Allarity Therapeutics, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter report. All figures below are U.S. dollars unless stated otherwise.
Business context and reporting period
Allarity is a clinical-stage oncology company that uses its Drug Response Predictor (DRP) platform to select patients for targeted cancer therapies. It has no approved products and has not established product-sales revenue. Its strategy changed materially in late 2023: management is concentrating internal resources on stenoparib for advanced, recurrent ovarian cancer. Dovitinib was terminated, and IXEMPRA was deprioritized; other assets are being developed by licensees or partners with limited Allarity support.
Stenoparib is being studied in a Phase 2 trial using the stenoparib-specific DRP diagnostic. The company reported preliminary, emerging benefit in evaluable patients, including one complete response, but the filing does not provide a complete trial results dataset. The DRP platform has not received FDA marketing approval; prospective evidence may be required for diagnostic approval.
Financial performance and position
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | No product revenue reported; the filing does not provide a clear total revenue figure for the year. | No product revenue reported. |
| Research and development expense | $7.103 million | $6.930 million |
| General and administrative expense | $10.026 million | $9.962 million |
| Total operating expenses / operating loss | $17.129 million | $34.463 million |
| Net loss | $11.901 million | $16.058 million |
| Net loss attributable to common stockholders | $20.416 million | $21.051 million |
| Net cash used in operating activities | $12.745 million | $16.817 million |
| Cash at year-end | $166,000 | $2.029 million |
Net loss per common share was $10.26 in 2023 versus $3,093.42 in 2022. The company effected 1-for-35 and 1-for-40 reverse stock splits in 2023; share and per-share figures are retrospectively adjusted. Loss attributable to common stockholders includes substantial preferred-stock deemed dividends and is distinct from net loss.
Operating expenses fell year over year mainly because 2022 included a $17.571 million impairment charge on intangible assets; there was no impairment charge in 2023. R&D expense rose modestly, including higher manufacturing and supply costs and research-study spending, partly offset by lower staffing, contractor and milestone costs. Other income was $5.311 million in 2023 versus $16.884 million in 2022, driven substantially by non-cash fair-value movements in warrant liabilities; these amounts make reported losses more volatile and are not operating cash generation.
At December 31, 2023, total assets were $11.862 million, current assets $1.971 million, total liabilities $14.613 million, and stockholders’ deficit $2.751 million. Current liabilities were $14.167 million, including $8.416 million of accounts payable, $3.083 million of warrant derivative liabilities and a $1.300 million convertible note and accrued interest. The balance sheet showed no secured promissory notes outstanding at year-end. The resulting current-liability shortfall was approximately $12.196 million.
Material changes, liquidity and financing
- Operating cash use improved to $12.745 million from $16.817 million, but financing cash inflows of $10.995 million were insufficient to prevent cash from declining to $166,000. The company reported an accumulated deficit of $94.451 million.
- Management and the auditor concluded that substantial doubt exists about the company’s ability to continue as a going concern. Management says year-end cash was insufficient for its plan and estimated cash on hand at filing would fund approximately three months. The audit opinion is unqualified but includes a going-concern explanatory paragraph; the statements do not include adjustments that could result if the company cannot continue.
- 2023 financing included approximately $19.1 million from equity offerings, $1.1 million net from Series C preferred stock, and $1.05 million from 3i notes, offset by $3.7 million in debt repayments and $6.7 million in Series A preferred-stock redemptions. Financing proceeds and conversions were accompanied by substantial warrant and share dilution.
- In January and February 2024, Allarity obtained two 3i senior convertible notes, each with $440,000 principal issued for $400,000 cash, totaling $880,000 principal for $800,000 purchase proceeds. The notes carry 8% interest, are convertible at specified prices of $0.4476 and $0.405 per share, and contain default, redemption and restrictive-covenant provisions. Further note closings may be available, subject to conditions.
- Subsequent conversion-price reductions increased potential shares from Series A preferred stock and 3i exchange warrants. These instruments, alongside other warrants and financing needs, could substantially dilute common stockholders.
Outlook, contingencies and key risks
- Stenoparib license and payment obligations: Allarity owes Eisai an $850,000 payment due March 1, 2024 under an amended payment schedule and was negotiating a further amendment as of the filing. The company also faces a trial-development deadline; failure to meet the applicable obligations could allow Eisai to terminate the license, imperiling its lead program. The license agreement includes up to $94 million in development milestones, a $50 million sales milestone, and tiered royalties if commercial sales occur.
- Novartis termination: On January 26, 2024, Novartis terminated the dovitinib license for material breach based on nonpayment. Allarity must cease development and commercialization, and licensed rights reverted to Novartis. The filing describes approximately $4.9 million plus interest as immediately due; the financial-statement note reports $5.001 million including interest. The liability was recorded across accounts payable, the convertible note and accrued liabilities.
- Nasdaq listing: The company was out of compliance with bid-price and stockholders’ equity requirements and faced delisting notices. It appealed and attended a February 1, 2024 hearing; the outcome was pending at the filing date. Nasdaq also sought information about whether certain 2023 offerings and warrant issuances required shareholder approval.
- Regulatory and clinical risk: Stenoparib remains investigational. Its current Phase 2 findings are preliminary, and future enrollment, safety, efficacy, trial design, diagnostic validation and regulatory review are uncertain. The FDA previously refused to file the dovitinib NDA and companion-diagnostic PMA; the company has since terminated that program.
- Additional matters: The SEC requested documents in January 2023 in an investigation focused on communications and submissions regarding dovitinib; the company says the outcome and any action are unknown and has recorded no loss provision. Former CEO James Cullem’s termination was disputed; a March 2024 settlement calls for $70,000 initially, $179,155 in installments and 290,000 shares, subject to settlement conditions.
- Other risks: The business depends on further financing, third-party manufacturers and clinical providers, and a small workforce. Potential note conversions, warrants and future equity raises increase dilution risk. The company has no approved products, no established commercial revenue, and no assurance it can secure funding on acceptable terms.
Management reported that disclosure controls and internal control over financial reporting were effective as of December 31, 2023. The auditor did not provide an attestation opinion on internal control, as the company is exempt from that requirement as a smaller reporting company.
Most important facts for investors to verify
- Available cash, near-term cash burn, accounts payable and the timing and terms of any additional financing; whether management can fund operations beyond the near term.
- Whether the Eisai payment and trial deadlines were amended or satisfied, and whether Allarity retains the stenoparib license.
- The precise amount, status and settlement of Novartis liabilities after license termination, and the consequences for the company’s financial position.
- The Nasdaq hearing outcome and the company’s continuing compliance with listing standards and shareholder-approval rules.
- Updated stenoparib Phase 2 enrollment, response, safety and durability data, including the number of evaluable patients and the clinical status of the reported complete response.
- Potential dilution from 3i notes, Series A preferred stock, exchange warrants, other warrants and the Cullem settlement shares; compare these claims with shares outstanding.
- Developments in the SEC investigation and whether any related legal or financial contingencies arise.