Allarity Therapeutics Inc

Previous wording

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Current wording

Item 2. Management**’s Discussion and Analysis of Financial Condition and Results of Operations.

Previous wording

We are a biopharmaceutical company focused on discovering and developing highly targeted anti-cancer drug candidates. Through the use of its 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 is: the poly-ADP-ribose polymerase (PARP) inhibitor stenoparib, or Stenoparib.

Current wording

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.

Previous wording

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 the Nasdaq Capital Market. On June 27, 2024, the Company was granted a hearing before a Nasdaq Hearings Panel. On July 30, 2024, the Company was attended a hearing before a Nasdaq Hearings Panel and presented its plan for regaining compliance with the Bid Price Rule. Nasdaq has advised the Company to expect to receive a ruling within two weeks of July 30, 2024.

Current wording

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).

Previous wording

We effected a 1-for-20 share consolidation of our Common Stock on April 9, 2024 (“Share Consolidation”). No fractional shares were issued in connection with the Share Consolidation. If, as a result of the Share Consolidation, a stockholder would otherwise have been entitled to a fractional share, each fractional share was rounded up to the next whole number. The Share Consolidation resulted in a reduction of our outstanding shares of Common Stock on June 30, 2024 from 6,854,604 to 342,774. The par value of our authorized stock remained unchanged at $0.0001.

Current wording

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.

Previous wording

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 intends to pursue the Wells Notice process, including submitting a formal response to the SEC.

Current wording

On July 19, 2024, we received a “Wells Notice” from the Staff of the SEC relating to our previously disclosed SEC investigation. The Wells Notice relates to our disclosures regarding meetings with the United States Food and Drug Administration (the “FDA”) regarding our NDA for Dovitinib or Dovitinib-DRP, which was submitted to the FDA in 2021. We understand that all conduct relating to the SEC Wells Notice occurred during or prior to fiscal year 2022. We also understand that three of our 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 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.

Previous wording

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel and collaboration partners, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations, and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. Even if the Company’s research and development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Current wording

We are subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that we may identify and develop, the need to successfully commercialize and gain market acceptance of our product candidate, dependence on key personnel and collaboration partners, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations, and the ability to secure additional capital to fund operations. Our product candidate currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. Even if our research and development efforts are successful, it is uncertain when, if ever, we will realize significant revenue from product sales.

Previous wording

We have incurred net losses in each year since inception. Our net losses were $5.0 million and $5.7 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $99.9 million and cash and cash equivalents of $19.2 million. Substantially all our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses over at least the next several years. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

Current wording

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. Substantially all our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses over at least the next several years. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

Previous wording

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

Current wording

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.

Previous wording

General and administrative expenses consist primarily of personnel-related costs, facilities costs, depreciation and amortization expenses and professional services expenses, including legal, human resources, audit, and accounting services. Personnel-related costs consist of salaries, benefits, and stock-based compensation. Facilities costs consist of rent and maintenance of facilities. We expect our general and administrative expenses to increase for the foreseeable future due to anticipated increases in headcount to advance our drug candidates and as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services.

Current wording

General and administrative expenses consist primarily of personnel-related costs, facilities costs, depreciation and amortization expenses and professional services expenses, including legal, human resources, audit, and accounting services. Personnel-related costs consist of salaries, benefits, travel, insurance and stock-based compensation. Facilities costs consist of rent and maintenance of facilities. We expect our general and administrative expenses to increase for the foreseeable future due to anticipated increases in headcount to advance our drug 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.

Previous wording

Since our inception through June 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 June 30, 2024, we had $19.2 million in cash and cash equivalents, and an accumulated deficit of $99.9 million.

Current wording

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.

Previous wording

On March 21, 2024, the Company commenced an at the market offering of shares of our Common Stock and as of June 30, 2024, had sold 31,891,433 shares of our Common Stock for net proceeds of $27,689. Subsequent to June 30, 2024, an additional 7,340,312 shares of our common stock were sold at the market for net proceeds of $1,404. In light of the Company’s cash position as of the date of this Quarterly Report, the Company has sufficient funds for its current operations and planned capital expenditures. As discussed above the Company intends to seek capital through sale of its securities or other sources. There are no assurances, however, that the Company will be successful in raising additional working capital, or if it is able to raise additional working capital, it may be unable to do so on commercially favorable terms. The Company’s failure to raise capital or enter into other such arrangements if and when needed would have a negative impact on its business, results of operations and financial condition and its ability to develop its product candidates.

Current wording

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. 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.

Previous wording

Management’s plans to mitigate the conditions or events that raise substantial doubt include additional funding through public equity, private equity, debt financing, collaboration partnerships, or other sources. We currently plan on completing an additional public offering in the near future, however there are no assurances that the Company will be successful in raising additional working capital, or if it is able to raise additional working capital, it may be unable to do so on commercially favorable terms. The Company’s failure to raise capital or enter into other such arrangements when needed would have a negative impact on its business, results of operations and financial condition and its ability to continue its plan of operations.

Current wording

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.

Previous wording

We expect to incur substantial expenses in the foreseeable future for the development and potential commercialization of our drug candidates and ongoing internal research and development programs. At this time, we cannot reasonably estimate the nature, timing, or aggregate amount of costs for our development, potential commercialization, and internal research and development programs. However, to complete our current and future preclinical studies and clinical trials, and to complete the process of obtaining regulatory approval for our drug candidates, as well as to build the sales, marketing, and distribution infrastructure that we believe will be necessary to commercialize our drug candidates, if approved, we may require substantial additional funding in the future.

Current wording

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.

Previous wording

The Company does not have any off-balance sheet arrangements.

Current wording

We do not have any off-balance sheet arrangements.

Previous wording

Critical Accounting Policies and Significant Judgments and Estimates

Current wording

Critical Accounting Policies and Use of Estimates

Previous wording

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 six months ended June 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. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

Current wording

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. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

Previous wording

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 six months ended June 30, 2024. These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes.

Current wording

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