Issuance of common stock, net of offering costs under open market sales agreement (ATM)

Reverse split (1-for-30) rounding adjustment

Stock based compensation (recoveries)

Currency translation adjustment

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Balance, March 31, 2025

Conversion of preferred stock into common stock, net

Extinguishment of preferred stock

Deemed dividend on preferred stock

Cashless exercise of 3i Exchange Warrants

Issuance of common stock, net of offering costs under open market sales agreement (ATM)

Reverse split (1-for-30) rounding adjustment

Stock based compensation (recoveries)

Currency translation adjustment

Loss for the period

Balance, June 30, 2024

Issuance of convertible redeemable preferred stock

Redemption of convertible redeemable preferred stock

Deemed dividend on redeemable preferred stock

Issuance of common stock, net of offering costs under open market sales agreement (ATM)

Reverse split (1-for-30) rounding adjustment

Stock based compensation

Currency translation adjustment

Loss for the period

Balance, September 30, 2024

* All common share data has been retroactively adjusted to effect reverse stock splits in 2024 (See Note 1).

See accompanying notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

dollars in thousands)

Nine Months Ended

September 30,

(in thousands)

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

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Stock-based compensation

Impairment of intangible assets

Unrealized foreign exchange (gains) losses

Non-cash financing cost

Non-cash interest

Fair value of New September Warrants

Fair value of modification to April & July 2023 warrants

Unrealized foreign exchange gains

Non-cash interest expense

Change in fair value of warrant and derivative liabilities

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Accounts payable

Accrued liabilities

Accrued expenses and other liabilities

Income taxes payable

Operating lease liability

Net cash used in operating activities

1 unchanged sentence

Proceeds from ATM sales of common stock, net of issuance costs

Net proceeds from sale of common stock and pre-funded warrant issuance

Net proceeds from warrants exercised in conjunction with price & warrant inducement

Proceeds from Series C Convertible Preferred Stock issuance, net of costs

Redemption of Series B Preferred Stock

Proceeds from issuance of Convertible Redeemable Series A Preferred Stock

Redemption of Convertible Redeemable Series A Preferred Stock

Proceeds from 3i promissory notes

Repayment of 3i debt and promissory notes

Redemption of Series A Preferred Stock

Proceeds from convertible promissory notes and accrued interest, net of discount

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Effect of exchange rate changes on cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental disclosure of cash flow information:

Cash paid for income taxes

Cash paid for interest

Net increase (decrease) in cash, cash equivalents and restricted cash

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents, and restricted cash, end of period

Supplemental disclosure of non-cash financing and investing activities:

Conversion of Series A Redeemable Preferred Stock

Deemed dividend on Series A Preferred Stock

Gain on extinguishment of Series A Preferred Stock

Conversion of Series A Convertible Preferred stock to equity, net

Deemed dividend on Series A Convertible Preferred Stock

Gain on extinguishment of Series A Convertible Preferred Stock

Stock issued in conjunction with consulting agreement

Issuance of 2,359,650 common shares on conversion of 3,632,366 3i Exchange Warrants

Issuance of Series A Preferred Stock in Exchange for Series C Preferred Stock

Issuance of Series A Preferred Stock to extinguish $350 3i Promissory Note

Deemed dividend on elimination of Series A redemption rights

Deemed dividend on exchange of Series C Preferred Stock for Series A Preferred Stock

Deemed dividend on redemption of Series A Preferred Stock

Deemed dividend on Series C Convertible Preferred Stock, and accretion of Series C Preferred Stock to redemption value

Deemed dividend on Convertible Redeemable Series A Preferred Stock

As reported within consolidated balance sheets:

Cash and cash equivalents

Restricted cash

Total cash and cash equivalents and restricted cash as presented in the condensed consolidated balance sheet

See accompanying notes to condensed consolidated financial statements.

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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 Therapeutics Europe ApS (previously Oncology Venture ApS), specializes in the research and development of anti-cancer drugs.

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.

The Company’s business address in the United States is located at 123 E Tarpon Ave, Tarpon Springs, FL 34689.

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.

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, the Company has evaluated whether there are conditions and 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 the accompanying Financial Statements were issued.

As a biopharmaceutical organization, the Company has devoted substantially all of its resources since inception to research and development activities for its Drug Response Predictor “DRP” in conjunction with the Company's product candidate, business planning, raising capital, establishing its intellectual property portfolio, acquiring or discovering new product candidates, and providing general and administrative support for these operations.

As a result, the Company has incurred significant operating losses and negative cash flows from operations since its inception and anticipates such losses and negative cash flows will continue for the foreseeable future.

Since inception the Company has funded its operations primarily from sales of its stock.

The Company has incurred significant losses and has an accumulated deficit of $ 111.5 million as of September 30, 2024 .

To date the Company has not generated any significant revenues and expects to continue to generate operating losses for the foreseeable future.

The Company expects that its existing cash and cash equivalents of $ 18.5 million as of September 30, 2024 , will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from the issuance date of the Financial Statements.

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, the Company has evaluated whether there are conditions and 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 the accompanying Financial Statements are issued.

The Company had an accumulated deficit of $ 121.7 million as of March 31, 2025.

Further, the Company incurred a net loss of $ 2.7 million and experienced negative cash flows from operations of $ 2.7 million for the three months ended March 31, 2025.

Based on the Company’s current operating plan, it estimates that its existing cash, cash equivalents and restricted cash of $ 27.7 million as of March 31, 2025 will be sufficient to enable the Company to fund its operating expenses and capital requirements through at least the next 12 months from the issuance of these Financial Statements.

While the Company believes its capital resources are sufficient to fund the Company’s on-going operations for the next 12 months from the issuance date of the Financial Statements, the Company’s liquidity could be materially affected over this period by:

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( 2 ) costs associated with new or existing strategic alliances, or licensing and collaboration arrangements;

( 3 ) negative regulatory events or unanticipated costs related to the DRP;

( 3 ) negative regulatory events or unanticipated costs related to the DRP or stenoparib;

( 4 ) any other unanticipated material negative events or costs.

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If the Company is unable to meet its obligations when they become due, the Company may have to delay expenditures, reduce the scope of its research and development programs, or make significant changes to its operating plan.

The Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.

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 and nine months ended September 30, 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 year ended December 31, 2023 , 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.

Use of Estimates

The preparation of Financial Statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amount of assets and disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported period.

Actual results could differ from these estimates and assumptions.

Reverse Stock Splits

On April 9, 2024, and September 11, 2024, the Company effected a 1 -for- 20 reverse stock split and 1 -for- 30 reverse stock split, respectively, of the shares of common stock of the Company (collectively, the “Reverse Stock Splits”).

All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Splits for all periods presented, unless otherwise indicated.

Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options, restricted stock, preferred stock and warrants outstanding on September 12, 2024, which resulted in a proportional decrease in the number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such stock options, restricted stock and warrants, and, in the case of stock options and warrants, a proportional increase in the exercise price of all such stock options and warrants.

No fractional shares were issued in connection with the Reverse Stock Splits.

If, as a result of the Reverse Stock Splits, a stockholder would otherwise have been entitled to a fractional share, each fractional share was rounded up to the next whole number.

Summary of Significant Accounting Policies

There have been no new or material changes to the significant accounting policies discussed in the Form 10 -K for the year ended December 31, 2023, that are of significance, or potential significance, to the Company.

Organization and Principles of Consolidation

There have been no new or material changes to the significant accounting policies discussed in Form 10 -K for the year ended December 31, 2024, that are of significance, or potential significance, to the Company.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed 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”).

The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of our management, reflect all adjustments, which include only normal recurring adjustments, necessary to fairly state our financial position as of March 31, 2025, our results of operations and stockholders’ equity for the three months ended March 31, 2025 and 2024, and cash flows for the three months ended March 31, 2025 and 2024.

The financial data and the other financial information disclosed in these notes to the condensed consolidated financial statements related to the three -month periods are also unaudited.

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for any other future annual or interim period.

The condensed consolidated balance sheet data as of December 31, 2024 was derived from our audited financial statements, but does not include all disclosures required by GAAP.

The condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10 -K for the year ended December 31, 2024 that was filed with the Securities and Exchange Commission (“SEC”), on March 31, 2025.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries:

Country of Incorporation

Allarity Acquisition Subsidiary Inc.

United States

Allarity Therapeutics Europe ApS (formerly Oncology Venture Product Development ApS)*

Allarity Therapeutics Denmark ApS (formerly OV- SPV2 ApS)*

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.

Use of Estimates

The preparation of Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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, 3i Exchange 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.

Risks and Uncertainties

The Company is subject to risks common to early-stage companies in the biopharmaceutical industry including, but not limited to, uncertainties related to clinical effectiveness of products, commercialization of products, regulatory approvals, dependence on key products, key personnel and third -party service providers such as contract research organizations (“CROs”), protection of intellectual property rights, the need and ability to obtain additional financing and the ability to make milestone, royalty or other payments due under any license, collaboration or supply agreements.

Foreign currency and currency translation

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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.

During the three months ended September 30, 2024 and 2023 , the Company recorded accumulated foreign currency translation losses of $ 0.2 million and $ 0.1 million, respectively.

During the nine months ended September 30, 2024 and 2023 , the Company recorded accumulated foreign currency translation losses of $ 0.3 million and $ 37,000 , respectively.

During the three months ended March 31, 2025 and 2024 , the Company recorded accumulated foreign currency translation losses of $ 0.3 million and $ 0.0 , respectively.

Concentrations of credit risk and of significant suppliers

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These programs could be adversely affected by a significant interruption in these manufacturing services or the availability of raw materials.

Cash and cash equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Cash, cash equivalents and restricted cash

The Company maintains deposits primarily in financial institutions, which may at times exceed amounts covered by insurance provided by the U.S.

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The Company has not experienced any losses related to amounts in excess of FDIC limits.

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

The Company had no cash equivalents on March 31, 2025 and December 31, 2024.

The Company had earmarked restricted cash on March 31, 2025 of $ 2.5 million for the purpose of payment to the SEC.

Property, plant and equipment

Property, plant, and equipment are stated at cost, less accumulated depreciation.

Depreciation is recognized using the straight-line method over the estimated useful lives of the respective assets as follows:

Life (in years)

Laboratory equipment

Furniture and office equipment

Accumulated other comprehensive loss

1 unchanged sentence

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 and nine months ended September 30, 2024 and 2023 , the Company’s other comprehensive gain was comprised of currency translation adjustments.

During the three months ended March 31, 2025 and 2024 , the Company’s other comprehensive (loss) and gain was comprised of currency translation adjustments.

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 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.

There have been no new pronouncements to date that are currently expected to be applicable, or currently expected to have a material impact to the Company’s condensed consolidated financial position and results of operations.

Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU No.

2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures , which requires that an entity report segment information in accordance with Topic 280, Segment Reporting.

The amendment in the ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company is currently evaluating the impact of the new standard on its financial statement disclosures.

In December 2023, the FASB issued ASU No.

2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures , which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S.

and foreign jurisdictions.

The update will be effective for annual periods beginning after December 15, 2024.

The Company is currently evaluating the impact that this guidance will have on its financial statement disclosures.

In November 2024, the FASB issued ASU No.

2024 - 03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220 - 40 ):

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The Company is currently evaluating the impact of the new standard on its financial statement disclosures.

Intangible assets

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 $0 and $ 9.8 million on September 30, 2024 , and December 31, 2023 , respectively.

The Company has halted enrollment in the ongoing Phase 2 trial of stenoparib and is focused on the development of a follow-on trial with FDA regulatory intent.

These developments prompted an updated impairment assessment of the Company's intangible assets utilizing a discounted cash flow model with a weighted average cost of capital (“WACC”) of 26%.

As a result of the updated impairment assessment, the Company recognized an impairment charge of $ 9.7 million and foreign exchange loss of $ 0.1 million during the three months ended September 30, 2024, with no comparable expense in 2023.

Accrued liabilities

The Company’s accrued liabilities are comprised of the following:

September 30,

The Company’s accrued expenses and other current liabilities are comprised of the following:

($ in thousands)

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Accrued interest on milestone liabilities

Accrued audit and legal

Payroll accruals

Accrued contracted services and other

Total accrued expenses

$ 1,322 $ 1,309

Accrued audit and legal

Accrued SEC settlement

Total accrued expenses and other current liabilities

Convertible promissory note due to Novartis

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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 September 30, 2024 , the liability is recorded as a current liability on the Company’s condensed unaudited consolidated balance sheets as follows:

As of March 31, 2025 , the liability is recorded as a current liability on the Company’s condensed unaudited consolidated balance sheets as follows:

$ 3.6 million in accounts payable, $ 1.4 million convertible promissory notes and accrued interest, net of debt discount, and $ 0.3 million in accrued liabilities.

Convertible senior promissory notes due to 3i, LP ( “3i” )

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:

On January 18, 2024, in an aggregate principal amount of $ 440,000 due on January 18, 2025, and with a set conversion price of $ 268.50 per share, for an aggregate purchase price of $ 400,000 , representing an approximate 10 % original issue discount (the “First Note”).

On February 13, 2024, in an aggregate principal amount of $ 440,0000 due on February 13, 2025, and with a set conversion price of $ 243.00 per share, for an aggregate purchase price of $ 400,000 , representing an approximately 10 % original issue discount (the “Second Note”).

On March 14, 2024, in an aggregate principal amount of $ 660,000 due on March 14, 2025, and with a set conversion price of $ 210.00 per share, for an aggregate purchase price of $ 600,000 , representing an approximately 10 % original issue discount (the “Third Note”).

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 the Company's common stock, at 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 the Company's common stock.

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 the Company 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 Sales Agreement (see Note 9 ), 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.

The 2024 Notes and accrued interest were redeemed in full and cancelled on May 6, 2024.

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 $ 1.7 million as payment of $ 1.7 million 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 $ 0.4 million in exchange for cash.

Effective December 30, 2022, the Company issued an additional Note in the principal amount of $ 0.7 million 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 was able to 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 concluded a future equity financing prior to the maturity date or other repayment of such promissory note.

Lastly, each Note and interest earned thereon was able to 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 were included in the carrying value of the Notes and amortized to interest expense over the contractual term of the underlying debt.

The Company recorded a $ 34,000 debt discount upon issuance of the Notes related to legal fees paid that were capitalized as debt issuance costs.

For the six months ended June 30, 2023, interest expense totaled $ 43,000 , comprised of $ 33,000 for contractual interest and $ 10,000 for the amortization of the debt discount.

The 3i Convertible Secured Promissory Notes were paid in full and cancelled on April 21, 2023.

Preferred Stock

August 2024 Series A Convertible Redeemable Preferred Stock

On August 19, 2024 ( the "Closing Date"), the Company entered into a Securities Purchase Agreement (the “August 2024 SPA”) with certain purchasers (the “August 2024 Purchasers”), pursuant to which the Company issued and sold, in a private placement (the “August 2024 Offering”), 35,000 shares of the Company’s Convertible Redeemable Series A Preferred Stock, par value $ 0.0001 per share (the “August 2024 Preferred Stock”), for net proceeds of approximately $ 2.9 million in the aggregate for the August 2024 Offering, after the deduction of discounts, fees and offering expenses.

In connection with the August 2024 Offering, the Company paid $ 0.2 million to Ascendiant Capital Markets, LLC, the Company’s placement agent.

On the Closing Date, the Company filed a certificate of designation (the “August 2024 COD”) with the Secretary of the State of Delaware designating the rights, preferences and limitations of the August 2024 Preferred Stock.

Under the August 2024 COD, for purposes of determining the presence of a quorum at any meeting of the stockholders of the Company at which the August 2024 Preferred Stock were entitled to vote and the voting power of the August 2024 Preferred Stock, each holder of the August 2024 Preferred Stock was entitled to a number of votes equal to shares of the Company’s common stock into which such August 2024 Preferred Stock are then convertible, disregarding, for such purposes, any limitations on conversion.

The August 2024 Preferred Stock were entitled to vote on each matter submitted to a vote of the stockholders generally and shall vote together with the common stock and any other class or series of capital stock entitled to vote thereon as a single class and on an as converted to the common stock basis.

The holders of the August 2024 Preferred Stock were entitled to dividends, on an as-if converted basis, equal to dividends actually paid, if any, on the common stock.

The August 2024 Preferred Stock was convertible, at the option of the holders and, in certain circumstances, by the Company, into common stock, as determined by dividing the net purchase price of $ 90 per share by the conversion price of $ 5.10 , at the option of the holders.

On the Closing Date, the Company and the August 2024 Purchasers also entered into a Registration Rights Agreement (the “August 2024 RRA”), pursuant to which the Company agreed to file a registration statement with the SEC, to register for resale the common stock issuable upon the conversion of the August 2024 Preferred Stock.

The registration statement was filed with the SEC on August 30, 2024.

All of the August 2024 Preferred Stock was redeemed in September 2024.

As a result of the redemption of the August 2024 Preferred Stock, the Company presented a deemed dividend of $ 0.6 million during the three and nine months ended September 30, 2024.

Series A Convertible Preferred Stock and Common Stock Purchase Warrants

Amendments to Series A Convertible Preferred Stock

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.

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 $ 600.00 to $ 268.50 , thereby increasing the number of Exchange Warrants outstanding from 7,346 at December 31, 2023 to 16,411 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 $ 600.00 to $ 268.50 .

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 $ 268.50 .

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 $ 2.0 million versus their carrying value of $ 1.7 million.

Accordingly, the Company has recorded a deemed dividend of $ 228,000 as at January 14, 2024.

At a stated value of $ 1.1 million for each share of Series A Preferred Stock, the revised price of $ 268.50 per share results in the 1,417 shares being convertible into 5,699 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 $ 268.50 to $ 243.00 and thereby increased the number of Exchange Warrants outstanding from 16,411 on January 18, 2024, to 18,137 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 $ 243.00 .

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 $ 122,000 .

At a stated value of $ 1.1 million for each share of Series A Preferred Stock, the revised price of $ 243.00 per share results in the 1,296 shares being convertible into 16,453 shares of common stock.

On March 14, 2024, pursuant to the terms of the Third Note, the Company modified the conversion price of the 3i Exchange Warrants from $ 234.00 to $ 210.00 and thereby increased the number of Exchange Warrants outstanding from 18,137 on February 13, 2024, to 27,648 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 $ 210.00 .

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 $ 69,000 .

At a stated value of $ 1.1 million for each share of Series A Preferred Stock, the revised price of $ 210.00 per share results in the 1,215 shares being convertible into 17,843 shares of common stock.

During the period April 1, 2024, through May 2, 2024, the Company 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 $ 34.50 as of May 1, 2024.

Series A Preferred Stock

As a result of fair value adjustments during the nine months ended September 30, 2024 , the Company recognized a deemed dividend of $ 0.3 million and an extinguishment gain of $ 0.2 million on the Company's 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 nine months ended September 30, 2024 , are as follows:

January 14 – March 14,

April 5 – May 2,

Initial exercise price

20.00 0 - 8.10 10

7.00 0 - 1.15 15

Stock price on valuation date

8.95 5 - 7.10 10

4.52 2 - 1.23 23

Risk-free rate

5.10 % - 4.82 % 5.47 % - 5.49 %

Term (in years)

0.25 - 0.08 0.08 - 0.01

Rounded annual volatility

145 % - 130 % 110 %

3i Exchange Warrants

The 3i Exchange 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).

Series A Preferred Stock and 3i Exchange Warrant Conversions

During the nine months ended September 30, 2024 :

3i exercised its option to convert 1,417 shares of Series A Preferred Stock for 15,976 shares of common stock at the fair value of $ 1.8 million.

As of September 30, 2024 , there were no issued and outstanding shares of Series A Preferred Stock;

3i exercised its option to convert 121,079 3i Exchange Warrants for 78,655 shares of common stock valued at $ 0.4 million.

As of September 30, 2024 , there were no issued and outstanding 3i Exchange Warrants.

During the nine months ended September 30, 2023, 3i exercised its option to convert 12,052 shares of Series A Preferred stock for 404 shares of common stock at the fair value of $ 3.9 million, and the Company redeemed 4,630 shares of Series A Preferred Stock held by 3i for $ 5.0 million.

As of September 30, 2023, there were 1,417 issued and outstanding shares of Series A Preferred Stock.

The accounting for the Series A Preferred Stock and Warrants is illustrated in the tables below:

Comprehensive

Consolidated Balance Sheets

Series A Convertible

adjustment to

($ in thousands)

Balances, December 31, 2023

$ 3,083 $ 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

( 419 ) — — — 419

Balances, March 31, 2024

2,664 1,510 — ( 6,976 ) 419

Conversion of 1,215 Series A Preferred Stock, net

— ( 1,550 ) — 1,550 —

Extinguishment of Series A Preferred Stock

— ( 31 ) — 31 —

Deemed dividend on modification of Series A Preferred Stock

— 71 — ( 71 ) —

Cashless exercise of 3i Exchange Warrants

( 405 ) — — 405 —

Fair value adjustment

( 2,243 ) — — — 2,243

Balances, June 30, 2024

$ 16 $ — $ — $ ( 5,061 ) $ 2,662

Fair value adjustment

( 14 ) — — — 14

Issuance of redeemable preferred stock

— — 2,938 — —

Redemption of redeemable preferred stock

— — ( 3,500 ) — —

Deemed dividend on redeemable preferred stock

— — 562 ( 562 ) —

Balances, September 30, 2024

$ 2 $ — $ — $ ( 5,623 ) $ 2,676

Comprehensive

Consolidated Balance Sheets

adjustment to

($ in thousands)

liability Equity Stock capital liabilities

Balances, December 31, 2022

$ 374 $ 2,001 $ — $ (3,756 ) $ —

Conversion of 3,838 Series A Preferred Stock, net

— ( 565 ) — 575 —

Fair value adjustment

( 309 ) — — — 309

Balances, March 31, 2023

65 1,436 — ( 3,181 ) 309

Conversion of 8,214 Series A Preferred Stock

— ( 812 ) ( 2,522 ) 3,334 —

Elimination of redemption rights on Series A Preferred stock;

deemed dividend of $ 3,328

— ( 624 ) 3,952 ( 3,328 ) —

Redemption of 1,550 Series A Preferred Stock

— — ( 1,445 ) — —

Issuance of 486 Series A Preferred stock as repayment of $ 350 debt;

$ 103 charged to interest expense

Exchange of 50,000 Series C Preferred Stock for 5,577 Series A Preferred Stock;

deemed dividend of $ 3,959

— — 5,199 ( 3,959 ) —

Fair value adjustment

1,078 — — — ( 1,078 )

Balances, June 30, 2023

$ 1,143 $ — $ 5,637 $ ( 7,134 ) $ ( 769 )

July 10, 2023 modification

— — 206 ( 206 ) —

Redemption of 4,630 Series A Preferred stock

— — ( 4,474 ) ( 526 ) —

September 14, 2023 modification

— — 373 ( 373 ) —

Fair value adjustment

2,803 — — — ( 2,803 )

Balances, September 30, 2023

$ 3,946 $ — $ 1,742 $ ( 8,239 ) $ ( 3,572 )

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 fair value to be $ 1.2 million, net of share issuance costs of $ 40,000 , and accreted to redemption value of $ 1.5 million on April 21, 2023, using the effective interest method.

Effective April 21, 2023, all of the 50,000 shares of Series C Preferred stock were exchanged for 5,577 shares of Series A Preferred Stock at an agreed value of $ 1.7 million.

The Company treated the exchange of Series C Preferred Stock for Series A Preferred Stock as an extinguishment as there has been a fundamental change in the nature of the instrument and applied the derecognition accounting model in ASC 260 - 10 - S99 - 2.

Accordingly, the Company had recognized the difference between ( 1 ) the fair value of the consideration transferred to the holders of the preferred shares of $ 5.2 million, and ( 2 ) the carrying amount of the preferred shares (net of issuance costs), of $ 1.2 million as a deemed dividend of $ 4.0 million that is deducted from additional paid in capital and subtracted from net income to arrive at income available to common stockholders in the calculation of loss per common share.

Derivative Liabilities

Continuity of Common Share Purchase Warrant and 3i Warrant Derivative Liabilities

Warrant liabilities are categorized within Level 3 of the fair value hierarchy and are measured at fair value on a recurring basis as follows (in thousands):

The Common Share Purchase Warrants, comprised of warrants issued in April 2023, July 2023, and September 2023, and 3i Exchange Warrant derivative liabilities are measured at fair value at each reporting period and the reconciliation of changes in fair value during the year ended December 31, 2023, and during the nine months ended September 30, 2024, is presented in the following tables:

($ in thousands)

Warrants Warrants

Balance as of January 1, 2023

Issuance date fair value of April, July & September 2023 Common share purchase warrants

Modifications to fair value upon exercise

Change in fair value adjustment of derivative and warrant liabilities

( 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 December 31, 2023

$ 264.60 $ 114.00

Warrant liability

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity and ASC 815 - 40, Derivatives and Hedging - Contracts in Entity ’ s Own Equity .

For warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.

For warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.

Warrant liabilities are categorized within Level 3 of the fair value hierarchy and are measured at fair value on a recurring basis.

The warrants issued in April 2023, July 2023, and September 2023 ( the “2023 Warrants”) are measured at fair value at each reporting period and the reconciliation of changes in fair value during the three months ended March 31, 2025 is presented in the following table:

($ in thousands)

Warrants Warrants

Balance at January 1, 2025

$ 2,263 $ 820

Change in fair value adjustment of derivative and warrant liabilities

( 2,261 ) ( 415 )

Cashless conversion of 3i Exchange Warrants

Balance at September 30, 2024

Fair value per Common warrant issuable at September 30, 2024

Common Share Purchase Warrants – Valuation Inputs

On September 30, 2024 , the Company used the Black-Scholes Merton model to estimate the fair value of the Common Share Purchase Warrants derivative liability at $ 2,000 , using the following inputs:

Change in fair value of warrant derivative liability

Balance at March 31, 2025

On March 31, 2025 , the Company used the Black-Scholes Merton model to estimate the fair value of the 2023 Warrants derivative liability at approximately $ 0 , using the following inputs:

September 2023

9 unchanged sentences

124 % 124 % 124 %

3i Exchange Warrants - Valuation Inputs

On September 30, 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 $ 4.0 million.

The 3i Warrants were valued at September 30, 2023 using the following inputs:

September 30,

Initial exercise price

Stock price on valuation date

Risk-free rate

Expected life of the Warrant to convert (years)

Rounded annual volatility

Timing of liquidity event

Expected probability of event

Stockholders ’ Equity

On September 9, 2024, the Company filed the Sixth Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State to decrease the number of authorized shares from, 750,500,000 to 250,500,000 shares and decrease the number of common stock from 750,000,000 to 250,000,000 shares.

Reverse Stock Splits

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 reverse stock split (the "April Reverse Stock Split") of the Company's shares of common stock effective as of April 9, 2024.

No fractional shares were issued in connection with the April Reverse Stock Split.

If, as a result of the April Reverse Stock Split, a stockholder would otherwise have been entitled to a fractional share, each fractional share was rounded up to the next whole number.

The April Reverse Stock Split resulted in a reduction of the Company's outstanding shares of common stock as of March 31, 2024, from 228,487 to 11,426 .

The par value of the Company's authorized stock remained unchanged at $ 0.0001 .

On September 9, 2024, the Company filed the Seventh Certificate of Amendment with the Secretary of State of the State of Delaware to effect a 1 -for- 30 reverse stock split (the "September Reverse Stock Split") of the shares of common stock, effective September 11, 2024.

As a result of the September Reverse Stock Split, every 30 shares of common stock outstanding immediately prior to effectiveness of the September Reverse Stock Split were combined and converted into one share of common stock without any change in the par value per share.

The September Reverse Stock Split became effective on September 11, 2024, and the common stock was quoted on the Nasdaq Capital Market ("Nasdaq") on a post-split basis at the open of business on September 11, 2024.

No fractional shares were issued in connection with the September Reverse Stock Split.

Stockholders who would have otherwise been entitled to a fraction of one share of common stock as a result of the September Reverse Stock Split instead received one whole share of common stock.

The Company issued 97,190 shares of common stock to shareholders who had been entitled to a fraction of one share.

All share and per share information has been retroactively adjusted to give effect to the April Reverse Stock Split and September Reverse Stock Split for all periods presented, unless otherwise indicated.

On November 2, 2023, the Company filed a shelf registration statement (File No.

333 - 275282 ) on Form S- 3, which was declared effective on November 29, 2023 ( the "Shelf").

Approximately $ 15.9 million of securities remain available for sale under the Shelf as of September 30, 2024.

On March 19, 2024, the Company entered into an At-The-Market Issuance Sales Agreement, as amended (the “Sales Agreement”) with Ascendiant Capital Markets, LLC (“Ascendiant”) pursuant to which, the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $ 0.0001 per share, having an aggregate gross sales price of up to $ 50 million, to or through the Ascendiant.

7 unchanged sentences

The Company and the Ascendiant may each terminate the Sales Agreement at any time upon specified prior written notice.

For the three and nine months ended September 30, 2024, the Company sold an aggregate of 1,493,878 and 2,556,927 shares of its common stock pursuant to the Sales Agreement, resulting in net proceeds of approximately $ 5.4 million and $ 33.1 million, respectively, after deducting underwriting discounts.

There were no sales of common stock pursuant to the Sales Agreement in 2023.

Series A Preferred Stock

During the six months ended June 30, 2024, 3i exercised its option to convert 1,417 shares of Series A Preferred Stock for 15,976 shares of common stock at the fair value of $ 1.8 million.

As of June 30, 2024, there were no remaining shares of Series A Preferred Stock issued and outstanding.

Exchange Warrants

3i converted 6,667 Exchange Warrants on a cashless basis for 2,824 shares of common stock at $ 69.00 per share on April 12, 2024, and 114,413 Exchange Warrants at $ 34.50 per share for 75,832 shares of common stock on May 2, 2024.

As September 30, 2024 , there are no outstanding Exchange Warrants.

Settlement Agreement

In accordance with the terms of the settlement agreement between the Company and James G.

Cullem, the Company's former CEO, the Company issued 484 shares of common stock valued at $ 90,000 to James G.

Cullem in exchange for consulting services for the nine month period ended September 30, 2024.

For the three months ended March 31, 2025, the Company sold an aggregate of 9,719,173 shares of its common stock pursuant to the Sales Agreement, resulting in net proceeds of approximately $ 9.7 million, after deducting underwriting discounts.

As of March 31, 2025, the Sales Agreement has been fully utilized and terminated.

Equity Incentive Plan

3 unchanged sentences

The 2021 Incentive Plan authorizes grants to issue up to 717,941 shares of authorized but unissued common stock and expires 10 years from adoption and limits the term of each option to no more than 10 years from the date of grant.

At the 2024 Annual Meeting of Stockholders of the Company held on September 3, 2024, the Company’s stockholders, upon the recommendation of the Company’s board of directors, approved an amendment to the 2021 Incentive Plan, as amended, to increase the aggregate number of shares of the Company's common stock authorized for grant under the 2021 Incentive Plan from 72,278 to 353,163 .

The number of shares available for grant and issuance under the 2021 Incentive 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.

Total shares available for the issuance of stock-based awards under the Company’s 2021 Incentive Plan was 353,156 shares at September 30, 2024.

The Company granted inducement awards consisting of 55,555 common shares on September 12, 2024 and 118,483 common shares on September 30, 2024.

The common stock inducement grants were made pursuant to Nasdaq Rule 5635 (c)( 4 ) and were not granted pursuant to the 2021 Incentive Plan.

In January 2025, Board approved a 5 % increase to the authorized shares in the 2021 Incentive Plan from 353,163 to 717,941 .

Total shares available for the issuance of stock-based awards under the Company’s 2021 Incentive Plan was 0 shares at March 31, 2025.

Stock-based compensation expense has been reported in the Company’s condensed consolidated statements of operations as follows:

Three Months Ended

($ in thousands)

Research and development

$ 66 $ ( 11 )

General and administrative

Total stock-based compensation expense

$ 139 $ ( 32 )

Restricted Stock Units

The following table summarizes the restricted stock unit activity during the nine months ended September 30, 2024:

The following table summarizes the restricted stock unit activity during the three months ended March 31, 2025:

Average Grant

2 unchanged sentences

174,038 $ 2.36

Unvested balance at September 30, 2024

570,671 $ 1.01

At September 30, 2024, the Company had unrecognized stock-based compensation expense related to restricted stock awards of $ 0.4 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.0 years.

Unvested balance at March 31, 2025

744,709 $ 1.32

At March 31, 2025, the Company had unrecognized stock-based compensation expense related to restricted stock awards of $ 0.8 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.8 years.

The expense is recognized over the vesting period of the award.

Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2024:

The following table summarizes stock option activity during the three months ended March 31, 2025:

Intrinsic Value

3 unchanged sentences

75,000 1.01 9.8 —

Cancelled/forfeited

( 2 ) 2,606,960 — —

Outstanding at September 30, 2024

Outstanding at March 31, 2025

75,000 $ 1.01 9.8 $ —

1 unchanged sentence

75,000 1.01 9.8 —

6 $ 5,328,373 2.6 —

There were no options granted during the nine months ended September 30, 2024.

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock.

As of September 30, 2024, the total compensation cost related to non-vested options awards not yet recognized is approximately $ 2,000 with a weighted average remaining vesting period of 1 year.

Stock-based compensation expense has been reported in the Company's condensed consolidated statements of operations as follows:

Three Months Ended

Nine Months Ended

September 30, September 30,

($ in thousands)

2024 2023 2024 2023

Research and development

$ 11 $ 121 $ 8 $ 39

General and administrative

6 59 ( 1 ) 20

Total stock-based compensation expense

$ 17 $ 180 $ 7 $ 59

As of March 31, 2025, the total compensation cost related to non-vested options awards not yet recognized is approximately $ 46,000 with a weighted average remaining vesting period of 0.8 years.

The Company estimated the fair value of stock options granted in the period presented using a Black-Scholes option-pricing model utilizing the following assumptions:

For the Three Months Ended

Expected term (in years)

Risk-free rate

Expected dividend yield

Escrow Arrangements

As of March 31, 2025, the Company held $ 2.5 million in an escrow account for payment to the SEC.

These funds were disbursed on April 2, 2025 to satisfy the SEC settlement.

The escrow balance is included in “Current Liabilities” on the balance sheet, with corresponding restricted cash reported under “Current Assets.”

License and Development Agreements

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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 September 30, 2024 , the liability is recorded as a current liability on the Company’s condensed unaudited consolidated balance sheets as follows:

As of March 31, 2025 , the liability is recorded as a current liability on the Company’s condensed unaudited consolidated balance sheets as follows:

$ 3.6 million in accounts payable, $ 1.4 million convertible promissory notes and accrued interest, net of debt discount, and $ 0.3 million in accrued liabilities.

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 the Company 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) $ 100,000 , which has been paid;

(ii) $ 50,000 within 10 days of execution of the fourth amendment, which has been paid;

(iii) $ 100,000 upon completion of a capital raise, which has been paid;

and (iv) $ 850,000 on or before March 1, 2024.

On February 26, 2024, in exchange for an additional $ 0.2 million, 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 $ 850,000 .

The Company agreed to make a one -time payment to Eisai of $ 850,000 upon completion of a ten -million dollar capital raising campaign, no later than September 1, 2024.

The Company paid Eisai $ 850,000 on August 20, 2024 and no payments are currently outstanding.

On August 2, 2024, the Company and Eisai entered into a sixth amendment to the Exclusive License Agreement with an effective date of August 2, 2024.

The terms of the amended exclusive license were further amended in order to ( 1 ) amend the definition of a successful completion and ( 2 ) amend the terms related to Eisai's right of termination for development.

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.

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 in such country and expiring on the later of (i) the expiration of the last valid claim of any and all Eisai patents, OV patents and joint patents covering such product in such country;

or, (ii) 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.

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 the Company's licensed rights to develop stenoparib for a purchase price equal to the fair market value of the Company's rights, giving effect to the stage of development of stenoparib that the Company has 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.

Related party

During the three and nine months ended September 30, 2024, Thomas H.

Jensen, a director of the Company, was paid $ 0 and $ 0.2 million, respectively, in fees as a consultant.

Effective June 1, 2024, the Company executed a Chief Executive Officer Management Services Agreement with Thomas H.

During the three and nine months ended September 30, 2023, Thomas H.

Jensen was paid $ 32,000 and $ 0.1 million, respectively, in fees as a consultant.

Loss per share of common stock

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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:

As of September 30,

As of March 31,

Unvested restricted stock units

Series A Convertible Preferred stock

182,602 29,929

Convertible debt

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 September 30, 2024

Fair Value Measurements as of March 31, 2025

($ in thousands)

Level 1 Level 2 Level 3 Total

Warrant liability

$ — $ — $ ( 2 ) $ ( 2 )

Warrant derivative liability

Fair Value Measurements as of December 31, 2024

($ in thousands)

Level 1 Level 2 Level 3 Total

Warrant liability

$ — $ — $ ( 2,263 ) $ ( 2,263 )

Derivative warrant liability

— — ( 820 ) ( 820 )

$ — $ — $ ( 3,083 ) $ ( 3,083 )

Warrant derivative liability

Methods used to estimate the fair values of the Company’s financial instruments, not disclosed elsewhere in the Financial Statements, are as follows:

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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.

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 to occur.

When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement.

There were no transfers between Level 1 or Level 2 during the nine months ended September 30, 2024 and 2023 .

There were no transfers between Level 1 or Level 2 during the three months ended March 31, 2025 and 2024 .

Commitments and Contingencies

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On July 19, 2024, the Company received a “Wells Notice” from the Staff of the SEC relating to the Company’s previously disclosed SEC investigation.

The Wells Notice relates to the Company’s disclosures regarding meetings with the United States Food and Drug Administration (the “FDA”) regarding the Company’s NDA for Dovitinib or Dovitinib-DRP, which was submitted to the FDA in 2021.

The Company understands that all conduct relating to the SEC Wells Notice occurred during or prior to fiscal year 2022.

The Company also understands that three of its former officers received Wells Notices from the SEC relating to the same conduct.

A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law.

The Wells Notice informed the Company that the SEC Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company that would allege certain violations of the federal securities laws.

The Company is continuing to cooperate with the SEC and maintains that its actions were appropriate, and pursuing the Wells Notice process.

Nasdaq Delisting Notifications

On June 18, 2024, the Company received a letter from the Nasdaq Listing Qualifications Staff (the “Staff”) of Nasdaq indicating that the Company has not complied with the Nasdaq Listing Rule 5550 (a)( 2 ) (the “Bid Price Rule”) which is the requirement that for 30 consecutive business days the bid price for the Company’s common stock close above the $1 per share minimum bid price requirement for continued inclusion on Nasdaq.

On July 30, 2024, the Company attended a hearing before a Nasdaq Hearings Panel (the "Panel"), and by decision date August 15, 2024, the Panel granted the Company's request for an extension through September 6, 2024 to obtain shareholder approval for a reverse split at a ratio that will allow the Company to demonstrate compliance with the Bid Price Rule.

This approval was granted by Allarity's shareholders at the Company's Annual Meeting of Stockholders on September 3, 2024.

On October 9, 2024, the Company was formally notified by the Staff that the Company has evidenced compliance with the Bid Price Requirement for continued listing on the Nasdaq, as set forth in Nasdaq Listing Rule 5550 (a)( 2 ).

The Wells Notice related to the Company’s disclosures regarding meetings with the United States Food and Drug Administration (the “FDA”) regarding the Company’s NDA for Dovitinib or Dovitinib-DRP, which was submitted to the FDA in 2021.

On March 13, 2025, the Company issued a press release announcing that the Company had reached a final settlement with the SEC relating to the Company’s previously disclosed SEC investigation, and as part of the settlement, the Company had agreed to pay a one -time civil penalty of $ 2.5 million.

The Company made a cash payment of $ 2.5 million to the SEC on April 2, 2025.

On September 13, 2024, a purported class action captioned Osman Mukeljic v.

Allarity Therapeutics, Inc., et al , 1:24 -cv- 06952, was filed in the United States District Court for the Southern District of New York against the Company and certain of its current and former officers.

The complaint alleges, among other things, that defendants made false and misleading statements and/or failed to disclose information related to Dovitinib NDA’s continued regulatory prospects and purported misconduct in connection with the Dovitinib NDA and/or the Dovitinib-DRP PMA.

The complaint asserts violations of Section 10 (b) of the Securities Exchange Act of 1934 and Rule 10b - 5 thereunder against all defendants as well as violations of Section 20 (a) of the Exchange Act of 1934 against the individual defendants.

The Company believes that the class action is without merit and plans to vigorously defend itself against these claims.

At this time, there can be no assurance that the Company will prevail in the lawsuits and the Company cannot currently estimate the possible loss or range of losses, if any, that it may experience in connection with this litigation.

On February 26, 2025, the Company issued a press release announcing the dismissal of the aforementioned class action lawsuit.

Subsequent Events

For its Financial Statements as of September 30, 2024, 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.

During the period October 1, 2024 through November 13, 2024, the Company had sold 1,534,356 shares of its common stock for net proceeds of $ 2.5 million.

Share Buyback

Subsequent to the three months ended March 31, 2025, from April 17, 2025 through May 6, 2025, the Company repurchased 1,995,766 shares of its common stock under its share repurchase program.

The average cost per share was $ 1.07 , including broker commissions but excluding federal excise tax, for a total value of $ 2.1 million.

As of May 8, 2025, the Company had $ 2.9 million of availability remaining under its existing share repurchase program.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

You should read the following discussion and analysis of our financial condition and results of operations together with “ Cautionary Note Regarding Forward-Looking Statements ” and our condensed consolidated financial statements and related notes included under Item 1 of this Quarterly Report as well as our most recent Annual Report on Form 10-K for the year ended December 31, 2023, as amended, including Part 1, Item 1A “ Risk Factors.

The forward-looking statements contained in this report reflect our views and assumptions as of the effective date of this report.

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In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

We are a biopharmaceutical company focused on discovering and currently developing a highly targeted anti-cancer drug candidate.

Through the use of our Drug Response Predictor (DRP®) platform, we identify the value in drug assets that have otherwise been discontinued by identifying patient populations where these drugs are active.

Our lead drug candidate, stenoparib, is a small molecule dual inhibitor of the poly-ADP-ribose polymerase (PARP 1/2) as well as tankyrase 1/2.

We are a clinical-stage, precision medicine pharmaceutical company focused on developing novel anti-cancer therapeutics for patients with high unmet medical need.

We were founded on the innovation of our novel Drug Response Predictor (DRP®) platform.

The DRP® technology is designed to define the gene expression signatures in cancer cells that predict the cancer cell’s sensitivity to a specific cancer therapeutic.

Once defined, the DRP® gene expression signature can then be assessed in cancer tissue biopsies from patients to identify those cancers that share this signature of drug sensitivity, and by extension, to identify those patients who may then be most likely to receive benefit from that specific anti-cancer therapeutic.

We have developed and published DRP® signatures for dozens of anti-cancer therapeutics.

Ideally, by using DRP to identify the patients most likely to benefit clinically from a given therapeutic, clinical development of that therapeutic can be focused on a smaller, more responsive patient population, which would allow for smaller, cheaper and quicker trials while also enhancing the probability of clinical and regulatory success for that therapeutic.

Historically, we have generated DRP signatures for numerous anti-cancer therapeutics and had in-licensed numerous assets for DRP-guided development, including Liposomal CisPlatin (LiPlaCis), Irofulven and dovitinib as well as the novel PARP/tankyrase inhibitor, stenoparib.

Recent Developments

Nasdaq Delisting Notifications

On June 18, 2024, we received a letter from the Nasdaq Listing Qualifications Staff (the “Staff”) of Nasdaq indicating that the we have not complied with the Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”) which is the requirement that for 30 consecutive business days the bid price for our common stock close above the $1 per share minimum bid price requirement for continued inclusion on the Nasdaq Capital Market ("Nasdaq").

On June 27, 2024, we were granted a hearing before a Nasdaq Hearings Panel (the "Panel").

On July 30, 2024, we attended a hearing before the Panel, and by decision date August 15, 2024, the Panel granted our request for an extension through September 6, 2024 to obtain shareholder approval for a reverse split at a ratio that will allow us to demonstrate compliance with the Bid Price Rule.

This approval was granted by our shareholders at our Annual Meeting of Stockholders on September 3, 2024.

On October 9, 2024, we were formally notified by Nasdaq that we have evidenced compliance with the Bid Price Requirement for continued listing on the Nasdaq, as set forth in Nasdaq Listing Rules 5550(a)(2).

Reverse Stock Splits

On April 4, 2024, we effected a 1-for-20 reverse stock split (the "April Reverse Stock Split") of the shares of common stock effective as of April 9, 2024.

No fractional shares were issued in connection with the April Reverse Stock Split.

If, as a result of the April Reverse Stock Split, a stockholder would otherwise have been entitled to a fractional share, each fractional share was rounded up to the next whole number.

The April Reverse Stock Split resulted in a reduction of our outstanding shares of common stock as of March 31, 2024, from 228,487 to 11,426.

The par value of our authorized stock remained unchanged at $0.0001.

On September 9, 2024, we effected a 1-for-30 reverse stock split (the "September Reverse Stock Split") of the shares of common stock, effective September 11, 2024.

The September Reverse Stock Split became effective on September 11, 2024, and the common stock was quoted on the Nasdaq Stock Market on a post-split basis at the open of business on September 11, 2024.

No fractional shares were issued in connection with the September Reverse Stock Split.

Stockholders who would have otherwise been entitled to a fraction of one share of common stock as a result of the September Reverse Stock Split instead received one whole share of common stock.

We issued 97,190 shares of common stock to shareholders who had been entitled to a fraction of one share.

On March 19, 2024, we entered into an At-The-Market Issuance Sales Agreement, as amended (the “Sales Agreement”) with Ascendiant Capital Markets, LLC (“Ascendiant”) under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, par value $0.0001 per share, having an aggregate gross sales price of up to $50 million, to or through the Ascendiant.

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Both we and Ascendiant may each terminate the Sales Agreement at any time upon specified prior written notice.

For the three months ended September 30, 2024, we sold an aggregate of 1,493,878 shares of our common stock pursuant to the Sales Agreement, resulting in net proceeds of approximately $5.4 million after deducting underwriting discounts.

August 2024 Series A Convertible Redeemable Preferred Stock

On August 19, 2024 (the "Closing Date") we entered into a Securities Purchase Agreement (the “August 2024 SPA”) with certain purchasers (the “August 2024 Purchasers”), pursuant to which we issued and sold, in a private placement (the “August 2024 Offering”), 35,000 shares of our Series A Convertible Redeemable Preferred Stock, par value $0.0001 per share (the “August 2024 Preferred Stock”), for net proceeds of approximately $2.9 million in the aggregate for the August 2024 Offering, after the deduction of discounts, fees and offering expenses.

On the Closing Date, we filed a certificate of designation (the “August 2024 COD”) with the Secretary of the State of Delaware designating the rights, preferences and limitations of the August 2024 Preferred Stock.

Under the August 2024 COD, for purposes of determining the presence of a quorum at any meeting of the stockholders of Allarity at which the August 2024 Preferred Stock are entitled to vote and the voting power of the August 2024 Preferred Stock, each holder of the August 2024 Preferred Stock shall be entitled to a number of votes equal to shares of our common stock into which such August 2024 Preferred Stock are then convertible, disregarding, for such purposes, any limitations on conversion.

The August 2024 Preferred Stock shall be entitled to vote on each matter submitted to a vote of the stockholders generally and shall vote together with the common stock and any other class or series of capital stock entitled to vote thereon as a single class and on an as converted to the common stock basis.

The holders of the August 2024 Preferred Stock are entitled to dividends, on an as-if converted basis, equal to dividends actually paid, if any, on the common stock.

The August 2024 Preferred Stock is convertible, at the option of the holders and, in certain circumstances, by us, into common stock, as determined by dividing the net purchase price of $90 per share by the conversion price of $5.10, at the option of the holders.

On the Closing Date, we entered into a Registration Rights Agreement (the “August 2024 RRA”) with the August 2024 Purchasers, pursuant to which we agreed to file a registration statement with the SEC, to register for resale the common stock issuable upon the conversion of the August 2024 Preferred Stock.

The registration statement was filed with the SEC on August 30, 2024.

In connection with the August 2024 Offering, we paid $0.2 million to Ascendiant Capital Markets, LLC, our placement agent.

For the three months ended March 31, 2025, we sold an aggregate of 9,719,173 shares of our common stock pursuant to the Sales Agreement, resulting in net proceeds of approximately $9.7 million after deducting underwriting discounts.

SEC Investigation

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The Wells Notice informed us that the SEC Staff has made a preliminary determination to recommend that the SEC file an enforcement action against us that would allege certain violations of the federal securities laws.

We are continuing to cooperate with the SEC and maintains that our actions were appropriate, and pursuing the Wells Notice process.

On March 13, 2025, we issued a press release that we have reached a final settlement with the SEC relating to our previously disclosed SEC investigation, and as part of the settlement, we have agreed to pay a one-time civil penalty of $2.5 million.

On September 13, 2024, a purported class action captioned Osman Mukeljic v.

Allarity Therapeutics, Inc., et al , 1:24-cv-06952, was filed in the United States District Court for the Southern District of New York against us and certain of our current and former officers.

The complaint asserts violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder against all defendants as well as violations of Section 20(a) of the Exchange Act of 1934 against the individual defendants.

We believe that the class action is without merit and plan to vigorously defend ourselves against these claims.

At this time, there can be no assurance that we will prevail in the lawsuits and we cannot currently estimate the possible loss or range of losses, if any, that it may experience in connection with this litigation.

The complaint alleged, among other things, that defendants made false and misleading statements and/or failed to disclose information related to Dovitinib NDA’s continued regulatory prospects and purported misconduct in connection with the Dovitinib NDA and/or the Dovitinib-DRP PMA.

The complaint asserted violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder against all defendants as well as violations of Section 20(a) of the Exchange Act against the individual defendants.

On February 26, 2025, we issued a press release announcing the dismissal of this class action lawsuit.

Reverse Stock Splits

On April 9, 2024 and September 11, 2024, we effected a 1-for-20 reverse stock split and 1-for-30 reverse stock split, respectively, of our shares of common stock (collectively, the “Reverse Stock Splits”).

All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Splits for all periods presented.

Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options, restricted stock, preferred stock and warrants outstanding on September 12, 2024, which resulted in a proportional decrease in the number of shares of our common stock reserved for issuance upon exercise or vesting of such stock options, restricted stock and warrants, and, in the case of stock options and warrants, a proportional increase in the exercise price of all such stock options and warrants.

No fractional shares were issued in connection with the Reverse Stock Splits.

If, as a result of the Reverse Stock Splits, a stockholder would otherwise have been entitled to a fractional share, each fractional share was rounded up to the next whole number.

Risks and Uncertainties

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Financial Operations Overview

Since our inception in September of 2004, we have focused substantially all our resources on conducting research and development activities, including drug discovery and preclinical studies, establishing, and maintaining our intellectual property portfolio, the manufacturing of clinical and research material, hiring personnel, raising capital and providing general and administrative support for these operations.

Since our inception in September 2004, we have focused substantially all our resources on conducting research and development activities, including drug discovery and preclinical studies, establishing, and maintaining our intellectual property portfolio, the manufacturing of clinical and research material, hiring personnel, raising capital and providing general and administrative support for these operations.

In recent years, we have recorded very limited revenue from collaboration activities, or any other sources.

We have funded our operations to date primarily from convertible notes and the issuance and sale of our ordinary shares.

We have funded our operations to date primarily from convertible notes and the issuance and sale of our securities.

We have incurred net losses in each year since inception.

Our net losses were $17.1 million and $10.2 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, we had an accumulated deficit of $111.5 million and cash and cash equivalents of $18.5 million.

Our net losses were $2.7 million and $3.8 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, we had an accumulated deficit of $121.7 million and cash, cash equivalents and restricted cash of $27.7 million.

Substantially all our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

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We expect our expenses will increase substantially in connection with our ongoing activities, as we:

advance our drug candidate through clinical trials;

pursue regulatory approval of our drug candidate;

advance stenoparib through clinical trials;

pursue regulatory approval of stenoparib;

operate as a public company;

continue our preclinical programs and clinical development efforts;

continue research activities for the discovery of new drug candidates;

continue research activities for stenoparib;

manufacture supplies for our preclinical studies and clinical trials.

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We expect our research and development expenses on stenoparib to increase substantially for the foreseeable future as we continue to invest to accelerate stenoparib in clinical trials designed to attain regulatory approval.

Costs related to dovitinib and IXEMPRA will decrease precipitously as these have been deprioritized/terminated.

We expect additional costs in research and development activities as we continue to conduct clinical trials.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our drug candidate is highly uncertain.

As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our drug candidate.

General and Administrative Expenses

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Facilities costs consist of rent and maintenance of facilities.

We expect our general and administrative expenses to increase for the foreseeable future due to anticipated increases in headcount to advance our drug candidate and as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services.

We expect our general and administrative expenses to increase for the foreseeable future due to anticipated increases in headcount to advance stenoparib and as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)

Comparison of the Three Months Ended March 31, 2025 and 2024 (unaudited)

Three Months Ended

Nine Months Ended

September 30,

($ in thousands)

Operating costs and expenses:

Operating expenses:

Research and development

Impairment of intangible assets

General and administrative

Total operating costs and expenses

Total operating expenses

Loss from operations

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Interest expense

Foreign exchange (losses) gains

Fair value of New September Warrants

Fair value of modification to April & July 2023 Warrants

Foreign exchange gains

Change in fair value of derivative and warrant liabilities

Total other income (expense):

Total other income, net

Loss before income tax benefit

Income tax benefit

Research and Development Expenses

For the three months ended September 30, 2024, compared to September 30, 2023

The decrease of $0.9 million in research and development expenses was primarily related to a reduction of $0.8 million in manufacturing and supplies and $0.1 million in milestone payments.

For the nine months ended September 30, 2024, compared to September 30, 2023

The decrease of $0.2 million in research and development expenses was primarily related to a reduction of $0.3 million in manufacturing and supplies, $0.1 million in personnel-related costs, including salaries and stock-based compensation, and $0.1 million in contractor and consultant expenses, partially offset by a $0.3 million increase in research study costs.

Impairment of intangible assets

For the three and nine months ended September 30, 2024, compared to September 30, 2023

We halted enrollment in the ongoing Phase 2 trial of stenoparib and are focused on the development of a follow-on trial with FDA regulatory intent.

These developments prompted an updated impairment assessment of our intangible assets utilizing a discounted cash flow model with a weighted average cost of capital (“WACC”) of 26%.

As a result of the updated impairment assessment, we recognized an impairment charge of $9.7 million and foreign exchange loss of $0.1 million during the three months ended September 30, 2024, with no comparable expense in 2023.

For the three months ended March 31, 2025, compared to March 31, 2024

The decrease of $0.8 million in research and development expenses was primarily related to a reduction of $1.0 million in manufacturing and supplies, $0.2 million in contractor and consultant expenses and $0.2 million in milestone payments, partially offset by an increase of $0.4 million in staffing costs including non-cash stock-based compensation and $0.2 million increase in the tax credit.

General and Administrative Expenses

For the three months ended September 30, 2024, compared to September 30, 2023

General and administrative expenses decreased by $0.9 million for the three months ended September 30, 2024, compared to September 30, 2023.

The decrease was primarily due to decreases of $0.7 million in financing costs, $0.1 million in professional services, and $0.3 million in insurance costs, partially offset by an increase of $0.1 million in personnel-related costs and $0.1 million in public reporting company costs.

For the nine months ended September 30, 2024, compared to September 30, 2023

General and administrative expenses decreased by $1.8 million during the nine months ended September 30, 2024, compared to September 30, 2023.

The decrease was primarily due to decreases of $1.1 million in financing costs, $0.8 million in insurance expense, and $0.2 million in professional fees, partially offset by an increase of $0.3 million in public reporting company costs.

For the three months ended March 31, 2025, compared to March 31, 2024

General and administrative expenses decreased by $0.4 million for the three months ended March 31, 2025, compared to March 31, 2024.

The decrease was primarily due to decreases of $0.5 million in professional services and $0.1 million in staffing costs including non-cash stock-based compensation, partially offset by an increase of $0.2 million in other administrative and corporate expenses.

Other income (expense)

For the three months ended September 30, 2024, compared to September 30, 2023

Other income of $0.3 million recognized during the three months ended September 30, 2024, consisted primarily of $0.3 million in interest income and $0.1 million in foreign exchange gains, partially offset by $0.1 million in interest expenses

Other expense of $21,000 recognized during the three months ended September 30, 2023, consisted primarily of loss of $4.2 million in fair value of New September Warrants, $0.6 million in fair value of the modification to April and July 2023 warrants, $0.2 million in foreign exchange losses, and $34,000 in interest expenses, partially offset by a $4.9 million change in fair value adjustment to derivative and warrant liabilities and $12,000 in interest income.

For the nine months ended September 30, 2024, and September 30, 2023

Other income of $2.5 million recognized during the nine months ended September 30, 2024, consisted primarily of a gain of $2.7 million in change in fair value of derivative and warrant liabilities, $0.3 million in interest income, and $0.1 million in foreign exchange gains, partially offset by $0.6 million in interest expense.

Other income of $2.1 million recognized during the nine months ended September 30, 2023, consisted primarily of a gain of $7.2 million in change in fair value of derivative and warrant liabilities and $19,000 in interest income, partially offset by losses of $4.2 million in fair value of New September Warrants, $0.6 million in fair value of the modification to April and July 2023 warrants, $0.3 million in interest expense, $0.1 million in foreign exchange losses.

For the three months ended March 31, 2025, compared to March 31, 2024

Other income of $0.3 million recognized during the three months ended March 31, 2025, consisted primarily of $0.2 million in interest income and $0.1 million in foreign exchange gains, partially offset by $0.1 million in interest expenses

Other income of $0.4 million recognized during the three months ended March 31, 2024 consisted primarily of $0.4 million in fair value adjustments to the warrant liabilities and $0.1 million in foreign exchange gains, partially offset by $0.1 million in interest expense.

Liquidity, Capital Resources and Plan of Operations

Since our inception through September 30, 2024, our operations have been financed primarily by the sale of convertible promissory notes and the sale and issuance of our securities.

As of September 30, 2024, we had $18.5 million in cash and cash equivalents, and an accumulated deficit of $111.5 million.

Our primary use of cash is to fund operating expenses, which consist of research and development as well as regulatory expenses related to our lead drug candidate and clinical programs for stenoparib, and to a lesser extent, general and administrative expenses.

Since our inception through March 31, 2025, our operations have been financed primarily by the sale of convertible promissory notes and the sale and issuance of our securities.

As of March 31, 2025, we had $27.7 million in cash, cash equivalents and restricted cash and an accumulated deficit of $121.7 million.

Our primary use of cash is to fund operating expenses, which consist of research and development as well as regulatory expenses clinical programs for stenoparib, and to a lesser extent, general and administrative expenses.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

On March 21, 2024, we commenced an at the market offering of shares of our common stock and as of September 30, 2024, had sold 2,556,927 shares of our common stock for net proceeds of $33.1 million.

In light of our cash position as of the date of this Quarterly Report, we have sufficient funds for our current operations and planned capital expenditures.

As discussed above we intend to seek capital through the sale of our securities or other sources.

On March 21, 2024, we commenced an at the market offering of shares of our common stock.

During the three months ended March 31, 2025, we had sold 9,719,173 shares of our common stock for net proceeds of $9.7 million.

The at the market offering has been fully utilized and terminated as of March 31, 2025.

We believe that our current cash balance is sufficient to fund operations through at least the next 12 months from the date of this report on Form 10-Q.

We may need to seek additional capital through the sale of our securities or other sources to carry out all of our planned research and development and potential commercialization activities.

There are no assurances, however, that we will be successful in raising additional working capital, or if we are able to raise additional working capital, we may be unable to do so on commercially favorable terms.

Our failure to raise capital or enter into other such arrangements if and when needed would have a negative impact on our business, results of operations and financial condition and our ability to develop our product candidate.

Management’s plans to mitigate the conditions or events that raise substantial doubt include additional funding through public equity, private equity, debt financing, collaboration partnerships, or other sources.

We currently plan on completing an additional public offering in the near future, however there are no assurances that we 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.

Our failure to raise capital or enter into other such arrangements when needed would have a negative impact on our business, results of operations and financial condition and our ability to continue our plan of operations.

We expect to incur substantial expenses in the foreseeable future for the development and potential commercialization of our drug candidate and ongoing internal research and development programs.

At this time, we cannot reasonably estimate the nature, timing, or aggregate amount of costs for our development, potential commercialization, and internal research and development programs.

However, to complete our current and future preclinical studies and clinical trials, and to complete the process of obtaining regulatory approval for our drug candidate, as well as to build the sales, marketing, and distribution infrastructure that we believe will be necessary to commercialize our drug candidate, if approved, we may require substantial additional funding in the future.

However, to complete our current and future preclinical studies and clinical trials, and to complete the process of obtaining regulatory approval for stenoparib, as well as to build the sales, marketing, and distribution infrastructure that we believe will be necessary to commercialize stenoparib, if approved, we may require substantial additional funding in the future.

Contractual Obligations and Commitments

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We have not included these payments in a table of contractual obligations since these contracts are generally cancellable at any time by us following a certain period after notice and therefore, we believe that our non-cancellable obligations under these agreements are not material.

Nine Months Ended

September 30,

Three Months Ended

($ in thousands)

Total cash and cash equivalents provided by (used in):

Operating activities

Financing activities

Net increase (decrease) in cash and cash equivalents

Total cash, cash equivalents and restricted cash provided by (used in):

Operating activities, net

Financing activities, net

Effect of foreign exchange rates on cash

Net increase in cash, cash equivalents and restricted cash

Operating Activities

Net cash and cash equivalents used in operating activities was $14.1 million for the nine months ended September 30, 2024, primarily comprised of our $17.1 million net loss, $3.8 million increase in operating assets and liabilities, $2.7 million change in fair value of warrant liability and $0.4 million in deferred income taxes, partially offset by a $9.7 million impairment of intangible assets and $0.2 million in non-cash interest expense.

Net cash and cash equivalents used in operating activities was $11.1 million for the nine months ended September 30, 2023, primarily comprised of our $10.2 million net loss, $7.2 million change in fair value of warrant liability and $0.1 million increase in operating assets and liabilities, partially offset by $4.2 million in fair value of New September Warrants, $1.1 million in on-cash finance expense, $0.6 million in fair value modifications to April and July 2023 warrants, $0.2 million in stock-based compensation, $0.2 million in non-cash interest and $0.1 million in unrealized foreign exchange loss.

Net cash and cash equivalents used in operating activities was $2.7 million for the three months ended March 31, 2025, primarily comprised of our $2.7 million net loss and $0.2 million increase in operating assets and liabilities, partially offset by $0.1 million in share based compensation, and $0.1 million in non-cash interest expense,

Net cash and cash equivalents used in operating activities was $1.4 million for the three months ended March 31, 2024, primarily comprised of our $3.8 million net loss, $0.4 million change in fair value of warrant liabilities, and $0.1 million in non-cash interest expense, partially offset by a $2.9 million decrease in operating assets and liabilities.

Financing Activities

Net cash and cash equivalents provided by financing activities was $32.6 million for the nine months ended September 30, 2024, primarily due to $33.1 million in net proceeds from the sale of common stock pursuant to the Sales Agreement, $2.9 million in net proceeds from the issuance of Series A Convertible Redeemable Preferred Stock, and $1.3 million in proceeds from 3i debt promissory notes, partially offset by the $3.5 million redemption of Series A Convertible Redeemable Preferred Stock and repayment of $1.3 million of 3i debt promissory notes.

Net cash and cash equivalents provided by financing activities was $11.1 million for the three months ended March 31, 2025, due to $11.1 million in net proceeds from the sale of common stock pursuant to the Sales Agreement.

Net cash and cash equivalents provided by financing activities was $1.4 million for the three months ended March 31, 2024, primarily due to $1.4 million in net proceeds from the sale of 2024 Notes to 3i.

Operating Capital and Capital Expenditure Requirements

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Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based upon our unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2024 and 2023, and our audited consolidated financial statements for the years ended December 31, 2023 and 2022, which have been prepared in accordance with U.S.

Our management’s discussion and analysis of financial condition and results of operations is based upon our unaudited condensed interim consolidated financial statements for the three months ended March 31, 2025 and 2024, and our audited consolidated financial statements for the years ended December 31, 2024 and 2023, which have been prepared in accordance with U.S.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses.

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Actual results may differ from these estimates under different assumptions and conditions.

Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, 2023 included in the Form 10-K, and there have been no significant changes to our significant accounting policies during the nine months ended September 30, 2024.

Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, 2024 included in the Form 10-K, and there have been no significant changes to our significant accounting policies during the three months ended March 31, 2025.

These unaudited condensed interim consolidated financial statements should be read in conjunction with our audited financial statements and accompanying notes.

Recently Issued Accounting Standards Not Yet Effective or Adopted

See Note 2 to our Financial Statements for a discussion of recently issued accounting standards not yet effective of adopted.

Quantitative and Qualitative Disclosures About Market Risk.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements