Allarity Therapeutics, Inc.

Previous wording

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.”

Current wording

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, 2024, including Part 1, Item 1A*“Risk Factors.”

Previous wording

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. The offer and sales of the shares are made pursuant to a previously filed shelf registration statement on Form S-3 (File No. 333-275282), originally filed with the Securities and Exchange Commission (the "SEC") on November 2, 2023 and declared effective on November 29, 2023, and the related prospectus supplement dated September 9, 2024 and filed with the SEC on such date. We will pay the Ascendiant a commission of 3.0% of the gross proceeds from the sales of shares sold through Ascendiant under the Sales Agreement. We will also reimburse the Ascendiant for certain expenses incurred in connection with the Sales Agreement. 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.

Current wording

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. The offer and sales of the shares are made pursuant to a previously filed shelf registration statement on Form S-3 (File No. 333-275282), originally filed with the Securities and Exchange Commission (the “SEC”) on November 2, 2023 and declared effective on November 29, 2023, and the related prospectus supplement dated September 9, 2024 and filed with the SEC on such date. We will pay the Ascendiant a commission of 3.0% of the gross proceeds from the sales of shares sold through Ascendiant under the Sales Agreement. We will also reimburse the Ascendiant for certain expenses incurred in connection with the Sales Agreement. Both we and Ascendiant may each terminate the Sales Agreement at any time upon specified prior written notice. 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.

Previous 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.

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. 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.

Previous wording

On September 13, 2024, a purported class action captionedOsman 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 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. 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.

Current wording

On September 13, 2024, a purported class action captionedOsman 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 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.

Previous 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.

Current wording

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.

Previous wording

Since our inception in September of 2004, we have focused substantially all our resources on conducting research and development activities, including drug discovery and preclinical studies, establishing, and maintaining our intellectual property portfolio, the manufacturing of clinical and research material, hiring personnel, raising capital and providing general and administrative support for these operations. In recent years, we have recorded very limited revenue from collaboration activities, or any other sources. We have funded our operations to date primarily from convertible notes and the issuance and sale of our ordinary shares.

Current wording

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 securities.

Previous 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:

Current wording

We have incurred net losses in each year since inception. 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. 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 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.

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. 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 stenoparib.

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, 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.

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 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.

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

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.

Previous 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.

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous 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.

Current wording

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 stenoparib.

Previous 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.

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 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.

Previous wording

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.

Current wording

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,

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

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 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.

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 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. 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 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.

Current wording

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.