| Convertible Redeemable Preferred Stock and Stockholders’ Equity | Note 9 — Convertible Redeemable Preferred Stock
and Stockholders’ Equity Authorized Capital As of March 31, 2024 and December 31, 2023,
the Company is authorized to issue 250,000,000 shares and 10,000,000 shares of common stock and preferred stock, respectively, with a
par value of $0.00001 for both common stock and preferred stock. As of March 31, 2024 and December 31, 2023, the Company had designated
and authorized the issuance of up to 1,150,000 shares, 10,000 shares, and 2,700,000 shares of Series Seed Preferred Stock, Series A Preferred
Stock, and Series B Preferred Stock, respectively. Preferred Stock Series Seed Convertible Preferred Stock The Company has 1,150,000 shares of preferred
stock designated as Series Seed Preferred Stock (“Series Seed”) and there are no shares of Series Seed outstanding as of
March 31, 2024 and December 31, 2023. Series A Convertible Preferred Stock On September 29, 2023, the Company filed a
Certificate of Designations of Rights and Preferences of Series A Preferred Stock of the Company (the “Series A Certificate of
Designations”) with the State of Delaware to designate and authorize the issuance of up to 10,000 shares of Series A Preferred
Stock. On October 3, 2023, the Company issued 3,000
shares of Series A Convertible Preferred Stock in exchange for the settlement of $3.0 million in notes payable due to Veru, Inc. (see
Notes 5 and 7). The maximum number of shares that the Series A Preferred Stock is convertible
into, based on the Conversion Price as of approximately 5,709,935 shares
of the Company’s common stock. Series B Convertible Preferred Stock On December 15, 2023, the Company filed a
Certificate of Designations of Rights and Preferences of Series B Convertible Preferred Stock of the Company (the “Series B Certificate
of Designations”) with the State of Delaware to designate and authorize the issuance of up to 2,700,000 shares of Series
B Preferred Stock. On December 15, 2023, in connection with the
PMX Transaction, as part of the purchase consideration, the Company issued 2,696,729 shares of Series B Convertible Preferred Stock (see
Note 5). The Series B Preferred Stock is initially convertible into approximately 269,672,900
shares of the Company’s common stock, upon Shareholder Approval as defined in the Series B Certificate of Designation. The Company evaluated the terms of the Series
B Preferred Stock, and in accordance with the guidance of ASC 480, the Series B Preferred Stock is classified as temporary equity in
the accompanying consolidated balance sheets, as the shares may be redeemable by the holders for cash, upon certain conditions that are
not within the control of the Company. Additionally, the Company does not control the actions or events necessary to deliver the number
of required shares upon exercise by the holders of the conversion feature. The Series B Preferred Stock was recorded at its fair value
as of the issuance date (see Note 5). The Series B Preferred Stock is not currently redeemable or probable of becoming redeemable because
it is subject to, among other things, Stockholder Approval as described above, and therefore the carrying amount is not currently accreted
to its redemption value as of March 31, 2024. Common Stock As of March 31, 2024 and December 31, 2023
there were 22,845,100 and 22,841,975 shares of common stock issued, respectively, and 22,327,701 and 22,324,576 shares of common stock
outstanding, respectively. Treasury Stock On November 10, 2022, the Board approved a
stock repurchase program (the “Repurchase Program”) to allow the Company to repurchase up to 5.0 million shares of common
stock with a maximum price of $1.00 per share, with discretion to management to make purchases subject to market conditions. On November
18, 2022, the Board approved an increase to the maximum price to $2.00 per share. There is no expiration date for this program. There were no repurchases of common stock
during the three months ended March 31, 2024. During the three months ended March 31, 2023, the Company repurchased 32,638 shares
of common stock at an average price of $1.03 per share, for an aggregate of approximately $33,500. Shares that are repurchased
are classified as treasury stock pending future use and reduce the number of shares outstanding used in calculating earnings per share.
As of March 31, 2024, there are approximately 4.5 million shares remaining, that can be repurchased under the Repurchase Program. At the Market Offering Agreement On March 29, 2023, the Company entered into
an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as sales agent (the “Agent”),
to create an at-the-market equity program under which it may sell up to $3,900,000 of shares of the Company’s common stock (the
“Shares”) from time to time through the Agent (the “ATM Offering”). Under the ATM Agreement, the Agent will be
entitled to a commission at a fixed rate of 3.0% of the gross proceeds from each sale of Shares under the ATM Agreement. The Company
has no obligation to sell, and the Agent is not obligated to buy or sell, any of the Shares under the Agreement and may at any time suspend
offers under the Agreement or terminate the Agreement. The ATM Offering will terminate upon the termination of the ATM Agreement
as permitted therein. Deferred offering costs associated with the
ATM Agreement are reclassified to additional paid in capital on a pro-rata basis when the Company completes offerings under the ATM Agreement.
Any remaining deferred costs will be expensed to the statements of operations should the planned offering be abandoned. As of March 31, 2024, no shares have been
sold under the ATM Offering, and the Company has recorded approximately $0.3 million of deferred offering costs in its condensed consolidated
balance sheets at both March 31, 2024 and December 31, 2023. Warrants The following summarizes the Company’s
outstanding warrants, excluding contingent warrants issuable upon exercise of the outstanding warrants issued in the August 2022 and
August 2023 offerings, as of March 31, 2024 and December 31, 2023: Number of Exercise Expiration Description Shares Price Date April 2022 Offering Placement Agent Warrants 70,849 $ 8.46875 4/19/2026 August 2022 Private Placement Warrants 2,486,214 2.546 8/11/2027 August 2022 Offering Placement Agent Warrants 220,997 3.394 8/11/2027 August 2023 Inducement Warrants 4,972,428 1.09 8/2/2027 August 2023 Offering Placement Agent Warrants 149,173 1.3625 8/2/2027 Total warrants outstanding 7,899,661 1.68 As of March 31, 2024, the Company had outstanding
warrants, which are fully vested and exercisable into 7,899,661 shares of common stock, of which the common stock had a fair value of
$0.15 per share, based on the closing trading price on that day. Additionally, as of March 31, 2024 and December
31, 2023, the value of contingent warrants issuable upon exercise of the August 2022 private placement and August 2023 inducement warrants
was approximately $3,000, and the maximum number of warrants issuable upon settlement of the contingent warrants was 447,519. Onconetix Equity Incentive Plans The Company’s 2019 Equity Incentive
Plan (the “2019 Plan”) was adopted by its board of directors and by its stockholders on July 1, 2019. The Company has reserved
1,400,000 shares of common stock for issuance pursuant to the 2019 Plan. On February 23, 2022 the Company’s board
of directors adopted the Company’s 2022 Equity Incentive Plan (the “2022 Plan”), which is the successor and continuation
of the Company’s 2019 Plan. Under the 2022 Plan, the Company may grant stock options, restricted stock, restricted stock units,
stock appreciation rights, and other forms of awards to employees, directors, and consultants of the Company. In May 2023, the number
of shares of common stock reserved for issuance under the 2022 Plan was increased to 3,150,000. Stock-based awards granted during the
three months ended March 31, 2024 and 2023 were all granted under the 2022 Plan. As of March 31, 2024, there are 1,252,617 shares available
for issuance under the 2022 Plan. Stock Options The following summarizes activity related
to the Company’s stock options under the 2019 Plan and the 2022 Plan for the three months ended March 31, 2024: Weighted Average Weighted Remaining Average Contractual Number of Exercise Life Shares Price (in years) Outstanding as of December 31, 2023 1,904,830 $ 1.63 8.4 Granted — — — Forfeited / cancelled (537,965 ) 0.99 — Exercised — — — Outstanding as of March 31, 2024 1,366,865 1.88 7.7 Options vested and exercisable as of March 31, 2024 908,224 $ 1.90 7.0 There were no stock options granted during
the three months ended March 31, 2024. The fair value of options granted in 2023 was estimated using the following assumptions:
For the
2023
Exercise price $1.05 – 1.29
Term (years) 5.00 – 10.00
Expected stock price volatility 113.1% – 119.5%
Risk-free rate of interest 3.5% – 3.6% The weighted average grant date fair value
of stock options granted during the three months ended March 31, 2023 was $1.08. The aggregate fair value of stock options that vested
during the three months ended March 31, 2024 and 2023 was approximately $83,000 and $272,000, respectively. Restricted Stock On May 9, 2023, the Board’s Compensation
Committee approved the issuance of restricted stock, granted under the Company’s 2022 Plan, to the Company’s executive officers,
employees, and certain of the Company’s consultants. The restricted shares granted totaled 487,500, of which 150,000, 75,000, and
150,000 were granted to the Company’s former CEO, former CFO, and former CBO, respectively. All of the restricted shares granted
vest as follows: 50% in January 2024, 25% in August 2024, and 25% in August 2025. In addition, on May 31, 2023, the Board’s Compensation
Committee approved the issuance of 25,440 shares of restricted stock, granted to the Company’s non-executive Board members, with
full vesting on May 31, 2024. Further, on February 14, 2024, in connection with the appointment of a non-executive Board member, the
Company issued 3,125 shares of restricted stock, with full vesting on June 14, 2024. The following summarizes activity related
to the Company’s restricted stock awards granted under the 2022 Plan for the three months ended March 31, 2024:
Weighted
Average
Weighted
Average
Number of Grant Date
Shares Fair Value
Nonvested as of December 31, 2023 256,580 $ 1.03
Granted 3,125 0.17
Vested (118,750 ) 1.03
Nonvested as of March 31, 2024 140,955 $ 0.98 Proteomedix Stock Option Plan Proteomedix sponsors a stock option plan (the
“PMX Option Plan”) which provides common stock option grants to be granted to certain employees and consultants, as was determined
by the board of directors of Proteomedix. In connection with the PMX Transaction, the Company assumed the PMX Option Plan (see Note 5). Generally, options issued under the PMX Option
Plan have a term of less than 11 years and provide for a four There was no activity under the PMX Option
Plan for the three months ended March 31, 2024. As of March 31, 2024, there were 58,172 and 57,546 stock options outstanding and vested,
respectively, with a weighted average exercise price of $3.46 and $3.16, respectively, and a weighted average remaining contractual life
of 5.11 years and 5.02 years, respectively. As of March 31, 2024 there were 57,546 stock options exercisable at a weighted average exercise
price of $3.16 and a weighted average remaining contractual life of 5.02 years. Stock-Based Compensation Stock-based compensation expense related to
stock options and restricted stock, for the three months ended March 31, 2024 and 2023 was as follows:
For the Three Months Ended
2024 2023
Selling, general and administrative $ 51,184 $ 99,207
Research and development 1,466 86,371
Total $ 52,650 $ 185,578 | Note 9 — Convertible Redeemable
Preferred Stock and Stockholders’ Equity Authorized Capital As of December 31, 2023
and 2022, the Company is authorized to issue 250,000,000 shares and 10,000,000 shares of common stock and preferred stock, respectively,
with a par value of $0.00001 for both common stock and preferred stock. As of December 31, 2023, the Company had designated and authorized
the issuance of up to 1,150,000 shares, 10,000 shares, and 2,700,000 shares of Series Seed Preferred Stock, Series A Preferred
Stock, and Series B Preferred Stock, respectively. On February 23, 2022,
in connection with the closing of the IPO, the Company filed with the Secretary of State of the State of Delaware an amended and restated
certificate of incorporation (the “A&R COI”), which became effective immediately. There was no change to the Company’s
authorized shares of common stock and preferred stock or the par value. Prior to this amendment, the Company had designated 1,150,000
shares of preferred stock, with par value $0.00001 per share. In addition, on February 23, 2022 and in connection with the closing
of the IPO, the Company’s board of directors adopted Amended and Restated Bylaws. Preferred Stock Series A Convertible Preferred Stock On September 29, 2023,
the Company filed a Certificate of Designations of Rights and Preferences of Series A Preferred Stock of the Company (the “Series A
Certificate of Designations”) with the State of Delaware to designate and authorize the issuance of up to 10,000 shares of Series A
Preferred Stock. On October 3, 2023, the
Company issued 3,000 shares of Series A Convertible Preferred Stock in exchange for the settlement of $3.0 million in notes
payable due to Veru, Inc. (see Notes 5 and 7). The significant terms of the Series A Preferred Stock are as follows: Voting Redemption — Liquidation Preference — Dividends Conversion — The Company evaluated the terms
of the Series A Preferred Stock, and in accordance with the guidance of ASC 480, the Series A Preferred Stock is classified
as permanent equity in the accompanying consolidated balance sheet. The Series A Preferred Stock was recorded at its fair value as
of the issuance date (see Note 7). Series B Convertible Preferred Stock On December 15, 2023,
the Company filed a Certificate of Designations of Rights and Preferences of Series B Convertible Preferred Stock of the Company
(the “Series B Certificate of Designations”) with the State of Delaware to designate and authorize the issuance of up
to 2,700,000 shares of Series B Preferred Stock. On December 15, 2023,
in connection with the PMX Transaction, as part of the purchase consideration, the Company issued 2,696,729 shares of Series B Convertible
Preferred Stock (see Note 5). The significant terms of the Series B Preferred Stock are as follows: Voting — Liquidation Preference — Dividends Conversion — Cash Settlement — Redemption — The Company evaluated the terms
of the Series B Preferred Stock, and in accordance with the guidance of ASC 480, the Series B Preferred Stock is classified
as temporary equity in the accompanying consolidated balance sheet, as the shares may be redeemable by the holders for cash, upon certain
conditions that are not within the control of the Company. Additionally, the Company does not control the actions or events necessary
to deliver the number of required shares upon exercise by the holders of the conversion feature. The Series B Preferred Stock was
recorded at its fair value as of the issuance date (see Note 5). The Series B Preferred Stock is not currently redeemable or
probable of becoming redeemable because it is subject to, among other things, Stockholder Approval as described above, and therefore the
carrying amount is not currently accreted to its redemption value as of December 31, 2023. Series Seed Convertible Preferred Stock The Company has 1,150,000 shares
of preferred stock designated as Series Seed Preferred Stock (“Series Seed”) and there are no shares of Series Seed
outstanding as of December 31, 2023 and 2022. Prior to the closing of the
IPO in 2022, there were 1,146,138 shares of Series Seed issued and outstanding. Each share of the Series Seed was convertible,
at the option of the holder, at a conversion price of $1.52 per share, subject to certain adjustments. The holders of the Series Seed
were entitled to receive cumulative dividends at a per share rate of 8% per annum, compounded annually. Each Series Seed share was
automatically convertible into common stock of the Company, at the then-effective conversion price, upon the closing of a firmly underwritten
public offering netting proceeds of at least $50 million with an offering price of at least three hundred percent (300%) of the Original
Issue Price of the Series Seed. On February 18, 2022, the majority of the holders of the Series Seed approved the automatic
conversion of the outstanding shares of the Series Seed and all related accrued and unpaid dividends, upon the closing of the IPO. The
number of shares of Common Stock to be issued upon the closing of the IPO pursuant to the conversion were to be calculated in accordance
with the original conversion terms provided by the Company’s Amended and Restated Certificate of Incorporation (“COI”)
dated July 1, 2019. This conversion occurred on February 23, 2022, upon the closing of the Company’s IPO. Also, upon
the close of the IPO, aggregate cumulative dividends of $1,586,162, or $1.38 per Series Seed share, were automatically converted
into shares of common stock. There were an aggregate of 5,626,365 shares of common stock issued upon conversion of the Series Seed
shares and cumulative dividends as of the close of the IPO. Common Stock As of December 31, 2023
and 2022, there were 22,841,975 and 15,724,957 shares of common stock issued, respectively, and 22,324,576 and 15,265,228 shares of common
stock outstanding, respectively. Holders of the Company’s
common stock are entitled to one vote for each share held of record, and are entitled upon liquidation of the Company to share ratably
in the net assets of the Company available for distribution after payment of all obligations of the Company and after provision has been
made with respect to each class of stock, if any, having preference over the common stock. The shares of common stock are not redeemable
and have no preemptive or similar rights. On December 15, 2023,
in connection with the Proteomedix acquisition, the Company issued 3,675,414 shares of the Company’s common stock as part of the
purchase consideration (see Note 5). On February 17, 2022,
the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Boustead Securities, LLC, acting as
representative of the underwriters (“Boustead”), in relation to the Company’s IPO, pursuant to which the Company agreed
to sell to the underwriters an aggregate of 2,222,222 shares of the Company’s common stock, at a price of $9.00 per share. The IPO
closed on February 23, 2022 and resulted in net proceeds to the Company, after deducting the 8% underwriting discount, and other
offering costs, of approximately $17.1 million. Pursuant to the Underwriting
Agreement, the Company issued to Boustead warrants to purchase 111,111 shares of common stock, exercisable for five years at the
option of the holder, at a per share exercise price equal to $10.35. The Company evaluated the terms of the warrants issued at the close
of the IPO and determined that they should be classified as equity instruments based upon accounting guidance provided in ASC 480
and ASC 815-40. Since the Company determined that the warrants were equity-classified, the Company recorded the proceeds from the
IPO, net of issuance costs, within common stock at par value and the balance of the net proceeds to additional paid in capital. During October 2022, in
connection with a settlement agreement that was entered into with Boustead, these warrants were exchanged for 93,466 shares of restricted
common stock (“the Warrant Exchange”) (see Note 10). The Warrant Exchange was accounted for as a modification of the
warrant, with an incremental fair value of approximately $10,000, which was recorded as selling, general and administrative expense in
the accompanying consolidated statements of operations and comprehensive loss. In addition, 200,000 restricted shares of common stock
were issued to Boustead upon execution of an advisory agreement, which was entered into concurrent with the settlement agreement. The
fair value of the restricted shares of common stock, which had no vesting provisions, was valued at $254,000, and was recorded as selling,
general and administrative expense in the accompanying consolidated statements of operations and comprehensive loss. The restricted shares of common
stock issued under the settlement and advisory agreements with Boustead was valued based on the closing trading price on the date the
agreements were executed, adjusted to reflect the effect of the restriction on the sale of the common stock. The value of the restriction
was measured using the Black-Scholes model to measure the discount for lack of marketability, using the following assumptions: expected
term of 0.5 years, expected volatility of 96.36%, risk-free interest rate of 4.09% and dividend yield of 0.0%. Treasury Stock On November 10, 2022,
the board of directors approved a stock repurchase program (the “Repurchase Program”) to allow the Company to repurchase up
to 5 million shares of common stock with a maximum price of $1.00 per share, with discretion to management to make purchases subject
to market conditions. On November 18, 2022, the board of directors approved an increase to the maximum price to $2.00 per share.
There is no expiration date for this program. During the year ended December 31,
2023, the Company repurchased 57,670 shares of common stock, for an aggregate of approximately $59,000, at an average price of $1.02 per
share. During the year ended December 31, 2022, the Company repurchased 459,729 shares of common stock at an average price of $1.23
per share, for approximately $0.6 million. Shares that are repurchased are classified as treasury stock pending future use and reduce
the number of shares outstanding used in calculating earnings per share. As of December 31, 2023, there are approximately 4.5 million
shares remaining, that can be repurchased under the Repurchase Program. Private Investments in Public Equity April 2022 Private Placement On April 19, 2022, the
Company consummated the closing of a private placement (the “April 2022 Private Placement”), pursuant to the terms and
conditions of a securities purchase agreement, dated as of April 13, 2022. At the closing of the April 2022 Private Placement,
the Company issued 590,406 shares of common stock, pre-funded warrants to purchase an aggregate of 590,406 shares
of common stock and preferred investment options to purchase up to an aggregate of 1,180,812 shares of common stock. The purchase price
of each share of common stock together with the associated preferred investment option was $6.775, and the purchase price of each pre-funded
warrant together with the associated preferred investment option was $6.774. The aggregate net cash proceeds to the Company from the April 2022
Private Placement were approximately $6.9 million, after deducting placement agent fees and other offering expenses. The pre-funded
warrants had an exercise price of $0.001 per share and were exercised in full on May 24, 2022. The preferred investment options,
which had an exercise price of $6.65 per share, were exchanged in connection with the August 2022 Private Placement. See August 2022
Private Placement H.C. Wainwright &
Co., LLC (“Wainwright”) acted as the exclusive placement agent for the April 2022 Private Placement. The Company agreed
to pay Wainwright a placement agent fee and management fee equal to 7.5% and 1.0%, respectively, of the aggregate gross proceeds from
the April 2022 Private Placement and reimburse certain out-of-pocket expenses up to an aggregate of $85,000. In addition, the Company
issued warrants to Wainwright (the “April Wainwright Warrants”) to purchase up to 70,849 shares of common stock. The Wainwright
Warrants are in substantially the same form as the preferred investment options, except that the exercise price is $8.46875. The form
of the preferred investment options is a warrant, and as such the preferred investment options, the pre-funded warrants, and the Wainwright
Warrants are collectively referred to as the “April 2022 Private Placement Warrants”. Further, upon any exercise for
cash of any preferred investment options, the Company agreed to issue to Wainwright additional warrants to purchase the number of shares
of common stock equal to 6.0% of the aggregate number of shares of common stock underlying the preferred investment options that have
been exercised, also with an exercise price of $8.46875 (the “April Contingent Warrants”). The maximum number of April Contingent
Warrants issuable under this provision of 70,849 were exchanged in connection with the August 2022 Private Placement. See August 2022
Private Placement The Company evaluated the terms
of the April 2022 Private Placement Warrants and determined that they should be classified as equity instruments based upon accounting
guidance provided in ASC 480 and ASC 815-40. Since the Company determined that the April 2022 Private Placement Warrants
were equity-classified, the Company recorded the proceeds from the April 2022 Private Placement, net of issuance costs, within common
stock at par value and the balance of the net proceeds to additional paid in capital. The Company evaluated the terms
of the April Contingent Warrants and determined that they should be classified as a liability based upon accounting guidance provided
in ASC 815-40. Since the April Contingent Warrants are a form of compensation to Wainwright, the Company recorded the value of the
liability of approximately $36,000, as a reduction of additional paid in capital, with subsequent changes in the value of the liability
recorded in other income (expense) in the accompanying consolidated statements of operations and comprehensive loss. The Company measured
the liability upon the close of the April Private Placement using a Monte Carlo simulation, using the following significant assumptions:
expected term of 4.0 years, expected volatility of 117.0%, risk-free interest rate of 4.00% and dividend yield of 0.0%. August 2022 Private Placement On August 11, 2022, the
Company consummated the closing of a private placement (the “August 2022 Private Placement”), pursuant to the terms and
conditions of a securities purchase agreement, dated as of August 9, 2022. At the closing of the August 2022 Private Placement,
the Company issued 1,350,000 shares of common stock, pre-funded warrants to purchase an aggregate of 2,333,280 shares of common stock
and preferred investment options to purchase up to an aggregate of 4,972,428 shares of common stock. The purchase price of each share
of common stock together with the associated preferred investment option was $2.715, and the purchase price of each pre-funded warrant
together with the associated preferred investment option was $2.714. The aggregate net cash proceeds to the Company from the August 2022
Private Placement were approximately $8.7 million, after deducting placement agent fees and other offering expenses. In addition,
the investors in the August 2022 Private Placement, who are the same investors from the April 2022 Private Placement, agreed
to cancel preferred investment options to purchase up to an aggregate of 1,180,812 shares of the Company’s common
stock issued in April 2022. The pre-funded warrants had an exercise price of $0.001 per share. During 2022, an aggregate of 1,686,640
of the pre-funded warrants were exercised. The remaining 646,640 of pre-funded warrants were exercised during the year ended December 31,
2023. The preferred investment options are exercisable at any time on or after August 11, 2022 through August 12, 2027, at an
exercise price of $2.546 per share, subject to certain adjustments as defined in the agreement. During the year ended December 31,
2023, 2,486,214 of these preferred investment options were exercised at a reduced exercise price of $1.09, in connection with the warrant
inducement transaction discussed below. As of December 31, 2023, 2,486,214 preferred investment options are outstanding. Wainwright acted as the exclusive
placement agent for the August 2022 Private Placement. The Company agreed to pay Wainwright a placement agent fee and management
fee equal to 7.5% and 1.0%, respectively, of the aggregate gross proceeds from the August 2022 Private Placement and reimburse certain
out-of-pocket expenses up to an aggregate of $85,000. In addition, the Company issued warrants to Wainwright (the “August Wainwright
Warrants”) to purchase up to 220,997 shares of common stock. The August Wainwright Warrants are in substantially the same form as
the preferred investment options, except that the exercise price is $3.3938. The form of the preferred investment options is a warrant,
and as such the preferred investment options, the pre-funded warrants, and the August Wainwright Warrants are collectively referred to
as the “August 2022 Private Placement Warrants”. Further, upon any exercise for cash of any preferred investment options,
the Company agreed to issue to Wainwright additional warrants to purchase the number of shares of common stock equal to 6.0% of the aggregate
number of shares of common stock underlying the preferred investment options that have been exercised, also with an exercise price of
$3.3938 (the “August Contingent Warrants”). The maximum number of August Contingent Warrants issuable under this provision
is 298,346, which includes 70,849 of April Contingent Warrants that were modified in connection with the August 2022 Private Placement. The Company evaluated the terms
of the August 2022 Private Placement Warrants and determined that they should be classified as equity instruments based upon accounting
guidance provided in ASC 480 and ASC 815-40. Since the Company determined that the August 2022 Private Placement Warrants
were equity-classified, the Company recorded the proceeds from the August 2022 Private Placement, net of issuance costs, within common
stock at par value and the balance of the net proceeds to additional paid in capital. The investors in the April 2022
Private Placement agreed to cancel the aggregate of 1,180,812 preferred investment options issued in the April 2022 Private Placement,
as part of their participation in the August 2022 Private Placement. The preferred investment options that were cancelled were effectively
exchanged for 1,289,148 new preferred investment options in the August 2022 Private Placement, and accordingly have been accounted
for as a modification or exchange of equity-linked instruments. In accordance with ASC 815-40, as the preferred investment options
were classified as equity instruments before and after the exchange, and as the exchange is directly attributable to an equity offering,
the Company recognized the effect of the exchange as an equity issuance cost. The increase in the fair value of the preferred investment
options as a result of the exchange was approximately $860,000, and was determined using the Black-Scholes option pricing model, with
the following assumptions: Original Exchanged Exercise price $ 6.65 $ 2.546 Term (years) 3.67 5.0 Expected stock price volatility 116.2 % 120.2 % Risk-free rate of interest 3.16 % 2.98 % The Company evaluated the terms of the
August Contingent Warrants and determined that they should be classified as a liability based upon accounting guidance provided in
ASC 815-40. As a result of the exchange of the preferred investment options issued in the April Private Placement, the
underlying equity-linked instruments that would trigger issuance of the April Contingent Warrants was replaced, and therefore the
70,849 of April Contingent Warrants were exchanged for 70,849 of the August Contingent Warrants. The value of the April Contingent
Warrant liability was adjusted to fair value on the date of modification, using a Monte Carlo simulation, with the change in fair
value of approximately $8,000 recognized in the accompanying consolidated statements of operations and comprehensive loss. The
remaining 227,497 August Contingent Warrants were measured as a liability upon the close of the August Private Placement. Since the
Contingent Warrants are a form of compensation to the placement agent, the Company recorded the value of the liability of
approximately $39,000, as a reduction of additional paid in capital. The entire 298,346 of August Contingent Warrants were
remeasured at December 31, 2022, using a Monte Carlo simulation, with the change in the value of the liability recorded in
other income (expense) in the accompanying consolidated statements of operations and comprehensive loss. The following significant
assumptions were used in the valuation of the contingent warrant liability, related to the August Contingent Warrants, as of the
date of the August 2022 Private Placement and as of December 31, 2022: August 11, December 31, Exercise price $ 3.3938 $ 3.3938 Term (years) 5.00 4.61 Expected stock price volatility 127.8 % 120.8 % Risk-free rate of interest 2.98 % 4.03 % During the year ended December 31,
2023, in connection with the warrant inducement transaction, the Company issued warrants to Wainwright as settlement of the contingent
warrant liability associated with 149,173 of the August 2022 Contingent Warrants, which was triggered upon exercise of the underlying
preferred investment options. See Warrant Inducement At the Market Offering Agreement On March 29, 2023, the
Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC,
as sales agent (the “Agent”), to create an at-the-market equity program under which it may sell up to $3,900,000 of shares
of the Company’s common stock (the “Shares”) from time to time through the Agent (the “ATM Offering”). Under
the ATM Agreement, the Agent will be entitled to a commission at a fixed rate of 3.0% of the gross proceeds from each sale of Shares under
the ATM Agreement. The Company has no obligation to sell, and the Agent is not obligated to buy or sell, any of the Shares under the Agreement
and may at any time suspend offers under the Agreement or terminate the Agreement. The ATM Offering will terminate upon the termination
of the ATM Agreement as permitted therein. Deferred offering costs associated
with the ATM Agreement are reclassified to additional paid in capital on a pro-rata basis when the Company completes offerings under the
ATM Agreement. Any remaining deferred costs will be expensed to the consolidated statements of operations and comprehensive loss should
the planned offering be abandoned. As of December 31, 2023,
no shares have been sold under the ATM Offering. Warrant Inducement On July 31, 2023, the
Company entered into a common stock preferred investment options exercise inducement offer letter (the “Inducement Letter”)
with a holder (the “Holder”) of existing preferred investment options (“PIOs”) to purchase shares of the Company’s
common stock at the original exercise price of $2.546 per share, issued on August 11, 2022 (the “Existing PIOs”). Pursuant
to the Inducement Letter, the Holder agreed to exercise for cash its Existing PIOs to purchase an aggregate of 2,486,214 shares of the
Company’s common stock (the “Inducement PIO Shares”), at a reduced exercised price of $1.09 per share, in exchange for
the Company’s agreement to issue new preferred investment options (the “Inducement PIOs”) to purchase up to 4,972,428
shares of the Company’s common stock. The Inducement PIOs have substantially the same terms as the Existing PIOs. On August 2, 2023, the
Company consummated the transactions contemplated by the Inducement Letter (the “Warrant Inducement”). The Company received
aggregate net proceeds of approximately $2.3 million from the Warrant Inducement, after deducting placement agent fees and other
offering expenses payable by the Company. Upon the close of the transaction,
the Company issued the Holder 1,575,000 of the 2,486,214 shares of common stock that were issuable upon exercise of the Existing PIOs.
Due to the beneficial ownership limitation provisions in the Inducement Letter, the remaining 911,214 shares were initially unissued,
and held in abeyance for the benefit of the Holder until notice from the Holder that the shares may be issued in compliance with such
limitation is received. These shares were issued to the Holder in October 2023. The Company agreed to file
a registration statement covering the resale of the Inducement PIO Shares issued or issuable upon the exercise of the Inducement PIOs
(the “Resale Registration Statement”), as soon as practicable, and to use commercially reasonable efforts to have such Resale
Registration Statement declared effective by the SEC within 90 days following the date of the Inducement Letter, and to keep the
Resale Registration Statement effective at all times until there are no Inducement PIO Shares. The provision to register the underlying
shares in the Warrant Inducement does not require payment related to the registration rights provided. As such, while the shares were
not registered within 90 days of the date of the Inducement Letter, there is no accounting impact for this provision. The Company engaged Wainwright
to act as its placement agent in connection with the Warrant Inducement and paid Wainwright a cash fee equal to 7.5% of the gross proceeds
received from the exercise of the Existing PIOs as well as a management fee equal to 1.0% of the gross proceeds from the exercise of the
Existing PIOs. The Company also agreed to reimburse Wainwright for its expenses in connection with the exercise of the Existing PIOs and
the issuance of the Inducement PIOs, up to $50,000 for fees and expenses of legal counsel and other out-of-pocket expenses and agreed
to pay Wainwright for non-accountable expenses in the amount of $35,000. In addition, the exercise for cash of the Existing PIOs triggered
the issuance to Wainwright or its designees, warrants to purchase 149,173 shares of common stock (“Wainwright Inducement Warrants”),
which were issuable in accordance with the terms of the August Contingent Warrants, and have the same terms as the Inducement PIOs except
for an exercise price equal to $1.3625 per share. The Company also agreed to issue warrants to Wainwright upon any exercise for cash of
the Inducement PIOs, that number of shares of common stock equal to 6.0% of the aggregate number of such shares of common stock underlying
the Inducement PIOs that have been exercised, also with an exercise price of $1.3625 (the “Inducement Contingent Warrants”).
The maximum number of Inducement Contingent Warrants issuable under this provision is 298,346. The Company evaluated the terms
of the Inducement PIOs and the Wainwright Inducement Warrants (collectively, the “August 2023 Inducement Warrants”),
and determined that they should be classified as equity instruments based upon accounting guidance provided in ASC 480 and ASC 815-40. The Warrant Inducement, which
resulted in the lowering of the exercise price of the Existing PIOs and the issuance of the Inducement PIOs, is considered a modification
of the Existing PIOs under the guidance of Accounting Standards Update (“ASU”) No. 2021-04, Issuer’s Accounting
for Certain Modifications or Exchanges of Equity Classified Written Call Options In addition, the change
in fair value of the contingent warrant liability associated with 149,173 of the August Contingent Warrants that were settled
through issuance of the Wainwright Inducement Warrants, of approximately $122,000, was recognized in other income (expense) in the
accompanying consolidated statements of operations and comprehensive loss, and the fair value of the contingent warrant liability of
approximately $129,000 was derecognized as of the settlement date. The corresponding amount, representing the fair value of the
Wainwright Inducement Warrants, was recognized as additional paid in capital.
The Company measured the liability on the settlement date using a Black Scholes model, with the following significant assumptions: expected
term of 5.0 years, expected volatility of 117.8%, risk-free interest rate of 4.24% and dividend yield of 0.0%. The Company evaluated the terms
of the Inducement Contingent Warrants and determined that they should be classified as a liability based upon accounting guidance provided
in ASC 815-40. Since the Inducement Contingent Warrants are a form of compensation to Wainwright, the Company recorded the value
of the liability of approximately $26,000 as a reduction of additional paid in capital, with subsequent changes in the value of the liability
recorded in other income (expense) in the accompanying consolidated statements of operations and comprehensive loss. The Company measured
the liability on the settlement date using a Black Scholes model, with the following significant assumptions: expected term of 5.0 years,
expected volatility of 117.8%, risk-free interest rate of 4.24% and dividend yield of 0.0%. Warrants The following summarizes activity
related to the Company’s outstanding warrants, excluding contingent warrants issuable upon exercise of the preferred investment
options, for the year ended December 31, 2023: Number of Weighted Weighted Outstanding as of December 31, 2022 5,910,914 $ 2.37 4.7 Granted 5,121,601 1.10 Exercised (3,132,854 ) 0.865 Cancelled — — Outstanding as of December 31, 2023 7,899,661 1.68 4.3 Warrants vested and exercisable as of December 31, 2023 7,899,661 $ 1.68 4.3 As of December 31, 2023,
the outstanding warrants include 70,849 April 2022 Private Placement Warrants, 2,707,211 August 2022 Private Placement Warrants,
and 5,121,601 August 2023 Inducement Warrants, which are exercisable into 7,899,661 shares of common stock which had a fair value
of $0.20 per share, based on the closing trading price on that day. Additionally, as of December 31,
2023 and 2022, the value of the August Contingent Warrants and the Inducement Contingent Warrants (collectively the “Contingent
Warrants”) was approximately $3,000 and $14,000, respectively. The maximum number of warrants issuable upon settlement of the Contingent
Warrants as of December 31, 2023 and 2022 was 447,519 and 298,346, respectively. Onconetix Equity Incentive Plans The Company’s 2019 Equity
Incentive Plan (the “2019 Plan”) was adopted by its board of directors and by its stockholders on July 1, 2019. The Company
has reserved 1,400,000 shares of common stock for issuance pursuant to the 2019 Plan. On February 23, 2022 and
in connection with the closing of the IPO, the Company’s board of directors adopted the Company’s 2022 Equity Incentive Plan
(the “2022 Plan”), which is the successor and continuation of the Company’s 2019 Plan. Under the 2022 Plan, the Company
may grant stock options, restricted stock, restricted stock units, stock appreciation rights, and other forms of awards to employees,
directors, and consultants of the Company. Upon its effectiveness, a total of 1,600,000 shares of common stock were reserved for issuance
under the 2022 Plan. In August 2022, the number of shares of common stock reserved for issuance under the 2022 Plan was increased
to 2,600,000 and in May 2023, the number of shares of common stock reserved for issuance under the 2022 Plan was increased to 3,150,000. The stock options and
restricted stock granted during the years ended December 31, 2023 and 2022 were all granted under the 2022 Plan. As of December 31,
2023, there are 718,402 shares available for issuance under the 2022 Plan. Stock Options The following summarizes activity
related to the Company’s stock options under the 2019 Plan and the 2022 Plan for the year ended December 31, 2023: Number of Weighted Total Weighted Outstanding as of December 31, 2022 1,392,654 $ 3.30 $ 670,161 8.2 Granted 962,154 0.48 — — Forfeited/cancelled (404,058 ) 4.87 — — Exercised (45,920 ) 0.01 45,920 — Outstanding as of December 31, 2023 1,904,830 1.63 94,239 8.4 Options vested and exercisable as of December 31, 2023 861,177 $ 2.23 $ 94,239 7.1 The fair value of options granted
in 2023 and 2022 was estimated using the following assumptions:
For the For the
Exercise price $0.26 – 1.29 $1.06 – 6.45
Term (years) 5.00 – 10.00 5.00 – 10.00
Expected stock price volatility 101.1% – 119.5 1 |
