Allarity Therapeutics, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited financial statements; amounts below are U.S. dollars in thousands unless stated otherwise. All share and per-share amounts were retrospectively adjusted for the 1-for-20 reverse stock split effective April 9, 2024.
Business context
Allarity is a clinical-stage cancer-drug developer using its DRP technology to identify patient populations for targeted therapies. Stenoparib is its lead candidate. The company reports very limited revenue historically; the statements provide no revenue figure for either quarter.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / prior balance |
|---|---|---|
| Research and development expense | $2,170 | $1,427 |
| General and administrative expense | $2,070 | $2,241 |
| Total operating expenses | $4,240 | $3,668 |
| Net loss | $3,843 | $3,352 |
| Net cash used in operating activities | $1,487 | $3,201 |
| Cash at period end | $312 | $166 at Dec. 31, 2023 |
| Current assets / current liabilities | $2,295 / $18,008 | $1,971 / $14,167 at Dec. 31, 2023 |
| Total liabilities | $18,440 | $14,613 at Dec. 31, 2023 |
R&D expense rose $743, mainly due to higher drug manufacturing and supply costs. G&A fell $171, principally from lower insurance and professional-services costs, partly offset by higher staffing and franchise tax. Operating cash use improved year over year, but was substantially affected by a $2,838 increase in accounts payable; it should not be read as a standalone measure of a sustained reduction in cash burn. The company had a $15.7 million working-capital deficit and a $98.3 million accumulated deficit. With no meaningful revenue disclosed, operating margins are not meaningful.
Current liabilities include $11,058 of accounts payable and $2,690 of convertible promissory notes and accrued interest, net of debt discount. The company recorded $9,656 of Stenoparib intangible assets and reported no impairment after an assessment using a 26% WACC. Cash flow from financing was $1,380, primarily from 3i notes; there were no investing cash flows.
Material changes and subsequent events
- R&D costs increased and net loss widened. The fair-value change in derivative and warrant liabilities generated $419 of other income, alongside $76 of foreign-exchange gains and $102 of interest expense.
- Novartis terminated the dovitinib license on January 26, 2024, citing material breach. Development and commercialization activities ceased, rights reverted to Novartis, and related obligations became immediately payable. At March 31, amounts included $3,600 in accounts payable, $1,317 in convertible notes and accrued interest, and $147 in accrued liabilities; interest accrues at 5%.
- During Q1, Allarity issued three 3i senior convertible notes with $1,540 aggregate principal, 8% annual interest, and conversion prices initially set at $8.95, $8.10, and $7.00. The notes have adjustment and redemption provisions. After quarter-end, 3i redeemed the notes and interest for cash. The filing’s disclosures differ on the redemption total and interest amount; see investor checks below.
- The company’s $22 million ATM program produced $40 net proceeds in Q1. The filing reports $20,610 net proceeds from ATM sales between April 1 and May 13. Subsequent transactions also converted all Series A preferred stock and Exchange Warrants into common shares. Common shares outstanding were 17,606,739 as of May 13.
- After quarter-end, the filing presents pro forma cash of $19,135, reflecting subsequent transactions. This is not the March 31 reported cash balance.
Outlook, risks, and contingencies
Management concluded that available cash was insufficient to fund operations and planned capital expenditures for at least 12 months, and that substantial doubt exists about the company’s ability to continue as a going concern. Management plans to seek equity or debt financing, collaborations, or other funding, but states there is no assurance it can raise sufficient capital on acceptable terms. No quantified financial guidance is provided. The company expects continued significant expenses, including increased Stenoparib development costs; dovitinib and IXEMPRA have been deprioritized or terminated.
Under its Eisai license for Stenoparib, the company deferred an $850 payment until completion of a $10 million financing, with a deadline no later than September 1, 2024; the filing says an additional $150 payment had been made by May 1. Potential Eisai development milestone payments total up to $94 million, in addition to a $50 million sales milestone and tiered royalties if applicable.
Other significant risks include clinical-trial and regulatory uncertainty, dependence on financing and third-party manufacturers, and potential dilution from financing instruments. An SEC fact-finding investigation concerning Dovitinib-related FDA submissions and communications remains disclosed; the filing says the investigation does not mean the SEC concluded a violation occurred. Nasdaq confirmed the company regained minimum bid-price compliance on April 27, 2024; equity-rule compliance was still awaiting confirmation. The company reported disclosure controls effective at March 31 and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Current cash runway and financing needs, including actual ATM proceeds, associated fees, and the pro forma cash calculation.
- The 3i note redemption disclosure: one section reports $1,747 including $207 interest, while another reports $1,746 and gives a different interest amount. Confirm the amount paid and reconcile the filing.
- Fully diluted share count and potential dilution following the ATM issuance, preferred-stock and warrant conversions, and reverse split.
- Nasdaq’s final confirmation of equity-rule compliance and the status, scope, and outcome of the SEC investigation.
- Timing and funding of the deferred Eisai payment, continued rights to Stenoparib, and progress and costs of its clinical program.